The update of our assumptions confirms a huge upside potential
The update of our assumptions confirms a huge upside potentialLATEST
We have estimated the future contributions of all seven NTEs (New Therapeutic Entities) currently under development
We detail here the main assumptions we made, including the probability of success of each NTE
The update of our model after talking to management confirms the huge potential for the share price (over 250% in the mid-term)
FACT
We have adjusted our assumptions after extensive talks with management.
ANALYSIS
After talking with the group’s management, we have entirely revisited our model, which forecasts the launch of the seven NTEs (New Therapeutic Entities) currently under development. This includes namely: Naloxone, Sumatriptan, Midazolam, Adrenaline, Methotrexate, Hydrocortisone and Terbutaline.
Our assumptions are based on the launches of the seven current NTEs that the group is developing. Clinical studies will be carried out in FY22-24. Thereafter, regulatory approvals can be obtained with commercial launches expected in FY25-26.
We have based our estimates on the following assumptions: first, products will be sold through partnership agreements. This means Crossject will benefit from upfront fees and royalties, the former financing part of the clinical studies. Altogether, this boils down to considering that Crossject’s turnover is a fraction (40%) of the final user’s purchasing price, the difference representing the distributor/wholesaler’s margin to account for logistics and marketing costs. We have also considered a risk factor: 50% for all NTEs, except for Midazolam, Epinephrine and Hydrocortisone (70%, i.e. a 30% risk of failure). Lastly, we have integrated the recent success with BARDA (the Biomedical Advanced Research and Development Authority) which has placed a US$60m order (to be delivered as soon as the FDA approval is obtained) with Crossject on Zeneo Midazolam, used in the treatment of epilepsy and against nerve agents, and which will also financially support the late-stage development and regulatory activities to obtain FDA approval of Zeneo Midazolam 10mg and a new paediatric dose (also see our Latest dated 20 June 2022).
As a result, our estimates are based on the assumptions discussed with management in terms of number of units sold (i.e. Zeneo devices) and their ramp-up from commercial launch to maturity, for each sub-market (i.e. each NTE), with a probability that is the risk factor assessing both potential issues in the approval process and the risk of not being able to find a suitable partner.
This had led us to build our cash-flow projections which show a considerable upside to the current market price. On the NAV valuation side, we have considered a conservative sales multiple (3x) for the revenues achieved for each NTE in FY25/26, which also shows a very significant upside potential. Lastly, it is worth noting that the peer valuation penalises Crossject, considering that the latter will not generate any turnover, thus results, before FY24.
IMPACT
The impact on the share price valuation is positive, despite the fact the first market launches will only occur in FY24 (Midazolam). This is mainly due to the fact that the probability of success has risen, as illustrated in our forecasts, and also integrating the first revenues linked to the contract with BARDA. Altogether, the upside potential remains huge (c. 250%).
Crossject SA is a France-based company that designs and develops medical injection systems. The Company specializes in needle-free, pre-filled, single-use injection systems for intradermal, subcutaneous and intramuscular applications for pharmaceutical companies. Is also has a pipeline and three drugs in the preclinical or clinical phase of research. The Company's products, which are based on well-known injectable drugs (chemicals and biologics), are designed to enhance patients' safety, compliance and comfort. Crossject's first ZENEO SUPERGENERIC product is expected to reach the market in the year 2015. The Company has industrial partnerships with Hirtenberger and Recipharm.
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