Orexo - Time to Buy?
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Orexo has received a milestone payment of EUR3.3m from partner ProStrakan as Abstral sales have surpassed EUR65m, which is slightly faster than expected. Although we had included this milestone payment in 2012 we expected the event to occur in H2(12) rather than in H1(12). It is obviously very positive that Abstral, that is Orexo’s key product, is growing this strong. Growth was up as much as 39% in Q1(12) driven especially by the key markets France, Italy and Spain. Abstral is now the leading new fast acting fentanyl product in EU.
We expect that US sales will start growing during H2(12). In the US the REMS risk management programme for fast-acting fentanyl products came into effect in March 2012. This means that also the old fentanyl product (i.e.) Cephalon’s Fentora and Actiq will be included in the program. With this in place, Abstral will be able to compete on equal terms and we foresee sales in the US to start increasing significantly.
We believe that the equity market’s interest in Orexo will increase during H2(12) when the expected sales increase of Abstral in the US will become more visible and its proprietary projects have move forward in clinical development. Our probability adjusted DCF value is SEK41/share highlighting a significant up-side potential. We reiterate our BUY recommendation.
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