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By Elizabeth Senko, CFA
READ THE FULL CASI RESEARCH REPORT
On August 12,2019, CASI Pharmaceuticals (CASI) announced the commercial launch of Evomela, the only approved and commercially available form of melphalan available in China. This is the Company’s first commercialized product and we are encouraged to see that volatile trade tensions between the US and China do not appear to be hampering CASI’s progress towards establishing its footprint as a leading provider of high quality proprietary, licensed and ANDA pharmaceuticals to the rapidly evolving Chinese market.
Management notes the supply chain is queued up, with hospitals and physicians educated on the product and its availability. We assume launch at a price of $6,400 per treatment. Our model includes $0.8 million in Evomela sales for 2019 growing to $3.8 million by the end of 2021. We estimate peak sales of $34 million in 2045, based on 55% market penetration and a price that falls to c. $3,800 per treatment. Sharp price decreases often go hand-in-hand with inclusion on various “approved” drug lists in China, and we believe that CASI will opt for the lower-price/higher market share route in part to suppress potential competition.
CASI Pharmaceutical reported Q219 results on August 9. Results showed continued investment towards launching its recently approved in-licensed drug, Evomela in China, progress towards gaining regulatory approvals for Marqibo and Zevalin and expansion of its robust product portfolio with its investment in CID-103 (also known as TSK011010), an anti-CD38 monoclonal antibody, which expands the Company’s hematology product pipeline.
Research and development for Q219 rose $1.2 million (+76%) to $3.0 million compared to $1.7 million in the year-earlier period, reflecting regulatory, consulting and manufacturing related services, additional personnel and facilities costs. General and administrative spending climbed to $7.0 million in the quarter, including $1.9 million in stock compensation paid to senior management. The balance of the increase stemmed from higher personnel costs in preparation for the marketing launch of Evomela and professional service fees.
In total, CASI reported a net loss of ($0.16) per share, or ($15.3 million) compared with a loss of ($0.07) per share or ($5.9 million) in the first quarter of 2019.
We are adjusting our estimates to reflect higher spending for research and development in 2019 from $7.8 million to $11.9 million, but holding our G&A expense steady at $23.7 million. This change reduces our 2019 EPS estimate from ($0.29) to ($0.34). We are also raising our R&D spending expectations for 2020-2022, reducing our EPS estimates by c. $0.03-0.05 each year.
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