We have been very bullish on Biovica. I wrote here several times about the opportunity, I published articles on SumZero and SeekingAlpha. We viewed the likelihood of the FDA approval for its Breast Cancer Test as over 90%. Market gave it much lower probability, the not patient retail sold the stock. Over the weekend Biovica announced the FDA appoved its product. Today the stock should re-rate materially. The major catalysts have materialized.
I believe there is a material re-rating in the coming weeks as well. The company will be announcing plenty of newsflow:
– Biovica will immediately start discussing with insurance companies on reimbursement.
– there should be increased price targets by brokers in the next days
– there should be first sales in the US through its partner hospitals
– there should be announcements about next cancer type FDA application timeline – they have several studies on other cancer forms.
– there should be announcement on EU sales strategy
– Biovica is now the leading company in this area. They could become takeover target later in the year
Pareto Securities Comment:
|DiviTum gets FDA approved as first ever biomarker in its field|
|Over the weekend, Biovica finally received US approval from the FDA for its diagnostic test. The approval was delayed over a year due to FDA’s prioritization of COVID-19 diagnostics and DiviTum specific questions. DiviTum is the first biomarker that has been cleared by the FDA for treatment monitoring (seeing disease progression or treatment response early) in hormone receptor positive, metastatic postmenopausal female breast cancer patients. The company has already set up a US organization and is now able to launch the product before end of this year. This is Biovica’s biggest achievement yet and we believe the stock should trade up more than 50% over the coming days or weeks. We have a Buy rating on BIOVIC with a target price of SEK 103/share.|
Redeye research on Biovica published this morning:
Biovoca FDA Approval: A late qualifier for a pole position
Finally, Biovica has secured US approval (510k) for DiviTum in the core market indication. The approval is to use DiviTum to aid in monitoring disease progression in previously diagnosed hormone receptor-positive, metastatic postmenopausal female breast cancer mBC. The company is now a Dx (broad sense) with an approved clinical marker on the US market.
The approval is excellent news. Even if widely expected, the approval finally came a bit earlier than expected. DiviTum is now the first FDA 510 (k) approved blood-based TKa marker, which is part of why the FDA process has been taking that long, in addition to the direct and indirect COVID effects.
Apart from this exclusive position (hence our reference to a pole position), the approval is based on the SWOG (SO226) study. The clinical outcome where DiviTum shows the ability to confirm non-progression of mBC with a very high negative predictive value, NPV, of 96.7% for non-progression within 30 days and 93.5% for non-progression within 60 days. The ability to confirm non-progression when using CDK 4/6i (at a price above USD 10k per month) in this patient cohort based on a blood sample (timed with existing planned patient visits) is clinically, ethically and economically very useful.
DiviTum’s NPV is significantly above the ctDNA (also blood-based) test. When using DiviTum mBC, patients can also reduce the use of imaging during the CDK4/6i therapy as long as DiviTum confirms non-progression, especially as earlier studies have confirmed DiviTum’s ability to deliver a result almost two months earlier than imaging.
Later in August, we expect Biovica to update and confirm the go-to-market plan announced during the CMD earlier this year. Should we expect sales already during 2022, and when can we expect to break even? We expect a launch with some sales already in 2022.
We also expect Biovica to initiate the process of expanding the label, where the first step could be to advance the BC space into advanced (regional) BC. This label expansion is a natural step as DiviTum has already secured clinical support in this space. It is also rational for DiviTum to follow the CDK4/6i therapy progression, expanding into this space where both Pfizer and Novartis are market leaders with a proven interest in DiviTum.
A second wave could include using DiviTum in other cancer indications and potentially confirming non-progression among already successfully treated patients.
Our value proposition is a base case value of SEK 95 (Bull SEK 325, Bear SEK 20). This approval increases the probability of approval from >95% to 100%, but market expectations have probably been significantly below 95% due to the delayed approval. Biovica is initially committed to initiating the US launch as an independent company without a strategic partner. We can expect Bivica to:
- Step up the initiative to secure a CLIA certification for Biovica’s Sand Diego lab (covering most of the US market).
- The first sales wave is probably to have the initial objective of expanding the network of interested cancer hospitals and centers, mainly in the US coastal region. The sales process could take some six to nine months to establish recurring volume sales. At this stage, investors should look out for an indication of the run rate of CDK 4/6 patients treated in this expanded network, in our view. At the first wave’s later stage, we expect Bivica to secure early recurring sales.
- In the second sales wave, we can expect Biovica to expand the in-house sales team and the commercial reimbursement cover and US guideline support. The prospects of including DiviTum in the US guidelines will be an opportunity later in 2023/24. If turned into reality, we can expect a step change in the usage and the commercial cover.
- Biovica has already secured pharma interest and collaborations well ahead of plans, including seven agreements with large and mid-sized pharma at this stage. With the FDA approval, we can expect this interest to intensify to a higher level.
These commercial processes will require growth capital. Having secured the FDA approval, we expect Biovica to secure growth capital, allowing the company to reach cash break even with a good margin whilst also allowing Biovica to progress with market activities in both US and Europe and expand the FDA label probably already during 2023.
At this stage, we do not change our Base case value proposition (SEK 95) as the approval is balanced by some uncertainty regarding the details of the approaching fundraising for obvious reasons. We look forward to the update of the go-to-market plan later in August and the subsequent launch.
We can expect a highly significant positive market reaction on the back of the FDA approval, and even a 50-100% increase would leave plenty of upside to our SEK 95 base case. The current market value of USD <90m for a company with FDA approval is hugely undemanding. Our Bull case (SEK 325) reflects the value proposition with support from an expanded label and support from strategic industrial partners. First thing first.
Link to the free research by Redeye: http://www.redeye.se/research/849782/biovoca-fda-approval-a-late-qualifier-for-a-pole-position?utm_source=note&utm_medium=email
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