New products, MRI developments and international deal
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) · (1.4) · (4.2)
Radiology contrast media use compounds like 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 Canadian barium 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.
A deal with environmental innovator Rain Cage, has been signed to develop and manufacture nanocarbon/fullerene-based contrast agents for medical imaging. These agents 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. A vanadium metallofullerene can enter further development and clinical testing once funding is available.
As a backup, both high-quality barium and pure iodine have limited global supply, so Voyageur could sell surplus raw product into global markets
Back-up revenues
Valuation of C$52mln or C$0.39/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 profit and cash flow positivity from 2028. Funding is planned to come from loans backed by valuable raw material extraction NA assets.
Table 1 - 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 1. We have moved the major projects back a year from our original estimates in June 2023 but included a rough estimate on initial sales of the five Canadian products in 2024. Based on barium alone and assuming fully integrated production from 2028, the value at a 25% discount rate and assuming a continuing value would be C$28mln 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$52mln. Note that these depend on obtaining adequate loan funding at reasonable terms, a current management priority. We cannot value the “green carbon” fullerene opportunity as yet.
With 133 mln shares currently in issue, this equates to C$0.39/share (formerly C$0.45/share). A major advantage of using loan finance is that this indicative value should not suffer massive future dilution. Our cash flow valuation includes operating cash flows, loan interest, and tax but not capital movements. The C$0.45 should not be regarded as a "price target" but as a current indicative value.
Financials
The Proactive detailed financial estimates for FY23 and FY24 have been updated for the Q3FY23 interim results and delayed funding and are shown below: Table 2 Profit and Loss, Table 3 Cash Flow, and Table 4 Balance Sheet. Note a loan of C$60mln is assumed in 2024 to develop the FC site and barium agent production facilities, but we now assume the capital expenditure is spread over H2 CY2024 and CY2025. The interest is rolled up over the first two years.
From the Q3FY2023 report, Voyaguer has little cash and will need interim funding till the main loans are received.
Table 2 - Profit and Loss (C$000)
Source: Voyageur reports, ProActive estimates
Cash flow
Table 3 - Cash Flow (C$000)
Source: Voyageur reports, ProActive estimates
Table 4 - Balance sheet (C$000)
Source: Voyageur reports, ProActive estimates