Shield Therapeutics (LON:STX) is a commercial-stage company delivering specialty products that address patients’ unmet medical needs, with an initial focus on treating iron deficiency (ID) with ferric maltol. Recent news that the FDA had approved this drug for a broad indication opened up a market in the US currently worth over $1bn p.a. – a US partnership deal is expected in 2020. A 2019 trading update showed STX’s performance to be in line with expectations, with £0.6m in sales-related revenue from Norgine’s sales of Feraccru in Europe and £2.3m in milestones. STX’s cash runway extends into 2021, in the absence of a US deal.
- Strategy: STX’s strategy is to out-license the commercial rights to its products to partners with marketing and distribution expertise in target markets. These deals allow STX to retain its intellectual property (IP) and to keep investing in its R&D pipeline, while benefiting from immediate and long-term value.
- Trading update: Partner sales of Feraccru in European markets were in line with expectations, giving gross revenues of £2.9m. 2H’19 sales volumes were 28% higher than in 1H. The gross cash position, at £4.1m, was lower than forecast, due to a combination of working capital, lower tax rebates and capitalised R&D.
- China deal: The novel iron replacement therapy, Feraccru/Accrufer, has been exclusively licensed to ASK Pharm for development and commercialisation in China. This paves the way to a large and growing market for iron replacement products and strengthens STX’s hand in ongoing negotiations with potential US partners.
- Risks: All drug companies carry development risk. However, the clinical risk with STX is limited because of Feraccru/Accrufer’s clinical profile and existing marketing approvals. The main risk is achieving an appropriate partnering deal in the US and executing on commercialisation strategy to capture market share.
- Investment summary: The FDA approval and pending launch of Accrufer reinforce our view that STX is at an exciting juncture. It has delivered on all the goals set at the time of its IPO in 2016. Feraccru/Accrufer has been validated by EU and US regulatory approvals, and the commercial deal in Europe looks set to be repeated in the US. Announcement of its commercial partner, together with the terms of any deal, represents the next valuation inflection point.
