Translation -- ProMetic soulève les passions
(Google Translate, edited)
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ProMetic raises the passions
By Dominique Beauchamp
The outlook for ProMetic Life Sciences Plasma Protein Specialist (PLI, $ 0.68) raises passionate opinions.
Two clans of analysts clash over the value to be attributed to the biopharmaceutical Laval which has melted 650 million dollars since the summit in February. The debate intensified after the US drug gendarme asked for further information that will postpone the final approval of Ryplazim, its flagship plasminogen replacement therapy for patients with congenital deficiency, for at least nine months.
The company also reported a larger than expected fourth quarter loss and cash of $ 23.2 million, enough to cover about one quarter of expenses.
$7 target price
On one side of the ring, Doug Cooper, of Beacon Securities, has confidence in ProMetic in the medium term.
"After a 50% drop in two months, the stock has returned to the price it had four years ago. However, the company is much more advanced then in terms of its science and infrastructure, " he says.
Since this is a deferral, the foundation of the company is not broken, he says, but the delay weakens its balance sheet in the short term and increases the possibility of future share issues.
The analyst still lowers its target price from $ 10 to $ 7 because the delay of the Federal & Drug Administration (FDA) undermines the credibility of leaders and postpones two sources of revenue, the commercial sales of Ryplazim and the possibility of selling a rare Pediatric Priority Review Right that the FDA may also grant.
"Even an issue of 71 M shares at the current price to reap $ 50M represents a dilution of only 10%. We have to weigh that with the commercial sales approach of three potential treatments. Their potential market is worth 7 to 10 billion US for ProMetic compared to its market value of $ 500M. Even with 800M shares outstanding, this market equals $ 7 per share, a value of $ 12.50 lowered by 45% for risk and time ", he explains in an interview.
Mr. Cooper would not be surprised to see his colleagues raise their target prices as soon as the hole in cash flow will be filled because they will then shift their focus to the future income instead of the balance sheet, he adds.
Dollar target price
At Echelon Health Partners, Doug Loe also believes in scientific and medical justification treatments developed by ProMetic, but considers that the financial risks associated with operating losses and capital requirements are significant in the short term.
Mr. Loe is lowering his target price from $ 3.75 to $ 1 per share.
"Regardless of the fact that we are very disappointed by the FDA's deadline for plasminogen at the time when phase 3 key clinical trials begin for its other treatment (PBI-4050) for patients with idiopathic pulmonary fibrosis, we we still see good potential for value creation for these two future programs ", he wrote.
Although the analyst agrees with the company's decision to refocus its research efforts on its most promising treatments to reduce its short-term expenses, this realignment also decreases the value it attributed to other plasma products and to other therapeutic applications for Ryplazim.
Its target price of $ 1 does not give any value to this right or its potential resale. Target price of $ 1.75 to $ 2
Douglas Miehm of RBC Capital Markets reduced his target price from $ 3.50 to $ 2 because FDA's deadline increases the company's urgency to enter into licensing agreements.
The analyst is also disappointed by the unexpected end of an agreement with Shenzhen Royal Asset just months after ProMetic ensured that licensing fees and Milestone payments would be received soon.
"It is imperative that ProMetic enter into a licensing agreement for PBI-4050 by the third quarter to bail out without issuing other shares. After talking to the leaders we are cautiously optimistic, "says Miehm.
The analyst warns that if the company fails to reach an agreement by the middle of the year, he will have to revise his model because the risks of a new issue of a depressed course would increase.
New sense of urgency
In fact, ProMetic has entrusted Bruce Wendell, a director since 2008, with the business development, as the company seeks to enter into partnerships and licensing agreements to finance themselves.
Loe also hopes for potential resale of "right of review" rare pediatric disease priority that the FDA could grant to reduce its financial risk.
In the past, such transferable rights have changed hands for more than US $ 100 million. Its $ 87 million debt compares to $ 23.2 million in cash and annual R&D expenditures of $ 100M.
ProMetic shares trade at the same rate as in 2000. (Source: BigCharts)
A potential issue of $ 50M to $ 0.90?
Rahul Sarugaser of Paradigm Capital lowers its target price from $ 4.25 to $ 1.75 because ProMetic's revenues will be $ 29M in 2018 instead of the previously forecast $ 70M.
These revenues, combined with the credit margin of the Thomvest investment fund, provide it with operating capital of $ 127.2 million for the year. FDA deadline cuts $ 30 million to 2018 revenues, but also postpones cash inflows US $ 125 million that the company could have received from the resale of the right of the agency.
"ProMetic therefore needs capital of $50 to $100M to reach profitability, in 2020," he writes.
Its target price incorporates the possibility of a share issue of $ 50M to $ 0.90 each will increase the number of shares by another 8%.
$4 target price
Sanjay Jha of London firm Panmure Gordon remains optimistic and recommends the purchase of the stock for which he reduced his target price from $ 6.74 to $ 4.06. The delay of the FDA only postpones the marketing of Ryplazim by one year.
The agency's requests do not address the safety or clinical outcomes of the treatment. Mr. Jha even sees a small advantage to this delay because it will allow the company to provide a total 48 weeks of data to the FDA, which could then speed up the marketing of Ryplazim.
Even the withdrawal of the license agreement to the Chinese SRAM could be favorable to ProMetic, because China now facilitates the development of drugs locally through non-Chinese companies.
Mara Goldstein, of Cantor Fitzgerald, even believes that this failure could open other doors in Asia. It maintains its target price of $4, because the one-year delay in Ryplazim's revenues has little impact on its financial model which relies, after all, on discounting future cash flows and long-term royalties for these two main treatments.
In a weak position to negotiate
Prakash Gowd of CIBC World Markets remains the most pessimistic analyst with a target price of $0.60. Its precarious financial situation puts the company in a weak position to conclude licensing agreements, he believes.
"If the company is unable to reap the capital it needs to carry out its treatments eventually, it may have to find a partner (who will impose their terms) or sell assets when the balance of power is not to its advantage," he says.
He also expects a new issue of shares to be necessary.
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Jim |
