Redeye: The essential Q3 (November-January) feedback is that the FDA process progresses without significant internal or external disruptions. Biovica is on track for submitting supplementary results in May, and the company is also on track to secure a likely conclusive subsequent FDA decision in July to August, in our view.
Pareto take on today´s results:
| Q3 21/22 (Nov-Jan) report takes – Setting-up own lab in the US |
| Biovica’s Q3 21/22 (Nov-Jan) report was in line with our expectations. The cash burn rate of SEK -14m (-11m) remains increased over last year due to commercialization activities. Cash and cash equivalents at the end of the period amounted to SEK 108m (155), which should last the company into 2H 2023. Biovica will hold a teleconference today at 15:00 CET and in case anything new is mentioned we will follow-up thereafter. While the regulatory delay was long, our view on the product has not changed, we thus reiterate our Buy rating on BIOVIC with a target price of SEK 103. Last regulatory step As mentioned in our note last month, Biovica is preparing to conduct a lab study which is to validate previous results related to DiviTum material specifications and inter-lot variability. The additional data will be included into the re-submission of the 510(k) submission scheduled for May. The FDA will then approve or reject within 30 days i.e. within June (given the FDA sticks to its timelines which we expect to be the case unless there is a resurgence of COVID-19). Considering the extensive FDA discussions that lay behind this last piece of analytical data to be submitted, we believe that DiviTum has a high chance of approval i.e. the FDA is unlikely to suddenly come up with a new concern. Own US lab for commercial operations Biovica announced yesterday that the company is establishing its own analytical lab in the US (in San Diego), which allows more direct interactions between Biovica and payers (as the labs are the ones receiving the reimbursement). It also enables a more direct contact with physicians and patients, which are critical interactions to achieve successful sales. With a foreign lab, Biovica’s test might not get the same attention as it does with an in-house one. Furthermore, due to a missing intermediate, Biovica’s margins on DiviTum are increased. |
Redeye Research Summary
The essential Q3 (November-January) feedback is that the FDA process progresses without significant internal or external disruptions. Biovica is on track for submitting supplementary results in May, and the company is also on track to secure a likely conclusive subsequent FDA decision in July to August, in our view.
In the current geopolitical state with logistical and procedural challenges, the Biovica message that the company remains on track to deliver in May is reassuring. It reduces the risk for any near-term delays in our view.
Biovica continues to secure additional scientific support from studies, including test studies, health economy studies, independent studies, and support from credible publications. This is important to ensure post-approval launch support later in 2022 and beyond.
Biovica has also recruited Kendon Richard as head of sales. We can expect Biovica to share sales and marketing material later in the spring and the updated market access and reimbursement strategy. The decision to set up an in-house CLIA Lab (CLIA = The Clinical Laboratory Improvement Amendments) in San Diego is probably part of this process. This lab will be operational during Q3, and it needs to secure FDA and CMS recognition/certification to our understanding. This Biovica lab will process the Divitum test, and it is also likely to collaborate with future clinical, distribution and commercial partners. The strategy will provide Biovica with improved control of the early launch process, including the pricing, reimbursement and future label expansion processes.
The cost base remains contained with a slight increase reflecting the upcoming US launch with SEK 14.4m during Q3, and the financial position is SEK 108m in cash as of the end of January 2022, which is sufficient for the next 12 months.
The next key trigger
Biovica is on track to deliver the supplementary data to FDA in May, and then we can expect FDA feedback and a decision within 30-60 days. The following five to six months will be most decisive for Biovica. The current share price level reflects a very challenging macro environment with geopolitical disturbances. In our view, the current share price also reflects low specific expectations for Biovica when considering the size of the futures market and the scientific support to date. As a result, Biovica represents a very attractive risk-return profile for a pre-revenue company over the next six months. 2022 has the potential to be an exciting year for the company. Our value proposition is a base case value of SEK 95 (Bull SEK 325, Bear SEK 20). A near term update would not trigger any significant change apart from slightly higher market risk, and a corresponding slightly increased discount rate (WACC).
Introduce Research (by ABG)
Q3 Interim report – Launch in US with own CLIA laboratory
| SEK 000s | Q3 21/22 | Q3 20/21 | May-Jan 21/22 | May-Jan 20/21 | Full year 20/21 |
| Net sales | 314 | 1,376 | 963 | 1,759 | 2,077 |
| Operating profit (loss) | -14,417 | -11,062 | -40,970 | -28,012 | -40,181 |
| Profit (loss) for the period | -14,334 | -10,909 | -40,947 | -27,491 | -39,482 |
| Earnings per share, after dilution | -0.50 | -0.38 | -1.44 | -0.97 | -1.39 |
Significant events during the third quarter
- Article on the DiviTum®TKa Budget Impact Model published in the Journal of Medical Economics.
- Three studies with DiviTum®TKa presented at SABCS 2021.
- Start of TK IMPACT study at Washington University in St. Louis.
Significant events after the end of the period
- Updated timetable for supplementation of the FDA submission.
- DiviTum®TKa results from the PYTHIA study published in EJC.
- Decision to set up own CLIA laboratory in San Diego, USA.
Audiocast:
When: 15 March 2022 at 3 PM CET
Where: https://tv.streamfabriken.com/biovica-international-q3-2021-2022
Phone numbers: SE: +46850558356, DK: +4582333194, UK: +443333009266, US: +16467224904
Broadcast language: in English
CEO’s comments
In February, just after the end of the quarter, we received feedback from the FDA, which means that we have a plan for our continued application process. Now, with the FDA’s feedback, we know what information we need to supply in order to answer their last remaining question and we feel certain that we will be able to provide them with the information they are asking for.
We believe that the interactive process we have had with the FDA will be to our advantage during their review (once we have submitted the supplement) since we will have answered all questions that arose during the process.
Our work to provide the information requested by the FDA has progressed well. Hence, we feel confident that we can reach the previously communicated goal to provide FDA with the information during May 2022.
During the quarter, we also continued our preparations for the upcoming launch. Warren Cresswell, President of the Americas, now will be joined by Kendon Richard, who has been recruited as the new Head of Sales. Kendon has more than 25 years of experience in sales. Most recently, he held the position of Senior Director National Sales at the diagnostics company, Prometheus Laboratories, where he built up and developed the sales organization. He also has many years of experience working with sales, primarily at Procter & Gamble.
By building up the organization and processes, we will be prepared to start selling as soon as possible after we receive market approval. Under the surface, much work is being done to prepare our marketing and sales material and we hope to be able to present our new material later this spring. We are also working with the plan for market access and reimbursement.
One important decision that our Board of Directors has made is to offer DiviTum®TKa in the USA by setting up a wholly-owned laboratory in San Diego. It will serve the entire country and there are major benefits associated with this solution. It enables us to have direct contact with our customers and payers, along with better circumstances for being able to establish a price for DiviTum®TKa that reflects the significant benefits it can offer to both payers and patients. We will also improve our margins with this solution.
With our laboratory, we can also build a biobank of patient samples that we will be able to use in the development of new products. It will enable us to more quickly add new biomarkers for new applications and improved performance. It will become a valuable asset to the company.
We are expecting to receive the CLIA laboratory certification during the third quarter 2022.
One important cornerstone for a successful launch is strong scientific support. It was therefore very encouraging to see recognition that DiviTum®TKa received during the last quarter. For example, the results from three studies with DiviTum®TKa, including a budget impact model, were presented at the world’s largest breast cancer conference, San Antonio Breast Cancer Symposium (SABCS), in December. The results of the budget impact model were also published in the Journal of Medical Economics and subsequent to the end of the quarter, positive results from the PYTHIA study were published in the European Journal of Cancer (EJC).
Although publications of prior study results are important, we must continue our efforts to strengthen the clinical evidence for DiviTum®TKa even more by initiating and supporting more studies. One example is the TK IMPACT study, which began during the last quarter. It is an investigator initiated prospective trial at Washington University of St Louis to evaluate the clinical utility of DiviTum®TKa on monitoring practices in the care of metastatic breast cancer patients. The study will examine care over time of 55 patients that will be tested regularly with DiviTum®TKa. Our vision is to change the standard of care in monitoring to easy, quick and safe blood-based TKa testing that benefits patients.
We have an intensive period ahead of us to supplement the last remaining information to the FDA, obtain 510(k) clearance, set up our CLIA laboratory and then launch DiviTum®TKa in the US market. I’m looking forward to it all with great enthusiasm!
Disclosure:
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.
Fit Investment Ideas 