Van Leeuwhoeck issues research note on Pharming (PHARM.AS): Turning the page.

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Summary:

  • Pharming Group is a Dutch based biopharmaceutical company and one of the oldest publicly traded biotech companies in Europe. The company is focused on the development of recombinant proteins for therapeutic use. Pharming’s main platform is the development of human recombinant proteins through the generation of transgenic animals which express the human protein in their milk.
  • Its lead product is RUCONEST, a recombinant human C1 esterase inhibitor approved for the treatment of angioedema attacks in patients with Hereditary Angioedema (HAE) in the USA (approved 2014) and Europe (approved in 2010). In Europe Pharming commercializes RUCONEST in Austria, France, Germany, Netherlands and UK and has a distribution agreement with Swedish Oprhan Biovitrum (Sobi) for Scandinavia, Eastern Europe and Italy. In the US, Pharming now distributes the product itself.
  • End of last year, Pharming struck a deal with Valeant to acquire all North American commercialisation rights for its own product, RUCONEST, including all rights in the US, Mexico and Canada. The deal had a total value of USD 125 million with an upfront fee paid to Valeant of USD 60 million, and future self- funding sales milestone payments up to a further USD 65 million in total.
  • We feel that with the acquisition of the rights for RUCONEST in North America, the company will propel into profitability much quicker than previously expected. Already in 2017 we expect Pharming to reach a net profit due to an acceleration of sales of RUCONEST. Pharming has taken over the complete sales force for RUCONEST from Valeant and will invest in extending the sales force and medical science liaison (MSL) personnel, both of which are key for a strong uptake of the sales of RUCONEST. MSLs are needed to establish and maintain peer-peer relationships with leading physicians, referred to as Key Opinion Leaders (KOL’s), at major academic institutions and clinics.
  • Following closing of the Valeant deal (08 December 2016), the Company’s cash position was EUR 34 million which should be sufficient to carry out the further development of its pipeline and the further strengthening of its sales and marketing force. Last December, Pharming successfully raised EUR 104 million with the help of top tier investors from the US and Europe through a combination of new equity, straight debt and convertible bonds. With regaining full commercial rights for RUCONEST in North America, the cash flow for Pharming will dramatically improve and we estimate that Pharming will be profitable as of this year.
  • Based on NPV based valuation, we believe that Pharming is substantially undervalued at the current share price of EUR 0.32. Using our valuation model and taking into account the future revenues from RUCONEST for both acute and prophylactic use, the company’s current total value should be EUR 660 million, which translates, based on an expected number of outstanding shares of approximately 700 million following conversion of the EUR 45 million 18 months amortising bond and the EUR 12.5 million 5 year convertible bond, into  EUR 0.94 per share. This represents a substantial upside from the current share price.
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