Approaching finish line? Despite share price underperformance, ACL has a number of key milestones looming on the horizon. These include filing for market approval of its generic synthetic heparin, which all going to plan is due to be launched in the US in 1HCY09.
Company data, ABN AMRO Morgans forecasts year to Jun, fully diluted
A$15.6m in cash at 30 June 08 ACL reported a net loss of A$10.9m, compared to a loss of A$12.9m in the pcp and better than our forecast loss of A$12.7m. This included total grant income of A$1.3m for the period, interest income of A$1.3m and operating expenditure of A$14m. R&D expense has declined 43% to A$3.2m due to the assumption of fondaparinux manufacturing costs by Dr Reddys. The net operating cash outflow was A$8.4m. Cash at year end was A$15.6m. Synthetic heparin on track for market launch in 1HCY09 ACL’s fondaparinux is a generic version of Arixtra, which is marketed by GSK. Together with manufacturing and marketing partner Dr Reddy’s, ACL has now completed the first commercial scale manufacture of generic fondaparinux, together with the required documentation for the filing of an Abbreviated New Drug Application (ANDA) with the US FDA. Depending on review time at the FDA, market launch is anticipated in 1HCY09. In our model we have first sales occurring from FY10. ACL will be the only generic version of fondaparinux available; we note that generics are generally priced at a small discount to the branded version and typically secure 40-50% of the prescription market share. Forecast revised to reflect a more conservative view on product launch While ACL has the support of a strong partner in Dr Reddy’s, market launch of a new product is complex. To reflect this, we have taken a more conservative view on penetration rates, with forecast changes detailed over page. In FY10 NPAT has decreased 75% and in FY11 by 48%. Investment view - Buy in anticipation of market launch Our milestone table is contained overleaf. Our DCF valuation is A$1.17 (was A$1.52). We have set our target price at A$0.59 (was A$1.06), a 50% discount (was 30%) to reflect where we see the share price trading in six months. The downside risk to our target price relates to the acceptance of Arixtra as an alternative to Lovenox.
Near-term catalysts to watch We have identified a number of upcoming catalysts, which, if achieved should drive ACL’s share price closer to our target price.
Table 1 : Milestone Table
Estimated date Milestone Expected catalyst 2HCY08 Arixtra ACS approval Positive 2HCY08 Submit NADA for fondaparinux Positive 1HCY09 Approval of generic fondaparinux (synthetic heparin) Positive Jul-09 Market launch of generic fondaparinux (synthetic heparin) Major positive
ACL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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