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Nicox valuation short term Auj. à 00:02
As of early 2009, NicOx has successfully completed its phase III clinical studies for naproxcinod (NO added to naproxen), a new class of Non-Steroidal Anti-Inflammatory Drug, targetting Osteoarthritis. The goals were to statistically demonstrate that : a) pain is reduced and motricity improved, b) that there is no detrimental effect on blood pressure and c) the gastro-intestinal side effects are not worse than other NSAIDs. All three goals were successfully achieved.
The most important one on a marketing point of view is the second one, since : - it has been demonstrated in many studies that all NSAIDS tend to increase blood pressure - it has been demonstrated that increased blood pressure results in increased number of cardio-vascular accidents or cerebral strokes - for these reasons, Vioxx and Bextra were withdrawn from the market by FDA in 2004 and 2005. And the prescription market for NSAIDs fell from 7 $BN to 2.5 $BN. The remaining market is currently held by Celebrex, which is also currently questionned for its cardio-vascular side-effects and more recently for its gastro-intestinal tolerance which could be worse than thought (see [4]). Doctors and patients had to switch to less effective pain-relieving drugs, such as paracetamol.
Having demonstrated that it doesn't increase blood pressure compared to placebo, naproxcinod has therefore a fantastic sales opportunity. Fisrt step will be to share the market with Celebrex ; this should be easy : Celebrex is marketed for its good (so far) gastro-intestinal tolerability, so naproxcinod will be used for patients presenting cardio-vascular risks (knowing that 50% of patients suffering from osteoarthritis also suffer from hypertension). Second step will be to regenerate the NSAID prescription market to its 2003-2004 level of 7 $BN ! Most analysts agree that 1 $BN sales in the US is a minimum (x2 for ROW). With sales starting in 2010 (drug submitted to FDA for approval mid-2009, 3 to 9 months investigation expected, approval in early 2010), the level of 1 $BN could be reached in 2013-2014. It should be mentioned that in august 2008, before phase III results, an analyst from Goldman Sachs questionned this marketing potential, claiming that not raising the blood pressure was not a strong enough marketing differentiator, and so that sales should be expected on a much lower level.
To achieve these sales, NicOx is looking for a commercial partner that will in-license naproxcinod, in exchange of an upfront payment and royalties on sales to NicOx. The minimum upfront expected is 100 €M, more likely in the range of 200-300 €M, and minimum royalties of 15%. NicOx wishes the partner to be responsible for sales to general practioners, while NicOx would develop an internal sales force to promote naproxcinod towards specialists. In order for its sales-force to be cost effective, NicOx needs to buy compounds that could be promoted simultaneously with naproxcinod. These compounds could be bought through in-licensing deals, or buying other small biotech/pharma companies. Of course these compounds would bring additionnal revenues.
To finance the set-up of its sales forces (1000 people to cover the entire US rheumatologists), marketing costs (advertising) and the purchase of additionnal compounds, Nicox needs around 500 €M.
250 €M should be brought by the partner. The remaining 250 €M would require a capital increase ; after the announcement of the partnership, NicOx said no later than mid-2009, or more likely after the FDA approval, the stock value is expected around 20-25€ (with Discounted Cash Flow calculation), so that around 10M new shares should be created (increasing the number of shares from 48M to approximately 60M).
Based on these assumptions, using 15% WACC, the NPV of Naproxcinod is around 15€/share. The rest of the pipeline is valued around 4€/share.
The market will probably recognize this value when the partnership on naproxcinod is signed and annouced.
As of early 2009, NicOx has successfully completed its phase III clinical studies for naproxcinod (NO added to naproxen), a new class of Non-Steroidal Anti-Inflammatory Drug, targetting Osteoarthritis. The goals were to statistically demonstrate that : a) pain is reduced and motricity improved, b) that there is no detrimental effect on blood pressure and c) the gastro-intestinal side effects are not worse than other NSAIDs. All three goals were successfully achieved.
The most important one on a marketing point of view is the second one, since : - it has been demonstrated in many studies that all NSAIDS tend to increase blood pressure - it has been demonstrated that increased blood pressure results in increased number of cardio-vascular accidents or cerebral strokes - for these reasons, Vioxx and Bextra were withdrawn from the market by FDA in 2004 and 2005. And the prescription market for NSAIDs fell from 7 $BN to 2.5 $BN. The remaining market is currently held by Celebrex, which is also currently questionned for its cardio-vascular side-effects and more recently for its gastro-intestinal tolerance which could be worse than thought (see [4]). Doctors and patients had to switch to less effective pain-relieving drugs, such as paracetamol.
Having demonstrated that it doesn't increase blood pressure compared to placebo, naproxcinod has therefore a fantastic sales opportunity. Fisrt step will be to share the market with Celebrex ; this should be easy : Celebrex is marketed for its good (so far) gastro-intestinal tolerability, so naproxcinod will be used for patients presenting cardio-vascular risks (knowing that 50% of patients suffering from osteoarthritis also suffer from hypertension). Second step will be to regenerate the NSAID prescription market to its 2003-2004 level of 7 $BN ! Most analysts agree that 1 $BN sales in the US is a minimum (x2 for ROW). With sales starting in 2010 (drug submitted to FDA for approval mid-2009, 3 to 9 months investigation expected, approval in early 2010), the level of 1 $BN could be reached in 2013-2014. It should be mentioned that in august 2008, before phase III results, an analyst from Goldman Sachs questionned this marketing potential, claiming that not raising the blood pressure was not a strong enough marketing differentiator, and so that sales should be expected on a much lower level.
To achieve these sales, NicOx is looking for a commercial partner that will in-license naproxcinod, in exchange of an upfront payment and royalties on sales to NicOx. The minimum upfront expected is 100 €M, more likely in the range of 200-300 €M, and minimum royalties of 15%. NicOx wishes the partner to be responsible for sales to general practioners, while NicOx would develop an internal sales force to promote naproxcinod towards specialists. In order for its sales-force to be cost effective, NicOx needs to buy compounds that could be promoted simultaneously with naproxcinod. These compounds could be bought through in-licensing deals, or buying other small biotech/pharma companies. Of course these compounds would bring additionnal revenues.
To finance the set-up of its sales forces (1000 people to cover the entire US rheumatologists), marketing costs (advertising) and the purchase of additionnal compounds, Nicox needs around 500 €M.
250 €M should be brought by the partner. The remaining 250 €M would require a capital increase ; after the announcement of the partnership, NicOx said no later than mid-2009, or more likely after the FDA approval, the stock value is expected around 20-25€ (with Discounted Cash Flow calculation), so that around 10M new shares should be created (increasing the number of shares from 48M to approximately 60M).
Based on these assumptions, using 15% WACC, the NPV of Naproxcinod is around 15€/share. The rest of the pipeline is valued around 4€/share.
The market will probably recognize this value when the partnership on naproxcinod is signed and annouced.
