Destiny Pharma  released their Audited results for year ended 31 December 2022 today.

 

Neil Clarke, CEO of Destiny Pharma (DEST), described 2022 as one of good progress and believes that their "targeted and diversified pipeline has substantial commercial potential that will drive value generation in the future."

But how much potential?

Nick Rodgers, Chairman of Destiny Pharma recently said, "Management's estimate of the Net Present Value (NPV) for NTCD-M3 is some $200 million. XF-73 nasal is wholly owned by Destiny Pharma and addresses a larger market so its value to the Company  is expected to exceed that of NTCD-M3 once partnered".

So should it land a deal on its second late stage asset,  XF-73, you can assume this net present value would most likely more than double to well over $400m.

Three seperate brokers have published share price targets for Destiny Pharma which currently stand at:

Equity Development = 267p
Finncap = 285p
Shore Capital = 290p

The average of these, is 280p, some 800% up on today's current share price of 30.2p.

Solid Progress Made

NTCD-M3 for prevention of C. difficile infection recurrence is the first of Destiny's two late stage assets. In February they signed an exclusive North American partnering deal worth up to $570m plus royalties.

This partnership with Sebela will finance the future clinical development and commercialisation costs of NTCD-M3 in North America whilst the Company retains majority rights for Europe and Rest of World. 

This means Destiny Pharma has no further financial burden in taking this asset through Phase 3 trials and its suggested that US/EU peak sales are $500m+.

Also encouraging was the recent release on April 4th of positive new data published on the absence of toxic gene transfer to NTCD-M3 in the peer-reviewed journal, Public Library of Science One.

This confirmed that NTCD-M3 can be used alongside all currently recommended antibiotics in the treatment of this C. difficile infection.

XF-73 nasal gel for prevention of post-surgical infections is the second asset ready to go into phase 3 trails but, as with NTCD-M3, Destiny is looking to secure a partner and it says that an "Active partnering programme, has been, initiated and early discussions with potential partners commenced".

Again worth re-iterating is that XF-73 nasal is wholly owned by Destiny Pharma and addresses a larger market (projected global peak sales estimated at ~$1 billion+) so its "value to the Company is expected to exceed that of NTCD-M3 once partnered".

Destiny reckons a deal on XF-73 will be reached this year.

The company also just announced the publication of landmark XF-73 clinical data in a leading US peer reviewed journal "Infection Control & Hospital Epidemiology".

Dr Bill Love, Chief Scientific Officer of Destiny Pharma, said: "This is certainly the most important paper that we have published on XF-73 nasal gel. XF-73 nasal gel is a potential game changer in the fight to reduce the risk of post-surgical infections from hospital superbugs."

View from Vox

One of the most important factors to consider when researching loss making companies is the strength of the balance sheet. Destiny Pharma had year-end cash of £4.9 million and recently raised £7.3 million (gross), which they say extends their cash runway to H2 2024.

It would also be safe to assume a deal on XF-73 would be signed before this time, which could include some upfront payment.

Sentiment towards Destiny Pharma's shares took a knock when they raised £7.3m at a discount after the announcement of its deal with Sebela. Before the deal, in anticipation of the announcement, the share price rose from 32p to 60p within a month from December 2022 to January 2023.

Ironically, the company is now in a much stronger position, financially and operationally, than it was in when the share price hit 60p. It has landed a big deal, has a bigger cash pile and is in talks on a deal on XF-73, which is looking like it will be larger than the deal on NTCD-M3.

I see the recent weakness as a result of sentiment and therefore temporary. Should the their value generation even reach half that of what three seperate brokers suggest is fair value, then there's plenty of upside.