Bucking the Big Pharma trend
Destiny Pharma (DEST) is focused on developing innovative drugs with the potential to prevent or treat prevalent forms of drug resistant infection. Lead asset XF-73 has potential to be first to a $1.2bn core market. We think that its low propensity to trigger Antimicrobial Resistance (AMR) seen in testing to-date means the strong commercial rationale for XF-73 bucks the trend which has caused a steady retraction in Big Pharma antimicrobials pipelines.In FY18 DEST made progress on achieving its strategic aims including delivering two successful Phase I skin irritation studies for lead program XF-73 a topical gel for intranasal delivery targeted at a new FDA-backed indication for prevention of post-surgical S aureus infection. These studies demonstrate XF-73 has a benign safety profile, fulfilling the requirements needed to initiate the placebo-controlled randomised Phase IIb study in post-surgical S aureus infection which is to commence imminently.
XF-73 has low propensity to trigger Antimicrobial Resistance (AMR) meaning that the drug can be used for high risk surgery to replace mupirocin which is routinely employed off-label in US in pre-surgical prep for S aureus carriers, but which has led to rates of resistance up to 95% in some cases.
The Company ended FY18 with a strong cash position of £12.1m having managed expenses tightly including £3.5m of R&D expenditure, providing a cash reach into 2020 on our forecasts and covering the cost of the Phase IIb trial. Further non-dilutive funding includes the award of up to £1.6m under the UK-China AMR programme for drug discovery with an ocular and dermal focus and is further validation of the XF platform.
DEST shares have underperformed since IPO, falling around 60%. By contrast, the imminent launch of the Phase IIb study is likely to be a key catalyst for revaluation and so we reiterate that at current share price offers a compelling entry point into a novel and commercially attractive antimicrobials pipeline.
We increase our SOTP DCF valuation marginally to £131m updating for cash, FY18 results and with rolling forwards: equivalent to 301p / share.
Destination Maternity is a designer and retailer of maternity apparel. The company operates in various retail locations, including stores in the U.S., Canada and Puerto Rico, and leased departments located within department stores and baby specialty stores throughout the U.S. and in Puerto Rico. The company also sells its merchandise on the Internet, primarily through its Motherhood.com, APeaInThePod.com and DestinationMaternity.com websites. In addition, the company has international store and product supply relationships in the Middle East, South Korea, Mexico and Israel. The company has various international franchised locations, comprised of stand-alone stores and shop-in-shop locations.
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