Prometic expands production capacity
The biopharmaceutical corporation has today given a clear signal of intent that it is on the pathway to convert its rich pipeline of plasma derived therapeutics, into a multi- centre production operation. The focus for 2015 and 2016 is very much on gaining approvals for multiple candidates which are currently in or imminently due to enter the clinical phase, and we expect no slow-down of development activity in the foreseeable future. However what we do expect is for manufacturing and sales of plasma derived drugs, and hence meaningful revenues to become an increasingly important part of the business mix.
Prometic has today announced a strategic manufacturing agreement with Canadian based Emergent Solutions. Technology transfer will commence in 2015, followed by the scale-up and manufacturing by Emergent of cGMP biopharmaceuticals to enable Prometic to pursue additional IND filings. Importantly Emergent’s Winnipeg facility is FDA licensed enabling Prometic to produce further material of a suitable grade for clinical trials.
The additional product manufacturing capacity will provide the ability to process up to 250,000 litres of plasma annually with the potential for further expansion should the parties agree. Such agreements expand capacity rapidly and at a relatively low cost. This 15-year manufacturing agreement involves an initial annual minimum payment of approximately C$4m per year, rising to C$7m per year in 2018 and to C$9m per year by 2021, for an aggregate total of minimum fees exceeding $100m over the life of the contract. To build an equivalent plant would cost circa C$150m and would not be on stream until 2018, thereby not contributing to the current development pipeline or planned IND applications. Emergent will produce three proteins on behalf of Prometic for IND filing by Q1 2016. Prometic’s Laval facility has a 150k litre capacity with Hematech and Generium due to add up to 500k and 600k litres in Taiwan and Russia respectively by 2018. In due course successful commercialisation of Prometic’s development pipeline has the potential to drive revenues of over C$3,000 per litre of plasma from the multiple products derived by Prometic’s Plasma Protein Purification System (“PPPSTM”).
The Emergent agreement is a highly synergistic addition to Prometic’s growing list of commercial partners and a step towards achieving the 3m capacity in our upside scenario. We leave our valuation model unchanged suggesting an implied base case valuation of C$3.46 per share and an upside scenario of C$7.87.