Notes

Aspreva Pharmaceuticals. ASPV

Company Blurb #1
"Aspreva Pharmaceuticals Corporation engages in the identification, development, and commercialization of approved drugs and drug candidates for new indications. It has two phase III clinical development programs underway to evaluate CellCept, an orally delivered immunosuppressant agent, in the treatment of the autoimmune diseases, such as lupus nephritis and pemphigus vulgaris."

Company Blurb #2
"In July 2003, we entered into our first collaboration with Roche for exclusive world-wide rights, excluding Japan, to develop and, upon regulatory approval, commercialize CellCept, for all autoimmune indications. CellCept is an immunosuppressant or "anti-rejection" drug currently approved by the FDA for use in the prevention of rejection in patients receiving heart, kidney and liver transplants. It is important to note that CellCept is not currently approved by the FDA for use in autoimmune indications."

ASPV does not benefit from the use of CellCept in transplants (the only approved use of CellCept). Roche holds the patents (expiring in 2009). Currently, ASPV benefits when CellCept is used off-label. On that basis, ASPV is already turning a nice profit. It has no other revenues.

Rummaging around the Internet turns up discussion sites for people treated with CellCept for lupus: there is no mention of insurance problems, and some mention that insurance paid for it. So, currently there seems to be no problem in getting insurance to pay for CellCept for off-label use. (What, exactly, is the financial benefit of trying to get formal FDA approval, then?)

It's probably a mistake to classify ASPV as a biotech, since it doesn't do original research. It conducts FDA trials, and markets the drug(s) for its partners who are biotechs. Nonetheless, the valuations are impressive for any company.

Its only revenue is from Roche in Swiss francs, which it hedges.

The generic name for CellCept is mycophenolate mofetil (MMF).
http://www.drugs.com/mtm/cellcept-oral-injection.html

Statement from Lupus Foundation of America (2005)
http://www.medicalnewstoday.com/medicalnews.php?newsid=34107

Another report:
http://healthlink.mcw.edu/article/1031002645.html

25May07

Trailing P/E (ttm, intraday): 6.17
Forward P/E (fye 31-Dec-08): 4.15 <-- WOW
PEG Ratio (5 yr expected): 0.25 <-- WOW
Price/Sales (ttm): 3.35
Price/Book (mrq): 2.20
Current ratio of 8 <-- Very good

GROWTH estimates
Sales 2008: 22%
Earnings: current qtr. 24%, next qtr. 52%, next year 21%

It is very profitable based on off-label use of CellCept.

MarketEdge TA: Avoid (May 20, 07)

Thoughts: Suppose CellCept is not approved for autoimmune treatments. What will that do to the off-label use? Currently, off-label use is already generating nice profits for ASPV. But, would Roche continue the relationship with ASPV? An intriguing high risk/reward stock, with an unusually strong balance sheet. Watch insiders on this one! Current insider ownership is 18%; no recent activity. It seems analysts have decided CellCept is bonafide: putting a lot of faith in analysts on this one....a PEG of 0.3 and forward PE of 4.

08JUN07 $20.39

FDA grants fast-track status to CellCept:
http://www.medicalnewstoday.com/medicalnews.php?newsid=73373

From company press-release:
"The FDA's Fast Track designation is designed to expedite the application and review process for products that have the potential to address a serious or life-threatening condition. There has been no new approved treatment for lupus in the United States in over thirty years.

"In granting Fast Track designation, the FDA noted that type III-V lupus nephritis is a severe inflammation of the kidney associated with systemic lupus erythematosus, and is a life-threatening disease. They continued stating that the partnership between Aspreva and Roche shows a commitment to study clinically important outcomes including death, need of dialysis, or loss of renal function in this serious disease. Finally the FDA noted that CellCept received Fast Track designation on the basis that, given the current development program in lupus nephritis, it may have the potential to address an unmet medical need in patients with this disease.

23AUG07 $19.50

On June 27, the company reported that CellCept (MMF) was not superior to its main competitor (IVC) in "inducing treatment response." In other words, in the first 24 weeks, the two treatments were roughly comparable. The next stage studies the "maintenance phase," i.e. how the treatments perform over a long period of time.

Trailing P/E (ttm, intraday): 5.53
Forward P/E (fye 31-Dec-08): 4.08
PEG Ratio (5 yr expected): 0.20
Price/Sales (ttm): 3.03
Price/Book (mrq): 1.86 (all tangible)
Current Ratio: 10.1
Debt/Equity: 0

Price/Cash Flow: 5.2

GROWTH estimates
Sales 2008: 7%
Earnings: current qtr. 51%, next qtr. 66%, next year 13%

Growth estimates for next year have declined quite a bit in the last 3 months. However, earnings growth for next year is still greater than the current PE. Estimated growth for the next five years is 20%

No insider action of any sort for a while; insider ownership is 18%.

Thoughts. Suppose CellCept is not approved for autoimmune treatments. What will that do to the off-label use? Currently, off-label use is already generating nice profits for ASPV. But, would Roche continue the relationship with ASPV? And, what happens when the patent expires in 2009? An intriguing high risk/reward stock, with an unusually strong balance sheet. Why doesn't the company have customers other than Roche? Is the business model a one-trick pony? By all the usual metrics, this company is a great buy: balance sheet, value, growth.

19NOV07 - $25.50

Aspreva gets acquired for $26/share, probably effective in January.

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