Optimism over US deal

STX is a commercial-stage company delivering specialty products that address patients’ unmet medical needs, with an initial focus on treating iron deficiency (ID). Feraccru/Accrufer has been approved by the regulators in both Europe and the US. The company has an established commercial relationship with Norgine for Europe and signed a licensing deal with ASK Pharm for the Chinese market in 1H’20. Management has indicated that several discussions are ongoing to secure an optimal commercial deal for the US, which reassured the market. Meanwhile, on current assumptions, STX has a cash runway into 1Q’21.

• 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.
• Interims: STX indicated that there remains a positive trend in Feraccru use in Europe with packs sold by Norgine up 50% over the previous six-month period. Both COGS and SG&A costs were higher than expected for specific reasons, yet STX still recorded an underlying profit of £2.8m (-£3.7m) for 1H’20.
• Deal update: Discussions between ASK and the regulator in China have indicated that the development programme for Feraccru might be less onerous than anticipated, making a launch in 2023 possible. Discussions with multiple interested parties in the US continue, suggesting that a deal is not too far away.
• Risks: All drug companies carry development risk, but STX’s has been limited by regulatory approvals in the EU and the US. The biggest risk now is commercial execution. Having achieved deals in Europe and China, securing a partner for Accrufer in the US remains the top priority for 2020.
• Investment summary: Interim results confirmed the market’s expectations and reiterated the length of STX’s current cash runway in the absence of a US licensing deal. In these uncertain times, Feraccru provides a really good option to physicians seeking alternative therapies for ID patients reluctant to attend hospitals/clinics for intravenous (iv) iron therapy. Meanwhile, management reassured the market that progress is being made towards closing a US commercial deal in the near future.