##{"id":59349,"date":"2011-12-22T11:52:44","date_gmt":"2011-12-22T00:52:44","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/12\/22\/qrxpharma-unlocks-strategic-partnership-potential\/"},"modified":"2011-12-22T11:52:44","modified_gmt":"2011-12-22T00:52:44","slug":"qrxpharma-unlocks-strategic-partnership-potential","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/12\/22\/qrxpharma-unlocks-strategic-partnership-potential\/","title":{"rendered":"QRxPharma Unlocks Strategic Partnership Potential"},"content":{"rendered":"

\n\t– QRxPharma<\/span> signs strategic partnership in US
\n\t– Will receive an upfront payment and royalties
\n\t– Deal viewed positively by Citi<\/span> and JP Morgan
\n\t– Buy ratings on QRxPharma<\/span> retained, targets lifted<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tAs development of MoxDuo<\/span> IR<\/span> and MoxDuoCR<\/span> for pain relief has continued, the market has been waiting for QRxPharma<\/span> ((QRX<\/span>)) to announce a strategic partnership with a major drug company. This announcement came yesterday, QRxPharma<\/span> announcing it had signed a deal with Actavis<\/span> of the US.<\/p>\n

\n\tFor JP Morgan, terms of the Actavis<\/span> deal were more favourable<\/span> to QRxPharma<\/span> than had been expected. An upfront payment of $6 million will be received, while Actavis<\/span> will then make tiered royalty payments of 10-30%, with a 50% royalty applying to the first $150 million of cumulative net sales following the initial launch.<\/p>\n

\n\tThe key to the deal for JP Morgan is the agreement allows QRxPharma<\/span> to retain some additional upside, as co-promotion rights for 25% of the US selling effort after the first 12 months will stay with QRX<\/span>. This is expected to assist in the launch of MoxDuo<\/span> IV and MoxDuo<\/span> CR.<\/p>\n

\n\tCiti<\/span> is also broadly positive on the agreement, noting the option for Mox-Duo<\/span> IV expires on January 31 of 2013. This means QRxPharma<\/span> effectively retains full ownership of MoxDuo<\/span> CR and MoxDuo<\/span> IV and of MoxDuo<\/span> IR<\/span> outside the US, something Citi<\/span> expects will offer potential for further licensing deals.<\/p>\n

\n\tActavis<\/span> is seen as a good partner for QRxPharma<\/span> given previous success in the pain relief market. As well, with around US$75 million in royalties expected in 2013, the agreement reduces the risk of QRxPharma<\/span> needing to raise additional capital in Citi's<\/span> view.<\/p>\n

\n\tThe terms of the agreement mean QRxPharma<\/span> has traded off some upfront cash for larger subsequent royalties, something Citi<\/span> suggests will provide the company with more leverage to marketplace success and so should generate more long-term shareholder value.<\/p>\n

\n\tIn the view of Citi<\/span> the 50% royalty on the first $150 million in sales is very high, so this should more than offset what is a low upfront cash payment. The tiered royalty rate is seen as being high at lower thresholds than may normally be expected.<\/p>\n

\n\tTo reflect the agreement, both Citi<\/span> and JP Morgan have lifted their valuation based price targets for QRxPharma<\/span>. For Citi<\/span> the increase is to $3.14 from $2.44, while JP Morgan's target rises to $2.03 from $1.74. These changes reflect increases to earnings estimates, which are most pronounced in FY14<\/span> when for example JP Morgan's earnings per share estimates increase by 45%.<\/p>\n

\n\tLooking ahead, Citi<\/span> sees the next critical milestones for QRxPharma<\/span> as an FDA decision on MoxDuo<\/span> IR<\/span> expected in June of next year and a subsequent product launch in the following quarter. Success with respect to the FDA decision would add further value in the broker's view.<\/p>\n

\n\tOn the back of the announcement shares in QRxPharma<\/span> are slightly higher and as at 11.40am<\/span> today the stock was up 3c<\/span> at $1.38. This compares to a trading range over the past year of $1.055 to $2.51. Relative to a consensus price target according to the FNArena<\/span> database of $2.71 the current share price implies upside potential of almost 100%.<\/p>\n

\n\tNote that RBS<\/span> still has to update its views and projections post this deal.<\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"