And assumptions:
INVESTMENT CASE We value Race Oncology at $0.44-$1.24 per share, using a probability-weighted DCF approach.
We arrived at this figure using the following approach which we regard as conservative:
– We assume the AUD/USD exchange converges on 0.7 over a three-year period from now;
– We valued only the US and European market opportunity for Bisantrene and assumed that Race did not partner the programme in either market;
– We assume that Bisantrene is approved only for use in AML and finds no use in breast cancer or lymphoma;
– We assumed a seven-year exclusivity period in the US for Bisantrene and a ten year exclusivity period in Europe;
– We assumed an FY19 (base) or FY18 (optimistic) launch for Europe and an FY22 (base) or FY21 (optimistic) launch for US;
– We modelled peak sales for Bisantrene of US$25-40m in Europe (market penetration 12-19%) and US$50-75m in the US (penetration 19-29%);
– We assumed gross margins for the drug of 75-85%, rising 0.1-0.2% p.a. over time;
– We assumed that the field force to distribute Bisantrene cost 20-25% of European revenue and 10-15% of US revenues – the difference accounts for a less efficient drug distribution infrastructure in Europe;
– We used a discount rate of 12.4% (RFR of 2%, an MRP of 9.5% and a beta of 1.1); – We assumed a 60% probably of clinical success for the Phase II bridging study and subsequent US registration study;
– We assumed that the clinical work required for Bisantrene over the next four years would cost US$5m (optimistic case) to US$10m (base case). The final figure will in part depend on how comfortable the FDA is with the existing safety profile of Bisantrene from the available data;
– We assumed another A$5m capital raising at A$0.40 per share. Our target price is $0.45 per share. $0.45 sits near our base case valuation.
We see newsflow over the course of FY17 as helping to drive a re-rating of the stock, with potential events including:
– Completion of formulation work and filing of new IP
– Completion of pre-IND development
– The pre-IND meeting with the FDA and filing of IND
– IND allowance in US
– Announcement of further details of the NPP
– Potentially a licensing deal for Bisantrene in Asia
– Potential clinical collaborations with hospitals in the US and Europe
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$1.49 |
Change
-0.010(0.67%) |
Mkt cap ! $254.7M |
Open | High | Low | Value | Volume |
$1.50 | $1.51 | $1.49 | $75.99K | 50.72K |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 26 | $1.50 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$1.51 | 1000 | 1 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 26 | 1.495 |
1 | 211 | 1.490 |
3 | 10469 | 1.485 |
3 | 1825 | 1.480 |
2 | 17265 | 1.475 |
Price($) | Vol. | No. |
---|---|---|
1.505 | 1000 | 1 |
1.510 | 1300 | 1 |
1.515 | 1 | 1 |
1.520 | 45 | 1 |
1.530 | 3005 | 2 |
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