MITHRA: The era of E4 MITRA BB

After recent turbulence in Mithra’s share price, we come out with a new company note to shed some light on the drivers of the investment case. We continue to see strong value in Mithra’s estetrol (E4) pipeline containing Estelle and Donesta. We have developed three scenarios regarding a deal for the commercialization of the latter which could materialize by year end and limit dependence on existing equity financing lines.

• Estelle represents a significant innovation in contraception, although commercial uptake continues to be slow. The contraceptives market is relatively slow to change, and we foresee long uptake curves until Estelle reaches its peak potential. Especially in the US, a lot depends on the performance of the Australian partner Mayne Pharma.

• Donesta is the major value driver, with a commercial deal imminent. The menopause drug recently reported positive Phase III efficacy readouts, hence we believe a solid partnership is possible given the vast addressable market. We have outlined three different scenarios (bear, base, bull), which show the critical importance of the Donesta deal to the company’s future.

• Several financing and overhead topics have pushed on share sentiment. We point to the existence of dilutive equity financing lines with Goldman Sachs International and LDA Capital, as well recent transactions by the former CEO and a significant Uteron earnout agreement. Although none have a direct impact on the intrinsic value of the E4 pipeline, these elements complicate the assessment of the overall business case.

• Altogether, we lower our target price from € 33 to € 28 and maintain a Buy rating. We slightly decrease our assessment of the addressable market for Estelle and somewhat increase the R&D burn in years to come, but continue to see strong value potential overall. Each of our three Donesta scenarios (at fair values of € 10, € 28 and € 43 per share for bear, base and bull case, respectively) represents an upside versus the current share price.