September 20, 2016 On September 7, 2016, QBIO announced that it had completed an exclusive license and option agreement
for all intellectual property related to Strontium Chloride (“SR89”). The license agreement finalizes an announcement made by the company in June 2016. We see the completed agreement as a significant accomplishment for QBIO given that it expands the company’s portfolio, presents realistic near-term revenue opportunities, and also shows that the management team can meet its goals for corporate actions – the agreement was completed within the initial timeframe outlined by management (which was calendar 3Q16).Highlights from the note are as follows:
Exclusive license expands company into palliative care
We were pleased to see that on September 6, 2016, QBIO completed the exclusive license for SR89. Management had disclosed this opportunity in a June 2016 press release, and completed the agreement in the expected time frame and at what appears to be attractive terms.
Near-term revenue opportunities; long term potential
The agreement to acquire IP related to SR89 should position QBIO for near term revenue generation. The company described the generic radiopharmaceutical as “revenue ready” and we note that it has already approved by the FDA. Management expects initial revenues within a year and believes it can generate $1mn+ in annual revenues within the first year following the procurement of materials and implementation of manufacturing and marketing strategies; QBIO also has an intermediate goal of generating 10mn+ in annual sales within 3-5 years.
Increasing target to $6.00 following license deal
We are raising our price target to $6.00 for QBIO, as the risk that the cancer palliative deal was unable to close has dissipated.
With the deal complete, we increased our expectations and weighting for this program, and look forward to hearing from management about the specific timing of revenues and the timeline for expansion. Moreover, we note that the company now has two completed programs, with potential new deals slated for the future. As QBIO is able to source and close more attractive deals, management will be able to point to a history that shows a replicable process of identifying and enhancing value in the market. The target of $6.00 represents upside potential of 26.3% from the recent close of $4.75.
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