Looking beyond congenital deficiency for Ryplazim
ProMetic has announced that plasminogen (Ryplazim) has been granted Orphan Drug designation by the FDA for the treatment of idiopathic pulmonary fibrosis (IPF), a fibrotic disease of the lung. While we generally don’t get too excited about such designations, we do believe this is of note given ProMetic’s strong focus on this indication through the development of PBI-4050. Ryplazim would be ProMetic’s second drug to receive Orphan Drug status from the FDA for this blockbuster indication, potentially creating an area of expertise in IPF. Although both drugs remain years away from commercialization in IPF (‘4050 is ready to enter a pivotal Phase III trial), we believe this indication represents a significant opportunity given safety and efficacy concerns surrounding existing therapies. Moreover, we believe the potential development of plasminogen in IPF underscores the applicability of this drug beyond congenital deficiency therapy.
Although timelines have slipped recently, we continue to see several catalysts lined
up for ProMetic in coming months including more data from PBI-4050, the initiation of clinical studies for PBI-4050 in IPF and DKD and, ultimately, the expected FDA approval of Ryplazim.
Investment highlights
• We think Ryplazim still has a good chance of approval. The FDA has granted Ryplazim a PDUFA date of April 14, 2018. The Ryplazim BLA is supported by strong clinical data, Orphan Drug status, an Accelerated Approval pathway, and a Rare Pediatric Disease designation. As such, we believe the drug could address an unmet clinical need and we see a strong likelihood that Ryplazim will be approved next year, providing a significant potential catalyst for the stock.
• We believe PBI-4050 is an attractive partnering candidate. We believe the planned pivotal study for PBI-4050 in IPF will likely require a partner with substantial resources to complete. However, given the limited competitive landscape in IPF, we believe that PBI-4050 could be an attractive partnering candidate for big pharma.
• Looking for ProMetic to control its burn rate. We believe that the key risk for ProMetic is its cash burn. While a Priority Review voucher likely has some value and there is the potential for non-dilutive licensing deals, we are nonetheless looking for a reduced burn rate ahead of the expected approval of Ryplazim early next year.
Valuation
We value ProMetic based on a sum-of-the-parts. We value the resin business using a DCF analysis (8.1% WACC and 2.0% terminal growth), plasma-derived therapeutics with an explicit NPV, and the small molecule pipeline with a pNPV. Based on this analysis, we arrive at a target price of C$4.00; our target implies an 199% annualized return and continues to support our BUY recommendation.