PHAR - Pharming Group: Small Company Unclear Management Style Low Volume

2023-04-17 12:50:43 ET

Summary

• Pharming Group N.V. is a Dutch company with two products in the market.
• However, despite having one product for 8 years now, the company has not managed to get its cash flow in order.
• Pharming Group N.V. trading volume is too low for investing.

Pharming Group N.V. ( PHAR ) is a Dutch developer of protein replacement therapies and precision medicines for the treatment of rare diseases. The company has been a public company in the Netherlands since 1999 and since 2020 in NASDAQ. Trading volume in NASDAQ is too low for investments, and trading volume in Amsterdam, although slightly higher, is still very low.

The company has two approved products, RUCONEST® (conestat alfa) in the U.S. and EU for acute hereditary angioedema ((HAE)), and JOENJA® (leniolisib), approved in the U.S. for APDS (activated phosphoinositide 3-kinase delta (PI3K?) syndrome). Its pipeline consists of the same molecule in a phase 3 trial for EU, and the rest of the pipeline is preclinical and not very important at this stage. That is a little surprising because a well-managed company prefers to keep its pipeline “fresh,” with multiple late stage shots on goal.

Anyway, here’s the pipeline:

Joenja is a PI3K? inhibitor which was just recently approved and will be launched in the US this month. In a 12-week, randomized placebo-controlled trial for APDS in patients aged 12 years and older, the molecule demonstrated efficacy, safety and tolerability. Approval for patients 4 to 11 years is also being pursued. A CHMP opinion will also be made available later this year.

APDS is a rare, recently identified primary immunodeficiency with some 1500 patients in the U.S., Europe, UK, Japan, Canada, and Australia. The disease can be identified through genetic testing, and Pharming has identified 500 patients so far. There are no approved treatments. Joenja is an immune modulator that targets APDS at its core. Apart from meeting primary and secondary endpoints with statistical significance, Joenja was also shown to be well-tolerated, with no serious adverse events.

Joenja has an annual WAC of $547,500. With 1500 patients, the company is looking at a $750mn market. Given the small size of the market, achieving a decent fraction of that very quickly is quite possible. However, the drug was just approved last month, and Novartis will have to be paid milestone payments as well as royalties.

Ruconest was approved in 2014 through the partnership of Salix and Pharming. In 2022, it had sales of $206mn. It is a recombinant treatment that works by replacing missing or dysfunctional C1-INH in HAE patients. Post-approval studies have shown that 93% of HAE attacks were stopped by Ruconest for at least 3 days, with 97% of acute HAE attacks needing only a single dose. Patients are taught how to self-administer the drug, and they have generally reported confidence in self-treatment.

In the last decade, over 2000 patients have been prescribed Ruconest. The medicine has strong support from the HAE community, with over 700 physicians having prescribed it.

Financials

Pharming Group N.V. has no real pipeline, so it is going to be judged on its financials, mostly. The market cap is $734mn, and the sales figure for last year is $206mn, so that’s one decent-looking ratio. Gross profit was $188.1 million. Operating costs were $184.4 million, an increase of 10.5% from the previous year, while the operating profit was $18.2 million. However, the net profit declined 14.5% this year from the previous year.

Cash balance at the end of 2022 was $209mn. R&D costs were $52mn, G&A was $46mn, and COGS was $85mn. Thus, they have cash for one year, however, their sales is almost equal to their operating expenses, so they will have some cash balance after the year. Frankly, Pharming Group N.V. is spending too much on operating expenses, given their sales and small size.

Bottom Line

Not much to like here. Pharming Group N.V. is a small company with a first product launched 8 years ago, and the product has developed its own niche. However, while in the last 8 years they did manage to get another product launched, it is a small market, and the expenses are just too high. To top it all, there’s just no trading volume here. I would avoid Pharming Group N.V.

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