Reassessing the US opportunity

STX is a commercial-stage company delivering specialty products that address patients’ unmet medical needs, with an initial focus on treating iron deficiency (ID). Feraccru®/Accrufer® has been approved by the regulators in both Europe and the US. For various reasons, STX has been unable to secure a commercial partner for Accrufer in the US. Consequently, the board is now considering an STX-led launch option, thereby retaining all the US profits. Financial modelling shows the logic of this option, but it would necessitate financing the working capital requirements covering the next two years in the region of £25m-£30m.

• Strategy: STX’s strategy has been to out-license commercialisation rights to partners with appropriate expertise in target markets. Although this strategy has been successful in Europe and China, the company has not been able to secure a satisfactory deal for the US, which has necessitated a re-think.
• US options: During multiple US commercialisation discussions, potential partners have shared with STX management considerable intelligence about the US sales and marketing opportunity for Accrufer. Based on this information and its own research, the board has concluded that STX could launch Accrufer by itself.
• Financial implications: Financial modelling suggests that retention of the commercialisation rights and profits to Accrufer in the US results in substantially higher returns for shareholders. However, to achieve this, the company will need additional working capital of £25m-£30m for the next two years.
• Risks: Operationally, the main risk is that of execution, with little in-house commercial experience; however, STX has begun to address this by recruiting experienced US commercial managers. Finance will also be required, potentially through a combination of specialist debt and equity.
• Investment summary: Subject to financing being available, the STX-led option for Accrufer appears to be the best option for shareholders. The attributes and positioning off Accrufer are well-suited to the COVID-19 environment, eliminating the hospital attendance risk. The shares have over-reacted to the “lack of deal” news and should recover quickly once the uncertainty is removed.