Today we're initiating coverage on Anatara Lifesciences (ASX: ANR), a Brisbane-based company whose lead product, called Detach, may be able to strike a blow against the scourge of antimicrobial resistance.
Have you noticed lately how worried people are getting about antimicrobials not working? And no wonder. In the US greater than 20,000 people die every year because of infections that antimicrobials can't deal with, thanks to previous overuse of what were once good drugs. That's one reason why major QSR operators like McDonalds and Taco Bell are now scrambling to remove antibiotics from their supply networks, and why the US Congress passed the GAIN Act in 2012 to provide incentives for developers of next-generation antimicrobials. We see Anatara Lifesciences as benefiting from the trend towards significantly less antibiotic use in the clinic and the food chain.
Anatara Lifesciences is getting ready to launch its first product this year. Detach is a non-antibiotic treatment for production animals such as cattle and pigs designed to reduce gastrointestinal disorders in these animals, thereby increasing meat yield. Anatara filed for Australian approval of Detach in October 2016 and expects to be selling the product commercially to pig farmers in 2017. We see significant upside for Anatara from an option granted last year to the animal health major Zoetis over a worldwide license for Detach’s use in production animals. Anatara has argued that Detach’s mechanism of action, which doesn’t involve killing pathogens directly, makes the product one potential solution to the antibiotic resistance problem. Anatara is currently looking at human applications for Detach, where the market opportunity in Inflammatory Bowel Disease and other gastrointestinal diseases in need of new anti-inflammatory approaches is significant. We value Anatara at $2.22 base case and $5.94 optimistic case using a DCF approach. Our target price of $4.00 sits at around the midpoint of our valuation range.
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