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ccamire
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I work for the pharma industry for 20 years and for the last 10 years I have worked as a sell-side analyst and investment banker in healthcare
  • Intel About IntelGenx 1 comment
    Apr 24, 2013 10:45 AM | about stocks: IGXT

    It has been a while, but IntelGenx has finally decided to add an experienced senior executive with significant experience in drug formulation and business development. Dr. Rajiv Khosla has been appointed COO and CSO for the company and will become the new CEO at the beginning of 2014. Dr. Khosla will continue the work that he has been doing since being appointed to the management team as a consultant at the beginning of 2013.

    Looking back at his track record, I think Dr. Khosla is well-equipped for the upcoming commercial phase and should be more aggressive in licensing/partnering activities. Dr. Khosla has over 30 years of experience for five different specialty pharmaceutical companies, including a five year stint at Biovail where he was involved in more than 75 deals. I believe his experience will be valuable in deal making which is where IntelGenx need a little more muscle given the number of new projects maturing and in need of commercial partners.

    With their first FDA approved product, Forfivo XL™, an anti-depressant, launched late in 2012, I am becoming more optimistic about the company becoming profitable in the coming quarters. With another 10 drugs in development and a high probability of regulatory approval, I expect the majority of these drugs to be on the market by 2016. I expect the major risk is not about clinical development and approvability but rather on the commercial timing. Given that all of these drugs are second or third generation drugs, the commercial viability and success depends on the market timing and its reimbursement. If you saw the movie "A Good Year (2006)", Russell Crowe, as a young kid, was asked by his uncle what is the most important thing in life and the uncle said "TIMING". With my short thirty years of experience in the sector both as an analyst and in business development, I can vouch for that also.

    Valuation

    For healthcare companies, the analysis is usually quite complex because many of them have little or no revenues. For emerging technology companies like IntelGenx, the valuation is based on the drug assets in development and the people. The people have been successful at developing 2 drugs so far and another 10 using three different formulations which offer equivalent or better safety profiles for patients and, in some cases, are cheaper than the competition. If you assume an 80% success rate for the drugs currently being developed and an expected average of $50-$100m in end-user sales, with 20% royalties for IGXT, this would mean an EPS of $2.50-$5.00; excluding taxes. Not bad for a company with around 10 people and no debt. Another nice feature for IntelGenx has been is low burn rate which has been below most companies, especially those located in the US, built around ex-Pharma people and salaries. The company has plenty of cash, no lawsuits, and multiple patents to cover their work.

    Maybe the approach is too simplistic; however let's look at the most promising drug in the pipeline which is the anti-migraine drug. This is a $2bn US market with current treatments which I see as basically similar. Then you have IntelGenx with a novel oral strip formulation of the very popular Maxalt (marketed by Merck and now off patent) which sold more than $600m last year. What people need to focus is that when a new formulation comes in the market; it may also expand and captures market share from pretty similar drugs if it works. Patients who have migraine issues need faster onset of action rather than better pricing and doctors are looking for drugs that are safe, fast and efficacious. People don't die from migraine but if you ever had it, you don't care how much it costs, as long as it works. I believe this anti-migraine product could be a $200-300m product at peak revenues and the timing is perfect given that I don't expect any new drugs to hit the market in the next 2-3 years. This is a 2014 event for IntelGenx and it could be important for the company history.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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  • yzzycz
    , contributor
    Comments (173) | Send Message
     
    This is great news. IGXT long and strong. Market Cap is soo small it may increase 10 times just this year.
    24 Apr 2013, 07:27 PM Reply Like
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