Analyse Degroof : confirmation objectif 26€

Strong 9M-2007 results

The facts: Nicox has reported operating charges of EUR35.8m (EUR42.3m expected) and a net loss of EUR13.7m (EUR20.2m expected) on nine-month 2007 sales of EUR18.39m. Its cash position now stands at EUR187.3m (EUR179m expected).

Our analysis: The sales number was in line with our estimated EUR18.5m and represents growth of 176% year-on-year. Q3-07 sales included a EUR5m milestone payment from Merck & Co announced on 16 July 2007. R&D spending was up sharply over the first nine months (launch of the third and final phase III on hip arthritis) at EUR25.3m compared with EUR13.8m in H1-07. This is consistent with the group’s declarations, but despite a near 100% increase vs 9M-06, the increase was not as big as expected (EUR32.8m forecast). This explains why the net loss was not as big as expected. The group’s net cash position is better than expected and is enough to meet the group’s needs (R&D, conferences, premarketing of naproxcinod).

Conclusion: The increase in operating costs has been contained, meaning that cash burn has been slower than anticipated. Today’s numbers are not likely to have much impact on the share in trading. Much greater impact is likely from results in phase II testing with Pfizer in glaucoma in late Q4-07 or early Q1-08 and the possible announcement of a partnership on naproxcinod by the end of the year. Any fall in the share price would provide an opportunity to buy on weakness.

Buy recommendation and target price confirmed.

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