Seeking the best of both worlds
Selvita, (SLVP) is a rapidly emerging drug discovery and services company. From a standing start in 2007, brisk organic growth resulted in PLN21.9m (€5.2m) in revenues last year, and 2014 has started strongly with PLN24.9m (€6m) already on the order book. Potential catalysts in 2014 could come from securing a partner(s) for one or more of its NME candidates from a growing internal pipeline of innovative drugs (multi-party discussions are ongoing), and/or fresh drug discovery deals.
An advancing NME pipeline
SEL24 (PIM/FLT-3 dual kinase inhibitor) and SEL120 (first-in-class CDK8 kinase inhibitor) are the most advanced candidates in Selvita’s pipeline, with respective potential against AML and colon cancer. IND filings are planned for 2015 and Selvita has committed to securing one partnership deal for these, or another pipeline candidate, by the end of 2014. Recent oncology-based collaborations with Merck Serono and H3 Biomedicine underscore Selvita’s research and discovery capability.
Cost-efficient, high-quality service provider
Operating out of a 1,600m2 new research facility in Krakow, Poland (a life science hub for the region), Selvita offers a full range of drug discovery services from medicinal and computational chemistry, to biochemistry and bioinformatics. Its service contracts, which have been secured with multiple medium/large pharma firms, are now transitioning from fixed price to more lucrative full-time equivalent (FTE) terms, and towards more integrated collaborations (Merck/H3).
Strong order book
Total revenues increased 37% in 2013, consisting of partnering revenue (PLN3.2m), contract services (PLN10m) and subsidies (PLN8.7m), typically Polish government and EU grants (PLN67m awarded to date: PLN32m received, PLN35m secured for 2014-17). These revenues help to fund Selvita’s innovative research. Q413 was also Selvita’s first quarter of net underlying profit, and with PLN24.9m in partnering revenue, services contracts and grants already secured (as of February) for 2014, the company could be profitable this year (dependent on pipeline investments).
Valuation: €22m EV does not reflect pipeline upside
With PLN5.4m in cash at end-2013, we suggest Selvita’s EV of €22m (PLN93.6m) does not reflect the growth prospects of the company’s services division or fully capture the upside potential from Selvita’s innovative pipeline. Partnerships and/or fresh finance for NME candidates are key potential catalysts in 2014.
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