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goetzpartners securities Limited
Telix Pharmaceuticals Limited (TLX-AU): Radiant in cancer therapy
24-Apr-2018 / 11:35 GMT/BST
Free to access research and investor meetings in a post-MiFID2 world
Telix Pharmaceuticals Limited (TLX-AU): Radiant in cancer therapy
Recommendation: OUTPERFORM
Target Price: AUD$ 2.50
Current Price: AUD$ 0.625 (COB on 23rd April 2018)
KEY TAKEAWAY
With radio-pharmaceutical valuations riding high, Telix has assembled a unique
product portfolio that exploits the natural synergy between radio-imaging and
radio-therapy; meeting urgent unmet needs in kidney, prostate and brain
cancer. Addressing substantial markets, the commercial strategy balances risk
against reward. Well characterised and heavily de-risked imaging products and
a niche orphan therapy sold direct by Telix lead the charge; a
much-anticipated renal cancer diagnostic entering pivotal phase III. The
higher value clinical stage therapeutic programmes for big pharma partnering
following close behind. De-risked and diversified, the stock looks
substantially undervalued on the basis of our DCF, as well as the
multi-billion-dollar acquisitions and several-fold market capitalisations of
key peers. We initiate with an OUTPERFORM recommendation and a target price of
AUD 2.5 / share.
Urgent need for better diagnostics - There is an urgent need for better
diagnosis in prostate and kidney cancers. Too frequently mis-diagnosis results
in inappropriate or unneeded intervention. The increasing complexity of the
therapeutic options can only be navigated with the right imaging tools for
disease and treatment monitoring.
De-risked diagnostics move to market - Telix has focussed on well
characterised and much anticipated diagnostic tests. The forerunner of Telix's
renal diagnostic now moving into a confirmatory pivotal Phase III previously
received 16-0 from an FDA advisory committee. The agent upon which the Telix
prostate diagnostic is based is widely considered the most effective of the
current imaging options. Telix's convenient 'shake and shoot' solution now
makes its wide-scale use practicable. Marketed directly by Telix, these
products should see rapid adoption.
Huge promise in cancer therapies - Advances in radio-isotopes and dosing
regimes that unleash the synergy between radiotherapy and immunity are
yielding exciting results. Proof of concept trials involving Telix's
radiopharmaceuticals indicate efficacy in renal, prostate and brain cancers;
with improved overall survival in advanced prostate and one patient with brain
cancer potentially disease-free. Telix imaging products should streamline
trial design and facilitate broader clinical use.
Substantial upside - Sold direct the Telix imaging portfolio represents a
significantly, but relatively de-risked opportunity with the higher valued
therapeutics offering significant upside. Our DCF analysis indicates that the
current market valuation is justified on the basis of the imaging programmes
alone and ascribes little or no value to therapeutics; despite the quality of
data in all three programmes. Our risk adjusted analysis indicates a fair
value of AUD 2.5 / share with upside of AUD 4.5 / share should the products
achieve their full therapeutic potential.
Kind regards,
Dr. Chris Redhead | Analyst
goetzpartners Healthcare Research Team | Research Team
goetzpartners securities Limited
The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.
T +44 (0) 203 859 7725 | healthcareresearch@goetzpartners.com /
chris.redhead@goetzpartners.com
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April 24, 2018 06:35 ET (10:35 GMT)
