Motif Bio plc (LON:MTFB, NASDAQ:MTFB), is a late clinical stage antibiotic development company. The company completed its IPO on NASDAQ in November last year raising $25m before expenses. With the funds from the IPO the company is now funded to completion of REVIVE-1, the first of its two phase III clinical trials of its lead drug candidate, iclaprim. This antibiotic is being developed for the treatment of serious and life threatening bacterial infections, particularly those caused by drug resistant bacteria. It is a next-generation antibiotic targeting an under-utilised mechanism of action which causes rapid killing of bacteria making it an attractive candidate for acute infections. Given our belief in iclaprim showing positive results in REVIVE-1 and Motif’s current share price, we think an investment now would be timely with REVIVE-1 on-track to report soon (Q2’17). Our risk-adjusted fair value estimate for Motif Bio now stands at £210m (107p per share).
Development update – Motif expects to report results from REVIVE-1 in Q2 2017. The study recruited patients faster than originally anticipated supporting the choice of Covance as the CRO to manage the study. This rapid recruitment points to the potential demand for a differentiated new antibiotic such as iclaprim for the ABSSSI indication and hints at the possible rate of adoption of the product following approval. REVIVE-2 is progressing on track and assuming additional funding becomes available, should report results in H2.
Financials – the company raised $25m before expenses in its NASDAQ IPO in November 2016. We expect that in 2016 Motif will have generated an operating loss for the year of $41m with SG&A costs of $4.3m and R&D expenses of $36.8m representing the vast majority of expenses and demonstrating the sharp focus on product development within the business. We estimate that Motif will have ended 2016 with cash of $23.6m but highlight that it is likely to have ended the year with accrued trial-related costs of around $10m. In 2017 we anticipate R&D spending will decrease as the company’s REVIVE-1 and REVIVE-2 ABSSSI phase III trials complete and assuming that the third phase III trial, INSPIRE (in bacterial pneumonia), will not commence in the absence of new funding. However, we believe that the likely positive REVIVE-1 results will enable access to new funding and this will allow both the completion of REVIVE-2 and the initiation of INSPIRE (estimated to cost around $40m over 3 years).
Valuation – Iclaprim is a near-term, high-value, commercial drug opportunity and Motif Bio plc has the team to successfully complete its development. The current market cap of £49.5m ($61m) heavily discounts the company relative to a group of highly comparable peers in antibiotic development. On the basis of our assessment of the market opportunity and development plans for iclaprim, our DCF-based, risk-adjusted NPV now stands at £210m (107p per share).
