Key Financials
List: Small cap
Market Cap: 782 MSEK
Industry: Healthcare
CEO: Peter Wolpert
Chairman: Mats Pettersson
8.0 points 7.0 points 5.5 points 2.5 points 6.0 points
Share information
Share price (SEK) 55.0
Number of shares (m) 14.2
Market Cap (MSEK) 782
Net debt (MSEK) -52
Free float (%) 63 % Daily turnover (’000) 40 Analysts: Klas Palin [email protected] Björn Olander [email protected]
Room for expansion
• The issuance of a five-year bond loan of SEK 300 million gives Moberg Pharma a strong financial position without further dilution. This opens up for taking on new acquisitions to expand its US OTC business. The challenge, we believe, will be in finding assets at attractive multiples. As guided previously by management, competition has intensified somewhat in the past year.
• It will be important to deliver on acquisitions of new products, as we expect sales growth from existing OTC products to decline considerably in 2016 and show a 5% growth rate compared to an expected growth rate of 42% in 2015.
• The main value driver of the share price in 2016 will be the delivery of new product deals and the Rx projects to advance further in clinical development. We are lowering our fair value (DCF valuation) to SEK 69 (74).
30 35 40 45 50 55 60 65 70 75
04-Feb 05-May 03-Aug 01-Nov 30-Jan OMXS 30 Moberg Pharma
Management Ownership Profit outlook Profitability Financial strength
Summary
Moberg Pharma
(MOB.ST)
Redeye Rating (0 – 10 points)
2013 2014 2015E 2016E 2017E
Revenue. MSEK 157 200 284 295 315 Growth 0% 27% 42% 4% 7% EBITDA -8 25 44 51 58 EBITDA margin -5% 13% 16% 17% 18% EBIT -14 17 33 38 47 EBIT margin -9% 9% 12% 13% 15% Pre-tax earnings -16 17 32 21 28 Net earnings -11 12 24 15 20 Net margin -7% 6% 8% 5% 6%
2013 2014 2015E 2016E 2017E
Dividend/Share 0.00 0.00 0.00 0.00 0.00
EPS 2013 -0.96 2014 0.88 2015E 1.69 2016E 1.04 2017E 1.45
P/E -33.1 43.3 32.5 53.0 38.0
EV/S 2.4 2.4 2.6 2.6 2.4
Redeye Rating: Background and definitions
The aim of a Redeye Rating is to help investors identify high-quality companies with attractive valuation.
Company Qualities
The aim of Company Qualities is to provide a well-structured and clear profile of a company’s qualities (or operating risk) – its chances of surviving and its potential for achieving long-term stable profit growth.
We categorize a company’s qualities on a ten-point scale based on five valuation keys; 1 – Management. 2 – Ownership. 3 – Profit Outlook. 4 – Profitability and 5 – Financial Strength.
Each valuation key is assessed based a number of quantitative and qualitative key factors that are weighted differently according to how important they are deemed to be. Each key factor is allocated a number of points based on its rating. The assessment of each valuation key is based on the total number of points for these individual factors. The rating scale ranges from 0 to +10 points.
The overall rating for each valuation key is indicated by the size of the bar shown in the chart. The relative size of the bars therefore reflects the rating distribution between the different valuation keys.
Management
Our Management rating represents an assessment of the ability of the board of directors and management to manage the company in the best interests of the shareholders. A good board and management can make a mediocre business concept profitable. while a poor board and management can even lead a strong company into crisis. The factors used to assess a company’s management are: 1 – Execution. 2 – Capital allocation. 3 – Communication. 4 – Experience. 5 – Leadership and 6 – Integrity.
Ownership
Our Ownership rating represents an assessment of the ownership exercised for longer-term value creation. Owner commitment and expertise are key to a company’s stability and the board’s ability to take action. Companies with a dispersed ownership structure without a clear controlling shareholder have historically performed worse than the market index over time. The factors used to assess Ownership are: 1 – Ownership structure. 2 – Owner commitment. 3 – Institutional ownership. 4 – Abuse of power. 5 – Reputation. and 6 – Financial sustainability.
Profit Outlook
Our Profit Outlook rating represents an assessment of a company’s potential to achieve long-term stable profit growth. Over the long-term. the share price roughly mirrors the company’s earnings trend. A company that does not grow may be a good short-term investment. but is usually unwise in the long term. The factors used to assess Profit Outlook are: 1 – Business model. 2 – Sale potential. 3 – Market growth. 4 – Market position. and 5 – Competitiveness.
Profitability
Our Profitability rating represents an assessment of how effective a company has historically utilised its capital to generate profit. Companies cannot survive if they are not profitable. The assessment of how profitable a company has been is based on a number of key ratios and criteria over a period of up to the past five years: 1 – Return on total assets (ROA). 2 – Return on equity (ROE). 3 – Net profit margin. 4 – Free cash flow. and 5 – Operating profit margin or EBIT.
Financial Strength
Our Financial Strength rating represents an assessment of a company’s ability to pay in the short and long term. The core of a company’s financial strength is its balance sheet and cash flow. Even the greatest potential is of no benefit unless the balance sheet can cope with funding growth. The assessment of a company’s financial strength is based on a number of key ratios and criteria: 1 – Times-interest-coverage ratio. 2 – Debt-to-equity ratio. 3 – Quick ratio. 4 – Current ratio. 5 – Sales turnover. 6 – Capital needs. 7 – Cyclicality. and 8 – Forthcoming binary events.
Strengthened financial position
The issuance of a five-year bond loan of SEK 300 million significantly improves Moberg Pharma’s (MP) ability to acquire new products and prod-uct licenses to plug in to the US OTC platform in a non-dilutive manner. This is positive news in our view, since growth through acquisitions - the company's stated strategy - will be particularly important to deliver on in the coming years, as we expect top-line growth from existing products to be more moderate in the next few years compared to last year. The challenge, we believe, will lie in finding assets at attractive multiples. The acquisition of new products is also a necessity if the financial target - an EBITDA margin of 25% - is to be achieved, which MP recently announced will not happen this year as previously guided by management. However, post-poning delivering on the financial target came as no major surprise to us, and was rather in line with our expectations.
The bond loan will have a floating rate coupon of Stibor (Stockholm Interbank Offered Rate) 3 months (-0.30%) + 6.00%. The total framework for the bond amounts to SEK 600 million, providing scope for doubling the loan size if needed. In our forecasts for MP, we model a Stibor 3m rate of -0.30% in 1H 2016, and a Stibor rate of 0.0% in 2H 2016. In 2017 we expect Stibor to turn positive and a rate of 0.5% and in 2018 a Stibor rate of 1.0%. MP intends to list the bond on Nasdaq Stockholm (http://goo.gl/718Gpx).
Promising phase II data
Recently released Bupi (lozenge formulation of bupivacaine) top-line data, from an open label phase II trial, showed a statistically significant
(p=0.0326) reduction in pain compared to the control arm. The primary endpoint was a measure of the mean oral pain intensity measured by the visual analogue scale (VAS). Patients treated with Bupi showed a 23% reduction in pain (in mouth or pharynx), and recorded a VAS score of 37.5 versus a VAS score of 48.9 for patients in the control arm. The pain inten-sity reduction was even more pronounced in the month (excl. pharynx) with a 46% lower VAS score (17.7 vs. 33.0, p=0.0027). As expected, no serious adverse events were reported among patients treated with the local anesthetic Bupi.
In the trial 32 patients were evaluated out of a total of 40 enrolled. They were patients with oral mucositis from the treatment of head and neck cancer. All patients in the trial were allowed to use standard treatment of their pain and in addition they were given Bupi in the active arm or a local acting lidocaine gel in the control arm.
Top-line data looks promising so far, and we have therefore hiked our expectations and increased the likelihood of the project to reach to market to 30% from 25% previously. However the data set is still limited and we don’t know anything about usage of standard of care during the study Non-dilutive financing of
SEK 300 million in place
Statistically significant reduction of pain in the active arm compared to the control group
We hike our expectations about the project
between the two treatment arms. We need a better understanding of this usage if we are to further lower the risk adjustment of the project. Analysis of the trial continues and we expect more data to be made public later this quarter.
Progressing towards phase III with MOB-015
It has become increasingly evident to us in the last few months that MP will move forward with MOB-015 into phase III by itself and, at least for now, abandon a partnering strategy. The reason for this decision, we believe, is that financial terms from potential partners have not met MP’s expecta-tions. Instead, MP sees investment in the phase III programme as an attrac-tive opportunity to build further value before a potential partnering deal. Late last year MP met with regulatory authorities in Europe and US, which provided guidance of what kind of clinical trials they consider to be neces-sary for MOB-015 to be able to obtain an approval in these markets. This guidance has not yet been fully disclosed, and we therefore don’t yet know about much of the final design of the phase III programme and how exten-sive these studies have to be to support a regulatory filing. Hence, estimate-ing the costs and time to a market approval involves a lot of guesswork. Our expectation is that the phase III programme will start in mid-2016 and dosing of the first patient will happen in 2H 2016. The clinical programme will likely run for about two years, with top-line data in 2H 2018. A positive outcome would pave the way for a regulatory filing in the US in 2019 and a possible launch in 2020 (60% probability). Given the much larger size of the US onychomycosis market, we expect the clinical programme to initially focus on US clinics and patients. We assume costs for the US phase III programme to reach about SEK 150 million. All of the development costs related to the phase III programme are expected to be capitalised up to an FDA approval in 2020, and not burden profits but cash flow during this period.
To somewhat limit the investment in the phase III programme MP has struck a cost-sharing manufacturing deal with Colep (Colep’s Healthcare Division), which also includes an exclusive agreement regarding the future commercial supply of MOB-015 in selected territories. Under this agree-ment Colep is committed to sharing funding to scale up the manufacturing process and stability programmes and build up a supply of MOB-015 for the phase III programme. Colep will also be responsible for the documentation needed for a filing in the US and EU, although MP will own all this data and documentation. The agreement obviously lowers MP’s investment ahead of the phase III programme. We expect Coleps investment into the pro-gramme (Redeye’s estimate, approx. USD 2-4 million) to be offset against future sales of MOB-015.
MP met with regulatory authorities in Europe and the US in 4Q 2015
We expect all phase III development costs to be capitalized
New topical nail fungus therapies displaying rapid growth
There is estimated to be approximately 35 million people in the US with nail fungus. About five to six million seek treatment for this condition each year, and roughly 2.5 million are treated with prescription therapies. A gold standard treatment is oral terbinafine (Lamisil, Novartis), which is highly effective, but uptake has been hampered due to its systemic side effects. Locally administrated products have the potential to overcome these kinds of issues, but low efficacy has historically been the main reason why topical products like Penlac (ciclopirox, Valeant Pharmaceuticals) have not enjoyed any considerable commercial success. However, new more effective topical therapies reached the US market in 2014; Jublia (efinaconazole, Valeant Pharmaceuticals) and Kerydin (tavaborole, Anacor/Sandoz). The launch of these new products has driven up demand of topical therapies. Anacor estimates the number of topical nail fungus prescriptions filled per month have almost tripled, from roughly 70,000 in mid-2014 to roughly 200,000 at the end of September 2015. Below we have compiled how revenues for Jublia and Kerydin have progressed since the launch.
Reported quarterly net revenues – Jublia and Kerydin
Source: Valeant Pharmaceuticals, Anacor Pharmaceuticals
As shown above, sales of these products have enjoyed strong growth and we estimate trailing twelve month net revenues of USD 415 million at the end of 3Q 2015. So far, the market leader Jublia has been a very successful launch, partly been driven by extensive investments in direct-to-consumer (DTC) advertising. As an example, Jublia ads ran during the Super Bowl last year, often seen as the most expensive event for advertising. To com-pete more actively with Jublia, Pharmaderm (part of Sandoz) also increased its DTC investments in late August last year and since then we have seen strengthened growth in new prescriptions of Kerydin (see next page).
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Kerydin 20 32 40 Jublia 3 13 53 62 102 106 0 20 40 60 80 100 120 140 160 U S D m il li o n
Topical nail fungus prescriptions filled per month have tripled in the past twelve months
Strong sales growth out of new topical products
Monthly number of prescriptions of Kerydin
Source: Wolters Kluwer
When interpreting the above prescription number, one should be aware that these numbers do not include sales through specialty pharmacies, which we believe represent approx. 35-40% of total prescriptions. An interesting reflection is also that the increased promotional activities surrounding the new topical products seem to have had a positive effect on the prescription of the older topical product Penlac and Penlac generics (ciclopirox).
Monthly prescriptions of ciclopirox (8%)
Source: Wolters Kluwer
We believe topical nail fungus therapies will continue to show strong growth and that the market has the potential to double in size up to 2020, when we expect MOB-015 to be on the market.
0 5000 10000 15000 20000 25000 30000 40000 45000 50000 55000 60000 65000 70000 75000 Strengthened growth in Penlac and Penlac generics since launch of new topical treatments
MOB-015 – competitive profile
The introduction of the two new topical therapies for nail fungus has been an important step forward for patients. Previously, only limited options were available to patients who wanted to avoid or were unable to take oral terbinafine. As mentioned above, Penlac a nail lacquer, has had poor thera-peutic outcomes and shown mycological cure rates (with nail debridement) ranging from 29 to 36%. Complete cure rates (mycological cure and normal toenail appearance) range from 5.5 to 8.5%. The table below lists outcome data for a couple of approved nail fungus therapies.
Approved RX products, Onychomycosis
Active substance Mycological cure Treatment length Product Company
Terbinafine 54% 48w MOB-015 Moberg Pharma
Tavaborole 31-36% 48w Kerydin Anacor/Sandoz
Efinaconazole 53-55% 48w Jublia Valeant Pharma.
Terbinafine (oral) >70% 12-16w Lamisil Novartis
Itraconazole (oral) 38-49% 12-16w Sporanox Johnson & Johnson
Ciclopirox 29-36% 48w Penlac Valeant
Source: Redeye Research, Moberg Pharma
In the phase II trial MOB-015 reached a mycological cure rate of 54%, which is in line with current market leader Jublia. This data looks very promising indeed, particularly considering that patients in the trial had a nail fungus that was more difficult to treat than in competitors’ trials. The mean affected toenail in the MOB-015 phase II trial was 60%, which can be compared to 36% in the Jublia trial and 40% in the Penlac trial.
In the forthcoming phase III trial, MP intends to enrol patients with slightly less affected toenails, mild to moderate onychomycosis, which will be more in-line with patients enrolled in the Jublia study. Going for patients with less affected toenails will likely translate into better efficacy data. This hypothesis is supported by data from a previous clinical trial with Nalox (same foundation as MOB-015), which showed a greater mycological cure rate in mild to moderate patients (25-50% affected toenails). The table shows MP’s view of a possible target product profile for MOB-015 in patients with mild to moderate affected nails.
Poor therapeutic efficacy has historically hampered uptake of topical
treatments
Better efficacy data is expected in patients with less affected toenails
Source: Moberg Pharma
If the target profile above is reached in the coming phase III trials, we believe MOB-015 has a strong case to challenge currently approved topical nail fungus products with the best efficacy profile. The challenge instead, we believe, lies in being more than five years behind Jublia and Kerydin to the market, which will by then be well-established brands. This is the main reason for why we model a market share of at least 20% for MOB-015, translating into peak sales potential of about USD 250 million.
Partnering deal post FDA approval
Even though MP aims to become a leading player within nail fungus, we are at present, with current products and distribution channels, sceptical about the rationale to eventually sell MOB-015 with the company’s own sales force. We see a much better rationale in partnering MOB-015 with an existing player in this field, which is why we model a partner agreement post an FDA approval. Our reasons are as follows:
- Looking at the launch of Jublia and Kerydin, substantial invest-ments in direct-to-consumer (DTC) advertising will be needed - MP currently has no other Rx products in the field, and no existing
relationship with prescribers
- No other dermatological Rx products to co-promote
When we model a deal we assume this will take place in 2020 post an FDA approval. We estimate MP will obtain a 30% royalty from a partner and an upfront payment of USD 30 million. This is somewhat lower than the best reference deal, the deal between Anacor and Sandoz, which was struck in 2014. The reason for this is that we want to be slightly cautious in our assumptions until we have more solid clinical data in hand.
We estimate MOB-015 peak sales to reach USD 250 million
We expect MP to partner MOB-015 in 2020
Growth levels off as expected
3Q revenues reached SEK 66.6 (50.3) million, representing +32% y/y growth, but slightly below our estimate of SEK 68.6 million. EBITDA came in at SEK 13.8 (7.3) million, well above our forecast of SEK 7.7 million. However, profits were boosted by a SEK 2.7 million revaluation of employee stock option costs and by SEK 1.0 million from other operating income (positive currency effect on receivables). Stripping these out, EBITDA was SEK 10.1 million, but still above our expectations.
Estimates vs outcome Q3 2015
(SEK million) Q3'15e Outcome Diff Q3'14
Revenues 68.6 66.6 -3% 50.3 Emtrix/Kerasal Nail/Nalox 35.6 30.1 -15% 27.4 Kerasal 8.5 7.9 -7% 6.8 JointFlex 8.5 9.4 10% 9.2 Other 16.0 18.9 18% 6.8 Milestone payments 0.0 0.2 Nm 0.0
Cost of goods sold -19.6 -17.9 9% -14.1
Gross profit 49.1 48.7 -1% 36.2
Selling expenses -31.4 -30.7 -2% -22.5
Administrative costs -6.4 -5.0 -22% -4.7
Research and development -6.5 -3.1 -53% -5.4
Other operating income/expenses 0.0 1.0 Nm 1.7
EBITDA 7.7 13.8 80% 7.3
EBIT 4.7 10.9 133% 5.3
Sales growth (y/y) 36% 32% 35%
Sales growth (y/y) excl. milestones 36% 32% 35%
Gross margin excl. milestones 71.6% 73.0% 72.0%
EBITDA margin 11% 21% 14%
EBIT margin 7% 16% 11%
Source: Moberg Pharma, Redeye Research
While profits surprised positively, as did sales of the branded OTC nail fungus products (Emtrix, Kerasal Nail and Nalox), sales surprised
negatively, coming in at SEK 30.1 million, well below the SEK 35.6 million that we were looking for. US sales in particular seem to have weakened considerably in 3Q, turning around the strong performance in 2Q 2015. This was somewhat anticipated, due to the inventory build-up in previous quarters. Perhaps more surprising was the weakness in the underlying US nail fungus OTC market, -8% in first nine months and down by about 10% in 3Q according to management. We believe that this downward trend in recent quarters, is due to stiffening competition from topical Rx products like Jublia and Kerydin. On a rolling 12-month basis, sales are now at SEK 155.3 (104.4) million.
Profits beat our expectations in 3Q 2015
US nail fungus OTC market continues to weaken as competition from Rx products increases
In the coming quarters we expect more or less flattish sales growth.
Kerasal Nail/Nalox product sales forecast, rolling 12 months
Source: Moberg Pharma, Redeye Research
Across the board, costs were below our estimates in 3Q 2015. Research and development (R&D) expenses in particular came down and were lower than we had projected. Looking back at investments in research and develop-ment, investments in commercial products have been trending lower for the last two years.
R&D expenses - commercial products
Source: Moberg Pharma, Redeye Research
Profitability (EBITDA) in the commercial operations, adjusted for R&D expense and business development related to Rx products, reached SEK 18.1 (11.7) million in 3Q. This equals an EBITDA margin of 27.1 (23.2)%. Excluding revaluation of stock options and receivables, adjusted EBITDA was SEK 14.4 million, representing an EBITDA margin of 21.6%. EBITDA from commercial operations has considerably improved in recent years, on a trailing 12-month basis, and rose to SEK 69.1 million in 3Q 2015. This represents an EBITDA margin of 25.0%, in-line with the financial target of
0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0
Q4'12 Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15e Q2'16e Q4'16e
S E K m il li o n -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 S E K m il li o n R&D – investments in commercial products at a low in the last two years
Profitability in the commercial operations delivers EBITDA margins in-line with the financial target
Adjusted EBITDA margin (adjusted 12m) Q4 2013 – Q3 2015
Source: Moberg Pharma, Redeye Research
Cash flow from operating activities continues to improve and amounted to SEK 11.5 (6.9) million in 3Q 2015.
Financial forecasts
Ahead of the 4Q numbers we have lowered our top-line estimates. We ex-pect the pressure in the US OTC nail fungus market to continue and that lower inventory levels will also put pressure on sales in 2016. To some ext-ent we have also lowered our cost estimates, softening the impact on profits.
(SEK million) 2015e 2016e 2017e
Revenues New 284.2 294.8 315.3
Old 294.0 332.6 358.3
(%) -3% -11% -12%
Gross profit New 214.9 221.4 236.5
Old 220.3 248.8 268.8
(%) -2% -11% -12%
Selling & admin. New 162.5 170.1 174.4
Old 164.6 170.6 178.0 (%) -1% 0% -2% R&D New 22.2 13.6 15.4 Old 27.7 18.7 19.3 (%) -20% -27% -20% EBITDA New 44.1 49.5 58.4 Old 40.6 65.6 76.7 (%) 9% -25% -24% EBIT New 32.7 37.7 46.7 Old 29.3 53.9 64.9 (%) 12% -30% -28%
Source: Redeye Research
0% 5% 10% 15% 20% 25% 30% 0 10 20 30 40 50 60 70 80 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 M S E K
Quarterly estimates for 2015 and 2016 are presented below.
Quarterly estimates
(SEK million) 2015 2016
Q1 Q2 Q3 Q4e Q1e Q2e Q3e Q4e
Emtrix, Kerasal Nail, Nalox 41.0 60.6 30.1 21.9 39.8 57.5 31.6 24.6
Kerasal 9.1 9.3 7.9 6.0 9.0 9.3 8.1 6.2 JointFlex 12.3 6.4 9.4 8.4 9.5 9.2 9.5 9.1 Other products 8.6 15.6 18.9 15.9 17.4 18.6 18.8 16.5 Milestones 2.1 0.2 0.2 0.0 0.0 0.0 0.0 0.0 Revenue 73.2 92.2 66.6 52.3 75.7 94.6 68.0 56.4 COGS -16.4 -20.6 -17.9 -14.4 -17.4 -21.8 -18.4 -15.8 Gross Profit 56.8 71.6 48.7 37.9 58.3 72.9 49.7 40.6 Selling expenses -31.7 -47.9 -30.7 -26.3 -34.4 -48.4 -31.6 -26.8 Administrative expenses -6.8 -7.1 -5.0 -7.1 -7.1 -7.8 -5.8 -8.2
Research and development exp. -7.9 -6.3 -3.1 -5.0 -5.4 -3.0 -2.2 -3.0
Other income/expenses 4.5 -2.0 1.0 -1.0 0.0 0.0 0.0 0.0
EBITDA 17.4 11.1 13.8 1.7 14.3 16.6 13.0 5.5
EBIT 14.9 8.3 10.9 -1.5 11.4 13.7 10.0 2.6
Net financial items -0.2 -0.2 -0.1 -0.1 -2.9 -4.4 -4.5 -4.6
EBT 14.7 8.2 10.8 -1.6 8.5 9.3 5.5 -2.0
Tax -3.7 -2.6 -2.0 0.0 -2.5 -2.7 -1.6 0.0
Net Profit 10.9 5.5 8.8 -1.6 6.0 6.6 3.9 -2.0
EPS 0.78 0.39 0.63 Neg 0.37 0.39 0.25 Neg
Growth, excl. milestones 54.5% 59.3% 32.0% 18.7% 11.5% 3.8% 4.9% 8.3%
Gross margin 77.6% 77.6% 73.1% 72.5% 77.0% 77.0% 72.0% 72.0%
EBITDA margin 23.7% 12.0% 20.8% 3.3% 23.1% 22.4% 20.9% 15.7%
EBIT margin 20.4% 9.0% 16.4% Neg 19.4% 19.3% 16.7% 10.6%
Source: Redeye Research, Moberg Pharma
The growth rate seems to have peaked in 2Q last year as we have expected, and growth will probably come down further in the coming quarters. The reason for this is a flattening positive currency effect going forward, in-creased competition from Rx nail fungus products in the US and an invent-tory build-up in 2015 which we expect to have a reversed effect this year. Although we expect growth to come down, we still believe MP will be able to deliver growth in 2016, driven in particular by a solid performance in ROW (Asia). We expect sales growth for North America could be more or less flat in 2016 and reach SEK 218.4 million, even though acquisition of Balmex (April 2015) will be fully taken into account in 2016. We expect Balmex to contribute SEK 10-12 million to the top line compared to 2015 estimates. We don’t expect sales to grow in Europe in 2016.
As previously projected the EBITDA margin will not reach 25% in 2016. Ee expect the EBITDA margin to be just slightly higher than the 15.5% we forecast for 2015 (see next page).
Full year estimates
(SEK million) 2013 2014 2015e 2016e 2017e
Emtrix, Kerasal Nail, Nalox 93.2 112.7 153.7 153.6 170.6
Kerasal 26.3 29.0 32.3 32.6 33.3 JointFlex 32.7 30.9 36.6 37.3 38.0 Other products 0.0 25.4 59.0 71.3 73.4 Milestones 4.8 2.2 2.6 0.0 0.0 Revenue 156.9 200.2 284.2 294.8 315.3 COGS -39.5 -49.1 -69.3 -73.3 -78.8 Gross Profit 117.4 151.1 214.9 221.4 236.5 Selling expenses -75.7 -93.2 -136.5 -141.2 -143.5 Administrative expenses -27.8 -26.6 -26.3 -28.9 -30.9
Research and development exp. -29.0 -19.9 -22.2 -13.6 -15.4
Other income/expenses 1.1 5.8 2.5 0.0 0.0
EBITDA -8.0 25.3 44.1 49.5 58.4
EBIT -14.1 17.2 32.7 37.7 46.7
Net financial items -2.1 -0.7 -0.6 -16.4 -19.0
EBT -16.2 16.6 32.1 21.3 27.7
Tax 4.8 -4.3 -8.4 -6.8 -7.5
Net Profit -11.4 12.3 23.7 14.5 20.2
EPS -0.96 0.88 1.69 1.04 1.45
Growth, excl milestones 83.9% 30.2% 42.2% 4.7% 7.0%
Gross margin 74.8% 75.5% 75.6% 75.1% 75.0%
EBITDA margin -5.1% 12.6% 15.5% 16.8% 18.5%
EBIT margin -9.0% 8.6% 11.5% 12.8% 14.8%
Source: Redeye Research, Moberg Pharma
In our forecast above we have not included any acquisitions, although it is highly likely we will see some during the forecast period. All research and development costs related to the MOB-015 phase III programme have been capitalised up to 2019. In 2016 we estimate investment in the phase III programme to reach SEK 46 million, in 2017 SEK 34 million, in 2018 SEK 58 million and in 2019 SEK 10 million. We forecast a risk-adjusted milestone payment of SEK 168 million in 2020 from a partnering deal in the US.
Valuation
We value Moberg Pharma using a combination of multiples based on peer group companies, and DCF. High dependency on the branded OTC nail fungus products and the brief history as a profitable company imply greater risk compared to the more mature consumer health companies, and for this reason we use a WACC of 11.6%. However, if Moberg Pharma performs in line with our forecasts, we would expect to reduce the WACC over time. Based on our base case assumptions presented above we derive a DCF value of SEK 69.
We model costs of SEK 148 million for the MOB-015 phase III programme
Scenario analysis
There are many factors that will affect the outcome in different ways in the coming years. In our scenario analysis we have attempted to quantify the most important ones and how different potential scenarios would impact the valuation of the company.
Base case scenarioassumptions:
• We assume an average revenue growth rate of approx. 6% through 2020 in the OTC business, which is based on current branded commercial products. From 2021 and onwards, we assume a growth rate in line with the expected inflation rate (2%)
• We risk-adjust pipeline products and assume a 60% probability of MOB-015 reaching the market in 2020 and a 30% probability of Bupi reaching the market in 2020
• We assume MP will deliver EBIT margins of 30% from 2021
Bull case scenario assumptions:
• We do not risk-adjust pipeline products (MOB-015) in our estimates – and expect a launch in 2020
• We assume an average revenue growth rate of 12% through 2020 in the OTC business, based on current branded commercial products. From 2021 and onwards we assume a growth rate in line with the expected inflation rate
• We assume Moberg Pharma delivers EBIT margins of 35% from 2021, strengthened by high-margin RX products which are expected to have reached the market
The assumptions above give a fair value of SEK 100
Bear case scenario assumptions:
• We assume none of current pipeline projects reach the market • We assume revenue growth flattens out in 2018 and then expands
in line with expected inflation rate
• We assumes EBIT margins peak at 15% in 2018 The assumptions above give a fair value of SEK 34
Income statement (SEK million)
2013 2014 2015E 2016E 2017E
Net sales 157 200 284 295 315
Total operating costs -165 -175 -240 -244 -258
EBITDA -8 25 44 51 58 Depreciation 0 -1 -1 -2 -2 Amortization -6 -7 -10 -11 -9 Impairment charges 0 0 0 0 0 EBIT -14 17 33 38 47 Share in profits 0 0 0 0 0
Net financial items -2 -1 -1 -16 -19
Exchange rate dif. 0 0 0 0 0
Pre-tax profit -16 17 32 21 28
Tax 5 -4 -8 -7 -7
Net earnings -11 12 24 15 20
Balance (SEK million) 2013 2014 2015E 2016E 2017E Assets
Current assets
Cash in banks 27 62 56 315 318
Receivables 20 42 65 68 69
Inventories 7 13 19 19 20
Other current assets 5 0 0 0 0
Current assets 59 117 140 402 408 Fixed assets Tangible assets 1 1 1 1 2 Associated comp. 0 0 0 0 0 Investments 0 0 0 0 0 Goodwill 70 88 88 88 88
Cap. exp. for dev. 0 0 0 0 0
O intangible rights 111 129 160 196 221
O non-current assets 0 0 0 0 0
Total fixed assets 183 217 248 285 311
Deferred tax assets 29 25 16 10 0
Total (assets) 272 360 405 696 719 Liabilities Current liabilities Short-term debt 13 13 3 0 0 Accounts payable 38 39 54 55 57 O current liabilities 0 0 0 0 0 Current liabilities 52 53 57 55 57 Long-term debt 17 3 0 300 300 O long-term liabilities 2 0 0 0 0 Convertibles 0 0 0 0 0 Total Liabilities 70 56 57 355 357
Deferred tax liab 0 0 0 0 0
Provisions 0 0 0 0 0
Shareholders' equity 202 304 347 342 362
Minority interest (BS) 0 0 0 0 0
Minority & equity 202 304 347 342 362 Total liab & SE 272 360 405 696 719 Free cash flow
(SEK million)
2013 2014 2015E 2016E 2017E
Net sales 157 200 284 295 315 Total operating costs -165 -175 -240 -244 -258 Depreciations total -6 -8 -11 -13 -11 EBIT -14 17 33 38 47 Taxes on EBIT 4 -4 -9 -12 -13 NOPLAT -10 13 24 26 34 Depreciation 6 8 11 13 11
Gross cash flow -4 21 36 38 45
Change in WC -2 -16 -14 -2 -1
Gross CAPEX -32 -42 -42 -49 -37
Capital structure 2013 2014 2015E 2016E 2017E
Equity ratio 74% 84% 86% 49% 50% Debt/equity ratio 15% 5% 1% 88% 83% Net debt 3 -46 -52 -15 -18 Capital employed 204 258 295 327 344 Capital turnover rate 0.6 0.6 0.7 0.4 0.4
Growth 2013 2014 2015E 2016E 2017E
Sales growth 0% 27% 42% 4% 7%
EPS growth (adj) -138% -192% 90% -39% 39%
Profitability 2013 2014 2015E 2016E 2017E
ROE -6% 5% 7% 4% 6% ROCE -6% 6% 10% 8% 7% ROIC -6% 6% 9% 9% 10% EBITDA margin -5% 13% 16% 17% 18% EBIT margin -9% 9% 12% 13% 15% Net margin -7% 6% 8% 5% 6%
Data per share 2013 2014 2015E 2016E 2017E
EPS -0.96 0.88 1.66 1.02 1.42
EPS adj -0.96 0.88 1.53 0.94 1.31
Dividend 0.00 0.00 0.00 0.00 0.00
Net debt 0.24 -3.28 -3.68 -1.07 -1.30
Total shares 11.89 13.96 14.22 14.22 14.22
Valuation 2013 2014 2015E 2016E 2017E
EV 378.7 484.8 729.7 766.8 763.5 P/E -33.1 43.3 33.1 53.9 38.7 P/E diluted -33.1 43.3 35.9 58.6 42.1 P/Sales 2.4 2.7 2.8 2.7 2.5 EV/Sales 2.4 2.4 2.6 2.6 2.4 EV/EBITDA -47.6 19.1 16.5 15.2 13.2 EV/EBIT -26.9 28.2 22.3 20.3 16.4 P/BV 1.9 1.7 2.3 2.3 2.2 Share information
Reuters code MOB.ST
List Small cap
Share price 55.0
Total shares. million 14.2
Market Cap. MSEK 782.0
Management & board
CEO Peter Wolpert
CFO Anna Ljung
IR
Chairman Mats Pettersson
Financial information FY 2015 Results February 17. 2016 Q1 report May 10. 2016 Q2 report August 09. 2016 Q3 report November 08. 2016 Analysts Redeye AB
Klas Palin Mäster Samuelsgatan 42. 10tr
[email protected] 111 57 Stockholm
Björn Olander
DCF valuation Cash flow. MSEK
WACC (%) 11.6 % NPV FCF (2015-2017) -5
NPV FCF (2018-2024) 367
NPV FCF (2025-) 575
Non-operating assets 62
Interest-bearing debt -17
Fair value estimate MSEK 984 Assumptions 2015-2021 (%)
Average sales growth 9.2 % Fair value e. per share. SEK 69.2
EBIT margin 22.0 % Share price. SEK 55.0
Share performance Growth/year 13/15e
1 month -13.7 % Net sales 34.4 %
3 month -4.4 % Operating profit adj �
12 month 35.5 % EPS. just �
Since start of the year -16.7 % Equity 31.3 %
Shareholder structure % Capital Votes
Östersjöstiftelsen 16.0 % 16.0 %
SHB fonder 8.1 % 8.1 %
Avanza Pension Försäkring 7.0 % 7.0 %
Grandeur Peak 5.9 % 5.9 % Carnegie Luxembourg 4.5 % 4.5 % Wolco Invest AB 4.2 % 4.2 % Fondita 4.0 % 4.0 % JP Morgan 2.0 % 2.0 % Societe Generale 1.9 % 1.9 % Nordnet Pensionsförsäkringar 1.8 % 1.8 %
Revenue & Growth (%) EBIT (adjusted) & Margin (%)
Earnings per share Equity & debt-equity ratio (%)
Conflict of interests Company description
Klas Palin owns shares in the company: No Björn Olander owns shares in the company: No
Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.
Moberg Pharma is a Swedish pharmaceutical company that commercialises proprietary. acquired and licensed products in the global market. Initially the company specialised in the treatment of skin diseases but is now widening its scope to include additional areas. Moberg Pharma markets OTC brands in the U.S. and sells through distributors in more than 40 countries.
-5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 0 50 100 150 200 250 300 350
2012 2013 2014 2015E 2016E 2017E
Net sales Net sales growth
-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -20 -10 0 10 20 30 40 50
2012 2013 2014 2015E 2016E 2017E
EBIT adj EBIT margin
-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3
2012 2013 2014 2015E 2016E 2017E
EPS, unadjusted EPS, adjusted
-20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
2012 2013 2014 2015E 2016E 2017E
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Redeye Rating (2016-02-04)
Rating Management Ownership Profit outlook Profitability Financial Strength 7.5p - 10.0p 35 42 16 7 18 3.5p - 7.0p 65 50 84 33 36 0.0p - 3.0p 5 13 5 65 51 Company N 105 105 105 105 105
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