Pipeline Potential29 Jun 2020 22:33
Evening all (and for those further afield, good morning!). At Thoths suggestion I’ve been having a look at both Janssen and Gilead in terms of their pipeline gaps and whether SAR might be a good fit in terms of the current M&A activity. The problem is that with 737 and 1801/2 there are so many indications that could be attractive that it’s difficult to settle on one potential acquirer. One pharma declares an interest in cancer while another goes for immunotherapies, one goes for ovarian, another for lupus and then there’s the whole respiratory market where both 1801 and 1802 might have a role. I can see that in the future the whole global licencing and sub-licencing issues are going to be difficult to follow let alone police. The lawyers will make as much money as the pharmas. Looking at Lupus first, both Gilead and Janssen have gaps in their pipeline and whilst we know that work has been done with the US DoD (which is available for a potential licencee to see) we don’t know just how compelling it is. I’m not convinced that either are looking to SAR in respect of Lupus. I suspect that if either are looking at SAR it will be in terms of cancer. Janssen put Niraparib up for testing with 737 against prostate cancer whilst Gilead has Filgotinib but its trialling it in inflammatory diseases. Niraparib is forecast for sales of £1.5bn in 2021. The prostate cancer market is roughly 3 times the size of ovarian so whilst ovarian is big if you had something that worked in both then the value increases as you dilute the manufacturing overheads. Gilead has a gap in Cancer while Janssen has an opportunity with 737 that it probably knows already works. Gilead will however, almost certainly have seen the latest results as well. It’s almost flip a coin but depends much more on how much the acquirer is prepared to risk. Whoever it goes to (and I don’t see it coming back) there will be a higher price than it was originally licenced at. If it gets to market in ovarian then it would be worth around 19p to SAR. Should it make the grade against prostate then the value triples. But these aren’t buy out prices. They are potential values years down the road. Given where we are then de-risking the price takes us down to 2-4p for ovarian and 6-12p for prostate. For 1801/2 it all depends on the indications. Gut feel/intuition etc suggests to me that Gilead are in the running for 737. 1801/2 are very much up for grabs and I don’t rule out a Chinese Pharma (unrelated to Aurora). The big question is what a pharma values the potential at, how much they will want this discounted and whether the BoD like the assessment in the light of their own expectations. Considering all the indications that could be targeted then if 737 and 1801/2 all got to market then the £4 valuation would be light but if someone offered me 5% of the potential, which based on the risk would equate to 20p, then I’d seriously consider it! With the SP well below 1% of the discounted potential its a steal!
Sign In
Follow the stocks
