Iconovo: Stepping closer to important milestones – Danske Bank

Iconovo’s Q1 results were confirmatory for us. Since mid-April, Iconovo has had a new CEO, Johan Wäborg, with extensive international experience in product commercialisation, while the former CEO Orest Lastow is stepping down to CTO to accelerate development of the company’s ICOpre inhalation platform. We continue to be positive about the future for Iconovo.

Impact on the investment case. The impact on our investment case is confirmatory. Iconovo reported net sales of SEK1.9m, versus our estimate of SEK1.3m, and EBIT of minus SEK5.0m, versus our estimate of minus SEK5.7m. Opex was 10% higher than we expected. It is worth highlighting that the net sales and EBIT deviations are not of the greatest interest, given that Iconovo is still in the development phase and that we expect larger revenue streams once its products are commercialised with its partners.

Iconovo continues to gain momentum gradually. First, the company has transferred its ICOres budesonide/formoterol product (generic Symbicort) back to Amneal Pharmaceuticals. Second, ICOpre (analogue to GlaxoSmithKline’s (GSK) Ellipta inhalers) has reached important development milestones with three concept inhalers under development. Third, Stevanato expects ICOcap to gain a CE mark later in May, opening it up for clinical trials.

Amneal Pharmaceuticals, back and stronger. We note that during Amneal’s Q1 conference call, it highlighted potential in its production infrastructure in Ireland for both metered-dose inhalers (MDIs) and dry-powder inhalers (DPIs). We believe Amneal’s commercial investments show it fully supports growth in its generic inhalation segment, which should benefit Iconovo on approval and commercialisation of the generic Symbicort (ICOres budesonide/formoterol) product.
Estimate changes. We raise our estimates of operating expenses marginally.

The estimate changes have minor implications for the long-term fair value of Iconovo.
Valuation. Our updated DCF-derived fair value points to a valuation range of SEK599-774m (down from SEK609-786m), assuming a cost of capital of between 9% and 12%, corresponding to a share price of SEK77-99 (previously SEK78-101).