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IMMUNOPRECISE ANTIBODIES LTD IPA
February 28, 2022 - 1:35pm EST by
bulldog2013
2022 2023
Price: 4.80 EPS 0 0
Shares Out. (in M): 20 P/E 0 0
Market Cap (in $M): 94 P/FCF 0 0
Net Debt (in $M): -31 EBIT 0 0
TEV (in $M): 64 TEV/EBIT 0 0

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Description

Intro

Immunoprecise Antibodies (IPA) is comprised of two businesses: a growing CRO providing antibody discovery capabilities to pharma and biotech companies and Talem Therapeutics, an internally developed pipeline of drug candidates targeting a range of diseases. The CRO is growing revenue mid-teens, has an impressive roster of clients, and, ignoring Talem, trades at deep discount to peer and recent M&A multiples. Talem, while still early, is advancing several candidates towards clinical trials and is likely to announce license/partnership deals in the next 12 months. Given all the moving pieces, valuation is certainly more art than science, but I think there is a solid path to 100%+ upside based on the CRO business alone and potentially much more as Talem becomes a larger piece of the equity story.

 

Business

IPA is a technology platform company that supports pharmaceutical and biotech partners in their pursuit of identifying and developing novel, therapeutic antibodies against all classes of disease targets. The company’s CRO (contract research organization) offers comprehensive assistance to its clients starting with customized computational project design, antigen preparation, proprietary immunization services, high-through discovery platforms, functional antibody testing, lead candidate selection, antibody characterization, antibody optimization, and antibody engineering and manufacturing. The company’s comprehensive abilities provide a one-stop service offering with the aim to disrupt conventional multi-vendor product development.

 

The company’s specific areas of expertise include:

·         B Cell Select single-cell interrogation technology

·         DeepDisplay customer phage libraries

·         Abthena bispecific program platforms

·         Artemis Intelligence Metadata (AIM) capabilities

IPA provides clients with therapeutically relevant antibodies, in a short period of time, with high probability of succeeding to clinical trials. The company has completed roughly 4000 prjects for over 500 clients worldwide. It counts 70% of the top 20 global pharmaceutical companies as clients (up from 60% a year ago).

The market for monoclonal antibody treatments is growing significantly with new technological advancements in screening and optimizing potential drug candidates. During the period from 2011 to 2020, 70 new antibody therapeutics were approved in the US versus 20 over the prior 10 year period. Antibody treatments have nearly twice the rate of regulatory approve compared to small molecule drugs (11.5% vs 6.2%). The five best selling antibody drugs recorded $55bn in sales in 2020 and 42 reached blockbuster status.

 

The below chart shows the company’s development over the past several years from a revenue, FTE, and client count perspective:

 

The company’s current enterprise value is C$83.27m (C$120m market cap and C$38.4m in net cash). Revenue for calendar 2022 is expected to be in the C$22-23m range putting the current EV/rev multiple at ~3.6x.

Over the past 12 months, there’s been a fair bit of M&A activity in the antibody discovery space. Buyers have included Twist Biosciences, Repligen, and Danaher and valuation metrics have ranged from 13-19x estimated forward revenue. Assuming a 50% discount to the low end of M&A multiples would yield 60% upside from current prices. Notably, this exercise entirely ignores any value from Talem, the company’s internal drug pipeline.

 

Talem

In 2019, IPA formed a wholly owned subsidiary named Talem Therapeutics. The concept was to leverage the company’s existing research and development capabilities to build a pipeline of drug candidates. The below graphic provides a snapshot of the current pipeline: