I’ve discussed Furiex (FURX) here in the past so if you are unfamiliar with the company, please see my older write ups in the FURX section. They are going to report earnings next week on the 11th, and it is possible to make some predictions on their royalty based revenue. FURX has two drugs that are active in the market, Nesina and Priligy. Priligy has been on sale in Europe for some time, but Nesina just came online in it’s first market, Japan, this June. That means that this is the first quarter we will see the impact of Nesina revenues.
FURX is entitled to 4% to 8% of the revenues of Nesina in Japan. From speaking with FURX, this number starts off at the low end and as sales increase, the royalty percentage also increases. Thus it will be around 4% this quarter. FURX partnered with drug company Takeda to develop Nesina. Luckily for us, Takeda releases their earnings about 2 weeks before FURX does and is kind enough to break down the sales of their individual drugs. Looking at the Takeda earnings release which can be found here we see that Nesina has revenues of 1.1 billion Yen this quarter. The Yen moved in a relatively straight line down from 88yen/USD to 82yen/USD. So using the mean of 85 yen per dollar this works out to sales of around $12.9 million. Furiex is entitled to 4% of this, so royalty revenues amount to about 520 thousand.
From the last quarter we see that royalty revenues, which were mostly Priligy sales, were $547 thousand. Thus I am predicting that FURX reports Royalty revenues of around $1 to $1.1 million. This is an ok increase, but is not nearly enough to be offsetting the $13 million in R&D expenses FURX burned through last year. The bulk of their revenue will still be comprised of milestone payments for some time which will be triggered by bringing new drugs to markets or by hitting sales based milestones.
On that note, it is possible FURX either hit some sales based milestones for Nesina this quarter or will shortly. Management was not allowed to articulate the exact number of sales that trigger milestones to me over the phone, but maybe we will get more information in the conference call next week.
So, for now, I would still not buy FURX until we can see higher royalty based revenues as the cash burn each quarter will make the company less and less attractive. Luckily for us, with our Takeda trick we can take our time and still get in before the rest of the market.