from last research report..14 Feb 2019 08:11
ValiRx is making good progress in the clinic with its two lead candidates. The signing of a value enhancing deal with a development/commercial partner for VAL401 particularly, but also for VAL201, looks not far off, as has been flagged by the company in recent RNSs. We believe that given the current late stage of 401 in Phase III trials and the very real likelihood of a partnership deal on the near horizon that the current post recent placing price of sub 2p provides an excellent opportunity to enter into the stock in anticipation of such catalysts and that a re-rating to a realistic level is now overdue. As has been evidenced before on positive trial RNSs, such news we believe would trigger a large rise in the share price. Additionally, as well as cementing value within the development portfolio, we would expect that any such partnership deal would include a funding element as well as attract institutional investment, thus reducing the market’s concerns over this major risk to the investment case and putting ValiRx into a higher league. As discussed, our total probability of success weighted NPV for VAL201 and VAL401 is £54.64 million, more than six times the current market cap. We use this to set our initial target price of 10.28p per share. As ValiRx moves along the valuation curve we expect to reduce our discount rate and increase the probability of success rate, thereby providing further upside potential. We point out that, assuming successful approval for both drugs, the unrisked NPV (100% probability of success) rises to £115.16 million, suggesting c.13 times upside.
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