Biotie Therapies: An Integrated Path

A maturing strategy
The completion of Biotie Therapies’s, (F8S.BE) portfolio review sets out a new strategic path as the company aims to transition from a search/develop/license model to a more integrated approach, particularly in bringing products to the market. The option to acquire Neurelis for NRL-1 (intranasal diazepam for epilepsy), a product that could be commercialised by Biotie in the US, is a prime example, and we anticipate further deals for assets with similar attributes. Securing a partner for SYN120 and/or co-funding for BTT-1023 in a Phase II study for a rare autoimmune liver disorder are other potential near-term catalysts.

An integrated path
Having successfully developed and partnered Selincro (alcohol dependence; marketed in EU) with Lundbeck and tozadenant (Parkinson’s disease; Phase III to start H115) with UCB, Biotie has a strong financial position (€43m at Q313e) from which to seek new pipeline opportunities. The Neurelis deal (An option in epilepsy) provides a product with a relatively fast-track to approval in an established market requiring a small, specialist sales force which Biotie could establish. Biotie is conducting the manufacturing and pre-clinical toxicology work and expects to exercise its option to acquire Neurelis (for $8.75m in new shares) in H114. Pivotal PK studies should start by mid-2014, take two years to complete, suggesting potential approval (using the 505(b)(2) equivalence pathway) and launch in 2017.

Near-term developments
The review also highlighted some important near-term developments. Biotie reiterated its desire to secure a partner for SYN120, a 5HT6/2a antagonist with potential for Alzheimer’s disease and other cognitive disorders, with discussions at an ‘advanced stage’. We expect a deal within the next six months, although likely to be back-end loaded with a relatively modest upfront fee. For BTT-1023 (VAP-1 antibody) a development path forward in primary sclerosing cholangitis (PSC) has been identified, a niche but potentially lucrative market opportunity. Co-funding is expected to be secured for a Phase II proof-of-concept study, providing Biotie with the prospect of minimal investment (low single €ms over two-three years) to generate a more compelling partnering package for the product.

Valuation: Adjusted for cash to €229m
We maintain our rNPV of Biotie’s key products – Selincro, tozadenant and SYN120 – at €186m, but adjusting for estimated cash at end-Q313 of €43m (vs €45m at Q213), the overall valuation is now €229m (vs €231m), or €0.51 per share. Upside potential therefore exists from the exercising of the option on NRL-1 and co-funding to advance BTT-1023 for PSC, products not currently in our valuation model. Securing a partner for SYN120, and/or licensing activity to bring in new and complementary pipeline assets, would boost sentiment further.

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