Tissue Therapies Announces Commercialisation Strategy
Today Tissue Therapies announced their commercialisation strategy at their AGM. It had been expected that Tissue Therapies would sign a deal with a large existing pharmaceutical company for an up-front payment and ongoing royalties. Instead, the company has announced a joint venture with Quintiles (with Movianto for distribution).
Key highlights from the announcement:
Company plans to go to market themselves
Commercial strategy and partners in place
Conservative target of $1bn sales per annum
US Re-imbursement easier for
Initially targeting UK, Germany (~40% of world market)
Negatives from the announcement:
No details on product pricing
No details on partnership arrangement with Quintiles (sharing marketing costs? )
No details on any additional capital requirements to execute strategy
Commercialisation strategy different from what many shareholders were expecting (contributing to todays share price fall)
I wasn't at the AGM, but a number of posters on HotCopper were. Here are some of the key points they picked up:
Re-imbursement is easier with VitroGro classified as a biological rather than a device
Expected pricing of $GBP50 / dose (~$AU1,000 / treatment of 12 doses)
Company was closing to signing deals with large pharma a couple of times, but GFC II making things difficult
Each 350L production cycle makes millions of doses and takes 3 months to prepare
Unlikely to be another capital raising
Company expects to see 2x the revenue they would have if they'd done a "typical" pharma deal
Opinion
The share price fell almost 20% on the news with many holders likely frustrated by the delay in reaching "pay day". However, provided the company can execute the announced strategy, the longer term potential of the company is significantly higher.
Assume, TIS can earn 20% after expenses on the targeted $1bn pa of sales. That's $200m and would value the company at $1.5 - $2bn, a comfortable 18 - 24x the current share price. However, the company would likely become a take over target well before then.
There are still a number of significant risks, in particular the current credit crisis engulfing Europe. I would expect if the company can get some sales on the board in Q2 2012 then they will be significantly de-risked and the share price will begin to reach some of its potential.
I'm maintaining my position and am watching carefully as news comes out in the next 6 months on progress to reach initial sales.