“We have received the vaccine approved because it protects and we feel completely confident that Strangvac will play a major role in the management of strangles”
More from Finwire via machine translation:
The animal healthcare company Intervacc has seen its share price plummet sharply on Wednesday after a document from the Medical Products Agency circulated on social media. In an interview with Di, CEO Andreas Andersson emphasizes that the company feels completely safe with the strangles vaccine Strangvac.
One of the points from the Medical Products Agency’s report was that vaccination cannot replace infection control measures, and Andersson believes that the company has been clear about this.
Even if you vaccinate your horse, it should not replace infection control measures, the company manager comments.
Regarding the report’s circulation on social media, Andersson believes that the interpretation has taken on a life of its own and that it has been interpreted as meaning that Strangvac does not work, which is said not to be true. The assessment from the company’s side was that the Medical Products Agency’s report was not something the market should pay attention to.
“We may have a continued dialogue with the Medical Products Agency, but I am completely confident that the vaccine will work,” says the CEO, who does not believe that the letter will affect sales.
Translation:
“Our interpretation is that the Medical Products Agency wants to ensure that horse owners and veterinarians continue with infection measures even after vaccinating their horses. We share this view and we will be clear that as horse owners continue to follow regular infection measures. Our goal is to improve the health of the horses, in addition to what is possible today and that this is done through both preventive infection measures and vaccination.”
So, the vaccine doesn’t eliminate quarantine arrangements, nothing more to it than that.
The price recovered a bit, so the previously purchased batch got some quick profits. I sold them and will now monitor where the price settles. No new information has really emerged, so this is a good “research subject” for the impact of sentiment on biotech companies.
Yesterday, retail investors were the sellers; today, presumably, funds and institutions are emptying their portfolios. The buy side is thin, so the outcome is ugly.
It is indeed peculiar that a company with EMA approval and the Swedish medical agency have completely different views on the vaccine’s efficacy.
It’s very difficult to determine the value of a Biotech company without revenue. There’s a lot of psychology involved, tied to share price fluctuations. Is the value now low, appropriate, or high? Impossible to say.
And there’s no real dispute here; the Swedish authority simply announced that quarantine practices will continue regardless of vaccination.
EDIT: By my logic, strict quarantines are precisely a motivation to vaccinate horses, to prevent confirmed illness from occurring.
Perhaps that really explains the lack of faith that has gripped investors. Because horses are largely kept together and there are plenty of contacts between them (stables, equestrian events, etc.), it is concluded that quarantine practices and their cost implications will not be lifted after all. Therefore, demand for the vaccine can be expected to collapse at the starting gate, as it is not a comprehensive solution.
Sales start at the beginning of the year, nothing special there. A good example of why stop-loss (stop-loss) mines should not be used without a very good reason.
According to the authority, the sentence that caused the fuss was taken out of context:
(and hardly by accident, the Twitter activity seemed like deliberate price manipulation)
Today, investor confidence seems to have returned +50% on the board.
A textbook example of how psychology and herd behavior are reflected in stock prices in both directions. Nothing new has happened in the company during the week.
Because the company is my second largest holding and the movement in recent days has been emotional, I decided to practice implementing a DCF model with this company. My previous “mental math” target for this was 80 SEK.
Model assumptions:
Horses in EU: 6M (Google), market growth 2% p.a.
Horses in USA: 7.2M (Google), market growth 2% p.a.
20% vaccination coverage, achieved in 5 years from launch (2%-4%-8%-16%-20%) (cf. influenza 40-70%)
USA approval 2024, sales start 2025
Vaccine doses 1.5/year (approximate, 2 x in the first year, later 1, see EMA guidance)
Dose price 250 SEK (ABG analyses, introduce.se)
Discount rate: 10%
FCF / revenue: 25% (there is great uncertainty here, comparable companies would be needed)
Terminal value perpetual growth rate: 2%
In the Bear case, I believe vaccination coverage remains at 10%, and in the Bull case, it reaches 40%, which gives a range of 24-98 SEK.
Not considered:
Other vaccine candidates
Changes in share count
Market outside EU + US
I would assume that a pretty big illegality would occur in the use of DCF if such a weight was given to a vaccine whose patent protection is expiring for the terminal.
I understand, but if you look at ABG’s analyses, absolute sales would peak in 2031, and there would be practically no sales left by 2040, at which point the present value of the 2031-> period is quite close to zero.
This seems to be the case in their analyses, which I find somewhat perplexing. If the 2031 → current value is close to zero, significant changes must be made to the vaccine coverage and free cash flow generation assumptions to justify the current price with this model. Or, alternatively, factors omitted from the model should be discounted. For example, the pig vaccine could be given a 10% probability of success, as the company has already succeeded once with the same technology. On the other hand, those cash flows are also quite far away.
The company is applying for supplementary protection for its patent. In addition, the comments mention that the biosimilar market is not relevant for vaccines.
In its analyses, ABG has, in my opinion, confused vaccines and medicines, and treats the matter as if “generic” preparations will quickly enter the market once the vaccine’s patent protection expires. However, the fact is that a vaccine is a biological preparation, and a “generic” version of a vaccine would be more accurately described as a biosimilar. These are subject to different regulations.
I expect ABG to significantly revise its analyses regarding the period after patent expiration.
+50% on the board.