I'm ss bcrx but think it's important to read the biggest touter of bcrx: the biotech analyst at Smith Barney.
Here is the full report LOL all.
Doorman
BCRX: Raising Target Price to $25 Based on Influenza Program
Salomon Smith Barney
Tuesday, August 10, 1999
--SUMMARY:--BioCryst Pharmaceuticals--Biotechnology
*We are raising our one-year price target on BCRX from $12.50 to $25 based
on our favorable outlook for its neuraminidase inhibitor (flu) program.
*BCX-1812/RWJ-270201, the lead drug candidate, is being developed for the
treatment and prevention of influenza. The company licensed the program to
JNJ, which has since accelerated clinical development. Phase II trials are
complete and results are expected this month. Phase III trials will begin
this Fall. At this pace, JNJ/BioCryst may have their influenza drug on the
market as early as the 2000/2001 winter season.
*Preclinical/early clinical data will be presented at ICAAC on Sept 26-29,
which should bring increased visibility to the BioCryst compound.
*BCX-1812 appears to have a better administration profile (oral, 1x daily)
vs. Relenza (inhalable, 2x daily) and Tamiflu's (oral, 2x daily).
--EARNINGS PER SHARE--------------------------------------------------------
FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year
Actual 12/98 EPS $(0.22)A $(0.21)A $0.19A $(0.10)A $(0.34)A
Previous 12/99 EPS $(0.16)E $(0.02)E $(0.23)E $(0.09)E $(0.50)E
Current 12/99 EPS $(0.16)E $(0.02)E $(0.23)E $(0.09)E $(0.50)E
Previous 12/00 EPS $N/A $N/A $N/A $N/A $(0.80)E
Current 12/00 EPS $N/A $N/A $N/A $N/A $(0.80)E
Previous 12/01 EPS $N/A $N/A $N/A $N/A $(0.40)E
Current 12/01 EPS $N/A $N/A $N/A $N/A $(0.40)E
Footnotes:
--FUNDAMENTALS--------------------------------------------------------------
Current Rank........:V1 Prior:No Change Price (8/6/99)......:$14.00
P/E Ratio 12/99.....:N/Ax Target Price..:$25.00 Prior:12.50
P/E Ratio 12/00.....:N/Ax Proj.5yr EPS Grth...:0.0%
Return on Eqty 98...:N/A% Book Value/Shr(99)..:1.99
LT Debt-to-Capital(a)0% Dividend............:$N/A
Revenue (99)........:5.90mil Yield...............:N/A%
Shares Outstanding..:14.8mil Convertible.........:No
Mkt. Capitalization.:207.2mil Hedge Clause(s).....:#
Comments............:(a) Data as of the most recently reported quarter.
Comments............:
--OPINION:------------------------------------------------------------------
BioCryst's anti-flu neuraminidase inhibitor, BCX-1812, appears to have
several promising characteristics: 1) oral availability, 2) activity
against both type A and B influenza, 3) a pharmacokinetic profile that
may permit once-a-day dosing, 4) cost effective synthesis, 5) good safety
and side effect profile, and 6) stability in liquid formulation
(attractive for the pediatric flu market).
Phase II trials have been completed and results are expected in August.
Pivotal phase III trials could begin as early as Fall 1999. Assuming
positive results and a conservative timeline, NDA filing could come at
the end of 2000 with approval in time for the 2001/2002 flu season. We
believe, however, that JNJ is targeting its developmental timeline
similar to Gilead/Roche's flu drug. Gilead started phase III trials in
Fall 1998, filed an NDA in April 1999, and was given fast track status in
July. We believe JNJ will start phase III trials this Fall, file an NDA
in Spring 2000 and use its pediatric formulation as a basis for
accelerated approval. This could get the drug onto the market as early
as the 2000/2001 flu season. BioCryst/JNJ plan to present preclinical
and early clinical data at ICAAC (Sept 26-29). We believe that the
likelihood of success for the BioCryst compound is increased due to the
success of other similar compounds (Tamiflu and Relenza) which have
provided proof of principle for neuraminidase inhibition.
BioCryst licensed worldwide rights of the influenza program to JNJ in
September 1998. Financial terms include paying for all development costs
related to the program, up to $43 million in milestone payments ($2
million was already recorded for start of phase II trials), and royalties
on future sales (similar royalty rate as the Gilead/Roche deal of an
estimated 18%-19%), BioCryst should receive milestone payments for
initiation of phase III trials, NDA filing, and marketing approvals in
the United States and Europe for treatment of influenza. Further
milestones are connected with drug approval for prevention of influenza.
Our EPS estimates of $(0.50) for 1999, $(0.80) for 2000 and $(0.40) for
2001 only include half of the total $43 million in milestone payments and
assume launch of the influenza drug in late 2001.
COMPETITION
Other competing neuraminidase inhibitors include Glaxo/Biota's Relenza
and Roche/Gilead's Tamiflu (GS-4104). Relenza received FDA approval in
July following an extended review period and despite a negative reception
from an FDA advisory panel. An NDA for Roche/Gilead's flu drug, which
was filed with the FDA in late April, received fast track status in
July. Roche expects to have the drug on the market in time for the
upcoming flu season.
We believe BioCryst's compound (oral, once a day) has a better
administration profile than Relenza's (delivered as an inhalant twice a
day using a hand-held device called a Diskhaler) and Tamiflu's (oral,
twice a day). BCX-1812 also does not appear to cause nausea, a side
effect seen with Tamiflu. Finally, the drug seems to be stable in
solution, making a pediatric liquid formulation possible. We believe
both Relenza and Tamiflu will do all the "leg work" in creating the
market. Hence, by the time JNJ/BioCryst's drug reaches the market,
neuraminidase inhibitors will be considered an acceptable therapeutic for
influenza. Furthermore, we believe that JNJ, with its extensive
over-the-counter (Tylenol flu) franshise, will be in the best marketing
position.
INFLUENZA BACKGROUND
The influenza virus causes "the flu" in people of all ages and is a
significant source of mortality and morbidity. In the U.S., influenza
afflicts more than 25 million people per year and is responsible for at
least 20,000 deaths, primarily among the elderly. In addition, influenza
causes substantial economic losses because of medical costs and absence
from the workplace by afflicted individuals. Therefore, the treatment of
influenza is a huge unmet medical need. We estimate the total size of
the U.S. market for neuraminidase inhibitors for the treatment of
influenza to be an estimated $2.5 billion per year. Hence, even end-user
sales of $500 million of BCX-1812 could translate into about $5.00 in EPS
for BioCryst. Existing pharmaceutical therapies for influenza are only
marginally effective and are only active against type A, which causes
two-thirds of influenza infections, and not type B.
Viruses such as influenza hijack the protein production machinery in
human cells to produce more viral particles, which are then released by
the host cell into the bloodstream, thereby infecting more cells.
Neuraminidase is an enzyme present in influenza-infected cells that
allows new viral particles to leave the host cell. Inhibitors of the
neuraminidase enzyme may trap the viral particles on the cell's surface,
thereby controlling the infection until the body's own immune system can
take over.
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