Research Note out..116p target16 Jul 2018 11:03
Northland Capital.Following Motif’s successful placing of 17th May, from which the Group raised £10m gross through the issuance of new shares at 31p each, Northland has updated its financial model for the Group. As a result, its share price target has been raised to 116p (115p previously).
The updated financial model, based on discounted cash flow (DCF) methodology, reduces the applied discount rate from 25% to 24% as a result of Motif’s completion of its rolling submission of a New Drug Application (NDA) to the FDA for the treatment of acute bacterial skin and skin structure infections (ABSSSI) (announced 14th June). The assumed terminal growth rate remains unchanged at a conservative 3%.
Priority Review is expected upon acceptance of this submission by the FDA. In anticipation of a Q119E approval, management is preparing for iclaprim’s market launch shortly thereafter. This now favours a prospective US commercialization option of partnering with a revenue generating/late development-stage company in the hospital space, as opposed to building its own sales network. The Fulford Group continues to identify potential commercialisation partners for iclaprim outside the US, with focus on the EU and Japan as some of the most valuable target markets.
Given that vancomycin demonstrates nephrotoxicity, iclaprim is ideally positioned to become a preferred alternative treatment for ABSSSI with impaired renal function, an addressable market of c.US$2.8bn globally. Similar-stage, US-quoted comparators presently achieve market capitalisations in excess of US$500m. In this respect, Motif Bio is considered to be significantly undervalued and Northland reconfirms its rating of BUY.
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