This stock is still so illiquid that a single large buyer or seller can move the price in their desired direction. On the buying side, the 3rd largest owner, Bengt Göran, has been continuously buying regardless of the price.
In itself, the valuation is already somewhat high if one only prices the Xlucane case directly with DCF. The bigger challenge then is to determine a fair price considering the entire future potential, and one cannot completely rule out a strategic acquisition by a larger company, which is why I, for one, only dare to make small lightenings.
If one is heavily overweight in Xbrane, it might not be the worst time to lighten up. On the other hand, compared to other pharmaceutical/healthcare companies, for example, in the Nordics, there are many more absurd companies trading at the same valuation. If we compare it to domestic companies better known to the general public, such as Nanoform, whose market cap seems to be over €500 million, or Nightingale at around €300 million, compared to Xbrane’s €295 million. And honestly, I don’t see much sense in these market caps relative to each other. We are talking about an entirely different level of potential with Xbrane, in my own assessment, but everyone can make their own comparisons and conclusions, as well as their own investment decisions.
If Xbrane’s Phase 3 goes through as expected, additional financing through the stock market should be possible with tolerably little dilution, which in turn would strengthen the cash position and protect against the worst downside. In other words, strong share price performance also strengthens faith in the investment case.
Xbrane recently reached a milestone that many investors have been waiting for years. Xlucane’s phase 3 interim results were published, and the drug showed the expected equivalent efficacy to the biological reference drug Lucentis. Based on these results, Xbrane can apply for market authorization for the drug in both Europe and America. Xbrane confirmed it would submit the marketing authorization application to the EMA during Q3 and to the FDA during Q4!
Absolutely brilliant! Now, the last 2-3% risk of the company’s value dropping to zero has essentially been eliminated, as the clinical trial reached its goal. Or, let’s leave a marginal <1% chance that for some reason, marketing authorization won’t be granted.
It will be interesting to see how high the stock price rises and whether Xbrane will soon announce a directed issue, or if they will wait, for example, a month. In any case, at these stock price levels, money can be raised quite affordably.
Great news! In light of this, I’m pondering the significance of the potential launch of Xlucane in H2 2022 (Redeye’s comment on the timeline below). When I owned Intervacc, their first drug approval boosted the stock by 150% in the year preceding the approval.
I wonder if Xlucane’s significance for Xbrane is at all this big?
Of course, the share issue at this point would also affect the stock’s valuation.
Redeye:
"… In light of this news, Xbrane reiterates its previous plan to submit MAA and BLA in Q3 and Q4 2021, respectively. Provided approximately 12 months lead-time for the regulatory process, the current outlook aligns with a launch of Xlucane in the second half of 2022.
Redeye undoubtedly has a very positive view of this news. We argue it brings further validation towards Xbrane’s in-house capabilities, providing strength in partner discussions for subsequent biosimilars."
I don’t completely understand Intervaccia, let alone the potential of their vaccine, but this is a truly significant milestone for Xbrane, even though it was somewhat expected. Therefore, the subdued share price reaction is a big surprise, although it’s understandable given the recent sharp rise, but it’s still not in line. Xbrane has now eliminated the last significant risk factor in the near future in a technological sense, and now only commercial risks remain.
In a broader pharmaceutical company context, this result is easily one of the most significant in the Nordics in recent years. We are talking about a drug molecule with such a large market and therapeutic importance. It’s somewhat absurd that positive Phase 3 results are met with a 2% share price increase, while all sorts of preclinical results, or lower phases, not to mention diagnostic companies’ own announcements, drive the price up by tens of percent.
But of course, this price can also be reasonably considered a fair price, in which case the share rallies of recent weeks can be attributed to market foolishness.
A quick directed share issue for institutional investors, which was expected, likely known in advance, and made room for new shares.
35 million euros will be raised, which should now be enough to reach cash flow positivity. This means about 10% dilution, and in a while, we’ll see where the price settles as trading caused by the issue decreases.
Now that the share price has been quite strong, in my opinion, it’s a perfectly reasonable move from management to capitalize on it in the form of a directed share issue.
380 million kronor in cash, 135 kronor per share, 11.3 percent dilution.
This year, another 14 million euros from the sale of Spherotide should hit the bank, so we should manage without rights issues before positive cash flow.
Good price and a well-timed offering. I only have a small position of a couple of thousand in this, but if/when things progress like this, I’ll have to increase the company’s weight in my portfolio.
In my opinion, the current share price only reflects successes, so I’m not buying head over heels. Gathering information on such a small company is quite challenging. Luckily, there’s this forum and Redeye, so I don’t have to rely solely on guesswork.
The company’s value after the offering is approximately EUR 370M. The forecasted revenue for 2025 is around EUR 100M.
The P/S ratio for 2025 would be 3.7.
What about the P/E ratio? In Redeye’s 10/2020 forecast, EBIT% is 60 and net margin is 47% for 2022. Based on this, let’s assume that 50% of the revenue translates to profit after taxes, i.e., EUR 50M. Based on this, the earnings per share in 2025 could be around EUR 50M / 25M shares = EUR 2 or SEK 20. The P/E ratio for 2025 would be 7.5x at today’s price (SEK 149).
Not an investment recommendation. Does anyone else have calculations that align with this?
Regarding Xlucane, now that Phase 3 has successfully passed, do you think EMA and FDA approvals are very likely? Or are there still significant “medicinal-technical” risks remaining that could prevent the drug from being granted marketing authorization?
There shouldn’t be many other risks, I estimated above that it’s <1%, and these are usually correctable, e.g., deficiencies in production processes, etc.
However, in drug projects of this caliber, the other sections of the marketing authorization are usually prepared so carefully that the risk is indeed very low.
The valuation calculation you presented above is very realistic. From that 100 million, however, all operational costs related to drug sales should probably already be cleared, but this has never been fully disclosed. But since the deal goes by the name “profit share,” I assume that production costs are deducted from the total sales of the drug before the cash flow is distributed to Stada and Xbrane. We’ll have to see exactly how this is implemented in accounting.
If so, then the profit margin could be much higher, and all costs would then be almost investments in future molecules.
It is really difficult to estimate valuation multiples for 2025.
Yes. The figures I presented are based on Redeye’s analysis, and my understanding is that the stock has multibagger potential, considering the information that the risk in drug permits is very small.
If moderate multipliers are used, because the 2025 data (revenue 100M, EBIT 60%) are still only indicative, calculating with a P/E ratio of 25x, the stock would have a 230% upside in 4.5 years. As an option, if everything goes well, that upside could be well over double that (P/E 50x) if the sales of the drug/drugs are still growing strongly.
Thus, the current valuation does not yet seem outrageous. It should be remembered that when drug sales begin, the market will partly value the stock according to the sales outlook for the coming years, meaning that with drug approvals in H1 2022, the valuation could already be strong. There is only a year left until then…
Xbrane’s share price has held up quite well above the IPO price of SEK 135. This suggests that the market sees the IPO price as the “floor price” and that target prices will move above it.
Kempen’s previous target price of SEK 180 is unlikely to decrease.
It’s surprisingly taking Redeye a long time to update their analysis on this one.
Flagging notification, when Avanza Pension’s ownership exceeded 5%. They now own 1,123,017 shares, at the end of June the number was 965,037, meaning the amount has increased by 157,980 pcs during the beginning of July. Of course, that was to be expected, because through Avanza (Avanza) shares have been ripped with both hands in July and the small investors of the neighborhood certainly don’t collect such amounts.
Spotted today on a neighboring site, Haataja’s blog, a story about a familiar company, Xbrane, towards the end of the post.
I’ve been involved in this for quite some time, and my strategy has been to buy more on the rise. It has worked well so far. The biosimilar market is a kind of megatrend right now, and Xbrane has its own platform with clear competitive advantages for manufacturing certain biosimilars. Xlucane alone justifies the current market value, but there’s more coming in the pipeline, and there’s still potential, so the stock is still, in my eyes, strong growth at a reasonable price. I would write more about this too, but the pharmaceutical manufacturing side isn’t my primary field, so I’ll skip it this time.
It’s great that the company is finally starting to get visibility elsewhere than just on the Avanza forum.
Everything seems to be progressing according to plan at Xbrane. This is a good ride to be on.
EMA application submitted. FDA application expected to be submitted during Q4.
Xcimzane (Cimzia) production is being scaled up with the help of a partner. To my knowledge, Xbrane has the world’s only Cimzia biosimilar in its product development pipeline, which means there would be a market of just under two billion euros to conquer starting in 2024.
