RE: Finncap broker upgrade 420p16 Oct 2020 10:34
Synairgen has raised £80m to fund a Phase III trial for SNG001 in COVID-19 disease, which is due to commence in Q4 2020 and will be run globally by Parexel, with results expected in Q2 2021, and scale up manufacturing. This follows a successful pre-IND meeting with the FDA, which provided the guidance to commence such a study. Assuming that this trial replicates the results seen in the 100-patient Phase II trial, we would expect Emergency Use Approval (EUA) to follow shortly thereafter. Meanwhile, the Managed Access Programme (MAP) in the UK and Europe, run by Clinigen, could generate early commercial revenues. We have made adjustments to forecasts to reflect these costs and raise our SOTP rNPV target price to 420p, which could rise further should stockpiling orders be received.
?Placing raised £80m with Open Offer (up to £7m): by way of the issue of 45.70m ordinary shares at 175p, representing 23.4% of the enlarged equity. Of this, c.£30m will be used to fund the Phase III trial with £33m allocated to scale manufacturing.
?FDA pre-IND meeting clarifies regulatory pathway and Phase III trial design: A successfully completed pre-IND Application meeting with the US FDA for SNG001 paves the way for a Phase III trial that is expected to start in Q4 with readout, all being well, in Q2 2021. The trial will be randomised, placebo-controlled and will enroll c.900 patients across c.20 countries in the Americas, Asia, UK and Europe. The primary endpoint will be the time to recovery of hospitalised patients receiving oxygen (OSCI=4) with confirmed SARS-CoV-2. Synairgen will use Parexel Biotech (ranked first among global CROs in 2019) to manage and run the trial.
?Second-source supplier for SNG001. Synairgen is partnering with Florida-based Akron Biotechnology, in order to meet expected clinical and commercial demand for the drug. Together with its current manufacturing partner, Rentschler Biopharma, the aim is to scale production of SNG001 from the current few thousand to c.100,000 treatments per month in early 2021. Benchmarking against existing treatments implies potential peak revenues of c.$300m per month in our opinion.
?Device manufacturing partnering with Aerogen (Ireland) to provide its Aerogen Solo and Aerogen Ultra aerosol delivery systems, to deliver SNG001 directly into patients’ lungs. This is a global business with the capacity to supply the necessary volume of devices with operations in US, China, India and Germany.
?Forecasts and valuation. We introduce new forecasts for 2020 and 2021 to reflect the costs of the Phase III clinical trial and manufacturing scale-up activities. We raise our SOTP target price to 420p, despite dilution, with the probability of SNG001 being commercialised for COVID-19 rising from 50% to 70%.
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