Adasuve uptake on rise, adjusting margins
The commercial reach of Adasuve (Staccato loxapine) continues to increase following Ferrer’s launch in Nordic countries in April and Teva’s ongoing US roll-out. Alexza Pharmaceuticals Inc (NASDAQ:ALXA) analyst day highlighted the therapeutic advantages of Adasuve versus oral and intramuscular treatments for agitation. Following Q114 results, we are raising our COGS assumptions to reflect higher fixed costs, leading to a revised $7.06 valuation (vs $9.06/share previously). Our revised valuation, which does not consider the technology value of the firm’s proprietary Staccato rapid inhaled drug delivery platform, provides meaningful upside to the current share price.
Rapid-acting, non-invasive
At Alexza’s analyst day on 7 May, a comment repeated by several of the presenting physicians was that oral medications often do not act quickly enough. The rapid-acting, non-invasive nature of Adasuve means that prospective patients are much more likely to be co-operative and receptive towards using the drug (versus intramuscular agents). This may improve patient compliance, trust in the provider-patient relationship, and hasten recovery. The risk of injury, property damage and need for using physical restraints during an agitation episode is also reduced.
Higher than expected COGS
Alexza reported Q114 results on 5 May, with revenue of $2.17m and fully-diluted EPS loss of $0.61, a larger loss than we forecast (US$0.42/share) primarily due to higher cost of goods (COGS). While Adasuve unit shipments to Teva doubled vs Q413, COGS ($3.8m) was higher than total product revenue ($0.44m) due to the indirect and fixed costs associated with production in relation to relatively low production volumes. With quarterly COGS consistently in the $3.5-4.0m range since Q313, we are increasing our fixed-cost assumptions for Alexza’s COGS.
Valuation: rNPV of $123.1m represents upside
We calculate an rNPV for Adasuve and AZ-002 at $123.1m rNPV (vs $145.4m previously), reduced due to our higher COGS assumptions. Adding $1.3m in net cash (at Q114) gives a $7.06 per share overall valuation for the firm. This offers significant upside to the current share price. We also do not specifically value the Staccato platform technology, which we believe can be extended into other pharmaceutical ingredients and provide further value-creation opportunities.
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