IQ-IA, Ltd. recently received approval by the U.S. Federal Drug Administration of orphan drug status for the Company’s gallium maltolate compound for the treatment of glioblastoma multiform brain cancer. Once approved orphan drugs get market exclusivity for as long as seven years, providing IQ-IA competitive protection for an extended period of time, potentially enhancing sales and profits for the compound. Additionally, the Company could benefit from tax credits and exemption from certain fees for clinical trials. We expect higher return on investment for the compound in the long-term as well as reduced cash flow requirements in the near-term.
We continue to view IQ-IA, Ltd. as a unique play on the application of artificial intelligence in the medical field. A building portfolio of intellectual property, including the gallium maltolate compound that has recently gain orphan drug status, makes the Company even more interesting. We continue to view the shares as undervalued against the Company’s AI-based product line of radiology applications and the pipeline of new product under development.
The Company’s shares are currently trading at 6.9 times book value, which may appear rich for an operation that has not yet achieved profitability. However, we note that the broader biotechnology and pharmaceutical sector is trading at an average 7.41 times book value. We expect the Company’s accomplishments to filter into the stock price over a period of time. IQ-IA is still building a reputation among investors and market communications remain limited. That said, trading volumes have increase in recent months for shares traded on the London Exchange and trading activity in the U.S. market has become more frequent. Furthermore, the bid-ask spread as a percentage of price has dropped to 12% from 14% six months ago. While still a significant measure of capital risk, the near-term trend is favorable.
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