DNB Markets: Isofol Medical - Licensing deal for Canada
Isofol Medical today announced it has entered into a licensing agreement with Paladin Labs for the commercialisation of arfolitixorin. Isofol is entitled to up to cSEK205m in upfront and milestone payments, and double-digit royalties. However, like the previous deal, the company is tight-lipped about the deal structure. On our valuation, there should be only potential upside to this deal as it incurs no more costs and leaves the door to a global licensing deal open. We have not updated our out-licensing scenario, hoping for a clearer picture in the Q3 report. We reiterate our fair value of SEK10–23.
Second licensing deal in H2 secures commercial partner in Canada. Under the terms of the deal, upon regulatory approval, Paladin Labs will be responsible for seeking market authorisation for arfolitixorin in Canada, as well as all the commercial activities. Isofol will receive cSEK205m, which includes an upfront payment and unspecified development-, regulatory- and sales-related milestones. Isofol is also entitled to double-digit sales-related royalties. This is the second licensing deal struck by Isofol in relatively quick succession; while the previous deal in Japan was better received by the market (stock rose c34% then compared to c7% today), nevertheless we believe this is an important commercial milestone that further validates arfolitixorin.
Isofol to remain global sponsor. We expect results from the interim readout in Q1 2021, with in our view the most likely scenario a recommendation to expand the study to 660 patients (from 440) to reach statistical significance.
Clouded deal structure – but likely back-end-loaded. Isofol declined to provide further detail on the deal structure and timing, which clouds our visibility. The company intimated that the Canadian deal has a similar structure to the Japanese one, and we hope to receive more concrete information about the latter with the Q3 report.
Adds upside to our estimates and leaves global rights on the table. While Canada is a smaller market for mCRC, this deal should add potential upside to our valuation. We had not included Canada in our estimates, and this deal should incur no additional costs as clinical trials in Canada are already part of the ongoing study. The company was clear this was the last local deal the market could expect, and that the focus now would be on securing a global licensing deal.
Our estimates not yet updated: fair value of SEK10–23 reiterated. We believe more information is likely to be provided with the upcoming Q3 report, which should help us to model this deal more accurately. Hence we are holding off until then.
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Best regards
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David Martinsson | Markets | Equity Research | Healthcare
DNB Bank ASA, Filial Sverige
Visiting address: Regeringsgatan 59 | Stockholm | Sweden
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Patrik Ling | DNB Markets | Equity Research | Senior Analyst Healthcare
DNB Bank ASA
Regeringsgatan 59 | Stockholm | Sweden