LEXXW - Lexaria Discusses Valuation Metrics for Biotech Industry
(TheNewswire)
Third Party Analysis for Biotech and Pharma Industries
Kelowna, British Columbia – TheNewswire - August 11, 2022 – Lexaria BioscienceCorp. (Nasdaq:LEXX) (Nasdaq:LEXXW) (the“Company” or “Lexaria”), a global innovator in drug deliveryplatforms is providing the following information to its stakeholdersas an aid to conveniently researching and understanding variousnon-affiliated third-party sources and their methodologies for valuingbiotech and pharmaceutical companies.
“ Biotech companies withlittle to no revenue can still be worthbillions ,” says Raphael Rottgen,CFA, FRM. While valuations can be extremely low or extremely high,there is often underlying logic in identifying risks and arriving atthose valuations. Developing new drugs can have significant costs ofover $1 billion and can take as long as 10 to 15 years to reach themarket.
According to the U.S. Food and Drug Administration(“FDA”), there are five steps tothe drug development process :
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Step 1: Discovery and Development
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Step 2: Preclinical Research
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Step 3: Clinical Research
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Step 4: FDA Drug Review
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Step 5: FDA Post-Market Drug Safety Monitoring
Lexaria’s DehydraTECH-CBD for hypertension program iscurrently operating within Step 3 using the FDA descriptions –various human studies seeking to evidence both tolerability/safety aswell as efficacy for intended purposes. Interestingly, of the 5,000 – 10,000compounds examined and tested in theDiscovery step above, not more than about 250 successfully completethe Preclinical Research step; DehydraTECH-CBD has already reached andsurpassed this Preclinical Research stage.
Many investors and analysts use a discounted cashflow (“DCF”) model as one methodof trying to understand the presentvalue (“PV”) of a company.Understanding a defined sector’s patient size, value of products,comprehensive opportunities, risks, and development timelines are justsome of the many datapoints that contribute towards understandingpotential valuations for that biotech or early-stage pharmaceuticalcompany. Some have found this article sourcedfrom Investopedia to be useful tocontemplate biotech valuation potential.
In a study conducted byMcKinsey that evaluated the 20 yearsfrom 1996 until 2016, total returns to shareholders from the biotechsector were 12% per annum, while the S&P 500 delivered 8% perannum during the same period. The Nasdaq biotech index is representedby the ETF; IBB. From the 2008 market lows, that index climbed nearly1,000% to the all-time highs reached in August, 2021. It then declinedby 41% to the recent low reached in June, 2022.
Bay Bridge Bio has made available an extensive valuationguide and set of online tools to helppeople understand potential valuation outcomes for different biotechcompanies or projects. Focusing on the above-referenced FDA drugdevelopment Steps 2 and 3 (Pre-Clinical and Clinical Research), BayBridge Bio looks in more detail at the widely utilized “Phase I,Phase II and Phase III” clinical trials often cited by the biotechindustry within Step 3. Their valuation expectations PER DRUG MOLECULEare presented in the table below.
| Start of Phase I |
| Start of Phase II |
| Start of Phase III |
| Valuation |
| $88,000,000 |
| $248,000,000 |
| $1,119,000,000 |
| Probability of FDA Approval |
| 12% |
| 20% |
| 56% |
More sophisticated investors know that there are stillfiner-grained thresholds and opportunities within the FDA drugevaluation and registration process. Lexaria has commented many timesthat DehydraTECH processing of a molecule does NOT appear to create anew chemical entity (“NCE”) or new molecular entity (“NME”).According to this article publishedat Pharma Tech Outlook , thatdistinction is important as it is favorable for Lexaria to pursue anabbreviated/accelerated drug evaluation and registration pathwayknown as 505(b)(2) where Lexariawould rely in part on already known data from previously FDA-approvedCBD product(s). “The advantages of 505(b)(2) aresignificant…and… the clinical program is typically much lesscomprehensive due to the 505(b)(2) applicant’s ability to referencethe innovator’s approved product.”
Of note, Lexaria was pleased to report in itsannouncement of August 10, 2022, that the FDA deemed Lexaria’s plansto pursue the 505(b)(2) regulatory pathway for DehydraTECH-CBD asappropriate, by way of its recent pre-Investigational New Drug(“pre-IND”) meeting outcome. Analysis has shown that 505(b)(2)applications have roughly twice theFDA-approval rate of NMEapplications.
Valuation of equities is a complex task withinnumerable risks and rewards that include far-reaching macro eventsas well as company-specific developments. It is nearly impossible toforesee all risks and rewards, but underlying logic-based evaluationis one way to provide a realistic framework of expectations thatinvestors can use in their analysis.
About Lexaria Bioscience Corp.
Lexaria Bioscience Corp.’s patented drug deliverytechnology, DehydraTECH™, improves the way active pharmaceuticalingredients (APIs) enter the bloodstream by promoting more effectiveoral delivery. Since 2016, DehydraTECH has repeatedly demonstrated theability to increase bio-absorption with cannabinoids, antiviral drugs,PDE5 inhibitors and more. DehydraTECH has also evidenced an ability todeliver some drugs more effectively across the blood brain barrier.Lexaria operates a licensed in-house research laboratory and holds arobust intellectual property portfolio with 26 patents granted androughly 50 patents pending worldwide. For more information, pleasevisit www.lexariabioscience.com .
CAUTION REGARDING FORWARD-LOOKINGSTATEMENTS
This press release includes forward-looking statements.Statements as such term is defined under applicable securities laws.These statements may be identified by words such as"anticipate," "if," "believe,""plan," "estimate," "expect,""intend," "may," "could,""should," "will," and other similar expressions.Such forward-looking statements in this press release include, but arenot limited to, statements by the company relating the Company’sability to carry out research initiatives, receive regulatoryapprovals or grants or experience positive effects or results from anyresearch or study. Such forward-looking statements are estimatesreflecting the Company's best judgment based upon current informationand involve a number of risks and uncertainties, and there can be noassurance that the Company will actually achieve the plans,intentions, or expectations disclosed in these forward-lookingstatements. As such, you should not place undue reliance on theseforward-looking statements. Factors which could cause actual resultsto differ materially from those estimated by the Company include, butare not limited to, government regulation and regulatory approvals,managing and maintaining growth, the effect of adverse publicity,litigation, competition, scientific discovery, the patent applicationand approval process, potential adverse effects arising from thetesting or use of products utilizing the DehydraTECH technology, theCompany’s ability to maintain existing collaborations and realizethe benefits thereof, delays or cancellations of planned R&D thatcould occur related to pandemics or for other reasons, and otherfactors which may be identified from time to time in the Company'spublic announcements and periodic filings with the US Securities andExchange Commission on EDGAR. The Company provides links tothird-party websites only as a courtesy toreaders and disclaims any responsibility for the thoroughness,accuracy or timeliness of information at third-party websites. Thereis no assurance that any of Lexaria’s postulated uses, benefits, oradvantages for the patented and patent-pending technology will in factbe realized in any manner or in any part. No statement herein has beenevaluated by the Food and Drug Administration (FDA). Lexaria-associated products are not intended to diagnose, treat,cure or prevent any disease. Any forward-looking statements containedin this release speak only as of the date hereof, and the Companyexpressly disclaims any obligation to update any forward-lookingstatements or links to third-party websites contained herein, whetheras a result of any new information, future events, changedcircumstances or otherwise, except as otherwise required bylaw.
INVESTOR CONTACT:
George Jurcic - Head of InvestorRelations
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