Broker snap: BTG overvalued after FDA rejects MS treatment

2nd Jan 2014 09:40

N+1 Singer has maintained its 'sell' recommendation for healthcare group BTG on concerns that partners Sanofi and Genzyme may not go ahead with their new Multiple Sclerosis (MS) drug Lemtrada in the US.The Food and Drug Administration (FDA) has sent a 'Complete Response Letter' to Sanofi regarding Lemtrada, in which BTG has licensed out certain patents. The product, which has approval for MS in Europe, Caneada and Australia, was previously approved for Chronic Lymphocytic Leukaemia in the US but is now off the market pending the MS indication.The FDA said that Sanofi/Genzyme "has not submitted evidence from adequate and well-controlled studies that demonstrate the benefits of Lemtrada outweigh its serious adverse effects"."A Complete Response Letter means that a product is not approvable at this time and can detail further work required before a product can be approved," explained N+1 SingerAnalyst Elizabeth Klein.N+1 Singer has decided to remove US Lemtrada revenues from its forecasts, bringing possible peak royalty revenues for Lemtrada down to a maximum of £6.25m in 2015, with some further revenues thereafter in Canada."This news has only a relatively small impact on our forecasts and valuation, because, compared to our peers, we were already bearish about Lemtrada," Klein said."The negative sentiment, though, could start to dent BTG's recent outperformance. We continue to believe the shares are overvalued. Even more so now - 'sell'."The broker's target price has been cut by 2p to 488p. "If Sanofi/Genzyme decide to pull the product completely, this would have a further negative 3p impact on our valuation," Klein said.BC