Also: Do we know anything about the status of the NCIB? Are they buying back opportunistically under a specified price point, or just purchasing x % of float per day? Thanks.
It looks like they repurchased about 90k shares at the end of 2023, so probably ~$500K Cad worth (unless I am not reading the Sedi disclosures probably) Nothing this year per Sedi, which is disappointing. But I am confident they will continue using the program opportunistically.
Hey Jake, I have begun my work in the last two weeks diving into CPH.TO as well... quick question regarding the perception of MOB-015. From what I've seen, we will likely have Phase III completed in Q1 of 2025. Given the fact that markets are typically 9-12 month forward looking instruments, it would appear that CPH is being valued like the market is not optimistic of this outcome. Do you think this is the byproduct of the security not screening well? Being a microcap / less explored asset class? Or do you feel that it's also the market simply disagreeing that MOB-015 will gain clearance ~1 year out? Would love your thoughts, thanks!
I think the reason this isn't being priced in is that the probability and upside are going unnoticed. Why? As you say, this is a Canadian microcap. But more specifically, the company has been rather quiet about how much money they are set to make off this thing. The projection I flag in the write-up is buried in the SIB prospectus on page 55 (I suspect not many people have read that) and it was included as a matter of securities law (Cipher did not meet liquidity exemption, and therefore needed to include a valuation in the tender offer). I don't believe the +$30m USD EBIT projection is disclosed anywhere else (investor decks, MD&As, transcripts etc.) My view is that management, who are not inherently promotional, probably didnt want to be too loud about these numbers so they could buyback stock at the lowest prices possible (given they own so many shares). Beyond this, you do have some uncertainty with respect to approval of course, but my view that this is about as good of a bet on drug approval as it comes remains the same. The product officially launched in Sweden in about a month ago: https://www.prnewswire.com/news-releases/mob-015-is-launched-in-sweden-under-the-brand-name-terclara-pharmacies-report-major-demand-for-the-new-medication-302055672.html
Sorry for the delay. If anything, standards in Europe can often be more onerous. But I don't think that question is particularly meaningful in this case.
My understanding is that MOB-015 could have been commercialized based on the prior P3 data as it was found both safe and effective (and by far the best topical terbinafine out there). However, obtaining an improved complete cure rate (i.e. improving the discoloration issue) obviously helps Moberg in promoting this new product to doctors and users, and potential partners (Moberg has retained the US rights for now, but will likely find a partner down the road to market the drug).
In short, I am not very concerned about regulatory approval. The bigger risk imo is competitive and whether Cipher's projections are too aggressive (e.g. Medexus is set to launch a similar product in 2025).
Hi Osten, thanks for letting me know of these issues...i'll try to have them resolved.
1) Not so much a question of standards, it is more just strong evidence of both established safety and efficacy. Leaving Europe aside, as indicated in the write-up, the NA trials have already established a very strong mycological cure rate - the issue is merely complete cure (plagued by problems of discoloration). There appears to be high levels of confidence that this issue can be solved merely through a reduced treatment period: https://nordiclifescience.org/update-on-moberg-pharma-trial/. Ongoing trials will let us know whether or not that is the case.
2. The url appears to have been changed, but there are calculators online to estimate pricing for Canadian drugs. e.g. here: https://www.pocketpills.com/drug/epuris. You will see that if you reduce insurance coverage to 0%, estimated cost is about $47/month.
3. You can find this by going to Sedarplus.ca, searching for Cipher and then downloading the Circular filed on Sept. 6, 2023. The valuation report begins on page 55 of the PDF.
basically a copy paste of Epuris but with a lower dosage. If this is correct, it makes me think, what would stop a competitor from just copying them and spending tons on M&A in a better way than Cipher, leading to a higher competition?
I have and tend to agree with management's position that Absorica LD is not particularly concerning to Epuris' competitive positioning - i.e. because it is not superior and any costs savings should be rather minimal, and therefore the incentives aren't really there for patients and dermatologists to switch over. In my opinion, the risk of other oral isotretinoin competitors capturing meaningful market share from Epuris is minimal. The larger risk rather is that a superior drug/product is developed to address severe nodular acne. There doesn't appear to be any such threat on the immediate horizon. That said, this is why continued execution on the M&A front is important for Cipher; the more quality products they can fold into the portfolio, the more they can diversify competitive risks away; e.g. MOB-015, assuming commercialization, will make Cipher far less dependent on Epuris obviously.
Also: Do we know anything about the status of the NCIB? Are they buying back opportunistically under a specified price point, or just purchasing x % of float per day? Thanks.
You can track Canadian buybacks on Sedi.ca. It is a laughably bad experience trying to navigate. https://www.sedi.ca/sedi/SVTItdSelectIssuer?locale=en_CA
It looks like they repurchased about 90k shares at the end of 2023, so probably ~$500K Cad worth (unless I am not reading the Sedi disclosures probably) Nothing this year per Sedi, which is disappointing. But I am confident they will continue using the program opportunistically.
Thanks for sharing!
Hey Jake, I have begun my work in the last two weeks diving into CPH.TO as well... quick question regarding the perception of MOB-015. From what I've seen, we will likely have Phase III completed in Q1 of 2025. Given the fact that markets are typically 9-12 month forward looking instruments, it would appear that CPH is being valued like the market is not optimistic of this outcome. Do you think this is the byproduct of the security not screening well? Being a microcap / less explored asset class? Or do you feel that it's also the market simply disagreeing that MOB-015 will gain clearance ~1 year out? Would love your thoughts, thanks!
I think the reason this isn't being priced in is that the probability and upside are going unnoticed. Why? As you say, this is a Canadian microcap. But more specifically, the company has been rather quiet about how much money they are set to make off this thing. The projection I flag in the write-up is buried in the SIB prospectus on page 55 (I suspect not many people have read that) and it was included as a matter of securities law (Cipher did not meet liquidity exemption, and therefore needed to include a valuation in the tender offer). I don't believe the +$30m USD EBIT projection is disclosed anywhere else (investor decks, MD&As, transcripts etc.) My view is that management, who are not inherently promotional, probably didnt want to be too loud about these numbers so they could buyback stock at the lowest prices possible (given they own so many shares). Beyond this, you do have some uncertainty with respect to approval of course, but my view that this is about as good of a bet on drug approval as it comes remains the same. The product officially launched in Sweden in about a month ago: https://www.prnewswire.com/news-releases/mob-015-is-launched-in-sweden-under-the-brand-name-terclara-pharmacies-report-major-demand-for-the-new-medication-302055672.html
Yup… how much more difficult (if any) is it to get drug approval in Canada relative to approval in the EU? Thanks for your thoughts.
Sorry for the delay. If anything, standards in Europe can often be more onerous. But I don't think that question is particularly meaningful in this case.
My understanding is that MOB-015 could have been commercialized based on the prior P3 data as it was found both safe and effective (and by far the best topical terbinafine out there). However, obtaining an improved complete cure rate (i.e. improving the discoloration issue) obviously helps Moberg in promoting this new product to doctors and users, and potential partners (Moberg has retained the US rights for now, but will likely find a partner down the road to market the drug).
In short, I am not very concerned about regulatory approval. The bigger risk imo is competitive and whether Cipher's projections are too aggressive (e.g. Medexus is set to launch a similar product in 2025).
Hi, I could not find a comment button in the CPH.TO writeup so I am writing her instead.
Why would successful trials in Europe lead to high probability of successful trials in north america? Are the standards higher in Europe?
The hyperlink “Epuris appears to run between $1-8 per day without insurance” does not work.
The third party valuation report link is not working either, "buried in the company’s SIB prospectus from September."
Cheers
Hi Osten, thanks for letting me know of these issues...i'll try to have them resolved.
1) Not so much a question of standards, it is more just strong evidence of both established safety and efficacy. Leaving Europe aside, as indicated in the write-up, the NA trials have already established a very strong mycological cure rate - the issue is merely complete cure (plagued by problems of discoloration). There appears to be high levels of confidence that this issue can be solved merely through a reduced treatment period: https://nordiclifescience.org/update-on-moberg-pharma-trial/. Ongoing trials will let us know whether or not that is the case.
2. The url appears to have been changed, but there are calculators online to estimate pricing for Canadian drugs. e.g. here: https://www.pocketpills.com/drug/epuris. You will see that if you reduce insurance coverage to 0%, estimated cost is about $47/month.
3. You can find this by going to Sedarplus.ca, searching for Cipher and then downloading the Circular filed on Sept. 6, 2023. The valuation report begins on page 55 of the PDF.
Thanks for the reply.
Have you looked into Absorica LD, Sun's branded product that is quite recent? https://leftfieldinvesting.substack.com/p/quick-overview-of-recent-developments?utm_source=profile&utm_medium=reader2
basically a copy paste of Epuris but with a lower dosage. If this is correct, it makes me think, what would stop a competitor from just copying them and spending tons on M&A in a better way than Cipher, leading to a higher competition?
I have and tend to agree with management's position that Absorica LD is not particularly concerning to Epuris' competitive positioning - i.e. because it is not superior and any costs savings should be rather minimal, and therefore the incentives aren't really there for patients and dermatologists to switch over. In my opinion, the risk of other oral isotretinoin competitors capturing meaningful market share from Epuris is minimal. The larger risk rather is that a superior drug/product is developed to address severe nodular acne. There doesn't appear to be any such threat on the immediate horizon. That said, this is why continued execution on the M&A front is important for Cipher; the more quality products they can fold into the portfolio, the more they can diversify competitive risks away; e.g. MOB-015, assuming commercialization, will make Cipher far less dependent on Epuris obviously.