IntelGenx Technologies Corp (IGXT)

[Smart Stocks]

"Time To Revalue IntelGenx - 2 More Products Being Reviewed By The FDA For Approval"

A Seeking Alpha article written by contributor 'ccamire'

Source: http://seekingalpha.com/instablog/192072-ccamire/2067722-time-to-revalue-intelgenx-2-more-products-being-reviewed-by-the-fda-for-approval

IGXT is a drug delivery company developing improved formulations of approved drugs for North America. IGXT has already succeeded to get one FDA approved drug using its proprietary technology: Late in 2012, Forfivo XL™ (the only single tablet high dose alternative to lower dose multiple tablet Wellbutrin XL® indicated for depression), was launched by Edgemont Pharma in the US. However the success of this small-cap based in Montreal (Canada) stands much deeper given its strong pipeline of products. Let's focus for now on just two new drugs that are now late stage and could be launched within the next 12-18 months.

IntelGenx has unique skills in developing improved drugs and has been very successful given the amount of capital invested. Investors should not forget that the company has raised less than $15m since its inception in 2003, has one drug approved and two drugs in the waiting room. Investors should also know the odds favors IntelGenx to receive approval for both drugs given reformulated drugs have an overall approval rate >90% compared to new chemical entities or NCEs below 30%.

First, the announcement this week for a US filing for a generic of Suboxone film (buprenorphine and naloxone for the treatment of opioid addiction.) for a relatively large market should be a wake-up call for investors. The product is likely to be first generic to market in the fast growing market $1.4bn (tablets and film version almost divided equally). It is difficult to predict what Reckitt Benckiser Pharmaceuticals, the brand manufacturer, will do given its sizeable contribution to profits for the company. Currently patients must be medicated 3x/day; therefore an annual treatment between $4,300- $7,700 depending on the dose. In recent years, the market has shifted from tablets to film formulation to reduce side effects and be cheaper, which is good news for IGXT. Therefore the potential for this product could be huge given that film revenues have increased by 50% versus the prior year. Usually first generic companies capture 60-70% of revenues for the exclusive period (normally six months). Contrary to tablet formulation, where there are many generic companies (>300), makers of film products are very few, probably less than ten in the world. High barriers to entry in formulating this product provide a huge potential upside for IGXT. Therefore we would expect IGXT could enjoy a leadership position beyond six months. Assuming a conservative $1.5bn market at the time of market launch, a 25% price discount and capturing a 50% market, this would means revenues in excess of $500m for its commercial partner. With IGXT being the manufacturer and collecting royalties, this drug itself could add a minimum of $2.00/share in EBITDA. However given the patents on this drug are still valid until 2022, I am not sure when IGXT could launch this drug, but I am sure management has spent time to figure a strategy to reach the marketplace as soon as feasible.

The other important piece of news (June 18) involved the filing for regulatory approval of a novel anti-migraine drug developed by IGXT. I find this product could be an extremely appealing drug in this market because it offers something really different versus the competition. Even though the US migraine market is close to $2.5bn (all tablet formulations), many patients do not respond to many drugs, are often required to try different treatments and for many are left without any adequate treatments. The advantage of IntelGenx' Anti-Migraine VersaFilm is that it acts faster than probably most drugs and it is also easier to swallow. Commercially this would be the first oral film product for IntelGenx. There are very few oral film drugs on the market; therefore its success will be closely monitored. Assuming a $600m market at the time of market launch, a 25% price discount and capturing a 25% market, this would means revenues in excess of $100m for its commercial partner. With IGXT being the manufacturer and collecting royalties, this drug itself could add $0.40-0.45/share in EBITDA in 2015.

These drugs are not $1bn potential but they can certainly generate significant revenues with a smaller investment and much lower risks than a typical cancer drug.

Over the next 2 years, we should expect more drugs that could be launched or in the queue for regulatory approval with the FDA. I believe very few companies have accomplished this feat. We see too many catalysts to ignore the story. Given the company has already delivered on many fronts, drug delivery companies such as IGXT should not be ignored. This is much easier to swallow.