The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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I'm still on the side lines, but agree it was a informative presentation, in marked contrast to the rns's under Tovey's stewardship. One wonders why, particularly as some of the information could have been drip fed to the market, with a probable positive effect on the sp.
You previously mentioned the $19m staged payments from Sebela, but hard as I try, I cannot find a calendar for the trigger points and amounts.
And that's the crux of my major concern. Neither M3 or XF73 are going to get through phase 3 trials before 2026/7.
Where does the money come to sustain the business from 2025 onwards.
There's no doubt that the business side of Destiny was poor prior to Tovey's arrival, and save for his reticence to publish news on a regular basis, he has clearly put the Company onto a more professional footing.
The products, particularly the XF platform, appear to be ground breaking but we live in tough times and are dealing with hard nosed pharma.
Perhaps they have asked themselves the same question as me and are playing very hard ball.
I certainly don't see how the Company can conjure up £25-30 million, given the current valuation and the state of the markets, to fund the phase 3 trial of XF 73 and keep the business going for 2-3 years.
We were given the impression that news of the revised phase 3 trial and the associated reduced costs, if accepted by the regulators, is hot off the press and has yet to be presented to "interested parties".
I wonder if having watched YouTube, they will now be beating a path to CT's door.
As an aside, what's happened to Dr. Yuri Martina , the CMO ?
I would need to look closer at the Ondine data but I know it's not approved yet in the US because it also hasn't yet commenced phase 3.
In addition, a successful product does not remove the market for other follow-on ones. There are many factors that decide market share including price, effectiveness etc.
Personally I don't see Ondine Bio as a direct competitor to DEST. Although they are both attacking the same issue - AMR - they are completely different methodologies. XF-73 stops infection through medication, whereas OBI uses a device for Photodisinfection. Given that AMR is one of WHO's top 10 issues, there is plenty of room for more than one methodology to tackle the same problem.
Can I ask, if one direct competitor OBI which is already in US market is a concern to you?
I will rephrase that. Where is my added risk compared to late last year given the cash run that is still available?
This share price almost completely discounts the Sebela deal and traded as high as 84p based on the assumption the XF-73 nasal licensing deal would land soon.
If it does land then it'll go there and then some again. Making this a fabulous risk-reward set-up from here given the fact the company has no creditors and has the Sebela deal (plus Destiny platform) as a valuation leverage.
As far as I can see all we have lost so far is time but in that time we have gained a faster lower-cost phase 3 design with a more assured market realisation that plays to its clear market advantages (MRSA). More importantly, we have two products that now align with the current CEO's thinking and approach.
In hindsight, this process was always likely going to happen given his experience vs. the fledgling stage of this business.
He was incredibly professional in that presentation and very assured of where this is likely all heading. But as I say with the Sebela deal as back up where is my true risk here? Happy to hear view points.
Excellent post, BBN, thanks. Its clear that CT and the BOD are not really fussed about the short term SP and won't be deflected from doing what needs to be to achieve their L/T goal of maximising shareholder value - even if the SP takes a hammering in the S/T. I also thought CT's presentation was excellent and bore little resemblance to the RNS - that's why the SP damage was done before the presentation started! My guess is that most of the major II shareholders, plus Bill Love, Nigel Rudd and other large shareholders on the Board are all onside with CT's strategy and will hold tight at these current MCAP levels. There is clearly (IMHO) a massive upside to this share but we are talking years, not months.
Excellent post. I wish you could draft their RNS’s going forward. Just amazes me how different the presentation was to the RNS.
I also bought several hundred thousand during the presentation - having blown his credibility this year Tovey really spoke with authority.
It still remains risky - but what we heard yesterday was seriously positive versus the fears that have arisen since the terrible RNS’s from January onwards. If they had set out their stall more clearly during 1Q 2024 and then drafted an RNS that reflected the presentation i think we would be back well above 20p. This share price discounts any good news at all. And i would be amazed given what they actually said if we don’t get that good news in the coming months.
Thanks BBN. Only one error. OBI have already entered US market, through trials in HCA hospitals. Steriwave is nasal photo disinfection prior to spinal surgery. It has very good safety data. However needs funding in my view. Not in either currently but watching with interest.
Great post BBN, thanks.
Well done BigBiteNow. Great notes and synopsis of yesterday’s presentation.
I sold out early yesterday, then listened to the presentation and immediately bought back on the basis of the reduced P3 trial costs and re-engagement with pharma companies and the statements regarding efficacy against MRSA and minimal risk of liver/kidney toxicity.
4/4
In all of this, it is very easy to forget that DEST already has a $570m licensing deal with Sebela who whatever happens will carry DEST through a revised phase 2 study, plus phase 3 and pay them $19m along the way. After that and assuming success DEST can access the other $550m + royalties.
Additionally, with a cool head and a thorough watch of this presentation it is clear that Mr Tovey has now stamped his mark on the Destiny platform and two lead products. There were clearly holes in the Sebela deal around formulation and contract manufacturing. With XF-73 the market looks to have changed and potential partners clearly want more for less.
Mr Tovey and his team have spent many months delivering on that and have answered the queries set. By doing so they have reduced the risk of the phase 3 trial even further and compounded the business cased for XF-73. In time I expect more investors will grasp this and the share price will react accordingly.
At the current 15p a share the entire Destiny platform is being valued at (minus cash on hand) just £8m.
For a company with such a large licensing deal in place and two advanced-stage drugs that is beyond ridiculous even for this market. It becomes even more so when we consider just how good XF-73 nasal now is post this updated design. Such that a partner or an alternative path through phase 3 is highly likely going to be found.
I bought some stock back at 15p for a trade but now I am going to keep them and have even added at slightly higher levels. I will continue to add on any weakness because at these levels the Sebela deal (for a company with zero debt on its books) alone supports a far higher share price. But if/when they land the XF-73 deal later this year then (dependent on the deal structure) this is worth many multiples of its current valuation and that can be stated even if they have to complete a working capital raise at some point over the next 12 months.
3/4
They have achieved FDA QIDP status "which means FDA makes their decision in 6 months rather than a year."
This has "allowed us close engagement with the FDA" which has allowed "a new endpoint for our phase 3 studies which has really enabled us to shrink the patient numbers and therefore shrink the costs." hence why its 1,000 patients now and not 2,500.
All of that combined creates an "incredibly compelling" licensing deal and answers the questions set by potential partners in the first round of discussions.
Moving forwards.
"Already preparing to go back to those potential partners we've met already with whom we only got a certain way through the process of developing them as actual partners." So the discussions start up again almost immediately and DEST has the cash and so a decent amount of time to get a deal over the line.
Now let's cover that strategic review.
Post the above adjustments to the XF-73 phase 3 design DEST stated "We are now in a very strong place."
"We're not prepared to just rely on one approach to get XF-73 nasal into phase 3. It is too important a programme and the BOD has directed management to explore and evaluate a range of strategic options to further progress the programme and that is really about enabling us to maximise the value from XF-73."
"That is really about enabling us to maximise the value from XF-73 nasal. So the prime plan is still about developing a license partner who will fund the phase 3 but looking at other options to ensure that we do realise the genuine value that XF-83 nasal has got."
So plan A remains the licensing partner for the right deal and those discussions will begin almost immediately but with a much stronger, more cost-effective and clearly compelling drug and path to market.
In parallel to this DEST is reviewing its options and in my view, this is being driven by the new BODs (and in particular Mr Tovey) desire to,
a) spread the risk of a deal being closed out this year.
b) retain more of the final value of XF-73.
But I also believe the revised phase 3 design and the reduction of the cost by over half has opened up alternative partnering options. Be they strategic investment in DEST or a partial buyout of XF-73 nasal I don't know but what I a clear on is that the decision is based on DEST holding a heavily de-risked phase 3 programme for XF-73 and the significant potential reduction in cost to get it through this study and that is what is most important here.
The market is determined to see it otherwise led by poor sentiment around junior pharma companies. I too still question their ability to secure "non-dilutive" funding but at the same time a partial sale of XF-73 would answer that.
2/4
US peak sales could range from c. $540m - $1BN depending on pricing but the figures used to date remain "relatively conservative" both in pricing and market share.
"To get a premium price you need to make sure you have MRSA in the label." So this programme will now deliver a label in addition to the broad indication that calls out MRSA."
"We have treated every MRSA that we have ever encountered with 100% success."
"You can generally predict at an early stage whether your drug is going to succeed in phase 3 or not."
"We have demonstrated in phase 2 that we kill the bacteria and that we can get the drug to the right place to do that. The thing that usually derails antibiotics in phase 3 development is that side effects that haven't been anticipated turn up in phase 3. There are issues with liver. There are issues with kidneys because the drug travels around the body and you only see these things when you look at large patients numbers."
"That is simply not an issue here. In all the studies we have done and we've got recent studies as well with the dermal formulation where we put XF-73 onto (she stifles a laugh at this point because it is so ridiculously good) open wounds in animal studies and it still barely got absorbed into the patients. So there is a very very small chance of systemic side effects which really does increase our chances of success and de-risks the phase 3 studies."
"We have regulatory confidence. We've been in close discussion with the FDA."
Need to now get the final protocols signed off by the FDA before starting phase 3 but have a "high degree of confidence because it is building on previous discussions." "Not pulling something out of the hat that the FDA hasn't seen before and it's based on phase 2 data."
So far we have a drug that is head and shoulders above the existing competition. A requirement to kill MSRA to be more marketable and push higher peak sales. To date, XF-73 nasal does that 100% of the time. We have low-risk phase 3 failure due to this drug not being absorbed by the body and despite every effort zero resistance from the bacteria meaning it is highly effective increasing the chances of a large market share. Finally, we have evidence of front-end ongoing discussions with the FDA and other health authorities based on existing phase 2 results which lower the risk of the protocols being rejected.
The feedback from potential partners said this.
"We really like your drug but can you bring it to market more quickly, more cheaply and with fewer patients."
So what DEST has done these last months is reduce the phase 3 study down from some 2,500 patients to 1,000 which more than halves the cost of each of the two studies required to $10m each.
Carried out marketing research to include the above MRSA label which allows a premium price to be charged making XF-73 nasal a $540m - $1BN peak sales drug.
1/4
I am going to park this set of notes and quotes here because pulling the lengthier quotes together on Twitter loses their impact.
Having had a substantial holding in DEST which I sold for a loss I was immediately negative towards the wording of the front section of yesterday's RNS and demonstrated so through my remarks at the time. But I was wrong and the presentation told me why.
Care for their share price doesn't seem to be top of this BOD's agenda. Some may read that as callous or complacent. Others like myself may see it as confidence and a desire to focus on the job at hand. In the end, it doesn't truly matter if the result is positive and doesn't rely too heavily on the current valuation.
The task at hand for DEST is to extract the most value out of XF-73 whilst supporting Sebela through its shorter repeat phase 2 programme due to the change in formulation requested by practitioners in the field.
Now the general reaction so far to the update was to focus upon the strategic review assuming it is an act of weakness led by a failure to secure a licensing partner for XF-73 nasal But the presentation and quotes therein do not support that argument.
What is clear is that XF-73 nasal is extremely effective at killing bacteria associated with MRSA.
It has compelling differentiation "when compared to off-label use of Mupirocin."
"To have this much differentiation against a single competitor as you go into the commercial world is a great place to start."
"We have not seen any resistance build up and we have been testing and trying to produce resistance and haven't managed to do it yet."
"XF-73 is the first antibiotic in a new class of antibiotics."
There is no resistance to it. "This is not a 6th generation" product "which will be held in reserve by doctors because they are scared to use it because the bacteria has seen it before and resistance is just around the corner."
"Being first in a new class means that we have a very strong profile with respect to resistance."
Phase 2b results to date demonstrate that because it is designed for nasal use it is "a very very well tolerated drug and importantly doesn't get into the body. So there are no systemic side effects to be expected with this drug. Which is a huge advantage when you are thinking about the probability of success for a phase 3 development programme."
"Most antibiotics that fail in phase 3 fail because of systemic safety issues. That's not an issue for us because we don't have any systemic vulnerability. The drug cannot get into the body. So it can't cause problems in the liver or the kidneys which is a huge reassuring factor for us in terms of predicting success of our phase 3 studies."
Hi Callum,
I am also a long-term investor, but sadly not as young as you. Yes, you're right, the fundamentals of the business are the most important thing. That said though, market movements can start to impact the fundamentals of the business. If your share price is low, you're in a weaker position when you negotiate with potential partners. You may also slow down your work schedule if the only way you can raise cash to pay for your development work is via a highly dilutive fundraise. (If the share price was high, your fundraise needn't be so dilutive.)
And that's the frustrating thing about where we are now. The management can talk about a 'strategic review' but I don't see how they can raise enough money to conduct phase 3 when the market cap is £15 million. Yes, they could sell the whole company but I fear that will be at a price that doesn't fairly reflect what we've got here.
Finally, don't give up on pharma - especially the big boys like GSK and Astra. They're very different beasts from the likes of Destiny and far less risky.
New research note (free & accessible) is here: https://www.equitydevelopment.co.uk/research/a-year-of-progress-and-addressing-the-future
Destiny Pharma (LON:DEST) full-year results for the year ending December 31 2023 included news of a strategic review of the options for its lead program XF-73 nasal. Cost-controls and reduced clinical trial spend at this point in the development of Destiny’s assets reduced the loss for the year.
With the increased focus on the partnering of XF-73 nasal, we were left in no doubt after the analysts’ meeting that XF-73 nasal is both a valuable asset and that it will be partnered at some point in time. While an external out-licensing transaction for XF-73 nasal similar to that for NTCD-M3 remains probable, the strategic update suggests a range of other options to achieve the same result for this asset.
Our fair value for Destiny Pharma plc has changed to £212.0m (or 234p / share) from £254.7m (or 279p / share). This reflects the longer times until Phase 3 studies start and, as a result, its products launch at Destiny’s partners. It also reflects the vast global unmet need that XF-73 nasal can address.
Your point about 'old device usually used to mean the company is for sale' seems spot on. In the RNS they even say 'Currently, the review is not actively considering an offer for the company'. From their timeline in the presentation they seem in no hurry to start the trial which, now that you said that, seems to be a strong call for selling the company (get your offers in!) before the trial. Which is really no bad news as it seems clear this would be handled better by a larger pharma co. The offer would likely be well in excess of current valuations given the current market cap and potential for the drug. So looks like this will be sold within the year (before cash runs out?). But I am generally wrong but even a stopped clock is right once a day (I mean twice).
Callum - i am a long term investor. Sitting on losses.
The investment case has certainly deteriorated from the excitement / expectations of last year.
The RNS was very poorly written. This strategic review stuff actually just makes them look silly. It’s an old device usually used to mean the company is for sale. So the mixed messages were quite odd. And their options aren’t that complicated so it’s just a silly thing to say which undermines confidence as we saw.
However, the detail of the presentation was pretty good. Both in terms of prospects and in clearly writing off any prospect for an equity raise in the next six months or so. So i left that thinking the price drop yesterday wasn’t deserved on the fundamentals - but was caused by the hopeless RNS.
Yes fundamentals are key and you need sometimes to ride out a negative market. However, the market is also telling you something so you have to keep your ears open or you can accumulate significant losses.
Personally i thought 15p was a good buying opportunity and significantly increased my stake at 15p. But time will tell!
I dont like to say anything negative about D|EST as I hold shares. But FFS, a strategic review? What a load of @:%! . Thery are a small company with 24 employees. Just make a decision and go with it. And for trial redesign? It seems like a total shambles who designed the first trial? bob the builder? I still think this could be big, but lets have some information on why startup of the trial is taking so long. Have they made any submissions to get the trial approved yet? And they are supposed to fund the trial without diluting the shares? How does that work? These people need to pull their fingers out....
With regard to yesterday I feel although the presentation was good they basically have shot themselves in the foot by announcing a strategic review. They realistically should have done the review before the results, there was no need to announce it, by doing that yesterday they're basically saying they can't get a deal based on the present credentials because any companies they have been in consultation with have deemed Phase 3 costs too expensive.
The positives are the cash which they have but the negatives are that how long will the review take? It's very amiss of Tovey to not give shareholders a timeline, that is a red flag. Not investable at the present, maybe when the review is done and we know further.
Hi everyone - I've been reading these posts everyday for about 6 months now (not sure why! Confirmation bias maybe?). I'm young and right at the very start of my investing journey. One of the first companies I ever bought shares in was Dest. God knows why I thought I knew anything at all about the pharmaceutical industry... but here I am. Everything else that I now own is the opposite of Dest (think boring, reliable, compounders) and Dest now makes up a very small part of my portfolio (even smaller today lol).
The whole rollercoaster of Destiny Pharma will remain an invaluable lesson to me about investing and epistemology. Overall, I think it has been an amazing emotional and psychological test.
Even though I will never buy another pharma stock for the rest of my life, I still own my shares and cannot see a reason to lock in losses. The fundamentals of the business appear to be unchanged and (although I admit that I don't really know anything) the share price seems to get dragged around by short-term speculation and market sentiment.
I understand this is a high risk investment and by nature, the share price will be volatile. But I wanted to try and ascertain how many of the people here are long term investors vs short term traders? Are you all the latter?
From my perspective, I'm happy to sit on my shares for years and own a chunk of a business that seems to have created something exceptional and are attempting to perform a serious breakthrough. I watched a video today from this YouTuber ‘Justin Waite’ and he said: “a company whose doing very well and everything is going to plan does not do a strategic review”... wow...I’m sure the entrepreneurs in this forum will be able to explain to the rest of us just how ludicrous of a sentence this is.
The legendary quote that seems to stand out to me, in the context of Destiny Pharma is: “The stock market is a device for transferring money from the impatient to the patient.”
As far as I can see, the only risk to my investment in Dest is the fundamentals of the business and my own decisions. Not the volatility of the market.
I do not know if I have ever lost 50% so quickly .
The ones I had and Hardman & co did not like have been doing well since 1st March just gone lol.
Fund Managers, share tipsters and Analyst , no better then my gambles .
News.
Destiny Pharma PLC, down 29% at 15.30p, 12-month range 13.20p-84.00p. The biotechnology company reports loss from operations of GBP6.7 million in 2023, narrowed from GBP7.8 million a year earlier. Pretax loss narrows to GBP6.4 million from GBP7.7 million. "During 2023 we intensified partnering activities for our lead asset, XF-73 nasal, and completed US market analysis that confirmed the significant market opportunity for this asset of up to $1 billion in the US alone. We also continued to progress the scale-up manufacture required for Phase 3 clinical studies and commercialisation. Our target remains progressing XF-73 nasal into Phase 3 clinical studies as quickly as possible," says Chief Financial Officer Shaun Claydon.
The XF-73 Nasal trial is mirroring competitor Ondine, first Ondine said they were going to trial 10,000 patients, then they had to cut that to 4,400, now it seems to be have a moved up again a bit to 5,000. At any rate long term prospects here look OK, but a fund raising in a few months is inevitable imo, without that their negotiating position wil be too weak, also likely to be something of a news drought for a few months, with most of the action in H2.