Global Pharmaceuticals "UBS Expert Call Feedback: head & neck cancer..."

Research evidence excerpt

Global Pharmaceuticals "UBS Expert Call Feedback: head & neck cancer..."

Valuation Method and Risk Statement

Potential downside risks in biopharma are 1) disappointing launches or commercial

performance of marketed products, 2) FDA and EMA regulatory decisions on clinical

candidates or approved products that are both on the market and in clinical development, 3)

potential biogeneric competition in the upcoming years for products that have lost/will lose

patent protection and 4) changes in the US healthcare system which provides a large portion

of revenues for most biotechnology companies. Investing in small and mid-cap biotech is

inherently risky and thus we view investments in this field is more appropriate for investors

comfortable with high risk/reward profiles. The sector is characterized by high volatility (often

related to expectations leading into and out of binary events); heavy use of options strategies

where sophisticated investors often use leverage in an attempt to maximize returns; and

sharp stock movements that can often be driven by pure market speculation. Given the

challenges of drug development, the intricacies of clinical trial design and interpretation of

results, and the complexities of the science, we advocate use of caution when evaluating

opportunities in the small and mid-cap biotechnology sector.

Akeso:

We base our price target for Akeso on risk-adjusted DCF methodology. Downside risks for

Akeso include: 1) failure or significant delays in completing clinical development, obtaining

regulatory approvals and commercialising drug candidates; 2) immuno-oncology therapies,

including immune checkpoint inhibitors, potentially causing undesirable side effects; 3)

becoming subject to unfavourable reimbursement practices that could harm the business;