Jul 30th 2014 - Edison Investment Research today published a report on Zeltia entitled "Deep Sea Treasures".
Analysts :
*.- Lala Gregorek .
*.- Dr Mick Cooper .
In summary, the report says:
Zeltia is a holding company that is increasingly focused on the potentially high-growth marine oncology activities of PharmaMar. This subsidiary has a unique business model and has built a pipeline of first-in-class cancer drugs for development with strategic partners. Yondelis, its first product, sold in Europe since 2007, is approaching regulatory catalysts in the US and Japan. Other catalysts include Phase III Aplidin data (expected in 2015) and deal potential for PM01183 (shortly to begin pivotal trials). Approval(s), data and/or deal news should increase our €904m valuation.
Yondelis : A foundation for profitability
Net Yondelis sales of €73m in FY13 underpin profitability, with potential for growth in Europe and beyond. Filings in soft tissue sarcoma in Japan (H214) and in the US around mid-2015 could lead to approvals in 2015/16, significantly boosting revenue through royalties from partners and near-term milestones. Japan approval would trigger a Taiho milestone, with up to $20m potentially due from Janssen.
Hidden potential : Aplidin and PM01183Aplidin has secured a strong haem-oncology partner in Chugai (ahead of Phase III multiple myeloma data in 2015), which should enable higher penetration in the eight EU countries covered, without needing additional investment from Zeltia. Updates from ongoing PM01183 trials (and pivotal trial start in ovarian, endometrial and small cell lung cancers) may catalyse a lucrative ex-Europe deal.
Financials : Focused investment and reducing debt
Revenue growth teamed with stable operating expenditure (ex-R&D) should enable Zeltia to grow its bottom line; we forecast EBITDA improvement from €23.8m in FY13 to €35.2m in FY14. R&D spending for FY14/15 will increase with investment in pivotal trials (Aplidin and PM01183) and the Sylentis glaucoma study. Increased operating cash flow should result in a continuing reduction in net debt.
Valuation : €904m SOTP, PM01183 prospects ignored
Our €904m (€4.07/share) valuation is based on a sum-of-the-parts DCF to 2025 (rNPV for the biopharma business; DCF for the chemicals division). It suggests the current market cap is largely supported by Yondelis, with limited value ascribed to earlier-stage assets, such as PM01183, which could drive significant value as part of a life cycle management strategy. Japan/US approval decisions for Yondelis in STS represent near-term upside as would Aplidin data or a PM01183 partnership.
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