All peer-based valuations have no meaning since Crossject currently has no revenues and negative results. Our NAV valuation is based on a 3x multiple of 2025-26 revenues for all segments. On the one hand, these revenues will not be booked for three years, which should lead us to a discount, however, they only correspond to the ramp-up in sales, meaning that growth rates will be high after 2025 and that these figures are very conservative ones indeed, which explains why we chose not to discount them. The multiple used is rather common for biotech and pharma companies, particularly for those that have a significant R&D pipeline and, thus, high growth prospects. A transaction value would certainly end up at a higher level (5-10x sales, depending on the pharma segment). As an indication of this, Emergent Biosolutions announced in FY18 that it would buy Adapt Pharma (the developer of Narcan, an FDA-approved naloxone nasal spray for US$635m (+US$100m in sales milestones), while we estimate sales of c.US$150m for FY18, implying a c.4.9x sales multiple.
Our DCF is based on our forecasts for each of the seven NTEs currently under development, considering that all of them will be sold through partnerships. We have also factored in a risk associated with the development of each specialty (50% or 70% probability of success as discussed in the Money Making section, depending on the status of clinical trials and the need to find a partner).
It is worth noting that our target price is derived from a weighted average of all methods used, NAV and DCF both showing huge potential upsides (which together account for 55% of our total valuation), while all comparison-based methods lead to weak numbers in the absence of results for the time being. In other words, the valuation of the stock is penalized and should go up quickly when the first products reach the market and enable Crossject to post profits. This also suggests it will take some time for the market to reflect the group’s potential fully. Patience will indeed be needed but the reward could be huge.
