First Take
GTC Biotherapeutics Inc. (GTCB)
Price: $0.32 (10/07/2008 - Intraday), Price Target: $4.00,
Market Cap(MM):$32.9, Rating: Market Outperform
Reni Benjamin, Ph.D., Senior Biotechnology Analyst
FDA Accepts ATryn BLA Filing – Triggers $2 MM Milestone from OVATION
BLA Filing Accepted By FDA Yesterday, GTC Biotherapeutics announced that the FDA accepted for review, the Biologics License
Application (BLA) for ATryn, a recombinant human antithrombin with anti-coagulant and anti-inflammatory properties. The BLA is for the prophylaxis of deep vein thrombosis (DVT) in patients with antithrombin hereditary deficiency (ATHD) undergoing high risk surgical and obstetric procedures. On September 4, 2008, the FDA granted a Priority Review designation for ATryn’s BLA which is intended for products addressing large areas of unmet medical need as well as for products that have the potential to be a substantial improvement over the current standard of care.
In addition, the FDA’s Blood Products Advisory Committee has an action date of February 7, 2009, which has been affirmed by the FDA following a preliminary review of the BLA Due to the achievement of these milestones, GTC Biotherapeutics has received $2 MM in milestone payments from its partner OVATION Pharmaceuticals, a privately owned company. If the BLA is approved, ATryn could be launched in the U.S. by 1H09.
Fruitful Collaboration With OVATION The goal of GTC’s partnership with OVATION Pharmaceuticals is to develop and market ATryn in the U.S. in both ATHD as well as other acquired anti-thrombin deficiencies such as the heparin resistance (HR) in patients undergoing surgery requiring cardiopulmonary bypass.
According to the partnership agreement, GTC Biotherapeutics will manufacture ATryn for use in clinical trials and commercialization, and in return, receive payments for ATryn used in clinical trials and a transfer price on commercial
product. In return, OVATION will fund GTC Biotherapeutics future costs of clinical development and is responsible for marketing ATryn in the U.S. GTC Biotherapeutics will receive payments associated with clinical, regulatory, and sales milestones as well as low 20% royalty on sales. Altogether, GTC Biotherapeutics may receive up to $257 MM in potential milestone payments, including $3 MM after closing, a $2 MM payment with acceptance of the BLA filing and a $4 MM payment upon approval.
Platform Technology Continue To Generate Shareholder Value As a reminder, ATryn was already approved and launched in Europe
last year by partner LEO Pharma, a privately owned company, for the treatment of patients with antithrombin hereditary deficiency
(ATHD). In order to expand the use and market potential of ATryn, LEO Pharma is actively enrolling patients in a Phase 2 study in
disseminated intravascular coagulation (DIC) associated with severe sepsis. Top-line results from this trial should be available in 2H09.
Cash Position Extended – Remains Overhang For Time Being At the end of 2Q08, GTC had cash and cash equivalents of
approximately $12.2 MM. With the addition of $5 MM in milestone payments expected in 3Q08, and a projected quarterly burn rate of
$12.8 MM, we estimate that the current cash position should fund operations into 1Q09.
Quick Take We are reiterating our Market Outperform / Speculative Risk rating and our 12-month target price of $4. Our 12-month price target of $4 is derived by applying a 6x multiple to our 2013 revenue estimate of approximately $226 MM, and a 35% annual discount rate. Today’s news reaffirms our belief that ATryn would be moving quickly in the U.S. regulatory process. In our opinion, GTC Biotherapeutics’ transgenic protein technology encompasses a broad platform to cost-effectively address the production of complex plasma proteins for use as therapeutics. Furthermore, we believe the company’s platform allows for a more cost-effective method to produce biogenerics. However, investors should be aware that to date, our models do not take into account the recent OVATION partnership. We continue to await further clarity regarding the company’s financial situation and delisting strategies before re-evaluating our model and valuation methodologies.
