Intersuisse like it too:Acrux Limited ACR Thursday, 27 March...

Intersuisse like it too:

Acrux Limited ACR Thursday, 27 March 2008
This Opportunity Will Get Under Your Skin
Recommendation Speculative Buy
Key Investment Argument
There are few Australian biotechnology companies that have a product in or near
the doctors’ clinic, and Acurx is one of these companies.
• The lead product Evamist™ (Ellavie™) is a transdermal ‘puffer’ containing
oestradiol that is expected to enter the US market within several weeks.
• Evamist™ will be marketed by treatment to relieve the symptoms of
menopause and is the first transdermal spray oestrogen replacement therapy
product approved for use in the United States.
• KV Pharmaceuticals (KV) have sub-licensed Evamist™ from Acux’s Phase III
development partner VIVUS. The deal terms for Acurx are royalties on sales,
indexed to sales.
• KV stated it expects sales of around US$125m about 3 years post launch,
which equates to US$15m to US$20m royalties to Acrux.
Market Overview
In 2006, sales of all prescription oestrogen products were about US$1.4bn, with
the transdermal segment approaching US$300m. The leading transdermal
oestrogen patch is Vivelle-Dot® (Novogyne). Novogyne is a US$130m business
controlling ≈50% of the oestrogen patch market. After the Women's Health
Initiative studies raised safety concerns about hormone therapy (HT), Vivelle-
Dot®, prescriptions increased 37%, while the HT market decreased > 60%,
reflecting Vivelle Dot’s advantages over HT.
Likewise the competitive advantages of Acrux’s technology over the competition
is expected to take market share as well as expand the market;
• Improved safety profile over oral HT therapy,
• Controlled dosing and cosmetically superior, over creams and gels,
• More convenience, cosmetically superior and reduced irritation over patches.
The KV Pharmaceuticals Partnership and Actions Against VIVUS
KV is a specialty pharmaceutical company that develops, markets and acquires
branded and generic pharmaceutical products. KV is a moderate player,
generating year ending March 2007 revenues and NPAT of US$443m and
US$58m respectively. Thus it is a good size US marketing partner.
In November 2006, Acrux took action against VIVUS notifying of a dispute over
Testosterone (Luramist™) and Oestradiol (Evamist™). The Evamist™ dispute
has been mitigated by the KV agreement. In November 2007, Acrux made a
demand for arbitration relating to Luramist™, seeking reversion of all rights
assigned to VIVUS and claiming monetary damages, a portion of milestones and
declaratory relief. The arbitration process is proceeding. The action was taken
due to development delays for Luramist™.
Recommendation
For the Trader - The news that Evamist™ is making sales into the US will attract
investor attention, with price appreciation due to speculative buying anticipated.
For the long-term investor - The competitive advantages of Evamist™ are
expected to take market share from HT and transdermal oestrogen patches. We
expect adoption of Evamist™ to be rapid and believe sales of US$125m within 3
years realistic and achievable.
We retain Acrux as a Speculative Buy.