Iconovo: Progressing according to plan - Danske Bank
Iconovo’s Q3 20 report was better than expected on both net sales and EBIT. We argue that Iconovo has an impressive operational balance between investments in drug-development capabilities and progress in its out-licensed projects with milestone payments covering most of its operational expenses. Our fair value range points to a valuation range between SEK77-101 per share, corresponding to an upside in the share of between 45-91%.
Better-than-expected headline numbers . Iconovo reported net sales of SEK5.8m (+66% y/y) in Q3 20 versus SEK3.5m in Q3 19. EBIT came in at -SEK2.3m versus -SEK6.4 in Q3 19. In the report, Iconovo also states that the company expects invoicing to be at a similar rate going into Q4 as in Q3, which we view as confirmatory. With its current cash position of SEK72m, the company can cover its burn-rate over the coming three years. Iconovo has strengthened its operational team with two senior recruitments in project management and alliance management and we believe this to be an initiative to accelerate upcoming new projects with potential partners and find new commercial avenues.
Royalty income expected in beginning to mid-2023. Iconovo’s ICOres project with Amneal regarding the generic version of Symbicort is now in its final phase and Iconovo expects that pharmacokinetic studies (to prove similarity of uptake as the original product) are due to start during next year (performed by Amneal) with potential filing in 2022. If achieving a positive outcome from its pharmacokinetic studies, ICOres as a generic version of Symbicort should be available for commercial launch in European countries in early to mid-2023; this is also set to translate into Iconovo collecting its first royalty payments.
Estimate changes. Our estimate revisions are the result of a change in the launch year for ICOres from 2022 to 2023. We have also postponed the launch of ICOres with Intas Pharma. In total this leads to short-term revenue revisions of -SEK9m-32m in net sales 2021-22E.
Valuation. Our updated DCF-derived fair value points to a valuation range of SEK596-783m (previously SEK649-847m), assuming a cost of capital of between 8% and 11%, corresponding to a share price of SEK77-101 (previously SEK83-109).
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