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results in increased number of cardio-vascular accidents or cerebral strokes - for these reasons, Vioxx and Bextra were withdrawn from the market by FDA in 2004 and 2005.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. Retrieved from
