Declan schreef op 4 november 2020 20:57:
Pharming Group Is Expanding Production Capacity For Their COVID-19 Treatment
Nov. 03, 2020 9:20 AM ETPharming Group N.V. (PHGUF)7 Comments5 Likes
Summary
Pharming Group's stock has had a lacklustre performance since it announced Ruconest might be effective at treating severe COVID-19 cases.
Pharming Group's CEO announced that the company is planning to use genetically manipulated cows to expand production of Ruconest significantly.
Pharming Group has a strong balance sheet and a reasonable valuation.
Pharming Group's stock provides an opportunity to hedge vaccine risks in one's portfolio.
Introduction
Pharming Group (OTCPK:PHGUF) is a small biotech company in the Netherlands. As elaborated in my previous article, it has marketed only one drug called Ruconest. In the previous article, I discussed that Ruconest - which is a drug used to treat HAE patients - might be effective at treating severe COVID-19 cases. I recommend readers first to study that article to understand the scientific logic substantiating Ruconest's effectiveness in treating COVID-19 cases.
Since writing that article, Pharming Group's stock performance has been lacklustre; the initial surge in May due to Pharming's small COVID-19 trial has vanished entirely in the subsequent months. Nonetheless, in this article, I will showcase that the COVID-19 thesis is still alive.
As discussed earlier in this write-up, Pharming Group has initiated multiple clinical trials to determine the effectiveness of Ruconest. As discussed in my previous article, Pharming Group already performed a small trial at University Hospital Basel wherein five patients were treated with Ruconest, and the bigger trial is also partially performed at University Hospital Basel; actually, the first patient of the new multinational trial was treated at that hospital as well.
I decided to search whether Basel-Stadt, the region wherein University Hospital Basel lies, published data about COVID-19 patients in hospitals. I hypothesised that COVID-19 data from Basel-Stadt could showcase that Ruconest is effective. In other words, maybe, we can make our own guess how the trial is faring by using publicly available data.
And after some exploration throughout the internet, I did find public data distributed officially by Basel-Stadt. Basel-Stadt reports daily or bi-weekly the number of patients hospitalized with COVID-19, and the number of COVID-19 patients in ICU. They do not report the number of hospitalizations. They only report the number of people hospitalized with COVID-19 at the time of reporting. I was hoping for more useful data, but I figured it was worth a go either way.
I created a ratio: the total number of COVID-19 patients on ICU beds shared by the total number of patients hospitalized with COVID-19. Ruconest is a drug that should, in theory, dampen the load on ICUs, so in theory, Basel-Stadt should have fewer patients on ICU beds relative to the total number of patients hospitalized. Some countries published similar data, and some published other kinds of data. However, I was not able to show that Basel-Stadt's ratio was significantly better.
Basel-Stadt Netherlands United Kingdom Switzerland
Share of COVID-19 patients hospitalized on the IC, relative to the total COVID-19 patients hospitalized 15% 22% 11.2% 17%-20%(Estimate)
I think that the data is too general to make any assumptions about Ruconest's effectiveness. Even the IC patients/total patients ratio of countries like the Netherlands and the United Kingdom is vastly different due to cultural differences. While it was a nice attempt, the data is too general to find out whether Ruconest is effective. If Basel-Stadt instead published data per patient - instead of daily capacities - I might have been able to make a better guess, since the average time spent in the hospital could have been significantly lower.
Valuation
Pharming Group's valuation at its current stock price provides a sufficient margin of safety. As of Q3 2020, Pharming Group has €156.1 million in cash and cash equivalents, while Pharming Group's long-term debt comprises of €138.082 million. Pharming Group's market cap at the time of writing is €548.26 million. So, Pharming Group's Enterprise Value is €530.242 million. Pharming Group's EBITDA is approximately €71 million, so its trailing twelve-month EV/EBITDA ratio is 7.6. Whilst Pharming Group remains a biotech company, their balance sheet is strong, which should be reassuring to investors. It has a massive cash position which lowers the risk profile of the stock.