Prometic (T.PLI)
On the TSX. Trading .20... New Paradigm report, price target 2.75$.... excerpt:
Paradigm Capital Inc, IIROC/TSX member 1
Claude Camiré, Analyst 416.360.1322
Alisa Beach, Associate 416.360.3579
September 5, 2008
Financial Summary (C$)
(end-Dec) Rev EPS EV/Rev P/E
FY07 $8.4 ($0.09) 13.1x Nmf
FY08e $24.8 ($0.06) 4.4x nmf
FY09e $55.2 $0.01 2.0x 33x
FY10e $99.2 0.08 1.1x 4.1x
All figures in C$ unless otherwise noted
* ProMetic has announced a licensing agreement with Abraxis
Bioscience (ABII-N) that could be worth up to $295m in
development and sales milestones, for the development of 4
protein therapeutics.
* License and service fees could reach a total of $34m in the
next 3 years, with $10m expected before the end of 2008. This
eliminates the need to come back to the market for financing.
* We have arrived at a deal NPV of $0.75, and thus are raising
our target price from $2.00 to $2.75. Maintain Buy.
Major Technology License Financially Rewarding
This deal is worth up to $295m in development and sales milestones. However,
when including resin sales and sales royalties, PLI revenues could exceed $600m
in the next 8 years. Financial details include an upfront payment of $7m, made as
an equity investment at $0.47/sh (34% premium), $8m in license fees and $287m
in sales milestones payments. License and service fees could reach a total of
$34m in the next 3 years, with $10m expected to occur before the end of 2008.
Financial Details Beyond the Announcement
In addition to the $295m potential revenues mentioned in the press release,
ProMetic should receive royalties on Abraxis sales plus manufacturing revenues
that would approximate 15-20% of Abraxis sales. Royalties are expected to start
by 2011 and are expected to be mid-single royalties. We expect significant
revenues from manufacturing starting in 2009 from the production of clinical
supplies, ramping up at industrial scale by 2010-2011. Taking into account all
sources of revenues and using a 30% discount, we derive a $0.75/share net
present value. The discount reflects the lower risk associated to develop protein
drugs and the shorter time to reach commercial status.
Stock Rating:
Buy
12- target (C$) ??$2.75
Potential ROR 733%
Company Profile
Sector Health Care
Ticker PLI-T
Average S/O (m) 300
Free float (m) 285
Mkt cap (C$m) 99.0
Mkt float (C$m) 94.1
Key Metrics
Enterprise Value (C$m) 110
Research Team
Claude Camiré
Analyst 416.360.1322
Ccamire@paradigmcap.com
Alisa Beach
Associate 416.360.3579
Abeach@paradigmcap.com
SaleroMetic Life Sciences IncLI-T $0.33)gest Deal in ProMetic History – Raisinggece
Paradigm Capital Inc, IIROC/TSX member 2
Claude Camiré, Analyst 416.360.1322
Alisa Beach, Associate 416.360.3579
September 5, 2008
Abraxis BioScience- Experienced Partner with Proteins based Drugs
Abraxis BioScience, Inc. (ABII-Q) is a mid-size biotech company focused on the
development of novel formulations of proteins and is a strategic fit for this reason..
It is an integrated company with dedicated manufacturing capabilities including
discovery, clinical drug development, sales and marketing. Abraxis’ main product
is the first solvent-free taxane that was approved by the FDA, in January 2005 for
its initial indication in the treatment of metastatic breast cancer. Abraxane has
been a huge success in oncology and competes directly with Taxotere and Taxol,
a US$3b market. Abraxis generated $340m in revenues in the last 12 months and
has a market cap of US$3b.
Filling the Template Around the World
This is the fifth licensing agreement for “Cascade” in the last 18 months. Other
license partners include Biotest (acquired Nabi Pharmaceuticals), Kedrion, Blue
Blood and CNBG. We expect additional partners to develop other ODs. Current
agreements include:
Company Products Est Market Size Territory
Blue Blood (Taiwan) Hyperimmune CMV + 2
undisclosed
$75-100m Taiwan and
Southern Asia
Kedrion (Italy) Hep B + one drug
undisclosed
$200-300m Europe or Italy
China National
Biotec Group (China)
7 proteins: FVIII,
thrombin, fibrinogen,
a1PI, IVIG,
hyperimmunes and
albumin.
$300-500m China
Biotest (Germany) 3 proteins $100-150m US
Current science has not fully identified the number of proteins existent in plasma;
however most estimates place the number in the hundreds. Additionally, pricing of
these drugs is usually at a premium to traditional chemical drugs. The other main
advantage resides in a longer market cycle because generics are usually unable to
reproduce the drugs, therefore significantly increasing the return on investment.
