NPS Pharmaceuticals

NPSP : NASDAQ : US$32.39
BUY 
Target: US$42.00

COMPANY DESCRIPTION:
NPS Pharmaceuticals is a biopharmaceutical company
focused on the development and commercialization of
therapies for rare endocrine and gastrointestinal
disorders. The company is headquartered in Bedminster,
New Jersey.
All amounts in US$ unless otherwise noted.

Life Sciences — Biotechnology
NPSP IS WELL-POSITIONED INTO 2014 WITH TWO WHOLLY-OWNED ORPHAN
ASSETS; RAISING PT TO $42
For 2014, we like NPSP for a continued consistent Gattex U.S. sales ramp, the
Revestive ex-U.S. launch, Natpara FDA approval/WW launch and pipeline
progress. Specifically, we expect a nice Gattex Q4 pre-announcement in Jan. (as
of Dec. 6, the low-end of guidance for YE13 was achieved; Q4 revenue consensus
is $15.6M; CGe of $16.6M), with FY14 guidance (U.S. revenue consensus of
$108M does not appear aggressive) to follow post (likely EPS call) suggesting a
continued steady U.S. Gattex trajectory and ex-U.S. launch. In addition, a key
catalyst is Natpara approval/launch in Q4 (12-month standard review expected),
where we believe there is potential upside from chronic use in a wide range of
patient severities and given impacts on bone remodeling are underappreciated.
In addition, the calcilytic NPSP795 is entering Phase 2a in mid-14 and is not in
our valuation. Net-net, we view NPSP as a diversified three-product play
(possibility for in-licensing), with Sensipar royalties (~$4/share) providing a cash
base and M&A optionality given the wholly-owned GI/endocrine orphan assets.
Our DCF is now discounted back to YE14 and we are increasing our probability of
success for Natpara and as a result, increasing our PT to $42 from $35.
 Revestive gearing up for 2014 launch: With Revestive launches in Germany and
England in H1, we conservatively model for E.U. Revestive sales of $215K,
$1.1M and $8.6M in Q1, Q2 and FY14, respectively (vs. FY14 consensus of
$13.0M). We expect named-patient sales in France (2014), Turkey (Q1) and
Brazil (late-14).
 Natpara opportunity appears underappreciated: We derive our peak WW
Natpara sales estimate of ~$500M in 2025 per a launch price of $50K/year and
penetration into 38% of patients with uncontrolled hypoparathyroidism. We
view use by controlled patients (side effects from current therapies are
undesirable; physicians want to put all patients on Natpara) or higher pricing
(management has guided to pricing between MS analogs and PKU/chronic iron
analogues; i.e. ~$50K – $100K annually) represent upside. We note
management sees Natpara as potentially larger than the >$700M Gattex
opportunity.

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