Biocryst Pharmaceuticals' (Nasdaq:NASDAQ:BCRX) stock price has marked a fall in recent days to reach $1.38 as of Nov. 14, 2019). The cumulative reduction in recent sessions has been significant with a cumulative setback of 50% for a month and a half. On Nov. 12, 2019, the company announced a public offering of $55M at a price of $1.45 per share.
On the other hand, on June 11, 2019, the company published the latest data from phase III APEX-S and APEX-2 48-week trials of BCX7353 (daily oral pill for HAE), as well as an exhaustive analysis of the commercial prospects that are expected to be obtained with the commercialization of BCX7353. On the same day, the company reported the results for Q3 2019. Moreover, on Nov. 5, 2019, BioCryst announced the signing of a strategic agreement with the Japanese company Torii Pharmaceuticals. In this agreement, BioCryst will sell the Torii the rights to sell BCX7353 in Japan and will receive an advance payment of $22M, a further $20M later and royalties for the sales of BCX7353 in Japan, which ranges between 15% and 40%. In addition, the positive results of BCX9930's phase I commented on in my previous article.
As you can see, BioCryst has achieved many important milestones in recent days which, in my opinion, lay the foundations for the start of an imminent share price recovery. Furthermore, the uncertainty regarding the lack of cash has been eliminated after the $55M capital increase, the imminent payment of $22M from Torii pharmaceuticals and the upcoming deposit of $30M from Microcap.
I am certain that these current price levels ($1.50) will mark a turning point, and that the stock price will begin an upward phase in the coming months that will lead it to very high levels ($6 or $8) for the second half of next year. By the middle of next year, the commercialization of BCX7353 in the U.S., Japan, and Europe should have commenced which, according to data provided by the company, should generate revenues of more than $500M for the U.S. alone. With a current capitalization of $180M, it is not difficult to imagine the bullish potential that BioCryst currently presents for the coming years:
Ratio 5 times per revenues: 5X500 = $2.5B of predictable capitalization for the coming years.
On Nov. 6, 2019, BioCryst Pharmaceuticals published the latest data from the APEX-S and APEX-2 phase III trials for a 48-week period on BCX7353, as well as a thorough analysis of the commercial prospects that are expected to be obtained as a result of the commercialization of BCX7353. On the same day, the company reported results from the third quarter of 2019.
The results of these trials confirm those presented last May with regard to both efficacy and safety when data was published for a 24-week trial period:
Results of the APeX-S and APeX-2 trials show patients taking 150 mg of oral, once daily BCX7353 achieved a stable average attack rate of ≤ 1 attack per month at 48 weeks.
75 percent of patients taking 150 mg BCX7353 completed 48 weeks of dosing in the Phase 3 APeX‑2 trial.
As can be seen, the results confirm the good efficacy of BCX7353 in preventing HAE attacks. 75% of the patients administered with a 150mg dose have completed a 48-week trial with an average of less than or equal to 1 attack per month, with the monthly average at the beginning of the trail being 3 attacks.
The trials have also confirmed the safety of BCX7353 since no serious adverse effects have been observed during the 48-week trials in both APX-2 and APX-S. In the same press release, a study was published on the commercial possibilities that BCX7353 will have as well as the anticipated income.
According to the results, a total of 7,500 HAE patients are diagnosed and treated in the United States, 80% of which receive treatments to prevent attacks. According to the surveys conducted on doctors who currently treat HAE patients, at least 41% say they are willing to treat their patients with BCX7353, and at least 70% of the patients surveyed say state they are very much prepared to use BCX7353.
The report presents an estimated annual income for BCX7353 of at least $500M in the U.S.
In order to determine the potential market for BCX7353 for the U.S., the drugs which currently exist for treating HAE must be analyzed:
Income forecast 2022
Subcutaneous 2 times per week
Intravenous 2 times per week
Subcutaneous 2 times per month
Oral, daily pill
BCX7353 is the only oral drug that will exist in the market for HAE, and therein essentially lies its advantage over other competing drugs. The efficiency rate demonstrated in phase III last May was lower than that of its competitors. However, in the most recent phase III trials it has been proven to be very useful for a significant percentage of treated patients (75%), in which the attacks have been reduced to less than 1 per month.
Due to its best convenience and the good effectiveness rate shown, it is reasonable to think that BCX7353 will monetize part of the market to its competitors. Cinryze is the drug that will suffer the most from the market launch of BCX7353 since it is the subcutaneous drug with the lowest effectiveness rate.
The table indicates that the income forecast for Cinryze in 2022 will be more than 50% lower than in 2018. This is due to Takhzyro's launch in 2018, which will attract a good part of the current patients treated with Cinryze. Of the $285M expected for Cinryze in 2022, BCX7353 is reasonable to attract more than half, approximately $150M. BCX7353 will also be able to attract part of Takhzyro's sales, although I don't think this will exceed 15% or 20%, which is around $233M. With regards to Haegarda, about 30%, that is $75M. In total this amounts to $458M, a very similar figure to that provided by BioCryst ($500M), thus the company's revenue forecast for the coming years seems reasonable.
It should be noted that this does not take into account sales in Japan or in Europe, and therefore Europe and Japan's sales would have to be added to this U.S. sales forecast figure in order to obtain the global revenue figure. With a current capitalization of around $180M, BioCryst's current undervaluation is immense, with a potential to reach a $2.5B market capitalization in a few years.
BioCryst is expected to submit an NDA to the FDA for BCX7353 this quarter. It must be noted that BCX7353 received fast-track designation by the FDA last year, so an approval is likely to be seen before the start of the second half of next year. Similarly, authorization is expected to be requested from the Japanese Health Authority (PMDA) and the European Health Authority (EMEA) for the first quarter of 2020.
Likewise, the approval of BCX7353 by both health authorities could be expected before the start of the second half of the upcoming year 2020 as it has also received special attention from both of them for approval. It is therefore to be expected that, by the end of 2020, BCX7353 will already be commercialized in the U.S., Japan, and Europe.
On May 11, 2019, BioCryst announced the signing of a strategic agreement with the Japanese company Torii Pharmaceuticals, whereby BioCryst sells the rights to sell BCX7353 in Japan. The agreement involves an advance payment of $22M to BioCryst, and the payment of another $20M following the fulfillment of certain milestones. BioCryst will receive royalties for a percentage of BCX7253 sales that ranges between 15% and 40% depending on the sales figures obtained by Torii.
I believe that this agreement is very favorable for BCRX because it ensures an income from BCX7353 sales in Japan without the need to spend money. Additionally, the negotiated percentage of royalties is in the average sales margin of the biopharmaceutical sector (around 20%).
Moreover, the most important thing is that signing Torii the agreement demonstrates the commercial viability of BCX7353 in Japan. If Torii Pharmaceuticals did not see any chance of success, I am sure that they would not have signed an agreement and they definitely would not have agreed to pay $22M in advance. This payment only represents 16% of the cash balance that Torii presented in its Financial Report on Dec. 31, 2018 ($137M), so the payment is secured.
As previously noted, the company has made a capital increase of $ 55M and an additional $8M from underwriters' option to purchase shares at a price of $1.45 per share. This financial operation was necessary in order to cover the costs of future clinical trials and to start the commercialization of BCX7353 by next year. The abrupt fall in stock price of recent sessions anticipated this capital increase. The company required cash to allow them to undertake future projects and thus calm the markets.
The publication of the quarterly results declared a cash balance of $70M on Sept. 30, 2019, with a cash burn of $24.5M for the quarter. In the conference call in which the results were published, they stated that their objective is to raise $100M in cash before the end of the year. BCRX will receive $30M from Microcap financing, as well as the $22M advance payment from Torii Pharmaceuticals.With the capital increase made for $ 55M, the $100M is already completed.
With said $100M added to the $70M available on Sept. 30, 2019, 1.5-years cash needs would be covered, which is essential in order to continue with the various trials currently being developed.
Although the medium-/long-term prospects are very positive, it is essential to remember that we are facing a biopharma and therefore there are always some risks that must be taken into account:
Nonetheless, if one of these risks become a reality, the stock price could drop lower than the current level, and the turning point of the stock price may be delayed for some time.
Despite the collapse that BioCryst stock is suffering, I am still optimistic for next year. The positive results presented by BCX7353 both in terms of efficiency and safety, the good data reported by BCX9930, the commercial agreement with Tori Pharmaceuticals, and the $100M cash that will be raised from various sources this quarter allow me to believe that next year we will witness an increase in the stock price. Investors must be patient because, if there are no unforeseen adverse effects, we will be rewarded sooner or later. The current share price does not reflect a small percentage of its real value.
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Disclosure: I am/we are long BCRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.