Myovant: Catalysts Powering More Upside
Summary
- Due to the combination of a market downturn and other issues, Myovant shares depreciated substantially.
- Nevertheless, there are powerful fundamental advancements that signal much more upsides going into New Year 2022.
- The partial clinical hold for the SERENE trial is recently removed by the FDA. Orgovyx is poised to gain approval in Europe by mid-year 2022.
- I do much more than just articles at Integrated BioSci Investing: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »
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The need for patience if big profits are to be made from investment. - Phillip Fisher (Warren Buffett's Mentor)
In biotech investing, when a company enters its commercialization phase the stock tends to trade with much volatility. After all, the market is now sizing up whether the approved drugs can deliver robust sales growth. If the drug ultimately becomes a blockbuster, your investment would become a bonanza. Even if the drug manages to procure several hundred of million dollars, the stock tends to trade upward in the coming years. Therefore, you should assess the approved molecule's potential during this period of volatility.
That being said, I'd like to illustrate the aforesaid biotech investing principle through the case of Myovant Sciences (NYSE:MYOV). With two approved therapeutics and label expansions brewing, I strongly believe that the company will enjoy a substantial sales increase in the next few years. As such, the stock will likely rebound to a new high. In this research, I'll feature a fundamental update on Myovant and provide my expectation of this growth bio-equity.
Figure 1: Myovant Sciences chart (Source: StockCharts)
About The Company
As usual, I'll present a brief corporate overview for new investors. If you are familiar with the firm, I recommend that you skip to the subsequent section. Based in Basel Switzerland, Myovant is dedicated to the innovation and commercialization of medicines to serve the unmet needs in women and men's health.
Powering the pipeline is a stellar franchise medicine dubbed relugolix, which is an oral gonadotropin-releasing hormone (i.e., GnRH) blocker. Marketed as Orgovyx, relugolix is currently indicated as an androgen-deprivation treatment for advanced prostate cancer (i.e., APC) in the U.S. The company is also waiting for its approval in Europe.
That aside, relugolix is innovated in a combination pill for other indications. Dubbed Myfembree, this combo is comprised of relugolix, estradiol, and norethindrone. As you can see, Myfembree is recently approved for the treatment of heavy bleeding associated with uterine fibroids. Interestingly, the company is expanding its label for moderate/severe pain associated with endometriosis.
Figure 2: Therapeutic pipeline (Source: Myovant)
Orgovyx Launch Progress
Given that Orgovyx is the crown jewel of this pipeline, you should assess its commercialization progress. Since its approval and launch in late 2020, Orgovyx has treated a total of 8K patients. The net sales for the latest quarter are $18.7M which represents a 78% sequential increase from the previous quarter.
Figure 3: Orgovyx commercialization progress (Source: Myovant)
Based on the said growth trajectory, Orgovyx should reach $100M in net sales for the next fiscal year. This makes sense because more patient adoption would drive additional sales increases. Looking at it another way, the steep curve does not show any signs of slowing down. While you can argue that $100M isn't much, it's still significant for a small company like Myovant.
Figure 4: Orgovyx's gaining more traction (Source: Myovant)
Myfembree Market Penetration
Shifting gears, let us size up Myfembree's prospects. Because Myfembree was approved and launched in the past few months, I do not expect substantial revenue yet. However, you see encouraging early indicators with only $1.7M in revenue in the figure below. That is to say, Myfembree is already distributed to roughly 2,200 providers.
Figure 5: Myfembree early sales signals (Source: Myovant)
Looking ahead, I expect much better sales results. After all, Myfembree demonstrated stellar therapeutic merits and thereby positioned the drug to generate substantially higher sales in the future. Specifically, the mean blood loss reduction with Myfembree was as high as 83.7% for these patients. There was also a significant reduction in hot flashes (i.e., 11%). In other words, when Myovant boosted its sales/marketing team, Myfembree's revenues should correspondingly gap up because you have an excellent medicine.
Figure 6: Myfembree therapeutic progress (Source: Myovant)
Commercialization Partnership With Pfizer
Of note, Myovant shares took a nose-dive in October when Pfizer (PFE) disclosed that they will not exercise their sales/marketing rights for relugolix in the international market. Keep in mind, Pfizer's decision does not impact their collaboration in the North American (US/Canada) market for Orgovyx and Myfembree.
As you can see, the US market is where a company is expected to generate the most revenues due to premium drug pricing in our country. In unlocking additional value for shareholders, Myovant is ascertaining potential partnerships with interested parties for the European market.
Figure 7: Commercialization partnership (Source: Myovant)
Catalysts To Power More Upsides
Beyond what you saw, there are key catalysts that substantially improved Myovant's investing prospects. The most important one is Myfembree's upcoming FDA approval to treat moderate/severe pain associated with endometriosis.
You can appreciate this prudent growth approach (i.e., expanding relugolix's label for endometriosis), as it fits with Phillip Fischer's growth approach. On this metric, Myovant filed its supplemental New Drug Application (i.e., sNDA) for endometriosis and the agency set the Prescription Drug User Fee Act (PDUFA) date for May 6 next year.
Based on my integrated system of forecasting, I ascribed a 65% (i.e., more than favorable) chance of approval for the endometriosis label expansion. My rationale is based on my intuition, the robust data of Myfembree, and the strong demand for novel treatments regarding endometriosis. If approved as I anticipated, Pfizer will pay Myovant $100M in milestone achievement.
Viewing the figure below, there are other catalysts to deliver more upside to Myovant. For instance, the FDA lifted the partial clinical hold for the SERENE trial back in August as I predicted. You also have the upcoming European approval for APC by mid-2022. Of note, I also ascribed a similar success rate (i.e., 65%) for relugolix approval in Europe.
Figure 8: Upcoming catalysts (Source: Myovant)
Financial Assessment
Just as you would get an annual physical for your well-being, it's important to check the financial health of your stock. For instance, your health is affected by "blood flow" as your stock's viability is dependent on the "cash flow." With that in mind, I'll analyze the 2Q2021 earnings report for the period that ended on September 30. Don't be alarmed that this should have been Q3. Myovant simply employs a different time frame for reporting.
As follows, Myovant procured $77.9M in total revenues compared to none for the same period a year prior. Of that figure, the bulk comes from Orgovyx. The other big number came from the Pfizer partnership.
Figure 9: Revenues break down (Source: Myovant)
That aside, there were $26.2M and $40.5M in research and development (R&D) for the same period of comparison. I typically like to favor increasing R&D. However, the lower R&D made sense due to clinical trials (i.e., LIBERTY, HERO, and SPIRIT) completion.
Additionally, there were $21.5M ($0.23 per share) net loss compared to $67.1M ($0.75 per share) decline for the same comparison. On a per-share basis, the bottom line improved by 226.0%. That is an excellent sign for a young company. After all, it signals competent management that can cut costs to bank a net profit in the future.
Figure 10: Key financial metrics (Source: Myovant)
About the balance sheet, there were $657.3M in cash, equivalents, and investments under the Sumitomo Loan Agreement. Against the $96.2M quarterly OpEx, there should be adequate capital to fund operations into 1Q2023. Simply put, the cash position is strong.
Potential Risks
Since investment research is an imperfect science, there are always risks associated with your stock regardless of its fundamental strengths. More importantly, the risks are "growth-cycle dependent." At this point in its life cycle, the main concern for Myovant is if Myfembree will gain FDA approval for endometriosis by May 6 next year. There is also a risk that relugolix won't gain approval for APC in Europe by mid-year 2022. In case of a negative regulatory binary event, it's likely that the stock will tumble by 40% and vice versa.
There is a concern that despite marketing efforts, Orgovyx and Myfembree sales won't increase quickly enough to assuage the market. Furthermore, Myovant might grow too aggressively and thereby run into a potential cash flow constraint.
Conclusion
In all, I recommend Myovant a strong buy with the 5 out of 5 stars rating. Riding the powerful medicines (relugolix), Myovant is making history in the therapeutic innovation space. With the approval and launch of the first oral androgen-deprivation drug for prostate cancer (Orgovyx), Myovant is witnessing increasing sales. By next year, you can expect Orgovyx to deliver much higher sales due to the incoming European approval by mid-year.
Just as important as Orgovyx, you can appreciate more revenues growth from relugolix's Myfembree franchise for uterine fibroids and endometriosis. As you know, Myfembree is being commercialized for uterine fibroids. By May 2022, the drug is most likely to gain approval for endometriosis. Ultimately, the relugolix franchise will either deliver a blockbuster or at least several million dollars in sales
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Comments (11)
Short interest is high at 13.7% given institutions have 85% of the float. It's the ultimate shakedown cannot succeed if mkt conditions are let to improve. Despite FOMC and anticipated rate hikes there is enough liquidity in the mkt. FOMC is still pumping money into the repo mkt while "talking" about balance sheet reduction.
Inflation is high but it's a global phenomenon. Lot of countries around the world are still struggling with COVID-19. FOMC isn't foolish nor is it on am island to disrupt the world economies when they are looking to start or stabilize their economies.
Wall St and Pundits on CNBC and the idiot traders they parade all day. MYOV and rest may have been trades in the past at this stage with 2 SoC possibilities and the magnitude of importance of Myfembree winning approval in Contraceptive mkt is enormous. Dumb day traders parading their trades daily don't understand the magnitude they are momentum chasers. Investors should be lapping up on MYOV with or without take over possibilities. Even if rates go up to 3.5% by end of 2024. MYOV has sufficient cash to reach profitability. The growth in both segments is likely to continue to be 30-40% Q/Q for next 8-12 Qtrs. 11K patients with 100K on ADT and expected to add 300K. The head room for growth is tremendous.
Anyway dumb to ignore the value here. Insanity prevails because CNBC isn't teaching investing.
you make a lot of sense but for as an investor i need to have some idea of market share achievable and the size of the markets, and what peak sales could be until then its all noise to me.
Too many games being played and dumb money keeps chasing the wrong stocks so I think. I am sure they must think I am crazy to load up on MYOV..
Dr. Harvey Tran