New dermal collaboration on XF-73

Destiny Pharma has announced a new clinical programme that is planned to start in China, led by its existing partner China Medical Systems Limited (CMS). Destiny already has an earlier stage (than its two Phase 3-ready programmes) dermal programme on XF-73, but for serious infections of burns and open wounds. This new programme is to be run by CMS for the larger market of the prevention and treatment of superficial bacterial skin infections.

While investors may have forgotten CMS’s involvement, this type of collaboration may have been part of the original deal, hence financial terms were not disclosed. CMS already has a portfolio of dermatology assets which it sells via its sales and marketing infrastructure in China, so knows this therapeutic market in China - and its unmet needs - well.

In addition, the treatment of primary skin infections (like impetigo, which is not associated with injury), and secondary superficial skin infections (which are), are very large markets. What gives Destiny’s XF-73 product an advantage is the potential for the prevention of superficial skin infections noted in the announcement.

We have left our financials and valuation for Destiny unchanged for the moment, despite the recent CMS collaboration. Our fair value of Destiny Pharma remains at £200.2m or 335p per share.