Dimerix (ASX: DXB) shares are up 154% today. DXB shares should have risen too - they’ve a distribution deal for a number of major markets to announce. But whether the shares should be up 154% or not, that’s another matter. The headlines are stating that this is a $230 million (in those bijou Australian dollars) deal. Which it isn’t, not really, it’s a $10.8 million deal.
As in the announcement: “ADVANZ PHARMA acquires exclusive rights to register and commercialise DMX-200 for the treatment of Focal Segmental Glomerulosclerosis (FSGS) in the European Economic Area, the UK, Switzerland, Canada, Australia, and New Zealand • Dimerix to receive up to ~AU$230* million in upfront and milestone payments, plus royalties o €6.5 million (~AU$10.8 million*) in upfront payment o up to €132 million (~AU$219 million*) in potential milestones o tiered royalties on net sales • Focal Segmental Glomerulosclerosis (FSGS) is a rare disease that causes kidney scarring and can lead to end-stage kidney disease”.
The upfront payment is that $10.8 million. Everything else - and yes, everything else - depends upon success in the marketplace. Hey, who knows, it could be a right stormer. But we’d suggest that, just possibly, booking all of that as being valid revenue now might be being a bit previous.
Dimerix share price from Google Finance
As we say, the reports are all about the $230 million: “Special Report: Dimerix shares surged more than 100% after announcing it will receive $230m in upfront and milestone payments”. Which we do think is rather over-emphasising the amount that might come through rather than the amount that will come through.
And, well, there’s one more little thing here. This is all also conditional - other than that $10.8 million: “Dimerix will continue to fund and execute the global ACTION3 Phase 3 study for DMX-200 in FSGS patients, and ADVANZ will be responsible for the submission and maintenance of the regulatory dossier in the licensed territories, as well as all sales and marketing activities.” That is, the drug’s not even finished testing yet, let alone been approved for sale.
As we say, we’re sure that this is a good deal which should change the market valuation of Dimerix. We’re deeply unsure that it’s worth 150% and more of the market capitalisation given the uncertainties that still remain. It wouldn’t surprise us to see this price come back down again, at least partially, as the full deal is digested.