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Striking it big in small molecules

The licensing deal with Almirall exceeded our expectations and is of great strategic importance. Significant business opportunities remain in the internal programs. We raise the target price and reiterate Buy.

In our latest research note (November 2016) we noted good near term prospects for additional lucrative colla­borations for Nuevolu­tion. The deal with Almirall, announced already in December, promptly proved us right. Almirall obtains the rights to development and commercializ­ation of Nuevolu­tion’s RORγt-inhibitor program within inflammatory skin disorders as well as psoriatic arthritis. Nuevolution will receive up to EUR 453 million in upfront and milestone payments, in addition to royalties on future net sales. From a strategic point, the Almirall deal is an excellent addition to Nuevolution’s existing collabo­rations, such as the recently announced agreement with Amgen. The latter could prove even more lucrative long term but does not provide any upfront payment.

Nuevolution has a strategic goal of delivering five to six business opportunities from 2016 to 2018. With the Amgen and Almirall deals in place in 2016, it is well on course for delivering on this plan. The company retains the rights for use of the RORγt-inhibitor pro­gram outside the field of agree­ment. This includes Rheuma­toid Arthritis, where Nuevolution has reported interesting preclinical results, but may include other inflammatory diseases. This suggests that huge potential value still remains in the internal programs.

The drug discovery technology plat­form Chemetics® has already attracted 17 collaborations, many with Big Pharma. Nuevolution has a solid financial position and recent deals could provide considerable revenue in the coming years. Early stage drug development is inherently risky. Nuevolution however has a consistently proven capacity to identify new drug targets. This provides a safety buffer if some projects should fail.

We raise the target price for the second time in just three months, to SEK 28.1 (from 23.2). The main reason being the Almirall deal. We still see strong share price potential in this somewhat overlooked biotech stock. 

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Källa: Jarl Securities

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