Pharma Equity Group (One-pager): Huge pipeline value potential still only partly discounted by the market
Since Pharma Equity Group was ‘re-listed’ last year on March 28th, the company has been on a mission to broaden the awareness of its unique business model and the opportunities that its pipeline represent. As we enter 2024, we have revisited our DCF-model to get some perspectives on how Pharma Equity Group is progressing in this effort according to the market.
As we know, Pharma Equity Group has a unique business model as they follow a repositioning strategy to save time and money developing new products based on already developed products. The company currently has 6 candidates in Phase 2. The cost structure is very lean as Pharma Equity Group rely on outsourced development to hospitals and universities and particularly to partners going forward. There have been few announcements of progress in the pipeline, except for the recently announced positive preliminary data for its colorectal cancer and colon adenomas product candidate (RNX-051), but it is still only preliminary data, so it doesn’t affect the assumptions in the DCF-model markedly.
However, from a share price perspective, investors have been pleased, as the stock is up almost 40 percent from its first day of trading (as a Pharma Equity Group stock) 9 months ago, easily outperforming the broader biotech index (S&P Biotech) which is up approximately 20 percent in the same period. It should be remembered that the share price was probably affected negatively around the date of listing creating a beneficial base-effect for performance measurement as many old Blue Vision investors wanted to use the increased liquidity in conjunction with the re-listing to sell the share as the company behind the share changed from being a real estate company to being a biotech company. Although this could have some effect, the stock is still up a lot and since there is no major changes to the company guided assumptions in the DCF-model, the market implied Probability of Success, PoS, has risen to more than 20 percent since the listing.
Even though the higher share price reflects higher expectations and increased confidence the company can deliver on its promises, the implied likelihood Pharma Equity Group will be successful according to the market, is still low in relative and absolute terms. Apart from the current general low risk-appetite environment for biotech stocks and the potential for these companies to conduct diluting capital raises, in the case of Pharma Equity Group, it is probably more affected by investors keenly awaiting the company to announce the engaging into partnership agreements concerning one or more of its many pipeline product candidates. Also, the postponement of the repayment of the receivables from Portinho into 2024 has likely disappointed some investors. Once these two milestones are reached, a larger part of the potential pipeline value could be discounted.
Disclaimer: HC Andersen Capital receives payment from Pharma Equity Group for a Digital IR/Corporate Visibility subscription agreement. /Claus thestrup 09:15 AM 08-01-2024.
Pharma Equity Group
Pharma Equity Group develops new medicines for the local treatment of serious and life-threatening inflammatory diseases for which there is currently no adequate treatment. The company uses repositioning of existing drugs and brings drug candidates to a clinical phase III stage, after which it is handed over to a strategic partner who will complete the development of the products and bring them to market, either independently or in collaboration with the company.
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