Investors in Cyclopharm shares (ASX:CYC) just received some welcome clarity on the FDA approval process

Cyclopharm shares (ASX:CYC) are hinging on the fate of whether or not the company is able to obtain FDA approval for Technegas in the US. The company is anticipating this will happen by the end of September and just gave its shareholders a key update on the process.

 

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Cyclopharm expecting a visit from the FDA

Cyclopharm has a nerve agent called Technegas that assists with lung imaging for the purposes of diagnosing Pulmonary Embolism (PE). See the video below for a demonstration of how Technegas works.

 

 

Despite being approved in over 60 countries, the company’s efforts to be approved in the USA have been difficult. In mid-2021, it was issued with a Complete Response Letter (CRL), requesting it to address issues raised in a submission for regulatory approval. At the end of March 2023, it submitted its case to the FDA, triggering a 6 month review period.

On 9 May 2023, Cyclopharm told its shareholders that the FDA would visit the company’s facility once more, between July 24 and August 4.

What’s the big deal about this? Obviously it shows the FDA is interested in the technology, so much so that they are crossing the Pacific to see it in person. But it also gives clarity as to the approval timeline. Clearly, any approval won’t be happening until early August. So shareholders can breathe easy – for now.

 

Cyclopharm shares hinge on approval

Once the company obtains FDA approval, we think Cyclopharm shares can substantially re-rate. The company will have an initial addressable market of US$180m per annum and that is just for PE. We see potential for the company to expand the application of Technegas to other indications, such as asthma, Long COVID and Chronic Obstructive Pulmonary Disease (COPD).

Our friends at Pitt Street Research recently valued the company at A$3.09-A$4.37 per share assuming it can break into the US market – representing 46-107% upside. If, however, CYC fails to obtain FDA approval, our base case just is $2.56 per share (a mere 21% premium).

We think Cyclopharm is undervalued even if it doesn’t obtain FDA approval, but investors are hanging their hats on a favourable outcome with American regulators.

Disclosure: Stocks Down Under staff and directors own Cyclopharm shares

 

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