Life science - Same, same...but extremely different

2022-02-09 16:15

Despite having almost the same pipeline, how is it possible that a French clinical stage biotech company, Abivax SA is valued over 5 times!! higher than two corresponding biotech companies in Sweden (Medivir AB and Index Pharmaceuticals AB)? What do the French and US owners know that the Swedes don't? Let's compare.

It is called an anomaly - very different valuation of similar assets in different markets - despite pharmaceuticals being a global market. It should not happen in financial theory...sometimes it disappears thru arbitrage. Of course, valuation gaps do occur as a result of the development stage of assets, their perceived quality & execution capabilities. However, sometimes, as in this case, gaps are hard to explain, especially when assets are very similar and in the same indications.

An interesting example is comparing the French company Abivax SA (listed at Euronext Paris) with the, for this exercise combined Swedish companies Medivir AB (Nasdaq Stockholm - Small Cap) and Index Pharmaceuticals AB (Nasdaq Stockholm - First North). This combination, here referred to as the Combo, is very similar to Abivax in terms of pipeline and position.........​ but the numbers show something completely different.​



Abivax is thus valued 5.3 times the combined value of the Combo. Arguments for such a large valuation gap ought to be found in the companies' pipelines etc. ​However, the main clinical indications in both Abivax and Combo are Ulcerative Colitis and Liver Cancer (HCC) is more or less the same clinical stage. 

U​lcerative Colitis​

The phase 2b of studies had different primary objectives. Both parties reached their primary objectives. Index used the same primary objective as is required in​ a​ phase 3​ study​, i.e._ clinical remission​,​_ while Abivax had that as a secondary objective. In the Index study the highest dose gave the highest and best delt​a*​ ​of​ ​15​,​ while for Abivax the lowest dose gave the best and highest delta, also 15. For both parties the inter-dose-response results were not logical but seemingly the results give Index an advantage to be able to increase dose in phase 3 (250 &500mg in its ongoing Phase 3 with local delivery) while Abivax needs to do the reverse (not finally decided as of Feb 22) in its coming phase 3 with oral delivery.

Some argue that it has been easier to reach good results thru the Abivax route (another primary endpoint). Phase 3 will ​of course ​determine but from the outset, Cobitolimod from Index appears much safer while Abivax ABX-464 appears to have a somewhat more favored delivery as a tablet, instead of as an enema which is the delivery method for Index. In general a delta of 15 is considered good in UC.

​* Delta in is equal to Percent of patients in remission​ receiving the drug less percent of patiens in remission receiving placebo

L​iver Cancer ​

In liver cancer (mainly HCC) Abivax is 6-9 months ahead of the Combo (Medivir). Both are in phase 1b/2 combination trials with immune checkpoint inhibitors. The Abivax molecule ABX-196 (an injectable) is tested combined with BMS's Opdivo and the Combo's (Medivir's) molecule MIV-818 (an oral pro-drug) is tested with Merck’s Keytruda & Eisai's Lenvima (TKI). Abivax opened its 1b results recently (=ok to carry on) and the corresponding results for the Combo are probably available in H2-22. Looking at the early data, MIV-818 looks more interesting and recently, Abivax seems to down prioritize ABX-196. As always, data will tell, especially in Phase 2 during 2022/23.Both drugs have an opportunity "to rock the boat" in the liver cancer field. however, MIV-818 has probably a far better chance of doing so with its DNA damaging function.

SO FAR IT IS VERY HARD TO FIND ANY GOOD REASONS FOR THE CONSIDERABLE VALUATION DIFFERENCE BASED ON THE MAIN INDICATIONS AND THEIR CLINICAL TRIALS STATUS. Let us look at the rest of the pipeline and some other aspects.

Being a little rough, let's say that the licenses of the Combo above plus the DIMS plattform (in Index) value wise equals the value of RA and Crohns in Abivax. The tax loss carry forwards are huge in respect of both parties, actually somewhat bigger for Abivax.

IF THE ABOVE IS A CORRECT ASSUMPTION, WHY IS THERE A VALUATION DIFFERENCE OF APPROXIMATELY 5:1????

Could it be that Abivax is listed in France and Combo actually are two separate companies listed in Sweden? 

- This is a fact of course. Abivax main owner Truffle Capital has 31% and Sofinnova Partners Crossover Fund has some 12 %. The Combo companies do, however, both have Linc as main owner with about 12-13%. In Index second largest owner is Swiss HBM BioVenture Crossover Fund while in Medivir the second largest owner is a local Healthcare Investment fund.

Could it be that Abivax is taking a somewhat more aggressive stance in its, ABX-464 promotion, its pipeline handling and its share promotion?

- Possibly - the Abivax' outspoken vision has for years been to enter into Crohns Disease. This might have made Abivax look better than it is? On the other hand RA results look fine. The apparently low valuation of the Medivir licenses might be related to their early status. The Birinapant license to US biotech IGM BioSciences (now in phase 1) has a biodollar value of 350 musd which is hardly considered.

Could it be that Abivax has put effort into obtaining US investors in the last round in summer of 2021 with assistance from JP Morgan?

-This is of course positive but looking at share price developments for Abivax, Medivir and Index it looks like the valuation gap has been there for much longer than that.

Could it be that the Pfizer acquisition of Arena in December 2021 has triggered the share prices in any distinct way?

-Pfizer's bid of 6,7 billion dollar for Arena, admittedly the larger portion of the amount for the UC franchise with phase 3 reporting any week now. This transaction ought to have been positive on the share prices of both Abivax and Index. Some reactions were seen during December but they appear to have melted away in early 2022. The value gap between the Combo companies and Abivax has stayed largely untouched.

Could it be that Swedish investors do not see or are neglecting the parameters discussed above?

This last question will be left for now, for a discussion in any Swedish life science foras going forward. 

​As an investor one can bet on a short term acquisition bid on Abivax from Big Pharma. It is clearly possible, but the risk is also high considering all the ambitious plans that Abivax need to gather financing for. Personally, this analysis has told me that Index Pharma and Medivir are two shares worth holding for the coming 1-3 years.​ Several Big Pharma are prioritizing their pipelines in autoimmune diseases like UC and the same applies for solutions in Liver Cancer. Both partnering and M&A opportunities are plentiful as many Big Pharma/Biotech need to fill gaps in their pipelines.