Shield Therapeutics is focused on the development and commercialisation of Feraccru, a CHMP-approved oral formulation of iron positioned for the treatment of iron deficiency (ID) with or without anaemia. In 2018, out-licensing Feraccru to Norgine re-established an active salesforce in core EU5 territories and provided Shield with a cash injection of £11m. Additional near-term revenue (royalties and milestones) is expected as Norgine continues rollout of Feraccru across Europe in 2020. In the US, we expect Feraccru approval in 2019. We value Shield at £178m or 153p/share.
Iron deficiency anaemia (IDA) is large market globally; the 2015 Global Burden of Disease study estimated prevalence of c 1.5bn worldwide. Treatment discontinuation rates are high (30–60%) with first-line treatment utilising salt-based oral iron products (intolerable side effects) – the alternative is IV iron (requires hospital admission, higher costs, risk of anaphylaxis). Feraccru is non-salt-based oral iron with a preferential side effect profile (comparable to placebo), uniquely positioning it as an oral alternative to IV iron that aims to capture a portion of the IV iron market (c $1.1bn in 2017), which is forecast to grow (5.6% CAGR to 2024).
Norgine is re-establishing Feraccru sales in core markets (re-launching in the UK and Germany in December 2018) and will roll out into additional markets in Europe (as covered by the licensing deal) from 2020. Shield will be eligible for royalties on sales (25–40%) and milestone payments (up to €54.5m) for sales in Europe. Partnering strategies enhance economic returns and de-risk the investment case. Cost reductions enacted in 2018 have effectively lengthened Shield’s cash reach into 2020; we forecast sustainable profitability from 2022. Key inflections in 2019–20 include potential regulatory approval in the US (and partnering deal); top-line data from the head-to-head study, which could drive uptake in clinical adoption; sales growth across Europe and the US; and outcomes from patent objections from Teva.
Our valuation of Shield, at £178m or 153p/share, is based on a risk-adjusted NPV model of Feraccru for IDA in Europe and for CKD/IBD-related IDA in the US market. Our NPV calculation is based on Feraccru achieving 2029 peak sales of £334m from Europe (€133m) and the US ($251m). Should a broader US label be granted, our fair value increases to 203p/share. A successful patent challenge from Teva will reduce the duration of exclusivity from 2035 to 2029 (provided by a manufacturing patent) and decreases our valuation to 92p/share. Given its commercial availability, we have utilised a 10% discount rate and risk-adjusted the US opportunity accordingly (75%).