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Aequus Pharmaceuticals: Medicom Agreement Extended To 10Mio CAD

|About: Aequus Pharmaceuticals Inc. (AQSZF)

Announcement of 7 Mar 2019 mentions term sheet for exclusive rights for Medicom Dry Eye products with annual peak revenue of ~5Mio CAD.

Aequus recently announced the ratification of the Medicom term sheet and increased the annual peak revenue figures to ~10Mio CAD.

If Aequus succeeds to get regulatory approval for the whole product basket in Q4/2019, our investment thesis of Aequus reaching breakeven in 2020 will get further support.

In my previous article about Aequus Pharmaceuticals (OTCQB:AQSZF) I mentioned the term sheet of 7th Mar 2019 between Aequus and Medicom Healthcare, a United Kingdom based pharmaceutical company with focus on preservative free therapies in ophthalmology. The term sheet covered exclusive commercial rights within Canada and included six products, five of them being part of the Medicom Evolve product line. The annual peak revenue from this basket of products was communicated to be approximately 5Mio CAD.

Some days ago, on 29th July 2019, Aequus announced the ratification of this term sheet and seems to have managed to extend the licensed product portfolio. The annual peak revenue for the products has been communicated to be approximately 10Mio CAD in the latest announcement. This is exciting news for Aequus, and doubling the peak revenue projection is with no doubt another significant step in Aequus’ journey to breakeven.

As no details about any additional product(s) or their market readiness has been officially communicated, I will not update my revenue projections for 2020 / 2021 at the moment because of too many unknowns.

Entering the valley of speculations, however, let us check back on the announcement of 17th Dec 2018 when AQS communicated the signing of a term sheet for “an undisclosed preservative free ophthalmic therapeutic with a European partner”. They also mentioned: “Aequus (…) expects to submit an application for regulatory approval in the second half of 2019 for this product”. Finally, the announcement mentioned annual peak sales between 4-6 Mio CAD.

With Medicom being “a European partner” having a number of additional “preservative free ophthalmic therapeutic” products in their portfolio, it is not unreasonable to assume that the December term sheet has been signed with Medicom, too. As a possible conclusion, the ratified term sheet of 29 Jul 2019 may also have covered the December announcement. In case this turns out to be correct, it is pretty likely that Aequus will combine the application of regulatory approval with Health Canada for the whole 10Mio CAD basket during Q3/2019 as currently communicated for the Medicom Evolve products.

If the puzzle has been put together correctly and Aequus succeeds in getting regulatory approval latest during Q4/2019, our actual investment thesis of seeing Aequus reaching breakeven in 2020 would get a lot of support. Now we have to wait and see if our speculative "if's" materialize.

Last but not least, the agreement of 29 Jul 2019 closes with the following sentence: “Medicom continues to have a robust research and development division, in which Aequus will have first right of refusal on any new products Medicom wishes to commercialize in Canada.”

There is obviously even more potential for the future in the partnership with Medicom.

Disclosure: I am/we are long AQSZF.