IX BIOPHARMA LTD. (SGX:42C)
iX Biopharma - Multiple Share Price Catalyst
- Outlicensing of Wafermine for Phase 3 trials is a major share price catalyst for iX Biopharma (SGX:42C) to enter the estimated US$19bn global opioid industry.
- Plans for a Hong Kong IPO could trigger a price discovery of at least a HK$1.5bn (S$260mil) market valuation for the pharmaceutical business.
- Our earnings forecast cut to a net loss in FY22e due to delay in new capacity. Our BUY recommendation for iX Biopharma is maintained. Our DCF (WACC 10%) target price for iX Biopharma is lowered to S$0.335 from S$0.445 following our earnings downgrade and rights issue.
Model update
- FY22 revenue forecast for iX Biopharma is cut from S$12.8mil to S$3.4mil on account of slower Xativa sales and installation of only one freeze-drying machine. Our forecast was 3 machines in FY22e.
- Operating expenses are assumed largely stable.
- Lower other income to account for a possible delay in out-licensing. The global opioid market is around US$19bn. We assume a 5% market share or US$950mil by the licensee.
iX Biopharma - Oulook
- We narrow down iX Biopharma's share price catalyst into 4 areas:
- Wafermine outlicensing: Wafermine is a drug that uses ketamine to treat pain (and depression). The difference is ketamine will be delivered sublingually through iX Biopharma’s WaferiX patented manufacturing process. Wafermine has completed Phase 2 FDA trials. The next phase is to license the drug for Phase 3 trials and commercialization. A licensing deal could involve iX Biopharma receiving one-off upfront payment from a licensee, followed by milestone payments on successful Phase 3 completion, sales milestone of revenue targets and percentage royalties from sales of the product. The timing of a licensing deal is unclear, especially with the disruption from the pandemic. The company engaged licensing consultants in March 2020, after the End-of-Phase 2 meeting with the FDA. Details of the Wafermine trial in our Gound view Magazine.
- Hong Kong IPO: In July 2021, IX Biopharma announced plans to list its pharmaceutical business on the Hong Kong Stock Exchange as a biotech company (Chapter 18A). A successful IPO will allow iX Biopharma to raise funds and trigger a price discovery of this segment of its business. The Chapter 18A listing rules require a minimum market cap of HK$1.5 billion (S$260mil). This is higher than the current market cap.
- Wafersil: A drug for male erectile dysfunction. Wafesil uses the active ingredient sildenafil which is found in Viagra®. Similar to Wafermine, the drug is administered sublingually. In September 2021, IX Biopharma announced a licensing, supply and distribution agreement in China with China Resources Pharmaceutical Commercial Group (CRPCG), 3rd largest pharmaceutical distributor in the country. CRPCG will register the product in China. Upon commercialization, CRPCG will purchase and pay licensing fees to iX Biopharma for Wafersil. The timeline depends on the requirements by China NMPA for product registration, a process that may take up to 3 years.
- Xativa: There are many types of cannabis products, but Xativa is unique because it is delivered sublingually. Sales in Australia commenced in April 2020. We expect medicinal cannabis to be the major contributor of revenue in FY22e. Sales have been affected by delays in securing manufacturing equipment and pandemic lockdowns in Australia. Export agreements have been signed with Brazil and New Zealand. The largest opportunity will be in exporting Xativa to key markets such as the U.S. and Europe.
Recommendation
- Maintain BUY rating on iX Biopharma with a lower DCF target price of S$0.335 (previously S$0.445) due to lower earnings forecast and rights issue.
- See
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-10-20
SGX Stock
Analyst Report
0.335
DOWN
0.445
