SUDA Pharmaceuticals gets coverage from Edison with 13 cents per share valuation

Suda’s lead product ZolpiMist is the oro-mucosal spray version of the blockbuster insomnia drug Ambien, which has 30 million prescriptions written for it in the US annually.

SUDA Pharmaceuticals Ltd (ASX:SUD) is focused on reformulating established drugs into oro-mucosal spray formulations for better bioavailability. The company's shares are currently trading at 3.1 cents per share.

Edison Investment Research has initiated coverage on SUDA at a valuation of $18 million or 13 cents per basic share (9 cents per diluted share) using a risk-adjusted NPV model focusing strictly on the ZolpiMist program.The research house attributes a 70% chance of success to ZolpiMist as it has already been approved in the US by the FDA, one of the most stringent regulators in the world.

The following is an extract from Edison’s research report:SUDA's lead commercial product is ZolpiMist, an oro-mucosal spray version of Ambien for the treatment of insomnia that is partnered in certain regions with Teva and Mitsubishi Tanabe. SUDA is also working on formulating an oromucosal version of anagrelide for the treatment of solid tumours in patients who have high platelet counts. Anagrelide is currently used as an anti-thrombotic agent to reduce elevated levels of platelets in essential thrombocythemia.

Commercialising ZolpiMist globally
ZolpiMist is an oro-mucosal spray version of Ambien that has a faster onset than the pill form. SUDA has the rights outside of North America and has out-licensed rights in Mexico, Brazil and Chile to Teva, and in Singapore, Malaysia, the Philippines and Korea to Mitsubishi Tanabe. Royalties are typically double digit and include a handling fee.

Reducing anagrelide cardiotoxicity
Anagrelide is an effective agent used to reduce elevated levels of platelets in essential thrombocythemia but use has been limited by cardiotoxicity. SUDA believes that an oro-mucosal spray version could minimise these issues by reducing first-pass generation of a highly potent cardio-excitatory metabolite of the drug in the liver, 3-hydroxy anagrelide.

Additional shots on goal
Besides ZolpiMist and anagrelide, SUDA is also using its technology to reformulate sumatriptan for migraine (partnered with Strides) and has programmes with Zelira Therapeutics and Cann Pharma Australia on cannabinoid formulations. Additionally, there are projects on undisclosed targets being funded by Sanofi and Ordesa.

Valuation: A$18m or A$0.13 per basic share
We value SUDA at A$18m or A$0.13 per basic share (A$0.09 per diluted share) using a risk-adjusted net present value (NPV) model. We currently only attribute value to the ZolpiMist programme as it is the most advanced and the rest are still in formulation stages. Once these programmes advance, we would add them to our valuation. The company had A$1.5m in cash on hand at 31 March 2020 and we estimate a need to raise A$10m in FY21 (A$22.5m total over the next three years) to fund operations based on the current business plan.