Bryan, Garnier & Co publishes a new Research Report on Actelion
BUY, FV CHF65
Actelion : Factoring an adjusted selexipag into our models
Based on a safety and futility analysis, the DMC has just recommended that the GRIPHON study continued to completion. Final results are expected by mid‑2014. Now, is it adequate to keep a selexipag-free FV for Actelion or should the share price start reflecting the value of this drug?
- Over the last 12 to 18 months, we advocated that the pharmaceutical sector was undergoing deep transformations that called for a change in valuation metrics and methods, in particular to better capture the value of increasing R&D productivity and output. As a consequence, very few molecules already in late-stage development are excluded from the FV calculation with the exception of compounds with little public proof-of-concept data, chaotic history and/or unclear mechanism of action.
- As far as selexipag is concerned, based on the various failures of other oral prostacyclins, we could be tempted to consider the drug carries a high-risk of failure in phase III. Nevertheless, it is fair to say that the drug is still making progress and so far has avoided the safety warnings that have prevented other products from reaching the market.
- Should selexipag succeed where others failed, it could reach a significant target market segment with a substantial unmet need. It is estimated that more than 10,000 PAH patients currently use prostacyclins for inhalation or injection and that market value is close to USD 1 bn. The availability of an oral drug would be likely to convert a majority of them into oral users while PG use would probably expand on a global scale.
- Although Actelion would have to pay a royalty rate of 10 to 15% on selexipag sales to Nippon Shinyaku, COGS is expected to be low (4-5%) but, more importantly, marketing synergies with Opsumit would be very significant.
- In conclusion, we believe it is time to include selexipag in our sales model for Actelion with a reasonable 50% probability of success, which represents an addition of 6CHF per share to our FV.
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