We start our recommendation for Synthaverse with a BUY recommendation with a target price of PLN 6.7. The company is investing heavily in expanding production capacity of a globally shortage bladder cancer drug. Once the investment is completed in 2025, production volumes will increase sixfold while margins will increase by switching from existing ampoules to vials. Synthaverse (formerly Biomed-Lublin) manufactures drugs in the areas of oncology, haematology and immunology.
The company's products are sold in 35 countries, with the drugs unregistered in some markets, but given the high demand for scarce products, they are granted an import licence. The company is the only domestic supplier of the anti-tuberculosis vaccine BCG 10.
In Poland, this vaccination is mandatory in the first days of a child's life, so every year the National Health Fund organises a tender for the supply of vaccines, which Synthaverse wins. Increased orders from abroad have also been seen recently. In June'23, the product was registered in Hungary. At that time, the company also received a significant order for the supply of almost 1.7 million doses of vaccine to Ukraine (order spread over 2023 and 2024). The BCG segment also includes the production and sale of Onko BCG (a bladder cancer drug), which is key to the company's growth.
In 2022, segment revenues accounted for 46% of the company's sales. The other leg of the business is the traditional segment (54% of the company's sales in 2022), where Synthaverse produces Distreptase (a drug used in gynaecology), blood products used in maternal-fetal conflict and hepatitis B prophylaxis, and Lakcid, a probiotic produced for ZF Polpharma. The company has an established position in the market.
Export sales are mainly dominated by Distreptase, which is sold mainly in eastern markets. The first revenues from the start-up of new production capacity in the Onko segment are expected in early 2025, when work at the Research and Development Centre will start. Products not used for research, due to their high therapeutic value and high market demand, will be sold as precious waste (we estimate sales of unused preparations of 60,000 vials in 2025).
The new production facility is expected to be commissioned in 2H'25, its target capacity will allow the production of approximately 210k vials of Onko BCG per year, so we will see the full potential in the 2026 results.
The company is already locating planned capacity in new markets. Onko BCG has registrations in Poland, Germany, Switzerland, Ukraine and Malta.
Registration processes are currently underway in France, Romania, the Netherlands, Turkey, Serbia and Bosnia and Herzegovina. In addition, the company also sells the drug in other countries, where the product is not registered, based on an import licence.
The expansion of production capacity will bring a leap in the company's results. We estimate that sales revenue will increase from PLN 59.5m in 2023 to PLN 179m in 2026, while net profit, in our view, has the potential to increase from about PLN 9m in 2023 to about PLN 58m in 2026.
