The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
I've been around the block in biotech for a number of years, like many others, some of whom invest in VAL, so I can estimate values of SPVs to levels that I think are reasonable; not too rampy, but conversely not too conservative, either.My personal experiences of the market would give a value to any niche, novel, first-in-class compound entering a SPV of around the 10M mark. This is reasonable. The first 6 months in an SPV will build the clinical rationale of the compound with efficacy testing, extending to the year 1 mark, so, at that stage, we'd be looking at around 25M in value. Concomitant to this would be shorter-term safety testing. In year two, we'd have more complex safety testing to calculate Phase 1 doses, and being oncology for the ones under evaluation, that should be fairly swift. During the second year, if those criteria are met, then we'd have a value of around 50M, per compound. At commercialisation, assuming VAL want to take it all the way to being clinic-ready, the valuation could be anywhere between 50 and 150M, assuming a clinical milestone package of 3-500M, and an assumed 7% ultimate royalty. It goes without saying that a deal for 201 will give confidence to this strategy, and allow a swifter realisation and re-rate of the SP to reflect this.If VAL ultimately have 3-5 SPVs, assuming a further dilution, over 2-3 years, of 40M new shares (obviously this might not happen), then the MCap would conceivably be 250M (assuming majority ownership), so I like the strategy and the odds, regarding the SP here, at 140M shares. The chances of an SPV being "bought" early, say within a year of launch, out of 3-5 opportunities, I would say are quite high, as a bigger pharma is likely going to be tempted by a given platform at some stage. I would therefore expect a "deal" anytime in the short to medium term.Either way, at a MCap of 15M, I, for one, despite being as displeased as many others with TX, would urge SHs to look at the wider strategy. It isn't going to take long for the BOD to provide material updates around the SPVs in the next few months, by which time, the MCap should be re-rating anyway. I have already pressed Suzy for the need to do this.In any case, I'm finding it of limited value to constantly beat the BOD over the head regarding 201, having been privy to several conversations recently. They know how we feel, but they are not going to bend. It's frustrating, but it isn't going to change. So my efforts will be focused on trying to influence a proactive engagement with the new SPVs. If folk can't get past 201, that's fair enough. It wasn't an ideal scenario, and it isn't an ideal situation, but it is the result of a slightly dog-eared inherited "project". To my mind, it's going to be better to press on the projects that are fully under the control of the BOD, and that is the SPVs. I will always hold feet to the fire for the SHs, but I won't call out over 2
This is generally along the same lines as the KCTNBC, but it's sort of old-school in comparison, in that they developed an oncolytic peptide in mice and last year ran a Phase 1 study, with "easily accessible" skin tumors. It needs to be injected into the tumors, rather than systemically , so if I'm honest, it doesn't have the clinical potential of CLX001.
https://www.lytixbiopharma.com
However, it does serve to highlight that there is precedent for this type of therapy, which is very good for us.
Heavily supported by Norweigian II's, they've become a bit impatient of late, but it's floated at a respectable £30-55M during this time. Seems about right.
I've checked and there is scope for other compounds in this series to be developed, should CLX001 continue to progress, so we'd almost have a stand-alone "Lytix" within our SPV.
Looking ahead, Amgen are interested in this area. They bought BioVex for 1 billion USD a while ago to get into oncolytic viruses for melanoma; hence my point yesterday about buying companies to get into the technology, rather than just the specific cancer type, and have just announced some really encouraging clinical trial results. Again, they have to inject it into the tumor!
CLX001 is systemically administered, and so whilst nothing is guaranteed, it's an absolute game changer in lytic tumor therapy, if it passes the toxicology testing. I'm fairly sure that it is going to pass the efficacy testing, from what I've seen, so the preclinical commercial brochure is already looking good.
Very exciting.
I should add that the compound also very significantly increases the permeability of other chemotherapies into cancer cells, in addition to destroying them itself.
Hence I would expect that it will not only be attractive as a monotherapy, but also as a combination therapy. VAL may have already trialed it in combination.
Here you go peeps:
https://onlinelibrary.wiley.com/doi/full/10.1002/advs.202105506.
The compound is basically the PhD project of one of the new Directors (Charles Chen - very smart fella, and now works for AZ), and supervised by Martin Ulmschneider, forming part of his group.
I'm glad that they are personal Directors, rather than just King's, as they now have deserved skin in the game.
It's an incredibly comprehensive, primarily in silico/vitro, development of a very novel test compound (nanoformulation).
There's only one other company that I'm aware of working in the field, who has attained grants of tens on Ms to develop theirs, but they seem to have to inject theirs into the tumor, rather than intravenously, so the King's approach (intravenous injection) is very practicable and in-line with traditional chemotherapies. There's nothing like it as far as I am aware. And it has a 19 year patent as far as I can see.
The paper ends with them trying it in tumor-bearing mice, whereby it completely halted the growth of the tumor, and eradicated it totally in 2/4 mice. As is typical of academic groups, the "n number" used was low (4 animals in each group), so this is precisely why VAL take these compounds in for "initial" assessment, wherein they attempt to recapitulate the scientific results to make sure that they are not just fortuitous scientific "gloss".
The fact that CLX001 has passed this evaluation, and that Suzy is very excited about it, should inform us as to the likely outcome of that evaluation. I am hopeful that some of this testing can be shared with us in due course.
It's a perfect example of the new strategy:
Promising academic data > evaluation by VAL to confirm positivity > entrance into an SPV.
I'm very very pleased with a major shareholding of 60%. I'd have been happy with 50%.
Great news. And with '001, there may be scope for the KC group to add '002, '003 etc. so we could have a series of candidates!
It also opens up the SPV to be bought by someone who wants to get into the area of that technology, as well as someone who wanted the specific compound. That's not uncommon.
The fact that it is a stand alone private company makes it more attractive to buy or partner "clean" too.
Very exciting unmet therapy area.
Well done to the team.
Hi Metom; that extended timescale certainly wouldn't be acceptable to SHs.
Whilst pharma is sitting in large piles of deflating cash reserves, which could be good for the new compounds, it is true that venture capital is harder to raise, which makes 201 more tricky.
We're either almost there, or it isn't happening at all IMHO.
Prolonged procrastination doesn't do the Company any favours, as I feel it's become a distraction to the otherwise exciting new candidates coming through; potentially limiting the impact of those. Not to mention time wasted on actually giving it, or a derivative of it, to patients.
So it is probably in the interests of VAL to bring it to a head, one way or another before year end, in my own personal opinion.
Let's see what happens in this final quarter.
All the best.
I appreciate that is a bit of a Jeremy Hunt-esque delivery of info, but I remain bullish.
Hi GMS,
The next thing I'm expecting is the King's compound being formally brought into an SPV. As the evaluation was completed in July, under pre-agreed terms, then I don't see why this won't be imminent. I'm told that this will be accompanied by an announcement and hopefully some information regarding the preliminary assessments. This will allow people like me to get excited.
The Barcelona and Hokkaido evaluations are due to be completed between December and February. To my mind, every compound entering an SPV should bring both confidence of strategy, and theoretically be of substantial value, when compared to the current MCap.
Having three SPVs, in my mind, is worth double our current MCap, but that is a personal "valuation".
Unfortunately, the 201 delay still lingers on. A resolution of this would allow a better re-rate of Company value, based on the new compounds, so it is holding us back, at least in my personal opinion, as a shareholder. If that follows on from new compound announcements, then the re-rate on that, in and of itself, could be larger, but who knows. It all depends on if SHs want to maintain sticky hands, or slice; so the ultimate SP will be reliant on the SHs themselves, in many ways.
301 progress would be a "nice-to-have". I am told that work is ongoing with that, so ideally an update before year end would be well-received, too.
I think after that, then the management would look at the SP, and the current status of the Company, and decide whether to pursue a method of indefinitely covering the overheads (lab), or whether to progress the compounds further, to incrementally increase value. That would be carefully timed, I am sure, as the BOD are acutely aware of dilution, which is good.
As soon as a new compound is in an SPV, it is effectively for sale, or can be partnered. This could bring revenue in at any point over a 2.5 or so year period, from Day 1 theoretically. Having a market desperate for the products that VAL are aiming to bring in helps us here.
If the SP increases, then we will get Director option buys, and possibly a few hundred grand from Cenkos, so that helps too.
I think that's the main prospects covered, but if you can think of more, happy to chip in.
Certainly. What would you like an update on GMS?
Oh still here, Valtree. In for the long-haul.
Imagine, in eight years, we'll probably have five or six IND drugs sold; each for nice juicy 250-500M milestoners...
...and all in exactly the same time as it took the old management to dose EIGHT (no laughing at the back) 201 Phase 1 patients. And they still forgot to collect most of the data!
It's good to remind ourselves what we could've had from time-to-time, so do keep swinging by old chap.
Big pharma often want one compound only, so with Sierra, it was Momelotinib, and they don't seem interested in the others. I feel for shareholders there though, because Sierra didn't half drag their heels with it before GSK, and have probably taken a fair bit of time off the patent now, the gits.
Question I'm pondering today is that if SAR fall 50M, on the back of a "handed back" deal that is not financially dissimilar to 201 (I'm assuming two ultimate indications, which seems fairly modest) does that mean that we fall to a MCap of -35M if TX hand back 201?
You can see that as SAR being oversold and/or our MCap being an absolute joke.
Probably both, but food for thought.
As someone mentioned SAR, I couldn't resist, because it's a good example.
SAR appear to want to run clinical trials with SDC-1802. It's a different model, in that by running a Phase 1, or even Phase 2 or beyond, has a risk:reward of millions more in investment, but potentially a larger upfront payment, or even an outright sale.
The VAL strategy is different, as SDC-1802 is now just at the stage where VAL would not take it further, i.e. on the verge of a Phase 1 clinical trial.
It's a massive potential inflection point, and good valuation bridge to commercialise.
The fact that SAR has drifted between about 120 and the best part of a 300MCap, based on this, and the fact that KC TNBC, Hokkaido, and the Barcelona compounds are roughly half way to this stage, once they enter an SPV, gives an indication of the market desire for promising drugs at early stages.
If any one had a 30-40% chance of getting to that stage (probably higher once in an SPV), then with three "opportunities" at the above highlighted potential, I like those odds. I more than like them, if I'm honest.
If any more compounds are adopted, beyond these three, then it would be extremely unlikely not to have at least one, if not two, get to this very stage.
Yes perhaps she does. I'm hoping for 2 of the 3 to progress to SPVs, as the two SPVs would be worth more than our current (poxy) MCap IMHO.
7). Potential Hokkaido SPV (December).
8). Potential Barcelona SPV (February).
Metom,
I lost the ability to turn the ladies into "Scottish Tomatoes" some years ago.
Unfortunately.
I'm prepared to overlook Cenkos in light of the below, but I personally think Turner Pope do better work (although I'm not privy to what's been "said"). I don't think we need two brokers going forward, and, at our size, we shouldn't be paying placing fees twice IMO.
That being said, there's much more to like (new compounds, new staff, cash runway, 301 update/new opps, potential collab for 401) than not be delighted with (201 delay), or unsatisfied with (Cenkos), at this stage.
As one if the new compounds could add 60-100M to the MCap though, I'm prepared to take some rough with the smooth. If we had 3 SPVs, as an example, it would be virtually unheard of not to have IIs banging the door down IME.
Thanks DrShan,
I haven't watched it back, as no one likes to watch themselves, but I will feed that back to the team.
The microphone used was the one on the computer, so I think a "proper" microphone would be much better. Maybe Nick can lend us one from his collection of karaoke machines.
Suzy also had to grasp the mouse, so that's why she sometimes appears to cross her arms - it turns out it isn't a defensive stance!
When TNBC is sold, maybe they can buy a media studio :-)
Also, in answer to the questions you previously asked – three new senior roles by year end – tick; and no way of low dilution without SH vote for a lab – tick.
Suzy told me she wants to be judged (in the financial deal sense) on the new assets. The reasons outlined above tell us why the 201 deal is far below that expected for subsequent compounds. For me, the importance of the 201 deal itself is beyond the immediate and mid-term revenue. It’s proof of strategy and foundation.
The new compounds are in Women’s health and oncology. Developing these to a stage where VAL intend (anywhere between Lead Optimisation and end of Preclinical (so between 1 month and 2 years, once in an SPV) to out-license or sell, in these areas of highly unmet clinical lead, will produce deals far outweighing that for 201. There’s a lot online if you look. They generally currently generate 10-20M upfront, with milestones of 250-500M at commercialisation (I won’t bother saying “USD” anymore, as it makes small odds currently), with 5-10% royalties. Suzy knows this, and that is precisely why the new strategy is keyed-in to these areas of maximum inflection; without running arduous and very expensive clinical trials. I do a lot of work for US VC funding, and I can tell you that Suzy knows exactly what to produce to sell, pre-clinically, to either vehicles, or Big Pharma (likely the latter, going forward).
If you had 3-5 compounds in an SPV, odds-on that you can get 1-2 of these fully down the route (they’ve already had 2-3 years’ work by SPV stage, so will have around an 18-year patent – 201 is currently about 5), and that’s when the real excitement starts. The only issue for 10%ers is that the KC TNBC could be sold in two years. But it could also be sold in a few weeks, for 20M quid upfront. That’s why I’m personally keeping. my money in, and not taking it out.
Happy days.
Afternoon Porky,
1. My understanding is if the service agreement changed, we’d have had an RNS, so this value is accruing and would be paid on licensing. I think the synergistic help has given VAL leeway; notably with 301. If the TX patent and/or formulation advice for 301 has changed its status from a world-class Brazilian striker, only discovered at age 30, to one who is 20 (analogy discussed with Mark Treharne; 201 is 35 btw), then I’d also be very inclined to agree with being flexible on the service payments. I think “immediate payment” was a Cenkos interpretation.
2. No. Any lab (which will require a shareholder vote by the way; so won’t ever happen at 7.5p (I know that was troubling you)) would be a drug development CRO; not for chemical reformulation. Reformulations could be tested, but not synthesised. As a patent attorney, it’s obvious to me that Ken has given significant help in this area; maybe in part by way of delay recompense. It would be hard for a UK patent lawyer to be found as good as him, and certainly not who happens to be a peptide expert, in addition. Probably no one else like him.
3. TX are preparing patents, but will not activate them – as far as I’m aware from yesterday - until signature. If they could “rip-off” 201 (which they can’t, as the target itself is patented), they wouldn’t have bothered signing a LoI).
4. I just can’t see that. My take – and this is my take – is that they have a number of compounds that are going to be triggered at once; hence the delay. Maybe it’s taken the year to get the DD done on all. We’ve suffered from this, but maybe we were the first adopted. I don’t think you could pre-arrange the point you’ve mentioned outside the scope of the LoI.
5. Yes – VAL have the option of repatenting/reformulating, but the latter would cost about 1.5-2M quid, and Suzy doesn’t want to ask SHs to fund this – and I agree with her at this stage.
Also, in answer to the questions you previously asked – three new senior roles by year end – tick; and no way of low dilution without SH vote for a lab – tick.