That’s exactly right - research and financial results. In my own thinking, financing solutions, valuation, and sentiment also significantly affect future stock returns. My view formation is roughly composed by balancing these elements.
It is probably clear that in small companies, an analysis published by Inderes can have a stock price impact on the day of publication. Yesterday, Faron seemed to drop a little over 3%? Whether that was due to our analysis or not, everyone can decide for themselves. In any case, I don’t believe that, for example, in 2 weeks, Inderes’ publication will have an impact on the level of the stock price. I recall a graduate thesis has also been done on the topic, according to which Inderes’ monitoring reduces stock volatility (hopefully I remember correctly).
For me, these sometimes have a quite high entertainment value. For example, Arvopaperi published a headline based on five (5) patients: “Faron’s developed cancer drug prolongs life in severe cases”. The stock reaction that day was probably around +15%. I didn’t notice this being a problem for anyone. Similarly, Kauppalehti’s headline “This is a once-in-a-lifetime opportunity for many investors”. Stock +20% and no problem. Inderes publishes a view based on verifiable facts about forecast changes and their impact on future cash flows → stock reaction -3% → conclusion: analysts are shaking the stock market far too much
What if no one did analyses, or they were only available for a significant amount of money? I wouldn’t have the time myself, nor would I really have the expertise to start analyzing all the stocks I’ve invested in. Perhaps a bit off-topic, but let’s add that FINPROVE is a non-randomized study, meaning its results regarding bex are not very significant, other than preliminary indications of possible efficacy/safety.
Apparently, I need to retract a bit on that industrial logic, as Zimbrelimab’s patent doesn’t expire until 2036, so Bex could also increase its value, meaning industrial logic also comes into play for some players.
Once again, if Gilead owns that molecule, it is more valuable to them than it is in Faron’s ownership, because they can also say that in the future, all PD-1 trials will only be done with Zimbe.
If it goes wrong, it’s a tougher situation for Gilead and is part of the game, but it’s really difficult to see Faron agreeing to a similar deal in a licensing scenario.
“That’s exactly it - research and financial results. In addition to this, in my own thinking, financing solutions, valuation, and sentiment also significantly affect future share returns. My view formation is roughly composed by balancing these building blocks.”
On a general level, research and financial results either exceed or are in line with consensus. Financing solutions are, of course, still enigmatic - as the whole journey probably has been - ceteris paribus. In yesterday’s interview, Juho challenged, among other things, Inderes’ valuation - on the basis of which Inderes, among others, has lowered its estimate. Has and how has the first-line value been taken into account compared to previous RR forecasts? I would expect that since there was a connection yesterday, you would have opened up and gone through Juho’s view. If Juho was right, the forecast should change upwards. If Juho was talking nonsense, the forecast does not change or decreases further… How did it go? Well, sentiment is driven by, among other things, the “reduce” guidance and perhaps some party’s attempt to short Faron, perhaps anticipating a future rise. You never know.
What is the correct target price when the views of different parties differ so much?
Good that you refreshed my memory regarding this PD-1. In this case, Gilead is certainly only and exclusively interested in exclusivity, while Faron is only and exclusively interested in working with all PD-1s. How will the cake be divided then? Even in an exclusivity situation alone, both certainly have their own view. As an owner of Faron, my opinion is certainly 70 for Faron and 30 for Gilead. The opposing side would certainly be around 85 for Gilead and 15 for Faron because they get to ride on their drug.
I don’t envy that.
Ralph is certainly the right man for the job; otherwise, he wouldn’t have been hired. There’s still plenty of entertainment to come even before the dose optimization results.
Yes, we did, and I told the same thing as in my message above. I believe it provides a completely exhaustive reason why our forecasts changed the way they did. That is, this message:
BTW, slightly off-topic, I just read the results of our reader survey. One of the key criticisms of our analysis in them is that readers feel we too often accept management’s message uncritically. In this regard, I have no specific comments regarding Faron, but on a general level, you can continue to expect me to strive for as independent thinking and analysis as possible. Many don’t like it when the results are not in line with their own views, but that’s perfectly fine.
What caught my ear from that earnings webcast, when Juho was again asked about partnering, was the comment that, among other things, Bex’s AML use has been under negotiation. So, could it be possible that blood cancers would be partnered separately at this early stage, and solid tumors would be left out of the first deal? For solid tumors, Gilead could be a good guess precisely because of the Zimberelimab link, but if blood cancers are discussed separately, could it be that the first partner would be found from that direction, for example, BMS? Of course, big pharma tends to seek exclusivity regarding these drug candidates, but Bex is still at a very early stage. The whole company can still be bought at a later stage with less risk.
Fortunately, the decision doesn’t seem to be Juho’s, but Faron’s board of directors’. Juho’s role is to coordinate and lead this partnering discussion; expertise comes from their own Hugheses etc. as well as outsourced resources, and the decision is ultimately made by the board, of which Juho is, of course, a member.
”The invention relates to an agent capable of binding to CLEVER-1 in combination with PD-1 and/or PD-L inhibitor for use in a treatment of cancer.”
To sum up: Argument: Whoever comes as a combo for Faron enjoys that protection. Efficacy just needs to be demonstrated for the patent to be beneficial.
Hmm, that patent does not specify which PD-1 is used.
We’re entering a bit of a gray area, but based on that, I could ask: if you demonstrate efficacy with Pembrolizumab, then why wouldn’t a competitor’s biosimilar, which is the same drug, also be acceptable, e.g., a product with the hypothetical name Pembrolizumab-sandoz. In that case, the treating physician makes the decision as to which pembro you use.
However, the people behind the hypothetical Pembrolizumab-sandoz would not be allowed to market their product
Ok, sometimes it was speculated in the thread that there would be a combination drug that could be given, but combining monoclonal antibodies into the same infusion does not seem to be possible. The lines are flushed between infusions. If given simultaneously, it is not known which one caused the allergic reaction. It is not known how the substances react with each other. Are the excipients the same. The problem could, of course, be circumvented by selling PD-1 and Bex in one package, albeit with instructions that these infusions must not be given together. This way, their own PD-1 would be force-sold alongside Bex.
So: It matters which PD-1 is in the combo. A biosimilar could bypass the original product. However, would Bex’s value decrease in the eyes of pembro’s original manufacturer if they continued even as a combo with pembrosimilars? Then one more possibility: Could Bex perhaps be combined off-label with any PD-1, even if efficacy has been demonstrated with another?
There are indeed mAb + mAb combinations in a single product, at least at Roche, which is desperately trying to extend the patent protection of the blockbuster Trastuzumab, so that’s one possible way to benefit from that patent.
My guess about the status of the partnership is based on the following comments.
AML companies are interested, about a dozen of these are really big, although several also have their own development lines underway.
The bank is handling the partnering process. It is likely that the interested companies have been selected and an auction will be held among them.
Shareholder value is being maximized. Money talks. There is no other way, if you value something, show it financially. The same applies to salary as to drug development; value is shown with cash, not promises.
If an auction is underway, we will know when it has taken place → we can calculate how far the money will go. Well, can anyone say how far they will go now?
Did it turn out that Faron had used money slower than expected? That could also explain the early repayment of the current loan in relation to the next point in time when one can draw the next (tranche?) from that same loan agreement. This could be a better solution than holding extra cash in the account and letting the lender settle all installments with shares eventually.
Ok! If Bexi could only be bought as such a combo from the store, no one would be able to combine their own with it. The combo would dominate the market. It would probably require CMC demonstrations for authorities that there is physical and chemical compatibility, no new immunogenicity or similar. Faron probably cannot have an estimate at this stage of all PD-1 preparations, whether they are okay as such a mandatory combo. Of course, everyone has been able to do their own tests, because Bexi has been available for purchase for research use.
Can any auction procedure be used in such a case when each partnership is different, the value of BEX is realized differently for different partners, and thus the partnerships are structurally different? Especially when the subject of the agreement is not necessarily just MDS but some possible rights/obligations, e.g., regarding fixed assets.
Not easy, of course, but doable. It’s likely that those interested in AML are also interested in fixed assets, and it’s simple to ask for an offer for the whole package: initial capital, stages, and royalties separately for different projects. Bankers surely have the know-how to put the offers in order, and Faron can then choose.
Yes, the auction is a good analogy here, although it might be better described as sequential bidding rounds.
For this, an investment bank is needed to facilitate the process, because to attract enough potential participants, a lot of discussions are required, and help is also needed with number crunching so that very different offers can be normalized to the same parameters and ultimately made comparable by net present value.
It is definitely doable, but not without the help of an investment bank, and that’s why it’s bullish for Faron that they are involved. It’s not exactly cheap to keep them involved, so now they are really serious.
Since BEX seems to be the issue in all projects, I don’t believe in, for example, two different partners. Someone can correct me if they also see this as possible.
Someone speculated whether this bank matter was a slip-up from Juho, but it was clearly stated that this is the situation, a partner is being sought, everything is on the table, so in my opinion, it’s good to tell, as it’s a common practice anyway.
Those banks are greedy, most likely getting a % of the advance payment, so I wouldn’t be surprised if Faron joins the dividend payers’ club next year. This is said tongue-in-cheek for the weekend
