Pinned valuation:
2024
Valuation - 25 cents. I think the current market cap of 86 mil is an incredibly low valuation for a business with a drug of pentosan's potential (in OA). That said, the track record of capital management warrants such a low valuation. I'm buggered if I know what it's worth but I think if you've held this long term you may as well see how the phase 3 trials play out. If they somehow get financing and make some progress on their phase 3 trials they could be completely re-rated and I will continue to keep an eye out.
Has taken huge amounts of capital to wade through the clinical trial mire...
2022
PAR I believe is a difficult business to value (perhaps the genre of (essentially) pre - revenue biotechs are all difficult to value and yet if I'm going to hold it I need to value it so here goes:
I hold PAR based on the applications of 'zilosul' in OA (although there are many other research trails being pursued by the compant) and I see three broad futures in this regard:
1) The drug fails its phase 3 clinical trial due to safety or efficacy concerns (I think this is unlikely given the data already published and long safety record in other indications but to me this is a scenario where the business goes to zero)
2) The drug 'succeeds' in phase 3 trials but has poor uptake for one reason or another (used by 0.1% of the target market in US as the lar
3) The drug 'succeeds' in phase 3 trials for not only pain but also for disease modification and becomes a well recognised and mainstream option for the management of OA (~1% of OA patients use zilosul on an ongoing basis in the US as the largest target market).
Clearly there is a huge number of possible futures but I consider these as a basis for forming a valuation recognising how far from the mark they may be.
Earnings in 5 years:
1) The drug fails its phase 3 clinical trial due to safety or efficacy concerns (I think this is unlikely given the data already published and long safety record in other indications but to me this is a scenario where the business goes to zero)
2) The drug 'succeeds' in phase 3 trials but has poor uptake for one reason or another (used by 0.1% of the target market each year in 5 years)
3) The drug 'succeeds' in phase 3 trials for not only pain but also for disease modification and becomes a well recognised and mainstream option for the management of OA (~1% of the targeted OA patients use zilosul each year).
Clearly there is a huge number of possible futures but I consider these as a basis for forming a valuation recognising how far from the mark they may be.
Earnings in 5 years:
1) Zero. Things have not gone well. Money gone.
2) 175 mil revenue/year based on one treatment/year. Let's assume ongoing costs similar to current costs on R&D/trials etc. ~ 50 million/year. Not a well justified assumption but gross margins for pharma referenced in the literature are 70-80% so not completely unreasonable.
Spitballing perhaps earnings of 100mil/year? Obviously a guess. Let's assume 300 million shares (currently 236 mil prior to current cap raising)
At a PE of 20 this would result in a SP of 6.67 discounting back gives 3.94 as fair value now
3) At a PE of 20 this would result in a discounted share price of @124 at the current time...
I feel your pain @GazD.
This morning's App 4C shows they have about 8 months of cash left, albeit at a reducing burn rate due to slowing R&D costs, so should squeeze another 9-12 months out.
So they remain at the mercy of the market.
They just re-submitted phase 3 to FDA and expecting a response this year.
If all goes well they'll start recruiting in Q1 25 for a trial they can't fund as FDA Phase III will cost US$50-60m and take 2+ years AFTER FDA approval!
But at least that will show a path to getting full approval - assuming the trial is a success. No guarantee but seems promising.
I expect they are negotiating with trial partners / potential buyers that will be waiting on the next FDA response to trigger some action...
Disc: Held (0.1% position)
This was the last biotech I held IRL before selling out earlier this year.
The share count has doubled in 5 years and they have almost burnt through $250 million since 2016.
The question I asked myself when I owned it was would I buy this now if I didn't own it. I sold as I've shifted my portfolio to profitable only companies hopefully with better downside protection for when the next market crash inevitably arrives.
