Shield Therapeutics (STX): Possible Turnaround?

I recently attended a Shares Investors Evening where the presentation from CEO Tim Watts (Shield Therapeutics (LON:STX)) caught my eye. Slides here

I admit, I have a tendency to like a turnaround stories as the potential upside could be large, but equally there is risk here, especially in Shield Therapeutics (LON:STX) case where its product has been in development for a number of years and it has no marketable revenues from any products to date. However, the product it does have has been through medical approval and is now fit for market release.

So, what is the product and what's its niche?

From their website

• Feraccru® / Accrufer® Our lead product is approved for the treatment of iron deficiency with or without anaemia in adults in the United States, European Union, UK and Switzerland and has exclusive IP rights until the mid 2030s.
  
• In Europe the product is marketed as Feraccru® with commercialisation led by Norgine BV. In the USA – where the product also benefits from NCE exclusivity until 2020 – it will be marketed as Accrufer®. We also have an exclusive licence agreement with ASK Pharm, who will lead the development and commercialisation in China.
  
• Feraccru®/Accrufer® is a stable, non-salt based oral therapy for adults with iron deficiency with or without anaemia. It has a novel mechanism of absorption compared to other oral iron therapies and has been shown to be an efficacious and well-tolerated therapy in a range of placebo-controlled and active comparator phase 3 clinical trials.
  
• Its niche / competitive advantage is the effectiveness of the product. Feraccru / Accrufer is more effective than competitor intravenous products and given the fact is an Oral medicinal, its potentially more freeing. However, I’m not sure how many patients would need to take the medicine intravenously just for iron deficiency or whether this is normally given as part of other hospitalised treatments
  

Out of Favour

Shield Therapeutics (LON:STX) was IPO in 2016 for a price of £1.50 (Market Cap @ 162m)

Since its IPO, the price has been on a bit of a roller-coaster ride.

Covid had an impact to Market Sentiment in 2020. Prior to that, there was an issue with the product trial, which lead to it having to be re-run at additional expense. I haven't checked to see if this relates to the big dip in 2018, but it was mentioned in the presentation.

The price has hit recent lows of 60p. I think its out of favour due to uncertainty around marketing in America. Shield Therapeutics (LON:STX) is deciding if it will pay experienced marketers (like its doing in the UK and EU), or if it will go it alone. The latter being the cheaper alternative, but more risky as the success of market penetration may be impacted by the company having to learn the best way to making the product visible and creating relationships with retailers.

Director purchases

Depending on your view point; are these recent director purchases enough to show real confidence in the company? I think so:

Stocko doesn’t like it!

Its currently caring a stock rank of 15 and has a Highly Speculative rating. Shield Therapeutics (LON:STX) has never made a profit, although it does have 4m cash in the bank. Its definitely showing the stock as a jam tomorrow / blue sky share.

Analyst Coverage

Interestingly, there is an Analyst Forecast, with a target price of £2.75, but I’m not sure when this was applied and how relevant it is to today.

My Conclusion

I'm no expert and have only been investing for just over 2 years, so still finding my way around researching and picking stocks. Its possible I have made a few mistakes with my observations above!

I personally like what I see with £STX. Its taken time to produce a market competitive product, that looks to be able to take a significant share of the Iron deficiency market. Over this year we should see it making in roads in to being sold and used in healthcare.

I like the fact that the directors have been buying, allbeit not small but also not massive amounts of stock and that it does have some positive Analyst coverage.

Last week, I took the decision to buy @ 58.4p and Shield Therapeutics (LON:STX) now makes up 2.5% of my portfolio.

I'm really interested to hear if anyone has an opinion on this stock etc.