PETALING JAYA: The completion of clinical trials of an Alzheimer’s drug by Genting Bhd’s unit, TauRx Pharmaceuticals Ltd, will provide greater visibility to its path to profitability, according to analysts.
Earlier this week, Genting’s 20.3%-owned TauRx Pharmaceuticals said the initial phase three clinical trial data for its Alzheimer’s drug showed favourable results.
While TauRx said this did not represent positive top-line results for the clinical trial, analysts believe that it puts the drug in a favourable spot to receive the necessary regulatory approvals.
“If the trial shows positive top-line results, this could pave the way to accelerated regulatory review and approvals and the subsequent market launch of the drug, which could be by late-2023,” RHB Research said in a report yesterday.
Meanwhile, CGS-CIMB Research said the gaming group’s stake in TauRx may be worth RM848mil to RM2.23bil or 22 sen to 58 sen per share.
To recap, TauRx had been touted for an initial public offering (IPO) previously, but failed to meet its “coprimary endpoints” in its HMTM phase three trials in 2016. At the time, The Wall Street Journal had reported that TauRx’s possible Nasdaq IPO may have had a valuation of US$15bil (RM65.89bil).
In March 2018, according to DealStreetAsia, TauRx claimed it was worth about US$2.5bil (RM10.98bil).
More recently, the research firm noted that in its first quarter 2022 results, Dundee Corp, which owns a 3.7% stake in TauRx, had valued TauRx at US$949mil (RM4.17bil).
This is based on the pricing from its fully subscribed rights offering in November 2021.
“If we assume TauRx’s valuation ranges from US$949mil (RM4.17bil) to US$2.5bil (RM10.98bil), Genting’s stake in TauRx may be worth RM848mil to RM2.23bil,” it said.
The research firm said pending the final outcome of TauRx’s phase three clinical trial and regulatory approvals, it had “conservatively not ascribed any value to TauRx in its current sum-of-parts-based target price of RM6.95 for Genting, which is still derived after applying a 30% holding company discount. We keep our earnings forecasts and ‘add’ rating unchanged.
“Its financial year 2023 (FY23) forecast adjusted enterprise value (EV)/earnings before interest, taxes, depreciation and amortisation (Ebitda) of 6.9 times is 0.7 standard deviation below its 14-year mean, with decent FY22 to FY24 forecast yields of 2.9% to 4.2% per annum,” added the research firm.
The key potential rerating catalyst is full earnings recovery post-Covid-19.
The main downside risks, meanwhile, are the worse-than-expected Covid-19 impact and higher net losses from Resorts World Las Vegas.
Meanwhile, RHB Research has maintained a “buy” call on the stock for its attractive 6.4 times FY23 forecast EV/Ebitda valuation versus regional peers’ 11 times average.