This is the stuff that should get us talking. Ceplene part of the presentation was very in depth. The positive tone was hard to ignore. Jack seemed to address of the concerns I am thinking about today. The size (not quality) of the phase 3 is still a partial issue for me, But conditional approval could easilty resolve that if necessary. After all THERE IS NO CURRENT MAINT THERAPY FOR AML. Definitely an unmet need!
However, Jack seems very confident that our single phase 3 meets all of the criteria for approval with a single trial. If this were for ANOTHER biosimilar type drug, I would have further reservations. Ceplene is unique in what it does, and how it does it.When you look at the whole package, it is very compelling.
On NP1, Jack affirmed our discussions about the DPN trial, Proof on concept was met and now it moves to phase 3. The results were very close considering it was of small size and short duration.
Excellent presentation that answered alot of questions.
Thanks again for your summary!
We've discussed this here before. However, it's probably as good a time as any to update expectations.
I consider myself a very reasonable investor and can't stand some of the ridiculous claims I see made on some of these message boards.
With that as a backdrop, I just don't think it's unreasonable for a small cap biotech with an approved cancer drug to trade at at least 2x estimated sales. So, if you take $200mm as a baseline for Ceplene sales (hundreds of millions per post from onebattery today), 2x that would be a $400mm market cap. Current market cap is $61mm, with a stock price of $1.46. A $400mm market cap would equal a $9.57 stock price. Reduce that by 15% to account for immediate dilution on a stock offering, and you still come up with a stock price north of $8.
The MAJOR benefit with owning EPCT is its relatively full pipeline. If Ceplene is approved, you'd have a biotech company with one approved cancer drug and 5 other drugs currently in clinical trials. THIS PIPELINE SHOULD ACCRUE SOME KIND OF PREMIUM FOR THIS STOCK, yet it hasn't. This benefit should become apparent if Ceplene fails. Most $60mm market cap biotechs have ONE DRUG they are counting on. If that drug fails, stock reaction is immediate and huge. It's not unusual to see these one drug wonder companies down 80% on a drug rejection. While a Ceplene rejection would clearly be a huge negative for the stock, the downside here should be capped at around 35-40%, in my opinion, on the initial reaction and then another 10-15% on having to do dilutive financing at unattractive price levels.
So, the question you have to ask yourself is- what does the overall risk-reward look like on the Ceplene decision. My own work leads me to belive you've got 6x upside on a positive decision and 50% downside. Considering my opinion that Ceplene should have at least a 50/50 approval chance, this seems like a great bet. I actually think that 2x sales is a very conservative estimate of valuation.
I have obviously made a ton of assumptions here to arrive at my conclusions. If I had an opportunity to play odds like this several times a year, I would take it every time. You can never discount the possibility of failure. In this case, the potential rewards seem worth taking the risk.
p.s.- onebattery, thanks for the update. I plan on listening to replay this evening
Thanks mountain, excellent post!
I have been using a higher multiple in my calcs, but I am bias :)
I also assume that Ceplene and Azixa will generate at least 500m if all Azixa indications are met, and 750m if Ceplene is approved in EU and US.
NP1 and Lido BP excluded
Thanks mountain for the reply
I think it is also interesting to look at companies like MBRK that recently got approval. Amoxicillin Pulsys is a reformulation and there are also concerns the drug could be priced too high (insurance companies will not allow to puchase the drug), not to mention the competition on the market for amoxy. MBRK´s pipline isn´t better than EPCT (worse imo).
The point is MBRK market cap is 150m with a drug that faces stiff competition.
With Ceplene you have an orphan drug, unmet medical need and no other option. The drug will sell it self.
So i guess your valuation makes much sense.
notes from the conference on ceplene:
opportunity: hundreds of millions of dollars for ceplene alone in europe alone
0201 study: audited by emea and gcp compliant: that means the data can be considered "trustworthy and reliable"
[great] discussion about the il-2 alone issue: major criticism "historically" was that FDA couldn't determine definitively THEN if il-2 alone was exerting the benefit. jack admits that it couldn't be determined THEN. only published data THEN was one 78 patient trial. since FDA decision, 4 additional large prospective trials published, including 2 at ash, and none show a benefit. "not even a hint of discernable benefit of il-2 alone" 5 randomized trials of nearly 900 patients, range of ages, regimens, all consistently show no benefit "WE CONSIDER THIS A SETTLED ISSUE FROM A REGULATORY PERSPECTIVE"
what is the appropriate endpoint? LFS or OS? new slides here and data intended to be published at copenhagen...LFS at 2 years is a leading indicator of OS at 3 years..."very gratifying very high correlation cooeficient" "WE VIEW THIS WITH THE EMEA REVIEWERS AS A RESOLVED ISSUE"
Agency asked question: since old patients, post hoc, asked to look at data censored for leukemia-related death..at year 3, nearly reaches statistical significance, at 5 years, it does reach statistical significance...
"clearly" fulfils unmet medical need
"the main issue as to whether ceplene will be approved in the next 45 days is whether we meet the guidance for approval based on a single positive trial. we have discected that guidance for the agency and have show them accross every measure that exists for approval based on a single clinical trial WE FULLY MEET THOSE GUIDELINES AND HENCE WE ARE EXPECTING A POSITIVE OPINION."
in the words of alesto, "nuff said"
I'm certain the EPCT management will not give you an answer, since the answer will give the market. However it also appears a strange question. EPCT is not a Ceplene only company. What about Lidopain BP, Lidopain SP, ASAP platform, NP-1, Axiza, EPC2407, and so forth?
I think the market is putting a zero value on the rest of the pipeline except maybe azixa (just look at the spike in april 07). Ceplene is the nearest possible revenue provider and imo we will not move much (if rejected) until we get results from pIII on any drug in the pipeline (excluding partnership,buyout etc).
However, i think we have about 60-40 chance and if approved, we will be looking at a 200m company.
Mal--approve cancer drug?--this could make its way to the teens in no time. With a disapproval?--could go below a buck in a hurry. Depends on the sales and what other larger bio companies are looking and lurking. Keep your fingers crossed....Regards, Ivan