Redeye - Hansa Biopharma Q2; Idefirix sales progress and secured funding to end 2024
Hansa Biopharma (Hansa) delivers another quarter with improved Idefirix European sales. The positive Q1 surprise is almost matched in Q2, and sales seem to be above both consensus and our expectations. Hansa has also secured non-equity dilutive funding to 2024 with a secured debt arrangement with US NovaQuest Capital Management. We expect a distinct positive reaction compared with the regional equity market.
Hansa delivers sales of SEK 26m, of which SEK 19m is product sales which is down slightly from the earlier Q1, which was a distinctly positive surprise. The Q2 sales are approximately 20% above our expectations and 40% above the market, even if this is still at an early stage of the European launch. The Q2 progress is supported by market access in 7 countries with the prospects of securing access in an additional 11 countries during 2022. With the expanded access in both France and UK, we now expect Hansa to have a good chance of delivering higher H2 sales compared with the SEK 56,7m delivered during H1. We expect Hansa reach above SEK 100m in product sales in 2022.
Hansa continues to advance the product pipeline, and late-stage studies and post (conditional) approval studies include Europe (kidney transplant postapproval), US kidney trx (ConfIdeS fully recruited pivotal by end 2022), anti-GBM (phase 3 initiated during H2 2022), GBS (Phase 3) and AMR (Phase 2). The pipeline activity, together with the early stage of the European launch suggests that Hans will require growth capital over the next three years. We welcome the fact that Hansa has secured growth capital to the end of 2024 based on a non-equity dilutive USD 70m debt arrangement with US NovaQuest Capital Management (have structured some 35+ tailored capital solutions to support pivotal clinical trials and product launches typically in the USD 30-100m range). The transaction structure includes;
- It is based on the US approval and sales of Imflifidase in the Kidney trx market and the anti-GBM market (phase 3).
- It is based on mid-single digit royalties (related to net product sales) and some unspecified milestone payments.
- It is capped at a maximum payment of USD 140m (2x the initial funding) by 2028 or earlier.
- The structure also includes some potential catch-up payments to secure some cash flow for NovaQuest (presumably if there are some substantial delays vs the expected timetable)
- If the candidates are unsuccessful, some secured rights are in the IP assets as collateral.
The planned NovaQuest transaction is an interesting financial arrangement where the exact cost is related to the sizes of the royalties, the size of the milestone royalties and the launch success (a successful launch will trigger earlier payments). Our initial impression is that the NovaQuest confirms the future potential of the US Imlifidase launch and the anti-GBM launch and is willing to share some of the risk/incentives. We look forward to a further clarification during the Q2 call later today at CET 14.00.
The operating cost base is higher in Q2 with some SEK 32m of additional cost in R&D plus SG&A (SEK 183m vs SEK 151m) which reflects the launch and the pipeline progress. We can expect the operational cost base to continue to increase until mid-2023.
Hansa has probably delivered Idefirix to some six patients during Q2. Together with contracted revenues of SEK 6.9 (revenues recorded from Axis-Shield and Sarepta agreements), recorded sales are SEK 26,4m during Q2 with SEK 616m (SEK 754m for Q1) in cash plus short-term investment balances, and the company is financed into end 2024 once the transaction with NovaQuest is activated. We point to:
- Market access in 7-8 countries, including pricing and reimbursement (full or partly)
- Post-authorization efficacy study (PAES) market study initiated, which will expand the clinical experience in Europe
- Ten priority canters are now ready to treat patients.
- The US (ConfIdeS) study is well underway and has recruited 22 (16) patients out of 64. Hansa is on track to complete the enrolment during H2 2022
- All five major European markets are now in the process of securing market access to Idefirix
- Agreement on patient treatment funding in seven-eight (six) countries
A growing number of patients are also identified and prioritized among an increasing number of priority canters ahead of treatment, suggesting that we can expect more treatment and sales during 2023. Hansa is approaching the mid-term stage of the commercialization stage (2023/24 to 2026/27, in our view). Idefirix launch activities, trial progress and external collaborations remain Hansa’s most essential value drivers at this stage. The actual sales continue to improve, but we expect sales to stay modest and volatile at this early launch stage.
The current valuation is attractive for investors prepared to look into 2023 and beyond. Our base case value proposition is SEK 410 (Bear SEK 175 and Bull SEK 600) is under review. Hansa’s Q2 result will likely trigger a positive reaction mainly based on the very modest valuations, secured access to growth capital and a promising outlook over the next 12 to 24 months.
