Following our high level overview of Oasmia Pharmaceutical (Nasdaq: OASM), on March 7th, I came across some great research on the company by Jason Napodano, CFA, biopharma analyst & consultant, and founder ofBioNap Consulting, Inc.
I highly recommend investors check out Jason’s very thorough due diligence article:
I believe Jason’s conclusion that OASM is undervalued with multiple positive drivers and large market opportunities is spot on.
Additionally, a good review of Oasmia’s financial model can be found here on the Swedish investment banking site Redeye.se which I have copied below:
The market for cytotoxic agents within oncology is still, and for a number of years ahead, the basic medical treatment, where most new therapies are add-on’s. As many most cytotoxic agents (chemical compounds/small molecules), aren’t so specific on the cancerous cells, patients often suffer from serious side effects, sometimes disabelling optimal dosing. Still, chemo’s are considered as first line treatment in the vast majority of the patients.
Pegarding Paclical/Apealea, the primary indication is ovarian cancer, which is a quite rare indication that accounts for approximately 90K patients a year in the US/EU/Rus markets. Probably, there will be off label use in other cancers, where breast cancer has the broadest population, approximately 800K patients annually, in the same geographic area.
For the Russian Federation (“RF”), this means a total market potential of over 250K patients, which corresponds to a fully de developed potential market value of US$2,5Bn.
As there is no Abraxane – which is comparable to Paclical/Apelea, to compete in the Russian market, but an awareness of Abraxane advantages in the RF-market, it’s not a bad assumption, that Paclical will accomplish a large and rapid impact in this market.
As the active ingredient, paclitaxel, is the same – the market offers the lowest barriers of entry – why a market share of 10% is likely to obtain within the next 12-18 months, equals US$250M in sales for the RF-market alone.
Adding a probable Doxophos (doxorubicine) approval for RF 2nd half of 2016, a Apealea approval from EMA within the same timeframe, and a FDA approval in 2017, gives any investor an opportunity to experience at least a 5 to 10-fold development of their investment in Oasmia.
The question is, if we’ll be able to enjoy more than a 5-fold, before Oasmia is to be acquired by someone like TEVA/Mylan, J&J, Valeant or maybe even BMS or Sanofi.
At the end of January 2016, Oasmia had US$3.1M in cash, and another US$5.3M in additional loans accessible. During the last report period (Nov15-Jan16), revenue from initial (launch) sales in RF, was US$0,7. Oasmia’s operating loss was US$2.9M for the same period.
As sales from Paclical in RF, is expected to raise substantially over the coming quarters, where we expect the royalty part to reach US$M: 1.4, 2.1, 3.15, and 4,95 the coming 4Q’s, it wouldn’t be necessary to raise funds through a rights issue for ongoing operations.
A total of US$11,6M in revenue from the RF-market during 2016, corresponds to approximately 0.5% (units) of the 10% market share-target mentioned above.
The assumption of Oasmia reaching a self-funding state through revenues during 2016, is also supported by possible revenues from initial sales of Apealea in the EU in the late 2016, along with potential payments along with partnering agreements that Oasmia is to reveal during the first half of 2016.
Best wishes for profitable investing,