Radiopharm Theranostics Ltd (ASX:RAD)'s star is rising, says Independent Investment Research as it initiates coverage of the recently listed biotech.
A number of positive factors favour the assigned value of A$0.86 per share, and these are outlined in the broker’s first report.
Foremost of these is the company’s strong pipeline of preclinical and clinical-stage radiopharmaceutical assets targeting a range of cancer indications, each with exclusive licences for development and commercialisation.
“We expect the company to commence a number of Phase 1 clinical trials over the next 12 months in addition to progressing the current trials, resulting in the number of candidates in clinical trials expanding,” the broker said.
“We view there to be significant potential upside for the company given the portfolio and potential market for the candidates if successful.”
Cash reserves
A healthy bank balance following IPO doesn’t hurt either, with A$50 million raised through the issue of 83.3 million ordinary fully paid shares at a price of A$0.60 per share. This boosted the company’s cash reserves to A$64.8 million on its first day of trading, which will be used for product development, licence fees and milestone payments, operating and working capital.
This first flush is expected to cover the company’s expenses for the next year, after which it will have to raise additional capital to fund further asset development, depending on the outcomes of current clinical trials.
RAD’s candidates are being tested in a diagnostic as well as therapeutic capacity, which ensures the company is dedicating capital resources to developing candidates that are most likely to succeed based on the trials as a diagnostic.
Experienced management team
RAD is backed by a wealth of experience in the medical and biotech fields.
Executive chairman Paul Hopper has more than 25 years’ experience in biotech, healthcare and life sciences sector with a focus on bringing technologies to market. Hopper has served as either founder, chairman, non-executive director or CEO for more than 15 companies in the US, Australia and Asia and is a significant shareholder in RAD.
Managing director and CEO Riccardo Canevari has extensive experience across specialty pharmaceuticals, oncology and radiopharmaceuticals, most recently as chief commercial officer of Advanced Accelerator Applications, acquired by Novartis, a global leader in nuclear medicine.
They are supported by an experienced team that Independent Investment Research views to be well placed to deliver on the development of the portfolio.
Strong market
The global radiopharmaceuticals market was estimated at US$6.7 billion in 2020 and is predicted to surpass US$11.5 billion by 2027, according to Coherent Market Insights.
There is keen interest in the market as we learn more about the nature of tumour cells and the availability of tools to target these proteins and advancements in technologies. Given the size of the oncology markets the company is targeting, the market potential is viewed to be substantial.
Valuation
The broker has assigned RAD a value of $0.86 per share – $0.76 per share on a fully diluted basis.
This valuation is based on a risk-adjusted NPV methodology and takes into account the strongest assets in the company’s pipeline, including five candidates across a range of cancer indications - four diagnostics and one therapeutic.
“We note that there are substantial risks associated with the company given the candidates remain in the early stages of clinical development, with the use of the candidates as therapeutics in the very early stages of clinical development.
"There are no guarantees that the candidates will be successful, hence the reason we adjust our NPV model to reflect the probability of the candidates being successful,” the report concluded.
RAD shares are trading at $0.365 and since listing the company has traded in the range of $0.29 to $0.495.