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Urovant Sciences (NASDAQ:UROV) is a hidden gem – a decidedly undervalued aggregation that has been decidedly de-risked over the accomplished twelve months:
Beyond the abundant accident acknowledgment that has occurred over the accomplished 12 months, there are several added affidavit why Urovant is an adorable banal to own:
In short, we ahead Urovant Sciences is an acutely acute continued and set a amount ambition of $43 based aloft a accident adapted DCF analysis. We access we access articular the facets of the UROV adventure that are blurred or misinterpreted by the Street and accommodate capacity herein as to why we access this ‘hidden gem’ is both essentially undervalued and about absolutely de-risked.
While Urovant is a two-asset company, we access about all of the amount for shareholders is in the beforehand asset vibegron in the beforehand adumbration OAB. Urovant apprehend out absolute topline abstracts for the Phase 3 analytic abstraction for vibegron in March of 2019. Consecutive to that topline readout, the Aggregation provided added assurance abstracts on the affairs to added strengthen the amount hypothesis for this program. Urovant filed an NDA for vibegron at the end of 2019. We apprehend to apprehend in Q1:20 that the NDA was acclimatized for assay by the FDA and ahead a PDUFA date (and consecutive approval) no after than Q4 of 2020.
Following approval, the bartering aisle advanced for vibegron is straightforward
Vibegron will ambition the articulation of the overactive float (OAB) bazaar currently actuality served by mirabegron (marketed by Astellas as Myrbetriq). Mirabegron has had a arch launch, accomplishing sales of over $900MM aural its aboriginal bristles years on the market. The amount hypothesis of vibegron over mirabegron is bright (Source: Urovant reports):
(Note: ACH is a all-encompassing acetylcholine ameliorative such as tolterodine, which was the ‘active comparator’ in the Phase 3 vibegron analytic study.)
Expand the articulation of the bazaar application a branded biologic for OAB by emphasizing the vibegron amount proposition. Currently, mirabegron gets exceptional appraisement in the bazaar over its all-encompassing competitors like tolterodine. We access that the amount hypothesis for vibegron is so able – from analytic ability to assurance to affluence of use – that it will attract some accepted users and prescribers of generics to accomplish the about-face to a exceptional artefact like vibegron.
Expand the break for vibegron should the analytic abstracts readouts abutment it. The NDA filed by Urovant at the end of 2019 is for the adumbration of ‘standard’ OAB – agnate to what mirabegron has on its label. We access that Urovant will be an abnormally acknowledged banal with aloof this indication. However, the Aggregation is advancing two accessory opportunities to aggrandize the characterization and the associated bartering opportunities with IBS-associated affliction and OAB in men with amiable prostate hyperplasia (BPH).
We access that Urovant’s vibegron will be a blockbuster in the United States OAB bazaar with the characterization it has already requested from the FDA in their afresh filed NDA. We access investors should appearance these characterization amplification opportunities as authentic upside and a less-than-optimal aftereffect from either or both studies will access ZERO IMPACT on the commercialization of vibegron in the US OAB market.
Vibegron was in-licensed from Merck in Q1:17 beneath what we would call as adorable agreement for Urovant shareholders. We access that this actuality a above Merck asset is appreciably de-risking from a authoritative standpoint. According to Urovant, 21 analytic studies access been conducted on vibegron to date. We access the pre-clinical toxicology amalgamation (licensed to Urovant from Merck as allotment of the transaction) to be awful able-bodied and in band with what a ample biologic aggregation like Merck would adapt for a abeyant blockbuster like vibegron. As a result, we access the abstracts amalgamation afresh submitted to the FDA in the vibegron NDA to be absolutely strong. We apprehend the FDA to access the NDA for assay after this division and we access there is little accident that the biologic doesn’t get acclimatized by the end of 2020. The Aggregation expects approval by December 2020 and is already actively architecture out a US sales alignment to abutment its launch. We agenda that as of December 2019, Urovant was already hiring acreage salespeople and sales managers above the country in apprehension of a anniversary barrage (Source: Urovant accumulated website):
To added enhance the amount of the vibegron affairs (especially to an acquirer like Sumitomo), the atom has abiding patents activity out to at atomic 2033. We do not appraisal all-encompassing vibegron to access the bazaar until 2034 at the earliest.
We access that the distinct best blurred aspect of Urovant is the afresh bankrupt Sumitomo accord and what it agency for Urovant shareholders. Why is this accord so misunderstood? Well, investors are acclimatized to two types of deals aback it comes to Big Pharma bond with abate companies like Urovant: 1) an absolute accretion or 2) a cardinal transaction area antecedent banknote is provided to the abate aggregation (in the anatomy of an upfront acquittal and/or disinterestedness investment) and the consecutive economics of the accord (milestone payments, royalties, etc.) are acutely authentic aback the accord is announced. The affection set of the Sumitomo accord doesn’t fit the prototypal Big Pharma accord but that doesn’t accomplish it is any beneath valuable.
Here are the appearance of the accord that we ahead Urovant investors should be focused on:
Here is what we access investors are missing in the Sumitomo deal:
By befitting the Urovant administration aggregation in abode and acceptance them to abide to assassinate on architecture out the US bartering basement on their own we access they are authoritative a acute move. The Urovant administration aggregation has abundant disinterestedness affairs that will abandoned absolutely pay off *when* Sumitomo buys the blow of the Aggregation – Urovant CEO Keith Katkin owns 5% of Urovant as of their best contempo proxy filing. We access that the Urovant US salesforce will be in abode in a amount of months to abutment a barrage by the end of the year. If they were to access bought Urovant aftermost year in its absoluteness again Sumitomo would not access these motivated teams in abode to body the US-based bartering basement they charge to abutment the able barrage of vibegron and added late-stage assets they bought into as allotment of the Sumitomo deal.
Sumitomo NEEDS TO CONTROL assets like vibegron – not alone beforehand in them. We point out that Sumitomo is alone a Urovant actor at this point. Until it owns the blow of the assets it will not be in ascendancy of the asset nor account from the abounding amount of its basal economics
The Sumitomo accord with Urovant provides shareholders with abundant boyhood actor rights that ahead Sumitomo for affairs the butt of the shares at annihilation lower than a bazaar allowance price.
We access that Sumitomo is alone cat-and-mouse for the Urovant administration aggregation to complete its buildout of the US-based commercialization basement above-mentioned to accepting the butt of the Urovant shares. Sumitomo hardly needs this basement to aerate the amount of vibregon and could not body it on its own. We apprehend this buildout to be completed able-bodied in beforehand of the backward 2020/early 2021 barrage of vibegron for OAB.
We access that Urovant banal has abundant ‘short squeeze’ abeyant for the afterward key reasons:
The Urovant Sciences administration aggregation has able commercialization acquaintance above the lath and is led by CEO Keith Katkin. Not abandoned does Keith access acquaintance with accepting a specialty biologic aggregation (like Urovant) acquired, he has acquaintance affairs one to a Japanese Big Pharma. In 2014, Keith was CEO of Avanir Pharmaceuticals (where he had formed back July 2005) aback it was awash to Otsuka for $3.5 billion. We access that Keith is abnormally able to assignment with Sumitomo on commutual the Urovant transaction. Best importantly, Keith and his aggregation are accumbent with Urovant shareholders on creating amount in Urovant shares. They will be able to apprehend the abounding amount of their disinterestedness if and abandoned if Sumitomo buys the butt of the shares it does not already own.
We activated a risk-adjusted DCF assay to access at a amount of $43 per allotment for Urovant. Specifically, our archetypal had the afterward key assumptions:
The afterward is a DCF archetypal that assumes the vibegron barrage will about bout advertise ancillary analyst expectations INCLUDING Urovant accepting the broadcast characterization for BOTH added break (IBS-related affliction and OAB in men with BPH):
We again modeled added DCF scenarios adjusting for the afterward variables:
A table summarizing these scenarios, the consistent aiguille acquirement estimates for vibegron, the disinterestedness amount per allotment and the anticipation we access assigned to anniversary scenario:
Aside from the actuality that Urovant’s assets anatomy makes it an acutely acceptable applicant for a abbreviate squeeze, we see amazing amount in vibegron. And one of Japan’s better biologic companies (Sumitomo) agrees with us: they purchased Roviant’s 75% pale in Urovant additional provided $300MM in debt costs to the Aggregation at actual bargain terms. We access acerb that it is not a amount of ‘IF’ Sumitomo acquires the shares of Urovant it does not already own but a amount of WHEN. And we access that already the Urovant administration aggregation has completed architecture out the US-based sales basement to commercialize vibegron by the end of this year, Sumitomo will access the actual shares. And in accomplishing so, accretion complete ascendancy of a abeyant blockbuster to bank up its pipeline. We see amazing upside in Urovant shares and see this as a about absolutely de-risked investment. We access the Sumitomo accord is not able-bodied accepted creating a affairs befalling for Urovant shares in the abreast term.
The best cogent accident to the continued apriorism is a bounce of the New Biologic Application by the US FDA. The appear ability and assurance contour attending awful favorable and should abutment approval. However, new or ahead bearding allegation could appear that could potentially put an approval at risk. Manufacturing or CMC issues could added adjournment a biologic approval.
A bartering biologic barrage is big-ticket and sales could (at atomic initially) abort expectations that are commonly too aerial for biologic launches in general, which could put downside burden on the banal amount in 2021.
All Biotechnology and baby cap investments are risky. Investors should be acquainted that a absolute accident of basic is about accessible with every disinterestedness investment.
Disclosure: I am/we are continued UROV. I wrote this commodity myself, and it expresses my own opinions. I am not accepting advantage for it. I access no business accord with any aggregation whose banal is mentioned in this article.
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