Significant market opportunity.
Iconovo’s addressable market amounts to c.500m people suffering from asthma or COPD (chronic obstructive pulmonary disease). The company’s current product portfolio addresses a market worth c.USD14bn in product sales annually, comprising mainly five approved inhalers (HandiHaler from Boehringer Ingelheim, Breezhaler from Novartis, Advair Diskus and Ellipta inhalers from GSK, and Symbicort Turbuhaler from AstraZeneca). Compared to generic solid oral tablets, the generic market for inhalants is tougher to access due to its high regulatory standards and complexity in drug delivery, combining a drug formulation with an inhaler.
Scalable business model.
We estimate Iconovo will be able to achieve total non-risk-adjusted peak royalty revenue of SEK293m, corresponding to SEK3,590m in combined peak sales from its generic partners by 2031E. Since we assume that Iconovo’s products will be produced, marketed and distributed by its partners, we see limited need for the company to expand its operational organisation to achieve incremental sales. We estimate the company will become profitable in 2021E, with peak operating margins well in excess of 70% beyond 2026E. With SEK89m in net cash (end-Q4 19), we do not fear the company will need to raise additional funds to break even.
Experienced team.
The company was founded in 2013 by former AstraZeneca employees with an extensive background in the development of inhalers and inhalation drug formulations, such as the Symbicort Turbuhaler.
Valuation.
Our DCF-derived fair value points to a valuation interval of SEK609-786m assuming a cost of capital of between 9% and 12%, corresponding to a share price of between SEK78 and SEK101.
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