Redeye Life Science Outlook 2021: Analysts’ Top Picks
Redeye Research Note 2021/01/21
Redeye’s Life Science Sector Top Picks 2021
Note: Our Top Picks represent our own views, are not recommendations, and may change during the course of the year.
We chose to include Orphazyme, a pure orphan play, in our 2021 top picks for the following reasons:
- The current valuation represents a significant EV discount to other late-stage, Scandinavian orphan companies
- It is well-funded (est. > DKK 700 mn at 2020 yearend), which could be strengthened by another USD 100 million in non-dilutive cash. This follows if arimoclomol gets approved in NPC by the FDA this year. Orphazyme could then be entitled a Pediatric Review Voucher (PRV), which can be sold to a third party for about USD 100 million
- Orphazyme has a news flow in the first half of 2021 that other biotech companies could dream of. It includes:
- Two phase 3 readouts (in ALS and sIBM)
- Potential approval in NPC, the furthest advanced indication, in both the US and the EU
- Potential advancement into a pivotal stage in a fourth rare indication; Gaucher disease
In our view, the phase III top-line data presented in November was a homerun. Nefecon once again showed a statistically significant improvement on disease-relevant primary and secondary endpoints. We now see a 95% likelihood that Nefecon reaches the market, and we expect an approval could be in place in the US already in Q4 this year.
Despite the encouraging data, the share has declined and is now trading close to levels seen before the data readout. We believe this is unjustified. In our view, the market has yet to grasp Calliditas’ transformation from a drug developer into a commercial biopharma company. 2021 offers several catalysts that could close the gap to our Base case of SEK 250 per share:
- Regulatory filings – Nefecon
- Potential approval – Nefecon
- Partnership agreement in Europe – Nefecon
- Initiation of clinical trials for pipeline projects
Backed by strong cost-saving incentives combined with accelerating market uptake and acceptance for biosimilars in the US, we argue Xbrane is well-positioned with its primary candidate Xlucane. Historical data indicates a roughly 95 percent success rate for Xlucane in its phase III-study, which presents interim data in the middle of 2021. If approved, Xbrane will, together with its partners STADA and Bausch + Lomb, be ready to launch Xlucane at the patent expiry of Lucentis in the EU during the middle of next year.
Xbrane offers a possible long-term value case, as it has relations established with strong partners and further biosimilars approaching clinical studies. Its next biosimilar expected to initiate clinical studies during the first half of 2022 is Xcimzane, a biosimilar to the TNFa-drug Cimzia, which currently has no biosimilars in clinical studies. We argue it could approach our Base Case of SEK 101 while advancing towards interim data; our Bull case amounts to SEK 157.
Catalysts for Xbrane Bipharma include:
- Mid 2021 – Interim data
- Q3 2021 – FDA and EMA filing
- H1 2022 – Clinical studies – Xcimzane
We argue that despite a strong share price performance in the past year, Bonesupport’s coming US launch will further fuel 2021 share performance. Given its established sales channels and a strong and growing customer base in the US with Cerament BVF, we believe surgeons’ uptake with the higher-priced Cerament G will be successful. Sales are likely to increase drastically on all time horizons, reaching SEK +360m in 2022. Based on peers’ EV/sales multiples, BONESUPPORT’s shares could be valued at SEK 130 ± 10% in 2022, i.e., a doubling from current levels. Finally, we believe the company’s progression increasingly positions it as a take-over play.
The catalysts we see for the share in 2021 all revolve around its accelerated commercialization in the US. These include:
- Q1 2021 – FDA clearance (De Novo) for the indication of bone infection (Cerament G)
- Q4 2021 – Clinical trial publication (FORTIFY)
- Q4 2021 – FDA filing (PMA) for the indication of trauma (Cerament G)