MasterMetals: Abzena's valuation nudged up after portfolio expansion

April 13, 2015

Abzena's valuation nudged up after portfolio expansion

Research house Edison has nudged up its target price for Abzena (LON:ABZA) after the life sciences company revealed news of a portfolio expansion last week.

Abzena said two of its partners have entered clinical development with biopharmaceuticals enabled by its technology.

Edison noted that healthcare colossus Johnson & Johnson also has an option to acquire diabetes specialist Vascular Pharma on completion of the Phase II study in diabetic nephropathy with Vascular’s anti-αVβ3 antibody, also developed using Abzena’s technology.

“Abzena could therefore have three major US pharma partners developing four of the eight current candidates,” Edison observed.

With two new drug candidates now in the clinic, Edison has lifted its fair value of Abzena from £95mln to £97.4mln, equivalent to 100p a share (up from 97.5p).

Abzena has a profitable contract services business, but it is the potential to receive substantial revenues from small royalties on sales of products that have been developed using Abzena’s technology that provides the exciting upside to the company’s share price, Edison believes.

“The potential to receive substantial revenues on royalties from licensed antibody/ADC [antibody drug conjugates] products is key to the investment case, so we are encouraged by these recent developments,” the research house said.

“For now, we do not add additional future products to the analysis, so there are now five such candidates (vs seven previously), which we note could be conservative given that Abzena currently has 30 licence or option agreements in place,” Edison said.

The completion of the University College of London collaboration for a new antibody candidate, two new antibody agreements with a US biotech company, and the reported increase in the number of ADC collaborations, are all encouraging developments in this regard, in Edison’s view.