BioLineRx: Weighing Aphexda’s Breakthrough Against Financial Challenges (NASDAQ:BLRX)

BioLineRx Ltd. (NASDAQ:BLRX) is a biopharmaceutical company founded in 2003 with headquarters in Israel and offices in the US. BLRX’s shares are traded in NASDAQ and TASE. Notably, BLRX has developed Aphexda, motixafortide for injection, the first drug FDA-approved for stem cell mobilization in multiple myeloma patients in a decade. The FDA approved Aphexda in September 2023. The expansion of motixafortide in the Asian market through a licensing agreement with GloriaBio marks a new chapter for BLRX’s global outreach and financial strengthening. However, a deeper look at its balance sheet reveals a desperate need for cash, as BLRX’s reserves appear stretched. This paints a picture of a company rushing to commercialize Aphexda on a last stretch, which could be its lifeline to turn it into a sustainable biotech company. Due to its low valuation multiple, BLRX’s valuation appears to account for this. Thus, as a whole, I think BLRX is a viable speculative bet for some more enterprising investors as long as they know the considerable potential pitfalls.

Business Overview

BioLineRx Ltd. is a biopharmaceutical company based in Israel with offices in the US. The company’s shares are traded in NASDAQ and on the Tel Aviv Stock Exchange [TASE]. It was founded in 2003 and had an IPO on TASE in February 2007. BLRX specializes In developing therapies for cancer and rare diseases. Its pipeline of products includes two approved medications, one recently authorized, and one legacy drug: Aphexda for multiple myeloma. BLRX also has BL-5010 for skin lesions.

The company doesn’t have any meaningful revenues as of 2023. However, out of its current IP portfolio, only one drug can soon become a significant revenue contributor. Thus, this places BLRX squarely in the pre-commercial stage of biotechnology companies. This significantly reduces the uncertainties related to speculating about potential FDA approvals, but uncertainties remain. After all, we still have to see early sales data to assess market acceptance and evaluate BLRX and its prospects properly.

BioLineRx’s Product Pipeline

First, the FDA approved Aphexda, motixafortide, for injection for stem cell mobilization to treat multiple myeloma cancer in September 2023. Aphexda motixafortide is the first innovation for this type of treatment, approved in a decade by the FDA. APHEXDA plus filgrastim effectively mobilizes enough stem cells to the level required for successful transplantation in patients with multiple myeloma. Aphexda is undoubtedly BLRX’s crown jewel, the company’s only approved product.

Still, it’s worth noting that BLRX also has BL-5010, a legacy non-surgical drug for removing skin lesions, which is CE-approved. The product is an alternative to invasive treatments like cryotherapy, laser treatment, and surgery for lesion removal. However, BL-5010 was out-licensed to Innovative Pharmaceutical Concepts Inc., now part of Perrigo (PRGO), to be commercialized in Australia, Europe, and other selected countries. Thus, it’s no longer as relevant for BLRX as it was from a product pipeline perspective.

Lastly, the company has two Phase 2 drugs, one for sickle cell disease [SCD], working in collaboration with Washington University in St. Louis, and AGI-134 medication for treating Solid Tumors. Additionally, BLRX is researching Phase 1 with a drug to treat Pancreatic Cancer in partnership with Columbia University. But, as you can see, Phase 2 and Phase 1 drugs are still far from becoming tangible revenue contributors. Thus, Aphexda is BLRX’s main selling point at this time.

As you can see in the figure above, only Aphexda is completely under the control of BLRX and ready for commercialization. The rest of its IP is either licensed or too early in development. In my view, this is why BLRX is now essentially a story about Aphexda.

Strategic R&D Focus and Expanding Motixafortide in Asia

Furthermore, in BLRX’s latest earnings call, executives highlighted the approval of motixafortide, commercially called APHEXDA, as an advance for stem cell mobilization, especially for older multiple myeloma patients or people who underwent strong induction therapies. The drug’s efficacy was demonstrated in the clinical trial phase 3 called Genesis, where many patients could receive transplantation after just one apheresis session. The reduced need for multiple apheresis sessions saves costs and is more convenient for patients. The focus for the application of the drug is the transplant center. However, motixafortide could be used in different indications because its role in modulating immune responses and impacting cancer cell behavior opens the possibility of its application in anti-tumor therapies and in controlling other immune-related conditions. These new applications are still a challenge that needs research but could unlock additional revenue verticals on top of BLRX’s existing IP.

On October 12, BLRX announced that the company had signed an agreement with GloriaBio for licensing motixafortide to be developed in Asia. BLRX receives $15 million upfront. After achieving regulatory milestones in China and Japan, they will receive $50 million and $200 million more after reaching sales targets. Additionally, BLRX will receive royalties on net sales in Asia. GloriaBio will develop and commercialize motixafortide in Asian markets. GloriaBio also signed to make an equity investment in BLRX by purchasing new ADS for $14.6 million.

A Seemingly Cheap Valuation

From a cash burn perspective, due to Aphexda’s launch activities, the company has increased sales and marketing expenses and reduced R&D expenses. This resulted in the company burning roughly $9.9 million in September 2023, an annualized burn rate of $39.6 million. Unfortunately, the company holds just $26.0 million in cash and equivalents as of September 2023, implying a concerning cash run of 0.66 years.

Nevertheless, BLRX believes it can leverage $30 million from its license agreement and deal with Gloria Biosciences and its $30 million debt agreement with Kreos Capital. Theoretically, if these two figures are added to the current cash position, extending the cash runway to 2.25 years would be enough. Notably, this would imply that BLRX has enough cash and financing to last into early 2026, and the company estimates that it has enough to support operations into 2025. However, I’d take those estimates with a grain of salt, as they seem rather optimistic. I think BLRX can leverage some of that additional financing to extend its cash runway, but at the end of the day, it only has $26.0 million in cash, which investors can truly depend on.

Still, the flip side of this concerning picture is that BLRX’s Aphexda does seem to tap into a relatively sizeable market. The company’s internal estimates from September 2022 projected that this drug could theoretically tackle a $360 million market in annual spending. Unfortunately, we don’t have much more than that vague figure from BLRX, as the company expects to capture a “significant share” of this market eventually. Yet, we don’t know how much a “significant share” is. Still, for the sake of argument, if BLRX manages to capture one-third of this market within the next few years, it’d set its current market cap of $106.28 million at roughly one times its annual sales. This valuation multiple seems rather low, especially considering BLRX’s sector P/S median multiple is 3.68. Also, since BLRX has an enterprise value of $93.31 million, it’d imply an EV/Sales ratio below one, assuming it captures a third of the market they claim to be targeting. From both perspectives, BLRX is trading on the cheaper side.

Buyer Beware

As previously mentioned, one of BLRX’s main risks is its limited cash runway. Even though they claim to have enough to last into 2025, the reality is that to commercialize Aphexda, they’ll likely require additional investments. I doubt they can successfully commercialize Aphexda at the necessary scale without a sizeable cash burn. If they start running low on cash without tangible results, it can quickly trigger an alarm on creditors. No one wants to lend to a company on the verge of bankruptcy. After all, cash is oxygen for businesses, and BLRX is certainly running low on cash.

Also, leaving aside the cash concerns, Aphexda itself remains rather speculative. All we have so far is the company’s estimates, even somewhat vague ones. It’s hard to pinpoint its annual revenues if it’s successfully commercialized accurately. It could be a resounding success, or it could disappoint substantially, potentially crippling BLRX’s already low cash reserves. So, considering those risks, I can see why the market appears tentative regarding BLRX despite its FDA approval for Aphexda.

Closing Thoughts: A Mixed Bag

Overall, it’s unfortunate that BLRX has such low cash reserves just as it’s starting to commercialize Aphexda. It truly adds a layer of risk that makes investing at this point highly speculative, given the potential downsides. If BLRX had $200 million in cash at this point, I’d be more certain about its success, as it’d have more than enough runway to commercialize Aphexda and enjoy its success successfully. However, as it stands today, BLRX is running low on funds, and that’s why it needs to potentially tap on credit lines and license its remaining IP to make it to the finish line. Indeed, the bull case is that Aphexda delivers on its financial promises for shareholders, and they’re nicely rewarded. But the flipside could involve additional shareholder dilution or, potentially, bankruptcy. The stakes are still high for BLRX, yet it’s also true that its valuation appears relatively conservative. This undoubtedly opens a window for more speculative investors who understand the risks. I think BLRX is a viable speculative “buy” at these levels for such a subset of investors. But it certainly isn’t fit for a substantial portion of anyone’s investment portfolio.