Analysguiden: Accelerated Development of RP501 for Dry Eyes
In October, Redwood Pharma announced a strategic change in the form of accelerated development of RP501 for dry eyes. RP501 can reach the market within two years and thus generate revenue in the near future. Analysguiden adjusts its target price to SEK 10.
RP501 Can Reach the Market Within 2 years
As expected, Redwood Pharma reported no revenue during H1 2021. Operating profit amounted to SEK -11 million (-8) and the company’s cash position amounted to SEK 22 million at the end of the period. In October, a strategic change was announced in the form of accelerated development of RP501 for dry eyes. While RP101 continues to be a clinically proven, unique drug candidate for postmenopausal women, there will be an increased focus on RP501, which can generate revenue in the near future. RP501 is intended to treat milder forms of dry eyes in a wider patient population with both men and women. As OTC products have a lower price level, the sales potential for RP501 is lower, at the level of USD 50 million per geographical region. Redwood Pharma has assessed that RP501 can reach the market within 2 years and that the company’s cash at hand is sufficient to obtain a CE mark in the EU.
Significant Market for the Treatment of Dry Eyes
With 344 million people worldwide suffering from dry eyes, the market potential for Redwood Pharma's ophthalmic drugs is significant. RP101 for the treatment of DED in postmenopausal women is, after positive phase 2 results, well positioned for continued development in a pivotal phase 3 trial. RP101 has shown significant effect on corneal damage, with a greater difference than the ophthalmic drug Xiidra, for which Novartis acquired the rights in a deal worth up to USD 5.3 billion. In our valuation model, we estimate RP101 could reach peak sales of EUR 500 million.
Target Price Adjusted to SEK 10
RP501 can reach the market within two years and thus generate revenues in the near future. With the accelerated development of RP501, we have now included it with RP101 in our sum-of-the-parts valuation. As the company will not invest more resources in the RP101 program at present, we have reduced the probability of a launch of RP101 in 2026. Overall, our changed assumptions mean that in our base case scenario our new target price is SEK 10 (previously SEK 14).