Renovo’s (LON:RNVO) interim results could beat forecasts, according to Panmure Gordon analyst Savvas Neophytou.
Previewing the results, which are expected on Tuesday 14 December, Neophytou expects that Renovo will report revenues of £9.8 million.
He also highlighted that changes to the Juvista licensing deal with Shire Pharmaceuticals (LON:SHP) may provide some upside from this forecast.
“We expect Renovo to report H1 2010 revenues of £9.8 million in recognition of upfront and milestone payments from the licensing deal with its US partner Shire for its lead product candidate Juvista,” Neophytou said in a note to clients.
“Following the changes to its licensing agreement with Shire earlier this year, deferred royalty which is on the company’s balance sheet will be amortised to the company’s P&L in total by June 2011 which is why there could be some upside to our forecast of £9.8 million.”
The analyst stressed: “As ever financial results for a biotechnology stock are of limited value other than the cash position which we expect should be a strong £46 million.”
He also believes that accompanying news about Renovo’s development pipeline could also drive the stock higher.
The Panmure analyst rates Renovo a ‘buy’ with an 85 pence target.
“Juvista is a novel, first-in-class product for the improvement of scar appearance post surgery,” Neophytou said.
“It will be the first drug commercialised for this indication, with no near-term competitors.”
Neophytou believes that Juvista is the company’s main value driver, as it is targeting a potential multi-billion dollar market.
“Juvista remains the main value driver for the Renovo investment thesis and we are now entering a rich vein of newsflow regarding this candidate,” he said.
The analyst adds: “The reason for our positive stance on Juvista hinges on our analysis that if all clinical trials ran to date on Juvista are pooled, efficacy rates in the region of 35–40% improvement in Visual Analogue Scales (VAS) have been achieved.”
“The phase III REVISE trial has been designed to show a 21% improvement, which should be a relatively low hurdle rate, and another reason why we are confident that the primary endpoint of REVISE should be met.”