STDY - SteadyMed Ltd

[hillfronter83]

STDY is another small cap pharmaceutical company that is being acquired by a bigger pharma (UTHR).
It will pay $4.46 cash per share plus a CVR paying up to $2.63/share. The CVR is contingent on its PAH(Pulmonary Arterial Hypertension) treatment Trevyent will reach 3000 case in USA within 5 years. The deal has a high probability to close as major shareholder with 43% agreed to vote for the deal.

I have no knowledge about PAH or its treatment. But based on my googling on the internet and reading company filings, Trevyent is just a new drug delivery method for some existing medicine for PAH. FDA requested additional information which company said they will finish submitting by the end of 2018. In 2015, a small Canadian company Cardiome paid $3m upfront for marketing rights of Trevyent outside of USA. At current price, the CVR is priced at less than 4% probability of payout.

[netnet]

Are (or will) the CVR's be publicly traded? If not then the lack of liquidity is an issue, also there is the discounted cash flow issue.

just saying...

[hillfronter83]

Are (or will) the CVR's be publicly traded? If not then the lack of liquidity is an issue, also there is the discounted cash flow issue.

just saying...

I don't think the CVR will be traded. The lack of liquidity is probably reason people don't like such things, hence the opportunity. Let's say the probability of payout is 10%, the expected payment will be $0.26 in 5 years, for an annualized return of about 23%. Honestly I have no idea what probability should be in this case, but I'm happy to bet small amount of money.

[writser]

I shared some thoughts about STDY with another forum member, we both thought it looked interesting. I agree that the lack of a public market is an opportunity rather than an issue. I.e. might be an issue for funds to own a 5-year, non-traded security but if you buy this for your personal account, what's the problem? You buy the stock for $4.55, get back $4.46 in a few months yet you worry about the lack of a public market in the $0.09 lottery ticket?

For a non-medical armchair specialist like me it's basically impossible to say something sensible about their product but at first glance it doesn't seem like a moonshot product, i.e. looks somewhat credible and sensible to me. Even better, insiders own a reasonable amount of shares, that makes me inclined to believe they see some potential in their product. Would be interesting to see in a proxy if they were initially offered a higher upfront amount.

On the flipside, given that the deal is supposed to close in Q3 (and the CVR payout can take up to five years if I remember correctly) the expected IRR isn't superb at the moment if you assume a conservative timeline, even if you think the expected value of the CVR is around $0.50 or higher. Especially if you also take into account that without a CVR this would probably trade 1%-2% below the cash offer). Also, I am not 100% sure about possible implications of Israeli withholding tax.

So to conclude, I think it looks good but not super. I own a few shares, maybe I buy some more shortly before closing and/or if the proxy contains some extra information.

[cameronfen]

The market leader costs 125,000 and generates 602 million annual revenue.  Thats 4500 visits per year.  Doing 3000 in 5 years may be tough: http://markets.businessinsider.com/news/stocks/cardiome-s-partner-steadymed-submits-u-s-new-drug-application-for-trevyent-for-the-treatment-of-pulmonary-arterial-hypertension-1002143364

[writser]

The market leader costs 125,000 and generates 602 million annual revenue.  Thats 4500 visits per year.  Doing 3000 in 5 years may be tough: http://markets.businessinsider.com/news/stocks/cardiome-s-partner-steadymed-submits-u-s-new-drug-application-for-trevyent-for-the-treatment-of-pulmonary-arterial-hypertension-1002143364

from the 10K:

In addition to its debilitating physical symptoms, PAH has a profound social, practical and emotional impact on the lives of patients and their families and caregivers. Although Remodulin is an effective treatment for PAH, we believe its use is limited in part because the day-to-day method of delivery is burdensome and inconvenient for patients and caregivers. Approximately 30,000 individuals in the United States are currently diagnosed with PAH. While approximately 24,000 of these patients are eligible for Remodulin therapy, we believe only approximately 3,500 are receiving Remodulin. We believe its use is limited in part because the day-to-day method of delivery is burdensome, complicated and inconvenient for patients and caregivers. We believe Trevyent will provide a better alternative for PAH patients taking Remodulin and expand the number of patients eligible to receive treprostinil therapy.

Remodulin is provided to patients in a multi-use liquid vial and delivered subcutaneously or intravenously 24 hours a day, every day, by infusion pumps not designed for this purpose. PAH specific infusion pumps do not currently exist. For subcutaneous administration, the patient or caregiver must transfer the drug from the vial, using a special connector, into a disposable syringe that is then inserted into a non-disposable insulin infusion pump, which is attached to the patient using a long tube and catheter. These pumps require complex manual programming and are often not water-resistant. Because Remodulin needs to be transferred from a vial to the pump, it is formulated with the preservative meta-cresol, which is a known skin irritant. We believe the infusion site pain reported in 85% of patients receiving subcutaneous Remodulin therapy to be potentially associated with or exacerbated by the presence of meta-cresol in the Remodulin formulation.

For intravenous Remodulin therapy, the delivery systems are larger than those typically used for subcutaneous therapy and require even more complex dose calculations and programming. They also include a larger drug reservoir that requires patients to precisely mix Remodulin with diluent, sometimes multiple times per day, which can take a substantial amount of time and may lead to dosing errors. Patients must also take care to use aseptic techniques when completing the complex preparation of intravenous treprostinil because contaminated filling can result in infection, which can lead to sepsis.

Trevyent is specifically designed for PAH therapy. It is designed to deliver a proprietary, preservative-free formulation of treprostinil using our ready-to-go, compact and disposable PatchPump. Trevyent is aseptically pre-filled with drug and pre-programmed with the required delivery rate at the site of manufacture. It is water-resistant and does not require any filling or programming by the patient or caregiver. To initiate therapy, the patient would simply attach Trevyent to the subcutaneous infusion set and after 48 hours of continuous dosing, Trevyent will alert the patient that a replacement needs to be attached.

Again, no expert, but if their product is much easier to use and there are 24.000 eligible individuals, of which 3500 use the 'difficult method of delivery' then 3000 patients over 5 years doesn't sound impossible. Certainly not a no-brainer, but fortunately it's not priced that way either.

And a final thought to ponder: why would the owner of Remodulin (UTHR) buy STDY if they think the new method of delivery isn’t significantly better?

[cameronfen]

The market leader costs 125,000 and generates 602 million annual revenue.  Thats 4500 visits per year.  Doing 3000 in 5 years may be tough: http://markets.businessinsider.com/news/stocks/cardiome-s-partner-steadymed-submits-u-s-new-drug-application-for-trevyent-for-the-treatment-of-pulmonary-arterial-hypertension-1002143364

from the 10K:

In addition to its debilitating physical symptoms, PAH has a profound social, practical and emotional impact on the lives of patients and their families and caregivers. Although Remodulin is an effective treatment for PAH, we believe its use is limited in part because the day-to-day method of delivery is burdensome and inconvenient for patients and caregivers. Approximately 30,000 individuals in the United States are currently diagnosed with PAH. While approximately 24,000 of these patients are eligible for Remodulin therapy, we believe only approximately 3,500 are receiving Remodulin. We believe its use is limited in part because the day-to-day method of delivery is burdensome, complicated and inconvenient for patients and caregivers. We believe Trevyent will provide a better alternative for PAH patients taking Remodulin and expand the number of patients eligible to receive treprostinil therapy.

Remodulin is provided to patients in a multi-use liquid vial and delivered subcutaneously or intravenously 24 hours a day, every day, by infusion pumps not designed for this purpose. PAH specific infusion pumps do not currently exist. For subcutaneous administration, the patient or caregiver must transfer the drug from the vial, using a special connector, into a disposable syringe that is then inserted into a non-disposable insulin infusion pump, which is attached to the patient using a long tube and catheter. These pumps require complex manual programming and are often not water-resistant. Because Remodulin needs to be transferred from a vial to the pump, it is formulated with the preservative meta-cresol, which is a known skin irritant. We believe the infusion site pain reported in 85% of patients receiving subcutaneous Remodulin therapy to be potentially associated with or exacerbated by the presence of meta-cresol in the Remodulin formulation.

For intravenous Remodulin therapy, the delivery systems are larger than those typically used for subcutaneous therapy and require even more complex dose calculations and programming. They also include a larger drug reservoir that requires patients to precisely mix Remodulin with diluent, sometimes multiple times per day, which can take a substantial amount of time and may lead to dosing errors. Patients must also take care to use aseptic techniques when completing the complex preparation of intravenous treprostinil because contaminated filling can result in infection, which can lead to sepsis.

Trevyent is specifically designed for PAH therapy. It is designed to deliver a proprietary, preservative-free formulation of treprostinil using our ready-to-go, compact and disposable PatchPump. Trevyent is aseptically pre-filled with drug and pre-programmed with the required delivery rate at the site of manufacture. It is water-resistant and does not require any filling or programming by the patient or caregiver. To initiate therapy, the patient would simply attach Trevyent to the subcutaneous infusion set and after 48 hours of continuous dosing, Trevyent will alert the patient that a replacement needs to be attached.

Again, no expert, but if their product is much easier to use and there are 24.000 eligible individuals, of which 3500 use the 'difficult method of delivery' then 3000 patients over 5 years doesn't sound impossible. Certainly not a no-brainer, but fortunately it's not priced that way either.

And a final thought to ponder: why would the owner of Remodulin (UTHR) buy STDY if they think the new method of delivery isn’t significantly better?

Sure I have no idea.  Just posting the first bit of research I came across.  I think the question is how will they price this?  If the price is similar to Remodulin, then it probably still will be a challenge. 

[Broeb22]

They will be nontransferable

[cameronfen]

The market leader costs 125,000 and generates 602 million annual revenue.  Thats 4500 visits per year.  Doing 3000 in 5 years may be tough: http://markets.businessinsider.com/news/stocks/cardiome-s-partner-steadymed-submits-u-s-new-drug-application-for-trevyent-for-the-treatment-of-pulmonary-arterial-hypertension-1002143364

from the 10K:

In addition to its debilitating physical symptoms, PAH has a profound social, practical and emotional impact on the lives of patients and their families and caregivers. Although Remodulin is an effective treatment for PAH, we believe its use is limited in part because the day-to-day method of delivery is burdensome and inconvenient for patients and caregivers. Approximately 30,000 individuals in the United States are currently diagnosed with PAH. While approximately 24,000 of these patients are eligible for Remodulin therapy, we believe only approximately 3,500 are receiving Remodulin. We believe its use is limited in part because the day-to-day method of delivery is burdensome, complicated and inconvenient for patients and caregivers. We believe Trevyent will provide a better alternative for PAH patients taking Remodulin and expand the number of patients eligible to receive treprostinil therapy.

Remodulin is provided to patients in a multi-use liquid vial and delivered subcutaneously or intravenously 24 hours a day, every day, by infusion pumps not designed for this purpose. PAH specific infusion pumps do not currently exist. For subcutaneous administration, the patient or caregiver must transfer the drug from the vial, using a special connector, into a disposable syringe that is then inserted into a non-disposable insulin infusion pump, which is attached to the patient using a long tube and catheter. These pumps require complex manual programming and are often not water-resistant. Because Remodulin needs to be transferred from a vial to the pump, it is formulated with the preservative meta-cresol, which is a known skin irritant. We believe the infusion site pain reported in 85% of patients receiving subcutaneous Remodulin therapy to be potentially associated with or exacerbated by the presence of meta-cresol in the Remodulin formulation.

For intravenous Remodulin therapy, the delivery systems are larger than those typically used for subcutaneous therapy and require even more complex dose calculations and programming. They also include a larger drug reservoir that requires patients to precisely mix Remodulin with diluent, sometimes multiple times per day, which can take a substantial amount of time and may lead to dosing errors. Patients must also take care to use aseptic techniques when completing the complex preparation of intravenous treprostinil because contaminated filling can result in infection, which can lead to sepsis.

Trevyent is specifically designed for PAH therapy. It is designed to deliver a proprietary, preservative-free formulation of treprostinil using our ready-to-go, compact and disposable PatchPump. Trevyent is aseptically pre-filled with drug and pre-programmed with the required delivery rate at the site of manufacture. It is water-resistant and does not require any filling or programming by the patient or caregiver. To initiate therapy, the patient would simply attach Trevyent to the subcutaneous infusion set and after 48 hours of continuous dosing, Trevyent will alert the patient that a replacement needs to be attached.

Again, no expert, but if their product is much easier to use and there are 24.000 eligible individuals, of which 3500 use the 'difficult method of delivery' then 3000 patients over 5 years doesn't sound impossible. Certainly not a no-brainer, but fortunately it's not priced that way either.

And a final thought to ponder: why would the owner of Remodulin (UTHR) buy STDY if they think the new method of delivery isn’t significantly better?

Sure I have no idea.  Just posting the first bit of research I came across.  I think the question is how will they price this?  If the price is similar to Remodulin, then it probably still will be a challenge.

Another thing to think about is even if they only sell 500 treatments a year and charge 100k, they still have revenues of 50 million a year and can still (potentially don't know the cost structure) be an accretive acquisition and they also saved themselves the money for paying out the CVR

[writser]

Market now values the CVR at $0.34 per share or ~$9m in total. With some luck / timing you could have basically picked up a few CVR's the past few weeks for free. My personal cost basis for STDY is around $4.52 for a return of ~6% in a few weeks. Deal is probably closing soon. Around $0 it was easy to state that the CVR was underpriced (ok, that's a bit simplistic, ignoring time value and deal uncertainty). At current prices I think an argument could be made for selling, but given that I'm lazy, don't like transaction costs and there are tax advantages to holding the CVR I'm not selling (yet).