Shard Capital initiated coverage on Motif Bio Plc (LON:MTFB) when they floated on AIM in April 2015 at 20p. Motif is focused on antibiotics targeting areas of unmet medical need – acute bacterial skin and skin structure infections (ABSSSI) & hospital-acquired bacterial pneumonia (HABP). Management has a clear strategy to develop and commercialise its lead drug as quickly as possible for a $3.0bn opportunity.
Since IPO, a number of events have reduced the risk and defined a precise pathway by which iclaprim can get US regulatory approval. Even though the stock has performed well over this period, completion of trials and regulatory approval should provide valuation uplift.
Shard’s last Research Note on 3rd May 2016 highlighted the progress since the float. However whilst the share price remains over double that of the IPO price recent announcements do not appear to have been well received by investors. Recent news has flagged a proposed US listing, funding requirements and higher-than-expected enrolment in the REVIVE trial. The later suggests over delivery on the management’s promises but it comes with a cost. Has this cost been over exaggerated? There is no hiding from the fact that cash is required but should the alarm bells be ringing as loudly as they are?
Shard Capital believe that Motif still has cash in the bank and whilst further funding is required Shard expects that not all of the liabilities relating to the patient trials are immediate cash calls. A portion of these liabilities will be future liabilities. Shard has been comfortable that Motif will be able to finance with partnership deals and/or utilise the capital markets and feel that the recent over delivery with regards patient enrolment is a positive and bodes well for early trial data.
As with any drug developer hurdles and risks must be considered alongside funding, not least the trial results. Motif is positioned in a market that urgently needs to address the problem of antibiotic resistance and Shard look forward to further news.
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