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Analysis Redwood Pharma: "Significant Potential in Unique Dry Eye Drug"

Detta är en betald analys på uppdrag av Redwood Pharma utförd av Analysguiden

RP101 Has Blockbuster Potential

Redwood Pharma develops ophthalmic drugs in areas with high unmet medical needs. The RP101 program targets dry eye disease (DED) in post-menopausal women by providing a low-dose treatment with estrogen to the front of the eye. After positive phase 2 results were presented in March 2020, the drug candidate is well positioned for further development in a pivotal phase 3 study. In December, US research organization Ora, Inc. published new findings on RP101 that emerged from an independent in-depth analysis. RP101 showed statistically significant clinical effect in terms of inferior corneal staining, with a difference of 0.70 against the control group on day 90. This is notable when considering that Xiidra, to which Novartis recently acquired the rights in a deal worth up to USD 5.3 billion, showed an improvement of less than 0.10 after three months of treatment.

RP501 a New OTC Product for Mild DED

The company's other program, RP501, is intended to treat milder forms of dry eye disease in a broader patient population consisting of both men and women. The completed phase 2 trial of RP101 revealed that the drug delivery platform IntelliGel had properties worth developing further. Based on these findings, Redwood Pharma has now started the project RP501 which is intended as a non- prescription therapy. Since OTC products generally have a lower price point, the sales potential of RP501 is lower, at an estimated USD 50 million per year. However, for Redwood Pharma it has the advantage that it can reach the market and generate revenue as soon as within two to three years.

We Initiate Coverage With a SEK 14 Target Price

Redwood Pharma is a development stage company and an investment does entail significant risk. However, we see great potential in the company's share price if clinical development continues to be successful. We assume that an RP101 launch will take place in 2025, and that the drug will reach peak sales of EUR 500 million. We are initiating coverage of Redwood Pharma with a SEK 14 target price. In our more optimistic bull scenario, we reach a fair value of SEK 28 per share, and in our more pessimistic bear scenario, the corresponding figure is SEK 7 per share. In January, the company also announced that it intends to move to the Nasdaq First North stock exchange.

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