FYI | Jul 17 2019
Anatara Lifesciences: Anatara can still partner Detach
By Pitt Street Research
On 14 June 2019, Anatara Lifesciences ((ANR)) announced that it would retain exclusive rights to Detach for livestock and horses, as Zoetis, Anatara’s former partner, returned the exclusive worldwide license for Detach that it had taken in May 2018.
Although the deal impacted ANR's share price at the time and may continue to negatively affect it in the short run, we believe that the company has several other options that can compensate for this loss in the medium to long term. ANR had engaged with over 10 top multinational animal health companies prior to signing an agreement with Zoetis.
Thus, even though the termination of the exclusive commercialisation agreement with Zoetis may slow down the pace of Detach’s commercialisation, we believe that ANR can still find a good partner for the product.
Investment case: Considerable upside from a human health application
In our 14 March 2019 initiation report on ANR we looked in some detail at ANR's bromelain-based Gastrointestinal ReProgramming (GaRP) product. GaRP is being developed for human GI health, particularly in irritable bowel syndrome (IBS) and inflammatory bowel disease (IBD), as a dietary supplement that could be used by itself or in conjunction with prescription medications.
Due to the regulatory and commercial advantages associated with natural products and the complexity of management of these diseases, we believe GaRP has significant upside potential. ANR's current cash is sufficient to fund GaRP in the human GI space through to the point of licensing out. Milestones and royalty payments will provide funding for future developments. We believe that even if investors are skeptical about Detach in the wake of the Zoetis hand-back, they can still be sanguine about the prospects of GaRP.
In March 2019 we valued Anatara at $1.34 per share base case and $3.61 optimistic case using a probability-weighted DCF valuation approach. We have adjusted our valuation to take account of the Detach commercial risk. Our new valuation range is $1.09/$3.20. We see the potential to be re-rated by the market as GaRP progresses and as Detach gains regulatory approvals.
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