Shield Therapeutics PLC (AIM:STX, OTCQX:SHIEF), which has developed a best-in-class anaemia treatment, has been going through the growing pains associated with a business at the formative stage of its commercial journey. While management has revised prescription volume guidance for its key product, Accrufer, for 2023 downwards, the market should not be too hasty in its judgement, according to a note from analysts at Proactive Research.
Closer look at the numbers
The revised guidance estimates 100,000 to 130,000 prescriptions for 2023, a reduction from the previous 125,000 to 160,000 range. On the surface, this might appear as a setback. However, it's worth noting that the company's Q2 results indicate a strong sales trajectory, particularly in the US market where Shield collaborates with Viatris. The average net realised price per prescription has been affected by a high level of discounted prescriptions, but this is a challenge the company is actively addressing.
Financial fortitude
Shield has fortified its balance sheet with a US$6.1 million (£5.0 million) equity fundraising and a US$20 million debt facility. The company's cash position at the end of June was a robust US$13.6 million (approximately £10.7 million). With the new debt facility, Shield has an additional US$20 million of financial headroom, providing a cushion until it reaches projected cash flow breakeven in 2025.
Valuation
Shield's enterprise value, which is the market capitalisation less net cash, stands at an estimated £55 million (US$67 million). Given the potential sales of Accrufer, which could reach approximately US$65 million by 2024, this valuation seems conservative for a high-growth company. The share price, therefore, warrants attention. At a placing price of 8p per share, with an estimated 799 million shares in issue post-funding, the market seems to be undervaluing Shield's growth prospects. According to the research note by Proactive, an indicative valuation for Shield Therapeutics' stock would probably be in the region of 50p per share.
Road ahead
Shield plans to deploy a 12-person "market access" team to support physicians in navigating the reimbursement system. This is a strategic move to improve the average net realised price per prescription. Long-term projections for prescription volumes in 2024 and 2025 exceed 350,000 and 500,000, respectively. While these figures are more cautious than previous estimates, they may offer room for future upgrades, making Shield an intriguing play for investors with an appetite for pharmaceuticals.
Final thoughts
In the drug sector, where the landscape is fraught with regulatory hurdles and market uncertainties, Shield Therapeutics appears to be a study in cautious optimism. The company has a strong product, a fortified balance sheet, and a strategy to improve its pricing model. While the revised prescription volume guidance may raise eyebrows, the overall picture suggests that Shield remains very firmly on an upward trajectory.
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