Biovica: Redeye Research joins Pareto in declaring the sell off as a nervous overreaction without and support in changing fundamentals

Pareto issued a note on Monday, that the FDA delay has no material impact on the Biovica value, and the sale off is unjustified. Redye research also came up with the same conclusion. The research is available for free on Biovica website. Full report is below:

Redeye Research:

Biovica: The submission of the updated application will be slightly delayed

Biovica’s next step before the FDA decision is to formally submit the updated application after addressing all FDA’s questions from earlier this year. This is now delayed because FDA has declared that it is not ready to handle the submission. As a result, Biovica will not secure an FDA decision by the end of September, which was the earlier communicated objective. This is most likely a minor delay, and it is outside Biovica’s control and most likely without any impact on the likely outcome. We regard the share price reaction today as a nervous overreaction without any support in changing fundamentals. Our value proposition remains a base case value of SEK 95 (Bull SEK 325 and Bear SEK 20).

This is a negative overreaction

Biovica’s next step before the FDA decision is to formally submit the updated application after addressing all FDA’s questions that the company received just before the summer.

Biovica has an interactive process with the FDA. The message from the FDA is that the authority is not ready to handle this submission as earlier planned and in line with the expected timetable. As a result, Biovica will not secure an FDA decision by the end of September, which was the earlier communicated objective. This is most likely a minor delay, and it is outside Biovica’s control and most likely without any impact on the likely outcome.

We point to the fact that there are other indications that the FDA has not yet reached a business as usual. The FDA is not yet ready to accept new pre-submission meetings during 2021, as an example. Biovica is at the other end of the process, and this is a smaller slippage ahead of the finishing line. This is clearly outside Biovica’s control, and there is no indication that this is related to the outcome or the risk that the FDA should reply with additional questions. Perhaps the FDA is not yet ready to commit the resources to handle the updated application ahead of the decision. The next step for Biovica is to confirm that the FDA has accepted the submission. Once approved for clinical use on the US market, Biovica will have a first-mover advantage. The fact that FDA is still experiencing delays will not change this, and it could even extend the lead.

We regard the share price reaction today as a nervous overreaction without any support in changing fundamentals. Our value proposition remains a base case value of SEK 95 (Bull SEK 325 and Bear SEK 20).

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