Radiopharm Theranostics Ltd (ASX:RAD) is a suitable investment for institutional and high-risk tolerant retail investors given the unique high-risk-reward opportunity, according to Diamond Equity Research.
The NYC-based global equity research firm noted that Radiopharm has engaged in multiple partnerships in the past few months that are expected to advance the company’s pipeline of radiopharmaceutical therapies.
Based on the recent developments, Diamond has updated Radiopharm’s valuation to $224.19 million or A$0.88 per share, contingent on successful execution by the company.
The valuation is underpinned by the company’s diversified pipeline of therapeutic and diagnostic candidates targeting diseases with high unmet needs
The following is an extract from the update note:
- Key partnerships aiding progress in clinical trials - Radiopharm Theranostics engaged in multiple partnerships in the past few months that are expected to advance the company’s pipeline of radiopharmaceutical therapies. The company entered into a supply agreement with Isotopia Molecular Imaging to supply high-quality Lutetium - 177 N.C.A for the purpose of conducting research, clinical trials, development, and early-stage commercialization of Radiopharm’s diagnostic and therapeutic products. Lutetium - 177(Lu- 177) has been widely discussed and proven to be one of the promising radioisotopes. Radiopharmaceuticals based on Lu-177 have gained prominence due to their excellent therapeutic performance for certain cancer treatments. Novartis recently gained the approval of lutetium Lu 177 vipivotide tetraxetan for the treatment of adult patients with prostate cancer. Additionally, Radiopharm extended its previous agreement with GenesisCare to support a second Radiopharm clinical trial in Australia. The trial will use Radiopharm’s PSA targeting antibody to start a therapeutic Phase 1 in prostate cancer. A global oncology provider GenesisCare aims to bring novel therapies and precision medicine to more cancer patients through its global innovation programs.
- Strong financial position and lower than expected burn rate - The company ended the quarter and year with an operating cash burn of $3.7 million and $9.9 million, respectively. Research and staff expenditure accounted for 83% and 78% of the total operating cash burn for the quarter and year ended June 2022. The operating cash burn was reported lower than our expectations of $15.1 million for the year. The company reported cash and cash equivalents of $26.9 million as of June 2022. We expect the company’s operating cash burn to steadily increase as both therapeutic and diagnostic candidate advances toward clinical trials.
- Valuation - Radiopharm has a diversified pipeline of therapeutic and diagnostic candidates targeting diseases with high unmet needs. Five new candidates are expected to enter the phase 1 clinical trial during the second half of 2022. We have updated our valuation methodology, reducing our estimates for the near-term operating cash burn. Even though we have reduced our near-term estimates, we expect the operating cash burn to increase significantly as more candidates enter clinical trials. Updating the discount rates and the comparable company analysis, our valuation methodology yielded a value of $224.19 million or $0.88 per share, contingent on successful execution by the company. We view RAD as a suitable investment for institutional and high-risk tolerant retail investors given the unique high-risk-reward opportunity.