We are maintaining our BUY rating on Synthaverse, setting a target price of PLN 6.5/share (previously PLN 6.7/share). Increased operating costs and a decline in short-term sales potential in individual products resulted in a lowering of forecasts for subsequent periods. The increase in the cost of equity (from 11.5% to 12.0%) was also a significant factor in the downgrade. In the long term, we continue to expect a surge in earnings once the new production capacity comes on stream.
In March'24, the drug Onko BCG was approved for marketing in Romania.
According to the agreement, the registration was to be completed by the end of 2024. Accelerating the process, in our opinion, will allow the drug to increase sales in the short term. In addition, the Ministry of Health has still not issued a tender for the supply of the anti-tuberculosis vaccine this year. It is produced on the same line as Onko BCG and the company is currently using 100% capacity in this segment.
This will reduce sales of the BCG 10 vaccine, but on the other hand, it provides an opportunity to increase Onko production and sales in export markets. We also expect sales of Distreptase to decline in future quarters. The company has ended its cooperation with the distributor Symphar.
In our view, the sales team established in 2023 will need several months to develop relationships with the entities previously reached by the distributor, so we expect it will take two quarters to rebuild volumes. In the long term, we view the change of distribution channel positively - the company will save on commission and be more flexible in adjusting prices and production to market demand. A new contract manufacturing agreement for Lakcid is still being negotiated.
The company has still not communicated the agreement, so we expect sales revenue for this product to come in Q3'24 at the earliest. Capacity expansion is going according to plan.
The final acceptance of the new production facility is expected to take place in July'24. We are not changing our assumptions regarding potential sales - we expect first results at the end of 2025 (sales of unused formulations produced at CBR for research), while we should see full potential in 2026 once full production capacity is operational.
