Johan Widmark | 2022-08-05 08:00
Focus to migrate to most high value application area
In the new CEO’s first official communication with shareholders, Julian Read puts emphasis on the ballooning opportunities for microalgae in the biopharma space. Focusing on Antibody Drug Conjugates (ADC), that has risen to rival CAR T as the potential magic bullet in oncology, where 12 ADC drugs have been approved by the FDA so far, we note that several of these approved drugs are based on cyanobacterial toxins, the very potent and close cousin to microalgae.
While pure biopharma license production and a GMP production facility are still some years away, the company now sets out to create revenues from collaborations with pharma companies. This is a first step to expand activities beyond biomass and Omega-3 that are already in scale-up phase. In the long-term however, the high margin nature of the biopharma venture means that it may grow to dominate the company, a development which could be accelerated further by acquisitions.
ADCs quickly catching up to CAR T
Looking closer at the ADC market in the CEO’s crosshairs, we find that ADCs, that comprise of an antibody conjugated to cytotoxic payloads by specially-designed linkers, not long ago was considered to have potential to become the magic bullet in oncology. But they’ve also presented huge challenges to researchers particularly regarding the identification of a suitable combination of antibody, linker, and payload. We also note that ADCs have quickly caught up to CAR T and is now amongst the fastest growing drug classes in oncology.
Today there are 12 ADC drugs approved by the FDA, including Kadcycla for metastatic breast cancer, Polivy for relapsed or refractory diffuse large B-cell lymphoma and Adcetris for treating relapsed or refractory Hodgkin lymphoma. The latest approval was for Tivdak in September 2021 for treating metastatic cervical cancer. With an average price of the mentioned drugs at 101 000 USD per treatment, these are expensive treatments. This can be compared to CAR T, that are more financially and medically intensive treatments, at a cost per treatment around 500 000 USD. In March 2022, market research firm Research & Markets estimated that the global Cancer Antibody Drug Conjugate market will grow to reach 25 BN USD by 2028. Should Simris be able to create a milestone / royalty business in ADC development, based on its closed, horizontal photobioreactor, this would be a significant long-term revenue opportunity for the company.
Far reaching implications for the share
It has long been debated where Simris should allocate its limited resources to best capitalize on all the various and highly dispersed business opportunities that come with owning a world class microalgae production facility. While we expect to see continued biomass deals as the ones press released in the past year, and a pick-up following the re-launch of the Omega-3 this fall, it is now clear that the CEO is gunning for the most ultra-high value opportunity out there, which we also believe to be the one that produces most value for shareholders in the long-term. With the strengthened financials after the combined rights and directed share issues during summer, that raised 25 MSEK before costs, we expect that Simris is fit to pursue affordable bolt-on acquisitions provided they are accretive to the Simris share price.
All in all, we continue to see a significant revaluation potential in Simris, and that the triggers are now starting to line up, the most important one would be an accretive M&A deal that can accelerate the venture in the biopharma space. For now, we continue to see an upside risk to our forecast of 25 MSEK in sales in 2023 and 35 MSEK in 2024 with a positive EBITDA by 2025. Supported by only a fraction of listed peer multiples we find support for a fair value of 150 MSEK in 2023 and 210 MSEK in 2024, which translates to 0.85 SEK and 1.19 SEK per share in 2023 and 2024 respectively.
Read more about Simris Alg here
With four orders with a total value of 7.5 MSEK in the last eight months, of which two booked in the first two months of 2022, it is
GENERAL DISCLAIMER AND COPYRIGHT
This commissioned research report is for informational purposes only and is to be considered marketing communication. This research does not constitute investment advice and is not a solicitation to buy shares. Information provided here or on Emergers' website emergers.se is not intended to be financial advice. This research shall not be construed as a recommendation or solicitation to invest in the companies described. Emergers cannot be held liable for either direct or indirect damages caused by decisions made on the basis of information in this analysis. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
This material is not intended to be financial advice. This material has been commissioned by the Company in question and prepared and issued by Emergers, in consideration of a fee payable by the Company. Emergers charges a standard fee for the production and broad dissemination of a detailed note following by regular update notes. Fees are paid upfront in cash without recourse. Emergers may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.
Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained herein represent those of the research analyst at Emergers at the time of publication. The company has been given the opportunity to influence factual statements before publication, but forecasts, conclusions and valuation reasoning are Emergers’ own. Forward-looking information or statements contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.
Exclusion of Liability: To the fullest extent allowed by law, Emergers shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained in this material.
No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Emergers’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in this material may not be eligible for sale in all jurisdictions or to certain categories of investors. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
Investment in securities mentioned: Emergers has a restrictive policy relating to personal dealing and conflicts of interest. Emergers does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Emergers may have a position in any or related securities mentioned in this report, subject to Emergers' policies on personal dealing and conflicts of interest.
Copyright: Copyright 2021 Incirrata AB (Emergers)
This document is prepared and provided by Emergers for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.
This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
Emergers relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Emergers does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.