Crossject announced yesterday it had signed a Cooperative Research and Development Agreement (CRADA) with the US Department of Defense.

This cooperation agreement consists, in our understanding, in developing Zeneo Midazolam (and potentially other speciality products) to be used in the case of chemical/bacteriological attacks on the battlefield or elsewhere. This is, of course, very positive news for Crossject, which indicated an audit had been carried out in July in Dijon.

Not only could the agreement give Crossject new opportunities on the US market (with the Federal state as a client), but it certainly strengthens its current position and increases the likelihood of positive news on the FDA front, with filings expected for Naloxone, Midazolam and Adrenaline in FY20 and commercial launches in FY21. This also comes after the first commercial agreement signed last summer with German Desitin on Midazolam (see our Latest dated 19 June), which has already contributed to validate the group’s technology and support its prospects.

As a reminder, the Department of Defense and the FDA announced in late 2018 that they intended to formalise collaboration to advance medical products in support of American military personnel. In short, a success in Crossject’s collaboration with the DoD could only lead to an increased probability for the FDA to approve the group’s products.

There will be no short-term impact on our numbers, given the lack of details on the potential quantitative consequences of the announcement. That said, such a release can only support Crossject’s prospects and management’s credibility. Our target price, based on the success of the group’s technology, leaves ample room for a share price re-rating once products actually reach the market.

Therefore, the share price reaction is not only justified, but also not as strong as one may have believed.

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