Zacks .com review @ BDSI
BioDelivery Sciences International (BDSI-NASDAQ)
Current Recommendation Buy
Prior Recommendation N/A
Date of Last Change 04/16/2009
Current Price (07/17/09) $6.07
Six- Month Target Price $9.00
OUTLOOK
SUMMARY DATA
Risk Level Very High Risk
Type of Stock Small-Growth
Industry Med-Biomed/Gene
Zacks Rank in Industry 1 of 138
On July 16, 2009, BDSI received approval from the U.S.
FDA for Onsolis for the management of breakthrough pain
(BTP). This is transformational event for the company.
Approval brings $27 million in cash from commercialization
partner, Meda AB, and allows management to begin
collecting royalties on sales of the product post-launch in the
fourth quarter 2009.
We think the shares are significantly undervalued based on
the potential ramp in Onsolis and the ability that
management now has to fund the rest of the pipeline, which
includes two $500 million ideas in BEMA Buprenorphine and
Bioral Amphotericin B. Our target is $9 per share.
52-Week High $6.94
52-Week Low $1.97
One-Year Return (%) 180.82
Beta 1.17
Average Daily Volume (sh) 677,059
Shares Outstanding (mil) 21
Market Capitalization ($mil) $128
Short Interest Ratio (days) 1.03
Institutional Ownership (%) 6
Insider Ownership (%) 33
Annual Cash Dividend $0.00
Dividend Yield (%) 0.00
5-Yr. Historical Growth Rates
Sales (%) N/A
Earnings Per Share (%) N/A
Dividend (%) N/A
P/E using TTM EPS N/A
P/E using 2008 Estimate N/A
P/E using 2009 Estimate N/A
Zacks Rank 1
BDSI: Onsolis Approved!
Maintain Buy Rating, Raising Target.
ZACKS ESTIMATES
Revenue
(In millions of $)
Q1 Q2 Q3 Q4 Year
(Mar) (Jun) (Sep) (Dec) (Dec)
2008 0.1 A 0.9 A 0.0 A 0.1 A 0.3 A
2009 0.0 A 0.2 E 30.2 E 0.6 E 32.2 E
2010 23.4 E
2011 35.2 E
Earnings per Share
(EPS is operating earnings before non recurring items)
Q1 Q2 Q3 Q4 Year
(Mar) (Jun) (Sep) (Dec) (Dec)
2008 -$0.14 A -$0.13 A -$0.14 A -$0.45 A -$0.90 A
2009 -$0.24 A -$0.23 E $0.79 E -$0.13 E $0.23 E
2010 $0.04 E
2011 $0.34 E
Zacks Investment Research
Onsolis Approved
On July 16, 2009, the U.S. Food and Drug Administration approved Onsolis for the management of breakthrough
pain (BTP) in patients with cancer, ages 18 and older, who already use opioid pain medication around the clock
(opioid tolerant) and who need and are able to safely use high doses of an additional opioid medicine. Approval
triggers a $15 million milestone ($12 million cash) payment from U.S. partner, Meda AB to BioDelivery Sciences
(BDSI). BioDelivery also expects to receive a $15 million launch-stock cash milestone from Meda AB for the
commercial supply. Meda plans to launch the product early in the fourth quarter 2009. For 2009, we see sales of
$6 million, resulting in $1.2 million in royalties (20%). We think peak sales in the U.S. under the current label are
around $250 million, with upside in the future if management can eventually gain approval for non-cancer patients.
Onsolis was approved with a Risk Evaluation and Mitigation Strategy ( REMS ) that is a required plan for managing
risks associated with a drug or biological product. As part of the REMS, Onsolis will only be available through a
restricted distribution program called the FOCUS (Full Ongoing Commitment to User Safety) program. The drug
contains fentanyl, a DEA schedule II controlled substance. As such, the goal of the FOCUS Program for Onsolis is
to mitigate the risk of overdose, abuse, addiction, and serious complications due to medication errors Under this
program, only those prescribers, patients and pharmacies registered with the program will be able to prescribe,
dispense, and receive Onsolis. The FOCUS program will provide training and educational materials to prescribers
and pharmacy personnel, and a counseling call will be placed to patients prior to dispensing to ensure they have
been adequately educated about the appropriate use of the drug. The REMS guideline was in-line with our
expectations.
Onsolis was approved with a boxed warning, which states that the medication should not be used for the
management of migraines, dental pain, or postoperative pain or by patients who use opioids intermittently, or on an
as needed basis. It also warns that the drug should be kept out of the reach of children. Again, this was as we
expected, and should not limit uptake for the drug. Our only concern from the label was the boxed warnings that
stats Onsolis should not be used as a substitute for other fentanyl products. We think this has the potential to
create some confusion around patients and prescribers, and Meda AB will need to educate as part of the FOCUS
program early on in the launch to mitigate the hiccups.
Approval is a transformational event for BDSI. Not only will it bring about a $30 million milestone payment from
worldwide commercialization partner, Meda AB, but BDSI will also receive double-digit royalties (we estimate 20%)
on sales of Onsolis when the product launches in the fourth quarter. The breakthrough cancer pain (BTP) market is
highly competitive, and there are several formulations of fentanyl already on the market, with several more in latestage
development, but we believe that BDSI s BEMA technology offers significant advantages over existingdelivery technologies.
We note that BioDelivery Science is currently planning a phase III study in non-cancer painthat could greatly expand the label and remove one of the black box warnings limiting the current product use.
Maintain Buy Rating / Target Now $9
At the current price of only $6.08, the market capitalization is approximately $115 million. Now that Onsolis is
approved, we believe this undervalues the company substantially. Risk has been dramatically reduced and the
financial position is now dramatically improved. Management now has enough cash on hand to fund operations
well into 2010, at which time they will probably seek to sign another lucrative collaboration with a development and
commercialization partner for BEMA Buprenorphine. The improved cash position now affords management the
ability to move both BEMA Buprenorphine and Bioral Amphotericin B, each with $500 million sales potential,
forward in clinical development.
Our $9 price target is based on 20x our 2013 EPS estimate of $0.85, discounted back to present day at 15%. We
note our financial model assumes no contribution from off-label uses of Onsolis in non-cancer pain, or does it is
factor in any contribution from BEMA Buprenorphine and Bioral Amphotericin B.
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