Voyageur: Earthly profits from contrasting media
Voyageur Pharmaceuticals has a bold strategy to use its expertise in natural resources to create an integrated value chain in radiology contrast agents in North America (NA). The contrast business is big, over US$1.7bln in NA, dominated by a few large companies and constrained by raw material supplies. Voyageur as a cost-efficient, vertically integrated new entrant aims to gain significant market share in two key sectors with C$157mln/US$117mln of sales by 2032 with profit and cash flow positivity from 2028. Funding is planned to come from C$120mln of loans backed by valuable raw material extraction NA assets.
Contrast media come in three main product types: barium sulfate for gastrointestinal (GI) X-ray and CT; iodine for CT and X-ray; and other agents, e.g. for MRI. Voyageur management assesses that both barium and iodine agents are required to interest distributors and to tender for hospital supply. In the final phase, Voyageur aims to develop “green” fullerene agents for MRI.
The NA barium market is dominated by Bracco. Voyageur plans to develop a high-quality barite quarry in Western Canada to manufacture and sell a generic barium “smoothie” plus other formulations with regulatory approval. Products will be sold in NA though standard distribution wholesalers. The NA market is worth US$70-100mln according to market research. We assume extra international sales.
The second phase is to bottle in Canada a generic iodine agent (from Asia) and sell it alongside the barium products from 2025. From 2028, Voyageur aims to have its own US iodine extraction and pharmaceutical manufacturing facility. Iodine agents are about a US$1bln current NA market limited by global iodine supply. A deal with the technology innovator, Rain Cage, has been signed to develop and manufacture nanocarbon/fullerene-based contrast agents for medical imaging. These agents will use Rain Cage’s EDEN system, which captures and transforms CO2 emissions into advanced engineered carbon material. These can be used to develop advanced imaging agents.
Vertical integration to capture radiology contrast profits
Voyageur aims to borrow about C$60mln by late 2023 to develop the barium quarry and facility, to install an iodine agent bottling line and cover costs. Barium and iodine agents could be sold from 2025. Voyageur then plans to borrow a further C$60mln by 2026 to develop the fully integrated iodine agent production from extraction to final pharmaceutical with sales from 2028 taking Voyageur into positive cash flow and profit.
Voyageur is currently pre-revenue. In FY22, it posted a loss of C$1.8mln. In FY23 to date, Voyageur has raised C$1.2mln with an immediate capital need for C$4mln. Year-end FY22 cash was C$0.2mln.
We value Voyageur based on barium and iodine agents assuming fully integrated production from 2028 with a 25% tax rate post 2030. At a 25% discount rate and assuming a 2032 continuing Enterprise Value we estimate a C$60mln indicative value. With 133mmln shares currently in issue, this equates to C$0.45/share. A major advantage of using loan finance is that this indicative value should not suffer massive future dilution.
Financial outlook and value
Year end Nov 30 · 2021 · 2022 · 2023 · 2024
Revenue (C$mln) · 0.0 · 0.0 · 0.0 · 1.4
EBITDA (CA$m) · (1.3) · (1.6) · (4.2) · (4.3)
Radiology contrast media uses compounds such as barium sulfate and iodinated organic compounds to improve radiographic visibility of the GI tract in X-ray and in computerized tomography (CT) clinical investigations. Iodine contrast agents are extensively used intravenously, for example, in angiography. A crucial aspect is the need for appropriate regulatory approvals in the US market. Due to vertical integration, Voyageur intends to be the most price-competitive producer.
Currently, high-grade barium sulfate is purified using an energy-intensive chemical process. The Voyageur advantage is a quarry that gives high-grade material that can be simply processed and ground to give 97.5%+ pure barium sulfate for direct blending into medical smoothies (Exhibit 1) and powders. The NA market could be worth up to US$100mln.
Recent supply shortages in iodinated agents exacerbated by high current iodine raw material prices and limited supply make this an attractive second market. Voyageur will build new iodine extraction facilities from brine sources in the US, add a GMP manufacturing facility, and gain FDA approvals. The iodine US market is possibly worth about US$1bln but accurate figures are not available.
Need for contast agents
Market entry in barium is planned early using a Chinese supply of barium with products produced by a Canadian third party. This will enable Voyager to develop a distribution chain. The product needs FDA approval for US sales but on the less onerous ANDA route. Initial testing in Canada has shown that the first “smoothie” products are very acceptable to patients and give the expected X-ray images. Voyageur will a white paper on the results.
From 2025, Voyageur plans to have its own Canadian barium supply and manufacturing plant. After FDA re-certification, this gives much better profit margins.
Alongside it in 2025 to improve the distributor offer and enable purchasing order tendering, Voyageur will bottle and sell an Asian generic iodine agent (after FDA approval). Own production is scheduled for 2028 onwards.
Exhibit 1 - SmoothX
Source: Voyageur
By 2028, Voyageur's own iodine supply and agent manufacturing facility could be on-stream enabling fully integrated production and high gross profits.
We then also expect to develop international sales of barium and iodine products; this requires separate regulatory approvals and diverse distribution systems. The FDA dossier forms the basis for these.
As a backup, both high-quality barium and pure iodine have limited global supply, so Voyageur could sell surplus raw product into global markets. Sales of high-grade barium (for chemical use) and waste barium (as drilling mud) could be over US$20mln/ year. The proposed iodine facility could sell up to US$25mln a year of raw iodine at US$70/Kg at the envisaged 350-ton annual capacity. Hence, the facilities can generate revenues streams without the pharma markets although pharma sales should be at much higher margin.
Back-up revenues
Product pipeline
Voyageur is developing barium products for the radiology pharmaceutical market. Of these, five are approved by Health Canada as "natural products", for example, the smoothies are Natural Product Number (NPN): 80108081. Products are:
- SmoothX radiographic barium contrast suspension smoothie;
- MultiX-thick liquid barium sulfate suspension. All will need FDA authorisation before sales in the USA;
- MultiX-thin liquid barium sulfate suspension;
- HDX dry powder high-density barium sulfate;
- LDX dry powder low-density barium sulfate.
SmoothX is designed for CT scan applications in the GI tract while MultiX, HDX, and LDX products are designed for fluoroscopic X-ray (that is real-time X-ray movies) in the stomach and colon. SmoothX is in the most advanced stage of development with preliminary batch tests completed. In April 2023 the company completed a comparative study of SmoothX with a leading barium sulfate competitor for CT scan patients. This concluded that SmoothX has equivalent scan performance with around 75% of patients finding it more drinkable. No detailed data was released. Management hopes to sell its first units in Canada later in 2023. In addition, applications for FDA approvals to market its barium products in the US are being prepared.
The product pipeline (Exhibit 2) shows the status of the three classes of imaging agent that Voyageur intends to ultimately produce and market. These all require separate raw material sources.
Exhibit 2 - Voyageur proposed product pipeline
Source: Voyageur
Barium contrast
Barium has been used in radiology since 1910 with rapid uptake in the 1920s. When ingested (typically orally, but sometimes rectally, via liquid suspension) barium sulfate fills the GI tract and absorbs more X-rays than the surrounding human tissue creating a clear image of the patient's digestive system. Exhibit 3 shows a CT scan of the small bowel visualized with barium (in white). Problem areas are circled. Barium's density and high atomic number means that it absorbs X-rays extremely well. Its negligible solubility means that barium is not absorbed into the blood when taken orally (FDA EZ-Paque insert). It is among the most common radiological procedures and is crucial for detecting tumours, and ulcers, and for monitoring other GI-related diseases.
Barium products on the US market are from Bracco or Genus. The range of products and dose depends on what the medical examination is for. A CT scan of the small intestine requires more barium agent, because of the greater volume than a quick X-ray of the oesophagus. For example, two bottles of EZ-paque (435g, 725ml) are recommended for adult upper bowel imaging but 150ml, 90g, for an upper GI examination.
Exhibit 3 - Barium CT
Source: Voyageur Corporate Presentation
Bracco
- EZ-paque (pack size 218g in 355mL, dose 87-435g), bottled smoothie;
- E-Z-HD, (pack size 340g), bottled barium powder for reconstitution;
- E-Z-CAT Dry (pack size 9g, dose 9-18g), barium powder resuspend before use;
- Varibar pudding (40% w/v), or Varibar Thin (81%w/v) (adult dose 5ml), barium pastes designed to assess swallowing and peristaltic action in the oesophagus.
NB, E-Z-paste (60% w/v) from Bracco is not FDA approved.
Genus Medical Technologies:
- SILQ (2.1% w/v), vanilla (pack size 100ml, 2.1g), bottled smoothie;
- SILQ MD (96% w/w), vanilla (pack size 100ml, 96g), bottled smoothie;
- SILQ HD (98%w/w), vanilla (pack size 100ml, 98g), bottled smoothie.
No Genus product is currently FDA approved but they may be on sale in the US from some suppliers given the regulatory tussle of recent years (see below).
Voyageur's product program covers the smoothie, powder and paste categories. However, the main target market appears to be the smoothies. These use more barium sulfate and will deliver the expected cost advantages from vertical integration.
Refined margins
The company's pricing estimates show the difference between the gross margin on SmoothX alone sold at around $5/unit using third-party barite vs using their own extracted barite is around 40-50% vs 60-70% respectively. However, some of these costs relate to using third-party contract manufacturers in the earlier stages of Voyageur's market development whilst its own facilities are being developed or passing through FDA regulatory approval (also separately needed by any third party manufacturers). We do not have any detailed cost breakdown to verify these estimates.
Voyageur estimates that control of its barium supply and effective integration of production will give it a consistent pricing advantage in the US against the dominant competitor Bracco. Management also believes that buyers will welcome a second source for these widely used, essential products.
Barium - chemistry, uses, sources and processing
Barium is an alkaline metal and is never found in nature as a pure element. A common ore form is barium sulfate (BaSO4), an insoluble mineral known as barite. Barium sulfate is a white powder when pure. Barium sulfate is used in a wide range of industries such as plastics, oil and gas, as a high-density concrete filler for radiation rooms, and in ceramic and glass production. The main use is in drilling as barium mud is very dense (4.2/4.1 specific gravity) and prevents oil or gas escape. This is a high-volume, low value application. According to the USA Geological Survey (Barium), world production of barite was 7.9mln metric tons with China, Morocco, and India accounting for a combined three quarters of production. There is some US barite mining in Nevada for local drilling use. One source in Canada is also impure and mined for drilling use. Barite is extracted from open pit and subterranean mining operations.
Since barium sulfate is insoluble, it is difficult to purify unless the barite is already very high grade — as is the case in Voyageur's proposed Frances Creek (FC) quarry. For most barium producers to obtain high-grade barium sulfate, barite ore is hearted with carbon to over 1,2000C, the “black ash” process. This reduces (removes oxygen and creates CO2) the barite to barium sulfide (BaS). This is soluble and impurities can be removed by dissolving it. Adding sulfuric acid to the barium solution precipitates high-grade barium sulfate as a fine powder in various grades and prices, for example, Blanc fixe (see VB Technochemicals). This is “synthetic”, though chemically the same as the “natural” ore form.
Voyageur, due to its high-quality barite, aims to produce “natural” barium sulfate. To do this, the barite is mined, finely crushed, sorted by gravity (barite is a heavy, dense ore), and washed with hydrochloric acid to remove carbonate impurities and contaminant metals (like calcium, iron and strontium). The insoluble barium sulfate is washed and then dried at 650oC. This produces a high-purity powder.
One aspect we are not clear on is the particulate size distribution. This is discussed in the regulatory section. Physical crushing will give a wide size range of asymmetric particles and that might have functional implications, as compared to the uniform particle size of synthetic barium sulfate in medical imaging. This might give Voyageur's barium products different characteristics and might improve imaging although this needs to be established. Any medical claim like that will need evidence and could require a more onerous regulatory pathway (see below).
Frances Creek mine
Voyageur is progressing its leading Frances Creek (FC) quarry project. The quarry is capable of providing pharmaceutical-grade barite after processing. An initial 2,000-ton extraction is planned in 2023 if permitted. Over 2024-5, this will also see the construction of a GMP processing plant capable of processing up to 5,000 tonnes of barite from the FC quarry per year. A separate plant will contain formulation and bottling lines for barium products.
The Preliminary Economic Assessment (PEA) showed indicated volumes of barite at 214,800 tonnes, with a further 134,200 tonnes inferred. So far, a notice of work has been submitted to the British Columbia Ministry of Mines. Design details of the plant are being finalized (see Capital costs below).
Frances Creek site
This site is on a steep hillside on Western Canada, Exhibit 4. The deposit is about 30-45% BaSO4 with some areas over 60% and other under 20%. The final grade is expected to be 98.5%+ BaSO4 after processing; the standard is 97.5%+..
The quarry will operate as an opencast pit, in effect a small gravel quarry for operational purposes. The deposit has about 90,000 tonnes recoverable. This can be extracted at up to 10,500 tonnes per year for pharmaceuticals and as high purity BaSO4 for chemical and other uses. Pharmaceutical demand is thought by Voyageur to be about 2,000 tones a year. Lower grade waste can be sold as drilling mud.
Since formulating barium contrast products is a matter of packing either a dry powder or mixing and bottling a barium suspension, the actual media production plant is relatively simple.
Exhibit 4 - Frances Creek mine
Source: Voyageur
Manufacturing (formulation and packing/ bottling) of the final dry and smoothie products will be in a small, high-volume GMP Pharmaceutical facility. This is separate to the initial barium processing at the FC quarry site. The facility has a planned 70,000 bottle-per-day capacity. The wholesale value at C$5/bottle is therefore C$350k/day. In theory, that could be nearly C$90mln per year in revenue (250 days) with up to C$66mln in gross profit.
Long-term supply and strategy
In addition to Frances Creek, Voyageur has other claims and projects, Exhibit 5:
- Pedley Mountain — barium sulfate project to be developed after the Frances Creek project becomes fully operational. No costing available.
- Four other metal projects (Jubilee) in British Columbia, currently dormant.
- US brine sources which Voyageur plans access to produce iodine.
These properties complement Voyageur's long-term strategy.
Exhibit 5 - Deposit location
Source: Voyageur
US regulatory fluidity on barium now precipitated
The US regulations on barium contrast agents have been fluid. The FDA used to regard these as medical devices as they were oral and barium does not enter the circulation being excreted in feces. However, in the 21st century, the FDA reclassified these as drugs and the sole manufacturer at the time, Bracco, registered its products using the 505(b)(2) NDA pathway. The FDA then attempted to prevent Genus Medical Technologies from selling barium products; a 2017 FDA warning letter is on file. Genus took the FDA to court and won on appeal in April 2021. However, the FDA closed this pathway with a clause in the law H.R. 2617, the Consolidated Appropriations Act of 2023 (CAA23) signed in 2022. Barium contrast agents are drugs. Note that Genus products seem to be sold but are not currently approved by FDA.
In 2018, the FDA published nonbinding guidelines on the determination of equivalence. This matters since, regulated as a drug, Voyageur's products must be effectively identical to a reference-approved product to use the Abbreviated New Drug Application (ANDA) route (clause 505(j)). An ANDA is the simplest way to get registration. For this, the particle size distribution of the product may need to be the same - but this may change or be disregarded and adjustment of particle size, Voyageur notes, is a simple production adjustment.
If the equivalence route is not used or available, or if the product is improved in some way, as Voyageur proposes, then for a 505(b)(2) New Drug Application may be required. These are more time-consuming. On the current position, Voyageur will need to submit an appropriate regulatory dossier. This can take several months to prepare and review and is relatively costly. Also, the plant will need to be inspected. We expect FC-sourced Voyageur barium products to reach the market from 2026.
Iodine contrast media
Iodine is an element with a high atomic number and high rate of X-ray attenuation: by absorbing the X-rays, the iodine darkens the image. This is because the electrons in iodine's outer electron shell levels have a similar energy level (33.3keV) to the X-ray energy used medically.
Iodine contrast media (ICM) are typically administered intravenously to visualise the blood supply to major organs to detect vascular disorders, cancer, and other organ-related disorders.
ICM has been used for over a century as a contrast agent. Unlike barium, iodine is incorporated into soluble carrier molecules using organic chemical synthesis. This gives a fast distribution of the agent and means it can be used in the body, for example, to visualize cardiac arteries (otherwise invisible on X-ray) during angioplasty (to open blocked cardiac arteries after a heart attack, Exhibit 6).
Exhibit 6 - Iodine contrast
Source: Voyageur
Visualisation is by either CT scan or X-ray (fluoroscopy); CT gives higher resolution images in “slices”, X-ray gives a flat 2D image but can be real-time (fluoroscopy) during a vascular procedure. There are various types of iodine products which differ in chemical composition and concentration. The most common are iohexol and iopamidol. Voyageur intends to produce generic versions of these leading products. CAT scanners can utilize dual energy techniques to optimize the images.
Modern iodine media are low osmolarity contrast media (LOCM), so less toxic. LOCM are often non-ionic monomers using tri-iodinated benzene rings with various polar (hydrophilic) side chains to make them water-soluble. One agent has the same osmolarity as a serum: iso-osmolality contrast media (IOCM) — e.g. iodixanol (Visipaque, GE Healthcare); a non-ionic dimer with two covalently bound tri-iodinated benzene rings.
Examples of ICM are:
- iopamidol (Isovue, Bracco)
- iohexol (Omnipaque, GE Healthcare)
- iodixanol (Visipaque GE Healthcare)
- iopromide (Ultravist, Bayer)
- ioversol (Optiray, Guerbet)
- Iobitridol (Xenetix, Guerbet, not FDA approved)
Guerbet also sells Lipiodol (ethiodized oil), an iodinated agent (and very venerable product) used to visualize tumours but only in Europe as this is not FDA approved.
Iodine contrast agents can also be given as oral formulations to visualize the digestive tract, as with barium sulfate. Older products like diatrizoate (Gastrografin, Bracco) have a high osmolarity so are not used intravenously but can be used orally or rectally.
ICM come in a range of concentrations and pack sizes. Some are packed in bulk and used with automatic dispensing systems to treat a days worth of patients, most are single use. Most are only injectable but Omnipaque also has an oral format for GI investigations. Hence, oral Omnipaque is probably the main competitor to barium.
ICM US market
A market research company, Grand View, indicates a 2021 US contrast market of $1.7bln with a 65% iodine share: US1.1bln. This is possibly based on their data that about two third of procedures use X-ray and CT and that ICM are preferred agents.
According to a recent clinical article, Omnipaque (GE Healthcare) is used in 50% of US CT procedures. Isovue (Bracco) had about 40% share. GE Healthcare reported global contrast media (pharmaceutical diagnostics) revenues of $1958mln for 2022. There was a shortage of Omnipaque in the US in 2022 because of the shutdown of GE's Shanghai manufacturing plant due then to Chinese COVID-19 restrictions. Whilst this is now resolved, there may be a policy to encourage US-based producers. However, we suggest that, if anything, this would reinforce the dominance of the bigger companies.
Despite the GE situation being resolved, as of March 2023, other suppliers have reported shortages. Voyageur understands these are due to, or exacerbated by, a shortage of iodine raw materials.
Sourcing iodine
The 2021 world iodine market, according to Imarc, a consultancy, was about $950mln with growth of 5%. The US Geological data on iodine does not include US production but has similar figures. World production is estimated at about 30,000 tonnes a year (Essential Chemical). Chile supplies about 66% of global iodine. Japan apparently supplies about 32% of the global supply. The US does not publish a figure but about 5% of world supply is estimated (1,500 tonnes, Essential Chemical).
Iodine at an industrial scale is sourced from subterranean brines, mineral halide deposits (Caliche) mined in Chile, or from seaweed; seaweed is small at about 2%. The biggest material source or new iodine is ore from Chile which at 400 ppm is very concentrated. Brines, which need typically 5-150ppm of iodine, are often, but not always, linked to oil and gas wells. Major global brine sources are Japan, US, Turkmenistan and Azerbaijan, with some Indonesian production (World Iodine).
Prices have risen from about $35/kg to about $70/kg now. However, as with any commodity processed materials, extra fixed industrial capacity added in response to higher prices can lead to oversupply and price pressure. About 25% of supply is used for contrast agents.
GE Healthcare, in 2022 announced a major deal to secure its long-term supply of iodine from a major mining operation in Chile. This is sufficient, in GE's view, to manufacture 30mln extra product doses per year by 2025. This highlights the importance of control over reliable iodine supply for contrast media manufacturers.
Voyageur has rights, currently not developed, to extract iodine from brines from Utah. Other US sources are being investigated and might be more cost-effective. Voyageur has estimated that its theoretical facility might yield 350 metric tonnes a year of iodine flake equivalent (there are various commercial grades); at the end of 2022 prices, $70/Kg, this would have a commodity value of about $25mln.
Iodine from US brines
In the US, there are a number of producers like Iochem (Oklahoma, US) which claims 1,200 tonnes a year and supplies pharmaceutical producers. Another US producer, Iofina, is investing in a new facility (Proactive report) and seems to be a producer in the Oklahoma and Kentucky oil basins. Iofina produced 518 metric tonnes in 2021 using its IOsorb process (ion-exchange) due to rise to about 750 metric tonnes with the new facility. Note that these US producers are not pharmaceutical focussed but may sell iodine for further processing that purpose. We also note Deepwater Chemicals in the US as a specialist iodine chemicals producer which is FDA inspected.
Both Iochem and Deepwater are owned by a Japanese conglomerate: Toyota Tsusho. This company also owns a Japanese Iodine producer, K&O Iodine which produces about 5% of global production.
One way for Voyageur to shortcut the production of ICM is to buy a suitable existing plant and set up ICM GMP manufacturing. Two are under consideration in Canada.
Blow-out process
The blow-out process being considered by Voyager is well established. It extracts iodine from a brine using two towers. In the cleaned brine, iodine is in solution as iodide (I- in an electrochemically reduced state). The brine is mixed with chlorine gas, or similar, and sprayed into the first “blowing” tower. This oxidizes the iodide to iodine (I2) by capturing its extra electron. The iodine is therefore in its natural elemental state which is happy to exist as a gas; iodine naturally sublimes (goes from solid to a gaseous state without melting) at room temperature. The blowing tower has an upward recirculating air current which transfers the iodine gas to the second, absorption tower. Here, it is mixed with a toxic solution of sulfur dioxide (SO2) or similar agent, This reduces iodine gas back to soluble iodide; sulfuric acid is also formed in the reaction. The acidic iodide solution at the bottom of the absorption tower is pumped out and mixed again with chlorine. This again converts the iodide to iodine which precipitates out as a solid. This is then collected, crystallized (further purifying it), melted, and flaked or processed into the final product which is 99.5% pure. The process requires a significant capital investment into a plant but this is known technology.
ICM and FDA-regulatory aspects
The FDA regulates ICMs as drugs. Hence, Voyageur will need to file any direct generic copies of iodine agents as Abbreviated New Drug Application (ANDA, Section 505(f)). If any changes are made to the formulation, then a New Drug Application under 5050(b)(2) will be needed with additional data and evidence. We also note that a product would not be approved till the manufacturing plant/line for that product has been validated and the products are individually authorized. Hence, investors should note that there is usually a delay between developing a product, completing a plant, and sales. This is of course much lower risk for a generic, as here.
Voyager is evaluating two possible “GMP” plants to purchase in Alberta, see below. GMP status depends on the plant design but is given for a specific production process in a specific part of the facility. Three batches need to be run and meet the required quality standards to verify the process.
Carbon fullerene for MRI agents
Voyageur has an interesting concept of using fullerenes (C60, large spheres of carbon in a very stable, spherical carbon atom formation) isolated from the Rain Cage clean carbon capture technology, as carriers for magnetic resonance contrast media. MRI scanners are expensive and still much less common than CT scanners. They use rare earth elements like gadolinium to provide additional contrast for soft tissues. If this works, it gives Voyageur a green public profile and a lucrative new product line. Fullerenes are very expensive to produce currently so this is a major potential advantage.
Whilst this is an intriguingly conceptual project, we currently know nothing of the proposed fullerene production technology, the "EDEN System" supplied by Rain Cage. Following on the above regulatory discussion on ICM, we assume any fullerene-based agents will be regulated as drug needing a full IND to start trials.
As a current example, the French contrast media company, Guerbet, has developed a new MRI contrast agent: elucirem-gadopiclenol. This was FDA approved in September 2022 under accelerated guidelines as seen as a novel innovation. It underwent two phase III clinical trials from 2019 to 2021 involving 564 patients in total. It is still being EMA reviewed. Hence, although such investment can be very lucrative long-term, they are major, expensive projects. One reason for Guerbet not taking advantage of the ICM shortage in the US (even though it has plants) is that these are being converted to make the MRI agent.
Capital costs up to C$120mln in two phases
The overall capital cost to develop the FC quarry and the barium production plant, Table 1 updated from the 2021 PEA, is set at C$20mln.
As discussed below, Voyageur plans to import pharmaceutical iodine contrast agents in bulk from an Asian supplier to bolster its NA distribution offer. This will supply product from 2025 to late 2027. The cost of the sterile bottling plant is about C$5mln. This is collocated with the barium smoothie production facility in Canada.
There is a further C$5mln into the fullerene “green carbon” project with Rain Cage.
Further allowance is made for the admin and regulatory costs, minimal sales costs basically distributor and tending contracts. On ramp-up of sales, working capital of about C$14mln has been budgeted by management. There is a contingency of C$3mln.
Table 1 - Capital use
Source: Voyageur
Next investment stages
In the next stage, as yet not fully costed as agreements are still under negotiation, Voyageur will build its own raw Iodine supply in the US. A variety of US sources are being considered. The cost of the plant is about C$5mln with an iodine agent pharmaceutical manufacturing facility costing possibly C$35mln. Overall with additional costs and working capital, a further C$60mln is likely to be required in 2026.
Revenues estimates
Based upon Voyageur management plans, we have prepared short and longer-term financial models.
Voyager initially plans in 2024 to import finished barium sulfate media from Asian suppliers to sell into the North American market to develop its brand and distribution channels. Sales will be small. One issue with this is what regulations the imported product will need to meet. This should be no problem in Canada but might be less easy in the US.
The second stage relies on barium smoothie manufacture in Canada by Alberta Veterinary Laboratories (AVL). The barium for this will be imported initially from China then come from the Frances Creek (FC) deposit as the quarry enters production. We assume that to do this, the FC barium finishing facility and the AVL site will need GMP status. Use of AVL gives project flexibility while Voyageur builds and validates its own smoothie GMP facility. The cost of goods from AVL is assumed, on Voyageur figures, to be about 50%.
As a third stage, we now assume from 2027, Voyageur aims to manufacture at higher volume barium agents in its own facilities as a fully vertically integrated producer. Own manufacture will lower our assumed cost of goods to 26% based on Voyageur management costings.
Voyageur estimates barium sales of over C$31mln in North America; generally, 90% of these would to be US. This might be a volume share of 40% depending on the price advantage. This assumes no retaliatory price cuts by Bracco and that the two products are equivalent as expected from the ANDA process. In reality, some radiographers may prefer one over the other on their perception of results or patient preference.
Voyageur has assumed that it can make export sales to international markets. This obviously depends on local regulations. We are more cautious on this than Voyageur and assume these start from 2027 with full FC production and in-house manufacture. In general, European prices tend to be lower than in then US market, so we assume a lower margin. In addition, markets and distribution channels are much more diverse and fragmented. We have no data on Asian markets but assume that Chinese and Indian suppliers will be more competitive.
There are two other barium markets Voyageur plans to access. One is for high-quality, but non-pharma grade barium sulfate for high-end chemical applications. Sales of about C$20mln a year are assumed at 72% gross margin (Voyageur estimates). These can start with FC barium production in 2025. The other line is low-grade barium waste which can be sold for drilling, a common and high-volume application. Drilling sales are expected to have a 44% gross margin.
Voyageur has plans for iodine contracts agents based on iodine brine production. This will require additional investment of estimated C$60mln. As outlined above, we also see iodine agents as much more complex in manufacturing and regulatory terms. Given this project is still in planning, we have forecast sales of up to C$90mln, about a 10% volume share. Again, this assumes no pricing response from either GE Healthcare or Bracco. The iodine market appears to be growing which will make capturing a share easier. We assume ICM sales from Voyageur facilities form 2028.
A final envisaged product line is contrast agents using green carbon-based delivery systems. This will require significant investment and pharmacological expertise. We have no forecasts or timelines for this project.
Our overall revenue build-up is shown in Graph 1. This indicates sales of about C$120mln by 2030, possibly up to C^$150mln if ICM sales go well and international sales develop further.
Graph 2 shows our expected revenues, operational cash flows and investment cash flows. The iodine investment is shown a single lump sum in 2026 as a simplification. The barium investment are spread over two years and total about C$47mln including $3mln on land.
Graph 1 - Non-risk adjusted sales projections
Source: Proactive estimates
Graph 2 - Cash flow projections (non-risk adjusted)
Source: Proactive estimates
Marketing
Barium agents appear to be sold in bulk packs though a variety of pharmaceutical wholesalers in the US. We are not aware of any specific marketing plans although Voyageur is developing these with consultants. As the products will be generic copies of existing contrast agents, this is purely a price-based strategy. As such, it is vulnerable to price pressure from Bracco and GE Healthcare, the market leaders, Hence, market volumes or prices may be significantly higher or lower than the estimates in this note indicate.
Voyageur as noted above anticipates that having both barium and iodine agents available will enable it to attract more distributors. It will also enable Voyageur and its distributors to bid for large purchasing orders by tender. This unlocks the mass volume markets as many centers use such contracts. They are also more price focussed, so a keenly priced generic is likely to find a good uptake, and more inclined to encourage a diversity of supply. In that context, recent shortages of iodine agents and the effective monopoly over Bracco of barium agents could encourage shifts by buyers.
Capital and manufacturing costs
Voyageur estimates that constructing the barium facility, quarry and iodine bottling facility (to bottle bought-in agent) will take a $60mln investment, including operating costs and working capital with a loan raised in late 2023 and deployed largely in 2024. As a second investment, a brine plant and building an ICM manufacturing plant will require a further C$60mln including other costs. Purchasing an existing facility may cost less and be faster to market.
Valuation of C$60mln or C$0.45/share
Voyageur Pharmaceuticals has a bold strategy to use its expertise in natural resources to create an integrated value chain in contrast agents in North America (NA) with international sales potential. The contrast business is big, over US$1bln in NA, dominated by a few large companies and constrained by raw material supplies. Voyageur as a cost-efficient, vertically integrated new entrant aims to gain significant market share with C$157mln/US$117mln of sales by 2032 with profit and cash flow positivity from 2028. Funding is planned to come from loans backed by valuable raw material extraction NA assets.
Table 2 - Valuations
Source: ProActive estimates
We have valued Voyageur using a discounted cash flow method based on Voyageur management's estimates of costs and revenues, Table 2. Based on barium alone and assuming fully integrated production from 2027, the value at a 25% discount rate and assuming a continuing value would be C$32mln based on 2032 estimates and a 25% tax rate.
Adding the less-defined iodine opportunity at 75% of forecast sales gives a value of C$60mln. Note that these depend on obtaining C$120mln in loan funding at reasonable terms, a current management priority. We cannot value the “green carbon” fullerene opportunity as yet.
With 133mmln shares currently in issue, this equates to C$0.45/share. A major advantage of using loan finance is that this indicative value should not suffer massive future dilution. The C$0.45 should not be regarded as a "price target" but as a current in indicative value assuming debt funding.
Financials
The Proactive detailed financial estimates for FY23 and FY24 are shown below: Table 3 Profit and Loss, Table 4 Cash Flow, and Table 5 Balance Sheet. Note a net financial loan of C$56.9mln is assumed in 2024 to develop the FC and barium agent production facilities.
Table 3 - Profit and Loss (C$000)
Source: Voyageur reports, ProActive estimates
Cash flow
Table 4 - Cash Flow (C$000)
Source: Voyageur reports, ProActive estimates
Table 5 - Balance sheet (C$000)
Source: Voyageur reports, ProActive estimates