Pareto on Biovica: “Despite the regulatory delays, the value proposition is as clear as ever … target price of SEK 103”

Biovica reported its Quarterly results today. Below is Pareto Summary of the report:

Biovica today released its Q2 21/22 report highlighting some progress with clinical studies and pharmaceutical companies while the FDA remains silent. Biovica is still waiting for feedback from the FDA as of end of November and does not expect anymore to get approval for DiviTum before year end. Meanwhile, net sales (research related) have increased to SEK 268k (44) while the operating loss has increased to SEK -14m (-8). Despite the regulatory delays, the value proposition is as clear as ever and thus we reiterate our Buy rating on BIOVIC with a target price of SEK 103.

New clinical data expected in December Biovica keeps building its clinical data library with more results expected to be presented at the San Antonio Breast Cancer Symposium (SABCS), which will take place during 7-10 December.
– Positive results from the clinical study PROMISE (NCT03281902) performed at Mayo clinic
– Positive results from a clinical study performed with Carrick Therapeutics
– According to the company, the data will further confirm DiviTum’s prognostic value in CDK4/6 inhibitor treated metastatic breast cancer patients (this is a second potential use to DiviTum’s treatment monitoring capabilities)  

Increasing demand from pharmaceutical companies The company noted an increasing demand from pharmaceutical companies such as most recently Carrick Therapeutics that is developing a CDK7 inhibitor (samuraciclib). Carrick had reached out to Biovica to investigate whether DiviTum could complement their drug development. First results were presented at SABCS 2021 in triple negative breast cancer, where DiviTum was able to monitor samuraciclib treatment and thus has shown to be a useful monitoring tool also for future CDK inhibitors.

Current status

Biovica is waiting for a feedback from the FDA on last open issues. After that will submit updated application, which should result in FDA approval. For the value of the stock, it is not relevant, if that happens two weeks or two months later. FDA Covid-caused FDA congestion should not impact the value. FDA related 50% sell off is an opportunity. The relevant issue are:

  1. The likelihood of the FDA approval is very high – Pareto gives this 95% probability.
  2. After the FDA approval the share price should re-rate strongly
  3. There will be further material catalysts right after approval – mainly the imminent start of the US sales and agreement on reimbursement with US insurers (expected within two months of the approval)
  4. In 2022 Biovica will file application for other cancer tests
  5. I spoke to the analysts, they believe that next year Biovica could become a takeover target.
  6. Redeye has a bullish scenario over 300 SEK. It is not unrealistic, that we could see this share price value next year

I believe Biovica offers very attractive risk/reward in Scandinavian Healthcare. The share price should at least double after FDA approval and potentially multiply further next year. If you doubled your money playing Xbrane with me, this ride might be even better.

Biovica is reporting on 1/12/2021. The link to webcast is below:

Detail investment thesis:

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The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

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