Interactive Investor

Insider: Shield Therapeutics duo bet on US success

25th January 2021 14:30

Graeme Evans from interactive investor

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The shares have fallen sharply in recent months, but selling may have been overdone, believe top brass.

A potentially “transformational” year for Shield Therapeutics (LSE:STX) has started with its chairman and chief executive each buying £60,000 of shares in the pharmaceuticals company.

The purchases by CEO Tim Watts and chairman Hans Peter Hasler come as Shield works out how best to launch and commercialise its Accrufer iron deficiency therapy in the United States.

The process has taken longer than expected, with shares falling sharply in December after the company revealed talks with potential partners had stalled for reasons not related to the product.

Its options for targeting the US market now include a Shield-led launch, which brings potentially higher returns for shareholders but needs additional working capital of between $30 million and $40 million (£22 million-£29 million).

While discussions continue with a number of licensing partners, the company has hired a commercial team to work on the option for going it alone. Regulatory approvals already exist for the product in the US, as well as in Europe.

In a recent update, Watts said the company's knowledge of the US iron deficiency market and the “great opportunity” it presents for Accrufer has developed massively in the past year.

He added: “We aim to give clarity on the US by the end of March and I am sure that 2021 will be a transformational year for Shield.”

Aside from the US commercialisation, the company has made strong progress in Germany and the UK where the product is known as Feraccru. There was a 70% surge in packs sold in 2020, but marketing activity inevitably slowed due the Covid-19 pandemic.

Demand is picking up again, however, as doctors see Feraccru as a practical alternative to requiring patients to visit hospital for an infusion of iron.

Revenues for last year are expected to be £9.4 million, compared with £700,000 a year earlier, and while cash is down to £2.9 million from £4.1 million the offer of  shareholder loans means Shields financial headroom has been extended out towards the end of the year.

The shares are down from 193p at the end of 2019 to 63p, valuing the company at £68 million, but analysts at broker FinnCap have a price target of 350p and note that current licensing deals in Europe and China are worth between 100p and 120p on their own.

They said there was financial logic to a Shield-led launch in the US but noted the execution risks and warned that forecasts are subject to change depending on which route the company takes.

Hardman analyst Martin Hall adds that every day is a further loss of income for a product that sits very favourably as an alternative to the current hospital-administered infusions.

He added: “Coupled with the financial return models, the decision to go down the Shield-led route is a ‘no brainer’, in our opinion. We estimate that any partner would need to generate over three times more sales than Shield to deliver the same financial rewards to shareholders.”

Watts has been Shields CEO since April, having moved to the Gateshead-based company as chief financial officer from Oxford Biomedica in 2018. He has worked in the pharmaceuticals and biotech sectors since 1990, when he joined ICI Pharmaceuticals prior to it becoming AstraZeneca.

Hasler, who joined the Shield board in 2018, has experience from senior positions at Elan Corporation, Biogen and Wyeth Pharmaceuticals.

IG share buying after sharp fall

Fridays £50,000 purchase of shares by IG Group Holdings (LSE:IGG) CEO June Felix capped a big week for the FTSE 250 index stock after the $1 billion (£730 million) swoop for US platform tastytrade.

Felix called the financial and strategic rationale of the deal as compelling, but shares have fallen sharply due to $700 million (£511 million) of the asking price being through the issue of IG paper.

Felix, who became chief executive in 2018, bought her shares at 789p on Friday, a day after chairman Mike McTighe picked up £25,000 worth of IG stock at a price of 828p.

 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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