Peer-based valuations are currently irrelevant for Crossject due to its lack of revenue and negative financial results. Our net asset value (NAV) valuation employs a 3x multiple of projected 2026-28 revenues across all segments. Although these revenues will not be realised for at least three years, particularly those for FY28, we have opted not to discount them. This decision is based on the expectation of high growth rates post-2026, indicating that our projections are conservative. The 3x multiple is standard for biotech and pharmaceutical companies with substantial R&D pipelines and strong growth prospects. In contrast, transaction values in the sector often range from 5-10x sales, depending on the specific segment. For instance, Emergent Biosolutions announced the acquisition of Adapt Pharma, the developer of Narcan, for US$635m plus US$100m in sales milestones. At the time, we estimated Adapt Pharma’s sales at approximately US$150m, implying a sales multiple of around 4.9x.
Our discounted cash flow (DCF) analysis is based on forecasts for each new therapeutic entity (NTE) under development, assuming sales through partnerships. We have incorporated a risk factor for each specialty, with success probabilities ranging from 50% to 90%, depending on clinical trial status and partnership requirements.
Our target price is derived from a weighted average of all valuation methods used. NAV and DCF indicate significant potential upside, collectively accounting for 55% of our total valuation. In contrast, comparison-based methods yield weak results due to the current lack of financial performance. Consequently, the stock’s valuation is currently suppressed, but is expected to rise rapidly once Crossject’s products reach the market and generate profits. This suggests that it will take time for the market to fully recognise the company’s potential. Patience is required, but the potential reward could be substantial.
