We arrive at an initial valuation of OV of SEK823.8m or SEK59.56 per share. Our valuation is derived from a risk-adjusted NPV analysis on the future earnings of six active clinical programmes, and as standard practice, this includes costs associated with each asset (Exhibit 8). Our earnings estimates are highly provisional, as the company has not disclosed details regarding patient sub-populations selected by the DRP for each asset. We construct a model market for each development programme based on the presumed mechanism of action of each asset, incidence rates of the indications being studied in the current focused Phase Ib/II clinical trials, and the presumed DRP threshold (Exhibit 9). As we have further efficacy data from ongoing trials, these estimates will be adjusted.
In all cases, our valuations of individual assets include associated costs (R&D, SG&A) in which we assume approximately $100,000 per patient per clinical trial including the costs of DRP development, validation and patient screening. We assume that each Phase IIa trial will include approximately 12-17 patients and that a Phase IIb trial will include 30-45 patients. We also assume a gross-to-net of 75% associated with discounts to payers. For all in-licensed assets we assume royalties of 5% to the respective rights holder as the terms of all the agreements have not been disclosed. The probability of success for each clinical programme is estimated based on an analysis of the underlying asset (Exhibit 9).
Exhibit 8: Key assumptions
Value driver |
Indication |
Addressable market (per 100,000 patient-years) |
DRP threshold |
Market penetration |
Launch |
Launch pricing per patient in the US (Europe) |
US peak sales (Europe peak sales) (m) |
LiPlaCis |
Locally advanced or mBC |
7 |
35% |
30% |
2023 |
$91,000 ($68,000) |
$102 ($89) |
Irofulven |
mCDRPC patients alive one year after receiving alternative treatment |
1 |
20% |
45% |
2023 |
$129,000 ($97,000) |
$22 ($30) |
APO010 |
Third-line relapsed/refractory MM |
3 |
20% |
20% |
2023 |
$143,500 ($107,600) |
$41 ($40) |
2X-121 |
Locally advanced or mBC and recurrent ovarian cancer with BRCA gene mutations |
3 |
20% |
45%* |
2023 |
$132,000 ($92,000) |
$55 ($61) |
2X-111 |
BMBC and GBM |
6 |
20% |
25%* |
2024 |
$169,000 ($127,000) |
$89 ($123) |
Dovitinib |
Metastatic liver cancer and third-line treatment for metastatic RCC |
2 |
20% |
50% |
2024 |
$145,000 ($109,000) |
$67 ($85) |
Source: Edison Investment Research. Notes: Addressable market opportunity is age-adjusted in the US and in Europe; DRP threshold refers to cut off or the inclusion of patients as identified by DRP (our assumptions); *these are averages for the programme (ie programme is targeting more than one indication); mCDRPC= metastatic castration- and docetaxel-resistant prostate cancer; MM=multiple myeloma; BMBC=brain metastases from breast cancer; GBM=glioblastoma multiform; RCC=renal cell carcinoma.
For the LiPlaCis programme, we calculate an addressable market opportunity of seven per 100,000 woman-years in the US and in Europe (age adjusted), which is comprised of the patient with locally advanced or mBC having received prior chemotherapy. We assume the company will include the top 30% of patients most likely to respond to LiPlaCis treatment identified by the DRP, which corresponds to peak sales of $102m in the US ($89m in Europe). We assume a peak penetration of 30% into this market with a launch price of approximately $91,000 in 2023. In Europe we assume a 25% discount to this price ($68,000). This price is in line and adjusted for future price growth with Doxil, a liposomal formulation of doxorubicin. Our probability of success for LiPlaCis is 25%, which not only reflects the progress OV has made in Phase II development, but also previous failures of liposomal formulations of cisplatin.
Correspondingly, we calculate an approximate market opportunity of one per 100,000 man-years in the US and in Europe (age adjusted) for the irofulven programme. This comprises the patient population with mCDRPC also alive one year after alternative treatment (ie Xtandi or Zytiga). We assume the top 20% of this population identified via gene expression will be treated with irofulven which corresponds to peak sales of $22m in the US ($30m in Europe). We assume a peak penetration of 45% into this specific market with a launch price of roughly $129,000 in the US and $97,000 in Europe assuming a 25% discount, which is in line and adjusted for future price growth with Pfizer’s Xtandi. We assume a 20% probability of approval considering the stage of development, limited in-human clinical data, and considering the irofulven DRP has not been proven and therefore may be ineffective.
For the APO010 programme, we estimate a target market of three patient-years in the US and in Europe (age adjusted) comprised of the MM patient population having already received third-line treatment. We assume a 20% DRP threshold for this group. We also assume a peak penetration of 35% with a 2023 launch price of approximately $143,500 in the US and $107,600 in Europe (25% discount), which corresponds to peak sales of $41m and $40m, respectively. This is price is in line (and adjusted for future growth) with Kyprolis. We similarly assign a probability of success of 20% to the APO010 programme, which is based on limited clinical data in humans, but a solid preclinical profile.
We calculate an addressable market opportunity for the 2X-121 programme of three per 100,000 woman-years in the US and in Europe. This estimation is composed of the patient population with locally advanced or mBC and recurrent ovarian cancer with the BRCA gene mutation. We assume a DRP cut off of 20% and an average penetration into these markets of 45%, which corresponds to peak sales of $55m in the US and $61m in Europe with a launch price of $132,000 in the US ($92,000 in Europe) in 2023. We have assigned a 25% probability of approval considering the demonstrated efficacy of PARP inhibitors in BRCA mutated cancers and the early stage of development.
Likewise, we calculate an average addressable market opportunity for the 2X-111 development program of six per 100,000 per patient-years in the US and in Europe, which includes the patient population with brain metastases from breast cancer (two per 100,000) and patients with glioblastoma (four per 100,000). We calculate a relatively small market opportunity for the brain metastases from breast cancer population given its relatively positive prognosis and that a median of 17% of mBC cases metastases to the brain. We assume the top 20% of patients identified by the DRP will be treated with 2X-111 and an average peak penetration of 25% into this market, which corresponds to peak sales of $89m in the US ($123m in Europe) with a launch price of $169,000 in the US ($127,000 in Europe) in 2024. We have assigned a 25% probability of approval to this programme in which we consider the demonstrated the stage of development and ability of the DRP technology to, an anthracycline chemotherapy with a similar drug profile to doxorubicin.
Lastly, we estimate an addressable market opportunity for dovitinib of two per 100,000 patient-years in the US and in Europe, which includes the patient population having either metastatic liver cancer or renal carcinoma requiring third-line treatment. We assume that the top 20% of patients identified by the dovitinib DRP will be selected for treatment and that the drug will be able to achieve 50% penetration in this market, which corresponds to peak sales of $67m in the US and $85m in Europe. We also assume launch pricing of $145,000 in the US in 2024, which is in line (and adjusted for future growth) with Nexavar. We have assigned dovitinib with a 35% probability of approval, the highest for OV’s pipeline at this time, which is based on the substantial amount of pre-existing clinical data that OV has inherited from Novartis. Given the targeted nature of this trial, there is a chance for a faster approval timeline.
We may increase our valuation if it is clear that the company will pursue the LiPlaCis programme for multiple indications as originally planned. Considering these trials have not been detailed we do not include these in the valuation at this time. We intend to update the valuation with the announcement of new deals (ie the in-licensing of new assets, or out-licensing Phase III ready programmes) and will adjust our valuation as we learn more about the details of the ongoing clinical programmes. Furthermore, we may increase our valuation with the potential validation of the DRP in clinical practice for a number of indications. Post-merger, the combined entity will be comprised of 50.3m shares and current OV shareholders will own 51% of the new company.
Exhibit 9: Valuation of OV
Development Program |
Indication |
Clinical stage |
Prob. of success |
Launch year |
Launch pricing |
Peak sales ($m) |
rNPV (SEKm) |
% owned by OV |
OV rNPV (SEKm) |
LiPlaCis |
mBC |
Phase II |
25% |
2023 |
$91,000 |
190.6 |
377.5 |
29% |
109.5 |
Irofulven |
Prostate cancer |
Phase Ib/II |
20% |
2023 |
$129,000 |
52.6 |
50.9 |
100% |
50.9 |
APO010 |
Multiple myeloma |
Phase Ib/II |
20% |
2023 |
$143,000 |
80.9 |
79.3 |
100% |
79.3 |
2X-121 |
mBC and ovarian cancer |
Phase Ib/II |
25% |
2023 |
$132,000 |
116.4 |
140.5 |
92% |
129.3 |
2X-111 |
Glioblastoma and brain metastases from breast cancer |
Phase Ib/II |
25% |
2024 |
$169,000 |
212.6 |
264.4 |
92% |
243.2 |
Dovitinib |
Renal and liver cancer |
Phase Ib/II |
35% |
2024 |
$145,000 |
152.0 |
387.4 |
40% |
155.0 |
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|
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Total |
|
|
|
|
|
|
|
|
767.2 |
Net cash and equivalents (as of December 2017 and January 2018 rights issue) (SEKm) |
|
|
|
|
56.7 |
Total firm value (SEKm) |
|
|
|
|
|
|
|
823.8 |
Total shares (m) |
|
|
|
|
|
|
|
13.8 |
Value per basic share (SEK) |
|
|
|
|
|
|
|
59.56 |
Source: Edison Investment Research