One Year Into Bullish Trend, DelMar Pharmaceuticals Inc (DMPI) Is Still Undervalued

Don’t Forget the Risks

That being said, it is important not to forget that glioblastoma is a notoriously difficult disease to trial and treat. Though it is a $1 billion market, it is a rare disease, with only 15,000 people in the US suffering from it. Even fewer will exhibit high amounts of MGMT the company is looking for, and even some of those that do cannot be tested because they are not candidates for surgery. This will be no cake walk here, but some of the advantages discussed above do help explain why the company is trading the way it is.

The biggest risk near term does not stem from VAL-083 failing outright, though that would certainly devastate the company. That is a longer term issue. The biggest risk at this stage of development is a halt in any upcoming pivotal trial, and unexplained screening halts or outright trial suspensions have been known to happen to other companies trialing glioblastoma in particular. If there are any bureaucratic roadblocks to a pivotal trial due to safety concerns or anything else, we are looking at a 60% downside or more.

Financially, the company has enough funds to run through the end of next year, with $10 million more in cash available from the exercise of warrants. By that time, a pivotal trial will probably be well underway.

Conclusion

Cutting the $1 billion market estimate by 80% taking into account that not all glioblastoma sufferers are the target patient population here, a $200 million annual revenue from VAL-083 is a conservative guess upon approval. Given that potential and an average price to sales revenue of 4.37 for pharmaceutical firms as of January 2016, a market cap of $72 million is still quite undervalued. Given the uncertainties here and danger of a trial halt for whatever reasons, even if we cut that ratio to say 3:4, a market cap of $150 million is still double where we are now.

Whether or not VAL-083 succeeds or fails in the long term, DelMar Pharmaceuticals Inc (NASDAQ:DMPI) can continue on its current trend if and only if it gets its pivotal Phase III off the ground and running in the short to medium term. If there are any holdups that linger unexpectedly, the downside could be 50% or more ultimately.

And if VAL-083 is approved and sells well? That’s a different calculation entirely, and Market Exclusive may cross that bridge when we get there.

Note: This article is written by David Rich and originally published at Market Exclusive.