$70m at $0.30 for 233.333m shares - a dilution of c. 15%.

No SPP as suspected.

Use of funds focused on Sofdra.

Thanks to the loyal shareholders.

While it’s easy to be disgruntled, the big picture is that not too far down the track, this business is likely to be worth a lot more.

Overall, I do want this business to have a strong balance sheet, but I still don’t understand why they didn’t raise a few days down the track.

Will look at the price action at the open and see if I can sneak in some more. Unlikely though.

$BOT has announced approval of Sofdra.

(Just seen the ASX announcement come through as I board flight for 2 weeks holiday.)

$BOT into a trading halt pending announcement of FDA Approval for Sofdra.

Looks like a pre-emptive strike to prevent any leaks ahead of them issuing an ASX announcement.

Watch this space.

Disc: Held in RL and SM

Just over a month ago Euroz Hartley published a short term price target for $BOT of $0.33, predicated on their assessment of the typical run-up in SP ahead of an FDA decision. Sure enough, with days to go, SP has passed this target standing today at $0.345.

I have absolutely no interest in short-term trading, as I am placing a 90% risked bet that this will be a much more valuable proposition. Much more over time. That said, it is interesting to watch the volumes and prices.

Last week's "non-announcement" appears to have given the market a little nudge, reminding the hot money out there about the impending FDA decision.

In the success case, on fundamental grounds, I expect the SP to go a lot higher. However, if there is a negative decision, this baby has pumped up enough that any correction will likely be hard indeed.

At time or writing there are still slightly higher volumes in the "BUY" queue (9m) than the "SELL" queue (7m), but things have evened up a little from this morning. But today marks the 3rd conseuctive day of higher than normal volumes.

tick-tick-tick

Disc: Held in RL and SM

$BOT have sent existing shareholders and everyone on their mailing list the updated Euroz Hartley report following last weeks Commercial. It is a thorough and well-written report, so I have put screenshot below in this straw.

Its gives a valuation of $0.33, and clearly seems to encourage the pre-FDA SP uplift short term trade. (Not for me)

I prefer to focus on the long term investment proposition in the success case.

Before reading, be aware the EH supported $BOT in the recent capital raise. It is also likely based on my reading of the disclaimer they have been engaged by $BOT as their defence adviser. EH have been paid by $BOT in shares for the advisory services they've provided. So although EH have certified that this is their own opionion, it is clear that it has been prepared benefiting from the EH collaboration with $BOT management and board.

So when I read it, I read it more as the view of $BOT management than of an independent analyst. So, I wanted to make that clear up front.

You can read the report yourself, but I wanted to highlight a few points.

FDA Approval

The imply a CoS of FDA approval in June as 90%

Benchmarking ASX FDA Knockbacks Leading to CLRs

They compare recent ASX companies that received a knockback at FDA approval (listed in Fig 3. on page 4). Of the 7, 5 were finally approved, one withdrawn, and one under review.

However, what is important, is that none of the sample group received knock-backs purely for label/patient information data. All were some combination of safety, efficacy of manufacutring, with one (later approved) not providing details.

%BOT's CRL was was labelling and patient information. The corrected labelling led to 100% compliance in the human factors study.

Therefore I think 90% is a reasonable CoS, and perhaps given $BOT reports of having high confidence of approval following engagement with the FDA in recent weeks, it is hard to understand the basis for a rejection. Should a rejection occur it would be a shock.

Revenue Profile

Figure 8 on Page 7 provide revenue projections. The growth curve looks reasonable. However, to my eye it looks conservative give the gap in the market that SOFDRA addresses. The projection is to only penetrate 1.0% of the market by 2033 - 9 years after launch.

As ever, the drug will only suit some sufferers, and not everyone will respond. In any event there is certainly upside to this if the drug is well-received by the market.

Cautioning my own enthusiasm, I note that the analysis has considered the progress of the drug in Japan in developing their projections. $BOT reported that Kaken have sold 350,000 units in the last 12 months in Japan. The valuation forecast projects the US taking 5 years to get to this. So following launch (assuming approval) it will be instructive to follow the early US profile compared with the experience in Japan. There has to be a bull case to do much better than the EH profile.

Valuation

Of EH's valuation of $0.33, $0.26 comes from SOFDRA and $0.06 from the development portfolio.

My Quick Valuation - Bull Case - SOFDRA is approved in June with minor risk adjustment

I think the EH sales profile is a prudent forecast, and I base my valuation solely on SOFDRA.

On the basis that $BOT achieve an EBIT in 2029 of US$104m, carrying no debt, and applying tax at 30% and USD:AUD 0.67 give 2029 NPAT of A$109m.

With 1,575m SOI, although $BOT will be highly cash generative quite soon, I'll allow some dilution due to share based compensation, so assume SOI of 1,800 in 2029.

That gives a 2029 EPS of $0.061.

I'll deal with the uncertainty via the P/E ratio, ranging from 25 to 45 - probably very conservative for a high growth pharma company.

I'll add a risk premium to the WACC, and discount at 12%.

My unrisked valuation range is: $0.88 to $0.1.56 (but including a margin of safety in the risk premium)

So, now I am going to apply my 90% CoS, and assume that in the 10% failure case

1. There is a net 5% chance that there is a subsequence approval on what ever the residual issues are, and that the profile gets pushed out by another year, leading to a further discount and a further dilution of 10%.
2. There is a net 5% chance that the drug is withdrawn amd the value of the business is $0.06 of the development portfolio.

Boiling all this up together, and I get a risked valuation of: $1.13

What do I have to believe: 1) SOFDRA gets approved some time in the next year, 2) the telemarketing strategy is successful, 3) the product gets some traction over 9 years with 1% of the potential market.

Not a long bow to draw for a Bull Case.

Now at the start of this straw, I speculated that EH are $BOT's defence advisor. If their valuation is truly $0.33 that clearly cannot be true, because as my analysis shows, if you believe the forecast, and had deep pockets, you'd happily put in a takeover offer today of $0.50 to $0.60. The board should send any acquirer away for anything south of $0.60 or even $1.00 IMHO, given the upside which I haven't even attempted to assess.

So there is a lot of risking being applied to the EH analysis, unless I am missing something!

(I note that my fellow $BOT bull @Nnyck777 is at $1.92 ... I'm slowly getting there :-)

Disc: Held in RL and SM

I attended the $BOT Commercial Webinar today.

Presentation

Obviously, everything hinges on the FDA decision slated for late June. However, that aside, the presentation gives a good indication as to just how advanced they are with their innovative, direct-to-cutomer via telehealth approach.

I have no experience of comparable case studies using this launch approach to be able to critically assess it. However, the team have approached all the Tier 1 payors, and seem to be getting a positive response. Manufacturing and supply chain is all set up.

Today's SP response continues a steady trend of buyers moving in following the confirmation a few months ago that their resubmission to the FDA represented a "Complete Response". That of course does not prejudge the approval decision, but the market is starting to position itself for an approval (as I indicated it would last year).

Clearly, an acquisition (i.e., being acquired) is very much on these folks mind ... a lot of the team has been there before.

Potentially a big upside here. Over to you, FDA. Let the countdown continue.

Happy to hold for a binary outcome, as the CoS looks high. But FDA approval is never a slam dunk.

Disc: Held in RL and SM

$BOT have issued their 4C.

Highlights

Cash holdings actually increased, thanks to exercise of options.

We're now two months away from the expected FDA decision on Sofdra - one way or another that will be a major SP catalyst, with anything but an approval a major surprise.

Accordingly, $BOT are making good progress in preparations for launch. They've focused activities on the US payers (insurers) and report"

"The Company has now engaged players that account for 80% of covered lives in the US and is pleased with the feedback regarding pricing and the relative absence of obstacles for patients to access Sofdra following planned approval."

So, if the approval is straighforward and goes as expected, then FY25 is going to be an important year!

Disc: Held in RL and SM

ASX Announcement

$BOT announcing this morning that the resubmission for Sofdra has been accepted by FDA as a "complete response" and that the timeline from resubmission in December to the approval decision is 6-months. So the decision is slated for June.

This is somewhat of a non-announcement, as that is what has been communicated previously and also what is understood by the market.

However, it is clear that $BOT are being careful to disclose everything around this key milestone to keep investors informed.

I also think it might address speculation by some that the FDA decision may come sooner.

@Nnyck777 posted a summary of the Euroz Harley report on $BOT earlier this year. I tried my usual trick of Googling "Botanix Pharmaceuticals Analyst reports" and bingo, scored the link to the April 2023 report (I don't know if there has been any update) buried somewhere on the Botanix website.

Euroz Hartleys Report

I don't think it has previously been posted on SM so I thought I'd share it for those who are looking at trying to value $BOT.

Note the disclosure that the analyst owns $BOT shares and that Euroz Hartley has been involved in providing corporate advice, raising equity and has been paid for its services in $BOT equity. So clearly they have a lot of interest in the SP of $BOT, so the research has to be viewed with that in mind.

Ahead of developing my own view in the New Year, I was interested to see the market penetration and revenue build profile assumptions. It is curious to see the forecasts have Sofdra very significantly expanding the addressible market, given its price premium to existing treatments. I think understanding this further is important.

The 6-9 month timing delay of the FDA setback is not necessarily that material to the revenue build projection in CY24 assuming a July launch if they position themselve aggressively ahead of FDA approval, which they appear to be doing. Also, given the ability for sales and marketing to target the relatively small number of dispensing dermatologists, the build profile through 2025-26-27 is actually quite pedestrian IF the product proves to be a hit with patients. So maybe, there is an element of risking in the build? Definitely room for some scenario thinking!

The target SP in this report is $0.28, and with the passage of 9 months since the report and a delay of 6-9 months due to the FDA setback, its still probably a reasonable price target today, if you accept the numbers. As I said, I will have a go at this in the New Year, so I am not giving a view on this at this stage.

Disc: Held in RL and SM

$BOT report that they have resubmitted the NDA for Sofdra to the FDA.

ASX Announcement

The original timeline they were targetting when they first received the setback from the FDA in September was for resubmission in early Q1 CY24 aiming for FDA approval in mid-CY24, with immediate commercial launch thereafter.

Along that process and since that time we've received two positive updates.

First, on 4-Dec following meeting with the FDA where the agency confirmed that $BOT's approach to update the labelling and patient use instruction are acceptable.

Second, on 14-Dec $BOT announced completion fo the Human Factors study, importantly stating that ALL patients in the trial successfully "prepared and applied Sofdra in accordance with the revised IFU".

CEO Howie McKibbon said "Our focus now is firmly on preparation for commercialisation as we work with FDA towards Sofdra approval by midyear.”

My Analysis

Unless I am missing something, FDA approval of Sofdra is entirely derisked. (That said surprises do happen!) Provide that centre for the HF study was validated (surely it must be), then a 100% compliance result should remove any questions regarding adequacy of the instructions. I don't think it can be clearer than that.

So, today the clock starts on the FDA's 6-month review timeline. Given everything we've learned Sofdra should get approval in late June 2024, with almost immediate launch.

There has been a mild positive market response today, simply because $BOT is doing what it said it would do, and the emerging news is entirely positive.

They've certainly moved along apace. Even though there is a clear sequence in which things should happen, activities are clearly being driven assuming success. That approach will be applied to the commercial / launch activities as well.

I've added 50% to my position this morning in RL, although overall it is still a small holding for me (1.6%). I'm on holiday now, but will do some proper valuation modelling of $BOT in the new year. Approval and early sales within CY24 means there is a lot of potential upside ahead and I think the risk-reward probably justifies a significantly larger position.

According to Med Esthetics, the US market for treatment of axilliary hyperhidrosis reached $500m last year. Given the attractiveness of the gel applicator over injections (which is the second line of treat for those who do not respond well to other topical applications) if $BOT can capture 20% of the market, i.e., revenue of $100m, then its current EV of c. $240m could easily re-rerate to 2x or 3x or more.

For now, I don't think the SP is going anywhere until the next FDA milestone unless $BOT starts to pick up some more analyst coverage. According to Tradingview.com there is one analyst covering it with a price target of $0.3000. (Do any StrawPeople have that research?)

Anyway, it looks like having quite a low risk profile for a drug company at its stage of development.

Disc: Held in RL and SM.

ASX Announcement

Botanix has successfully completed the planned human factors validation study assessing revised Instructions for Use (IFU) for Sofdra

• All HF Study participants successfully prepared and applied Sofdra in accordance with the revised IFU

• Botanix will now prepare to resubmit the Sofdra new drug application to FDA, including the revised IFU, human factors validation study report, and other requested materials

• Submission of the final component requested for FDA approval of Sofdra remains on track for early Q1 CY2024, targeting FDA approval in mid-CY2024

My Analysis

This is an unequivocal and clear statement. All participants in the study successfully followed the instructions. 100%. No ands or buts.

Of course, the FDA will have to review the updated NDA dossier and see if they agree, but it sounds pretty clear.

This removes the sole remaining impediment to getting Sofdra approved. We just have to wait for the FDA review process to complete.

Good news.

Disc: Held in RL and SM

ASX Announcement

$BOT have issued the above announcement following their feedback meeting with the FDA following the failure to receive approval for Sofdra based on the need to clarify patient instructions.

The purpose of the meeting was to better understand the FDA decision and, more importantly, to confirm that the planned changes to be included in the resubmission address the issues. FDA indicated that the proposed changes will be "acceptable for the planned resubmission of the Sofdra NDA package." While that is not the same as saying that the proposed changes will be approved (they can't say that), it is a positive indication that this final hurdle towards approval will be cleared.

The next step is for $BOT to implement the changes and then test them in a "human factors study'. The new patient information and results of the study will then be resubmitted to the FDA early in the new year, with a decision by mid-year.

Predictably, the SP has bounced, now sitting only 12.5% below its recent high just before the FDA setback.

Disc: Held in RL and SM

$BOT is in a trading halt pending announcement of a capital raising.

Despite earlier assurances to the contrary, the 6-12m delay to the FDA approval of Sofdra was always going to strain remaining cash, so in my view it was a matter of when and not if.

Disc: Held in RL and SM

$BOT are holding their AGM today.

The AGM Presentation has no material new information, but it is a good overview of where they are at. Next milestone is meeting before year end to get FDA guidance on the labelling/PIL feedback that has delayed approval of SOFDRA until mid-CY24.

Presentation has further details on the sales and marketing strategy, including details on sales force, geographic focus and telehealth strategy (recent partnership with UpScriptHealth annoucned separately).

Disc: Held in RL and SM

I wanted to better understand the precedence around the FDA letter holding up approval of sofpironium bromide gel based on labelling and patient information deficiencies.

I found an interesting reference on the subject in JAMA (Sacks et al. (2014) JAMA 311(4) 378-384). The article is a little too dated for my liking, but the information in Table 5 is interesting. (below)

Of 151 drugs not approved in their first cycle, 71 were subsequently approved following resubmission, with 80 not approved during the lifetime of the study.

What is more interesting is that only 4 drugs (2.6%) were not approved first time for labelling alone, and all 4 of these were subsequently approved.

Although the median delay in the study was 435 days this includes the entire population which is dominated by drugs with safey, efficiacy, chemistry, manufacturing and controls issues, many of which would have required further clinical trials. There's no data on the delay for labelling ony.

So this provides some independent support for the CEO's confidence that the drug will be approved when the labelling feedback is addressed.

It is many years since I was a practitioner in the industry, so it is good to know that the 2.6% of labelling rejections aligns with my own intuition that, while not un precedented, a labelling-only knockback is unusual.

In his interview on Ausbiz yesterday Howie McKibbon said "It's something that we anticipated. If we were going to get any feedback from the agency, we would have that much earlier in the cycle. So we were quite surprised that this occurred," which reinforced my own expectation that label feedback is usually addressed in earlier communication between the FDA and applicant, prior to the final decision.

Thinking about this overnight, I think the reason that this didn't happen in this case, is that the instructions relate to the use of the gel applicator, that requires validation in a controlled environment. So, its not just a change to the label (as you might easily do for a pill or capsule) but a patient instruction that has to be validated by observation and requires a supplemental submission reporting the results. I think that is why a resubmission is required and makes me think that maybe Howie shouldn't be so surprised. (It also weakens any argument about conspiracies!)

Source: Sacks et al. (2014)

ASX Announcement

FDA approval for sofpironium bromide gel has not been granted. FDA requires changes to the patient information provided with the product.

There were no adverse comments regarding safety and efficacy, so $BOT believe the path to final approval is de-risked.

This requires $BOT to makes changes to the patient information in the leaflet and the package, to conduct a trial to validate that the instructions result in correct use by patients, and to resubmit to FDA.

$BOT expect to resubmit in 1Q CY24 and to receive approval in mid CY24. They state the effective delay to commercial launch is 3-6 months.

$BOT say they have sufficient funds to launch and will manage costs.

My Takeaway

While disappointing not to receive approval, the work required to address FDA appears straightforward and, with an absence of any clinical issues, approval in mid-24 is further de-risked.

SP Pullback on any disappointment may provide an opportunity.

Disc. Held in RL and SM

$BOT responding to their ASX speeding ticket on yesterday's price action.

ASX Announcement

Yesterday's 14% jump was on the back of reasonable volumes just under 8m shares, indicating not a lot of sellers willing to get out ahead of the imminent FDA annoucement.

Given that the AGM was on Monday (with no online attendance option I am aware of), I wonder what Q&A took place and whether this led to some attendees to top-up. I wish online options were mandatory!

For example, I wonder if anything was said about discussions on the label, which could be a leading indicator?

One way or another, this one should see some further price action in the next week or two! If the result is positive, I'd like to double my initial holding, but buying discipline on price is important and I think I'll limit the order at $0.40, notwithstanding @Nnyck777's eye-watering valuation well beyond that.

Disc: Held in RL and SM