February 20, 2020
Ascelia Pharma has included the first patient in its pivotal, fully financed and an exceptionally straightforward phase III SPARKLE study with the lead asset Mangoral, targeting global launch in 2022. We estimate a relatively high 75% likelihood that the imaging drug Mangoral will reach the market on the back of strong cumulative clinical data and a solid, straightforward Phase III design. As the global trend move towards regulations and bans of standard liver-MRI contrast imaging agents, Mangoral’s market potential becomes evidently clearer. Furthermore, the successful commercial advances by the closest peer Blue Earth Diagnostics provides a blueprint for Ascelia Pharma and illustrates that there is significant commercial value potential in differentiated oncology imaging drugs targeting an unmet medical need. Our impression is that this case is misunderstood and share price deeply discounted, probably because the market sees it as a typical drug development company with the traditional clinical development risks. We argue that these risks are low, while the main pertains to commercialization.
The recent recruitment of Julie Waras Brogren as Chief Commercial Officer is a positive de-risking catalyst. This is not just another recruitment and we believe this should be seen as evidence of the board’s and management’s commitment plan to play it real big on executing the commercialization steps according to the blueprint provided by Blue Earth Diagnostics. This is not a clinical risk story – it’s a commercialization risk story and Ascelia Pharma’s recent move increases our confidence that the company is building up what it takes to successfully commercialize Mangoral. Our base case risk-adjusted DCF valuation suggests that Ascelia Pharma’s current market value is unrealistically low, reflecting a deep discount. We maintain our Outperform rating and raise the target price to SEK 54 share, corresponding to >140% upside to the current market cap, suffering from low consensus expectations.