NEW YORK, April 12, 2017 /PRNewswire/ -- Krensavage
Asset Management LLC, a 2.2% shareholder of Juniper
Pharmaceuticals, Inc. (NASDAQ: JNP), today publishes an open
letter.
James A. Geraghty
Chairman
Juniper Pharmaceuticals, Inc.
33 Arch Street
Suite 3110
Boston, MA 02110
April 12, 2017
Dear Mr. Geraghty,
As the fifth-largest shareholder of Juniper
Pharmaceuticals(1), we implore you to quit spending
shareholders' money on failed science projects and instead consider
selling the company. Juniper's cash, supply agreement with Merck
KGaA and pharmaceutical-services business suggest a potential
takeover value of more than twice the company's stock
price(2).
Since Juniper went public in 1988, it has spent $237 million, or almost $22 a share, on science of dubious value. Its
most-recent failure, a topical lidocaine to prevent the pain of
gynecological procedures, helped consume almost $17 million on research and development during
the last two years. Lidocaine is a proven painkiller available in
over-the-counter sunburn lotions. Yours still managed to fail.
The lidocaine debacle follows Juniper's failed bid to develop a
progesterone gel, Prochieve, to prevent preterm birth.
Physicians embrace progesterone as a prophylactic against
premature labor. Juniper and a partner, the former Watson
Pharmaceuticals, spent almost a decade and tens of millions of
dollars testing Prochieve on more than 1,000 pregnant women.
Regulators in 2012 rejected the drug.
Now Juniper is threatening to repeat this pattern by testing a
drug that delivers progesterone via a vaginal ring. Its development
likely would consume tens of millions of dollars and take at least
five years while providing no guarantees of safety and
efficacy.
Even if Juniper's progesterone ring were to win approval, it
likely would compete with clones of an injectable progesterone
approved in 2011, Makena. The prospects are slim that Juniper would
ever recover its investment.
Juniper also is considering the development of a vaginal ring
for incontinence. At first blush, its potential tantalizes: The
ring would bypass the body's first-pass metabolism and spare the
patient side effects such as dry mouth.
But a competing patch and gel that also avoids first-pass side
effects have generated disappointing sales, perhaps because they
compete with generic pills that retail for pennies. A patch sells
over the counter for $30 a month.
Teva Pharmaceutical Industries Limited abandoned its oxybutynin
vaginal ring. Juniper should do the same.
Juniper, with a market value less than $50 million, seems to have forgotten the
difficulty small companies face promoting drugs. Management during
its third-quarter earnings call on Nov.
15 said it would consider buying commercial operations.
In 2003, Juniper built a 122-person sales force to promote its
testosterone supplement, Striant. Its revenue totaled $14.8 million when Juniper divested it in 2011.
The list of small companies that failed to launch medicines
includes Dendreon Corp., and Savient Pharmaceuticals Inc.
Any efforts by Juniper to develop or promote drugs likely would
detract from the company's intrinsic value, we estimate, of almost
$9 a share.
Juniper's most-valuable asset, in our opinion, is its
pharmaceutical-services business. We value it at more than
$36 million, or $3.35 a share. Juniper in 2013 paid $27 million for the business, based in the
United Kingdom. Its revenues have
since grown 45%. Molecular Profiles can operate independently. It
doesn't need supervision from a team of executives in the United States.
Juniper also has a supply agreement with Merck KGaA on Crinone,
a progesterone approved to help women become pregnant. The Merck
contract, in our opinion, probably is worth at least $3.30 a share, or twice that were Juniper to
extend the Merck agreement beyond its expiration of May, 2020.
Other Juniper assets include net cash of more than $2 a share. We exclude the value of $156 million of tax-loss carryforwards because we
find them difficult to assess.
Asset
|
Per-Share
Value
|
Notes
|
Net cash
|
$2.12
|
Current assets less
current liabilities plus deferred revenue less notes payable as of
Dec. 31.
|
Merck KGaA
revenue
|
$3.30
|
Assumes Merck revenue
growth of 3% annually until agreement ends May 19, 2020; gross
margin of 43%, and Bloomberg's weighted-average cost of capital of
12.2%.
|
Juniper Pharma
Services
|
$3.35
|
Assumes 2.8 times
2016 revenue. Juniper acquired the business for 2.95 times revenue
in 2013.
|
Sum
|
$8.77
|
Assumes 10.9 million
shares outstanding.
|
Juniper management has an incentive to maintain the status quo,
with its top-four executives earning $2.3
million a year and its non-employee directors earning more
than $736,000 in 2015, according to
the proxy.
Shareholders are paying executives more than 6% of the market
capitalization a year. On April 11,
the stock hit a record low. While the company's executives
continue to draw rich compensation, its investors suffer. We
implore the company to act now and stop the downward spiral.
Regards,
Michael P. Krensavage
Founder
Krensavage Asset Management LLC
(1) Bloomberg as of
Dec. 31.
(2) See Per-Share Valuation table
Contact:
David W. Walbert
Analyst
Krensavage Asset Management LLC
Office: (212) 706-0589
david.walbert@krensavage.com
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SOURCE Krensavage Asset Management LLC