Biotech General Discussion

ESPR announced another major ex-US commercialization deal yesterday for its LDL-C lowering drugs, for certain ex-US countries. The deal is another with Daiichi Sankyo and brings $30M up-front cash, up to $175M in milestones and tiered royalties from 5% to 20%. This follows its prior large ex-US deals for Europe and Japan. The market never seems impressed by these ESPR commercial partnering deals, especially since the 1st Daiichi deal in Jan 2019. That was a disappointment for many shareholders despite the fact that it was a rich deal for ESPR, because it made it far less likely that ESPR would be acquired by a large U.S. cardio pharma company for a high share price premium. With todays deal, we have to see the upcoming details to analyze it, but it is impressive the ESPR was able to get a significant ex-U.S. (not including China, Canada, EP and Japan) commercial deal done during a pandemic and without long-term MACE trial data. it is nice to see that China is still ESPR's to deal in the future. We have been impressed by all of EPSR's bempedoic acid corporate development deals.

ESPR's success now primarily lies in their ability to take some of the U.S. LDL-C market and/or Daiichi's success in Europe. ESPR's near-term hope in the U.S. is that patients return to visit PCPs and cardio docs, and they can grow revenue quickly. Countering managements impressive corporate development record, its decision to commercialize heavily without long-term cardiovascular risk reduction until fall 2022 is questionable in our view. This has led to a painful burn rate of ~$70M/quarter mainly for commercialization into a pandemic and ~18 months ahead of key long-term cardio risk data.

Since the pandemic was in full force during much of Q1 in the U.S., we are not expecting a great revenue number next week when ESPR reports its Q1 numbers. Plus, the biggest overhang on the stock is the pending long-term cardiovascular risk reduction trial scheduled for readout in fall 2022 (see ESPR image below) as the PSK-9s have more time to establish in the marketplace. However, if you are convinced that reduction in LDL-C regardless of how that is achieved, leads to reduced risk of major cardiac events, then you might become a long-term ESPR stock holder. Daiichi and Otsuka (ESPR's commercialization partner in Japan) must be convinced of the link between LDL-C lowering and reduced risk of major cardio events.

For the near-term, ESPR will likely remain on a tough trajectory for shareholders. However, at some point the stock likely starts to rise ahead of the Fall 2022 data. At a current enterprise value of ~$1B there doesn't seem to be huge downside, unless that nasty cash burn and continued revenue challenges start to make investors nervous about cash. Finally, the market might get excited if ESPR files an IND for the oral PSK-9 inhibitor in development, and the FDA gives it a green light. Will that require a cardio risk reduction trial for full market adoption too? In the meantime we'll likely keep our position in ESPR in the hope of some revenue surprises in 2021, and to be long before the fall 2022 readout.

source: ESPR - https://esperion.gcs-web.com/static-files/0dd31839-51bd-496f-a12e-64c9ef389a08

#Esperion #ESPR #bempadoic #bempadoic_acid #ezetimibe #nexletol #nexlizet #PSK9 #LDLC #statins #cardiovascular