2019 progress made; next up, CDNF data

Herantis Pharma 22 January 2020 Update
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Herantis Pharma

2019 progress made; next up, CDNF data

Corporate update

Pharma & biotech

22 January 2020

Price

€7.45

Market cap

€50m

SEK:€0.095

Net cash (€m) at 31 December 2019e

1.2

Shares in issue

6.7m

Free float

73.8

Code

HRTS

Primary exchange

NASDAQ OMX

Secondary exchange

Nasdaq First North Growth Market

Share price performance

%

1m

3m

12m

Abs

(3.9)

2.8

36.7

Rel (local)

(7.3)

(4.0)

26.4

52-week high/low

€10.10

€5.15

Business description

Herantis Pharma is a Finnish innovative biopharmaceutical company focusing on regenerative medicines for unmet needs. Key assets include CDNF for Parkinson’s disease and Lymfactin for breast cancer associated lymphedema.

Next events

FY19 results

27 February 2020

CDNF PD Phase I/II data

Q120

Lymfactin Phase II data

Q121

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Herantis Pharma is a research client of Edison Investment Research Limited

Herantis Pharma progressed on multiple levels in 2019. With the main study of the Phase I/II cerebral dopamine neurotrophic factor (CDNF) study now complete in Parkinson’s disease (PD) (top-line safety and efficacy data are expected in Q120), positive trial data could validate the research efforts and enable future partnering opportunities. Advances have been made on the development of a non-invasive next-generation CDNF (xCDNF); three lead candidates have progressed into lead optimisation stage. The Phase II Adenovirus gene therapy for the treatment of LymphEdema (AdeLE) study evaluating Lymfactin in breast cancer-associated lymphedema (BCAL) has fully recruited (data expected H121). In H219 Herantis successfully completed a share offering (€4.17m gross raised) and a secondary listing on NASDAQ Stockholm. We value Herantis at €60.8m.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

0.0

(2.2)

(0.5)

0.0

N/A

N/A

12/18

0.0

(4.2)

(0.8)

0.0

N/A

N/A

12/19e

0.0

(5.8)

(1.0)

0.0

N/A

N/A

12/20e

0.0

(4.2)

(0.7)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

CDNF and Lymfactin inflection points approaching CDNF is a neuroprotective factor that Herantis hopes could have a disease-modifying effect on patients with PD. Top-line efficacy and safety data from the ongoing Phase I/II trial testing CDNF in PD patients are expected in Q120. The current PD treatment armament focuses on symptoms and a product that modifies disease would be a game changer. Herantis’s second clinical asset, Lymfactin, has completed patient enrolment in the Phase II AdeLE trial in BCAL patients (data expected Q121). The non-invasive xCDNF has moved into lead-optimisation stage of preclinical development; although early days, it could improve CDNF’s profile given CDNF is dosed intracranially once a month as an infusion using an implanted drug-delivery device behind the ear.

Financials: Cash runway extended

In H219, Herantis issued 618,018 new shares (subscription price of €6.70), raising gross €4.17m and extending the cash runway to key value inflection points. In the near term, Herantis will continue to be cash consumptive and operate as a non-revenue-generating biotech. We note most funding for the Phase I/II CDNF trial comes from an EU grant. Cash burn amounted to €2.7m in H119 (H118: €1.8m), implying a cash runway to 2021.

Valuation: €60.8m or €9.1/share

Our valuation is €60.8m (€9.1/share) versus €58.7m (€9.7/share) previously; it includes net cash of €1.2m (FY 2019 estimate) and is based on an rNPV of CDNF in PD (€3.5/share) and Lymfactin in BCAL (€5.4/share). We have rolled our model forward and updated for FX and an increased number of outstanding shares after the recent capital raise. For more details please see our initiation note.

Exhibit 1: Financial summary

Accounts: IFRS, year-end: December, €m

 

 

2016

2017

2018

2019e

2020e

INCOME STATEMENT

 

 

 

 

 

 

 

Total revenues

 

 

25

0

0

0

0

Cost of sales

 

 

0

0

0

0

0

Reported gross profit

 

 

25

0

0

0

0

SG&A (expenses)

 

 

(942)

(1,024)

(1,244)

(1,493)

(1,508)

R&D costs

 

 

(27)

0

0

(2,840)

(1,988)

Other (includes exceptionals)

 

 

(2,273)

(1,703)

(2,424)

232

235

Depreciation

 

 

(1,203)

(1,218)

(1,202)

(1,213)

(910)

Adjusted EBIT

 

 

(4,420)

(3,945)

(4,871)

(5,313)

(4,171)

Reported EBIT

 

 

(4,420)

(3,945)

(4,871)

(5,313)

(4,171)

Finance income/ (expense)

 

 

(4)

1,780

691

(464)

(47)

Other income (expense) (includes exceptionals)

 

 

0

0

0

0

0

Adjusted PBT

 

 

(4,425)

(2,165)

(4,180)

(5,778)

(4,218)

Reported PBT

 

 

(4,425)

(2,165)

(4,180)

(5,778)

(4,218)

Income tax expense

 

 

0

0

0

0

0

Adjusted net income

 

 

(4,425)

(2,165)

(4,180)

(5,778)

(4,218)

Reported net income

 

 

(4,425)

(2,165)

(4,180)

(5,778)

(4,218)

Earnings per share

 

 

 

 

 

 

 

Basic EPS (€)

 

 

(1.1)

(0.5)

(0.8)

(1.0)

(0.7)

Diluted EPS (€)

 

 

(1.1)

(0.5)

(0.8)

(1.0)

(0.7)

Adjusted basic EPS (€)

 

 

(1.1)

(0.5)

(0.8)

(1.0)

(0.7)

Adjusted diluted EPS (€)

 

 

(1.1)

(0.5)

(0.8)

(1.0)

(0.7)

Average number of shares - basic (m)

 

 

4.1

4.2

4.9

5.5

6.1

Average number of shares - diluted (m)

 

 

4.1

4.9

5.5

6.1

6.1

BALANCE SHEET

 

 

 

 

 

 

 

Property, plant and equipment

 

 

9

7

5

4

3

Goodwill

 

 

0

0

0

0

0

Intangible assets

 

 

6,590

5,663

4,735

3,524

2,616

Other non-current assets

 

 

712

392

118

117

116

Total non-current assets

 

 

7,311

6,061

4,857

3,644

2,734

Cash and equivalents

 

 

2,829

5,402

2,186

8,424

5,117

Inventories

 

 

0

0

0

0

0

Trade and other receivables

 

 

65

109

105

105

105

Other current assets

0

0

0

0

0

Assets classified for sale

 

 

0

0

0

0

0

Total current assets

 

 

2,895

5,511

2,290

8,529

5,221

Non-current loans and borrowings

 

 

8,018

6,022

5,878

6,729

6,729

Trade and other payables

 

 

0

0

0

0

0

Other non-current liabilities

 

 

0

0

0

0

0

Total non-current liabilities

 

 

8,018

6,022

5,878

6,729

6,729

Trade and other payables

 

 

186

278

200

200

200

Current loans and borrowings

 

 

103

547

507

507

507

Other current liabilities

 

 

324

634

651

651

651

Liabilities of assets held for sale

 

 

0

0

0

0

0

Total current liabilities

 

 

613

1,460

1,358

1,358

1,358

Equity attributable to company

 

 

1,575

4,090

(89)

4,086

(132)

Non-controlling interest

 

 

0

0

0

0

0

CASH FLOW STATEMENT

 

 

 

 

 

 

 

Profit before tax

 

 

(4,425)

(2,165)

(4,180)

(5,778)

(4,218)

Depreciation of tangible assets

 

 

1,203

1,218

1,202

1,213

910

Amortisation of intangible assets

 

 

0

0

0

0

0

Share based payments

 

 

(0)

(2,021)

(3)

0

0

Other adjustments

 

 

5

240

(688)

464

47

Movements in working capital

 

 

166

372

(79)

0

0

Net cash from operating activities (pre-tax)

 

 

(3,052)

(2,355)

(3,747)

(4,100)

(3,261)

Interest paid / received

 

 

16

(244)

15

(464)

(47)

Income taxes paid

 

 

0

0

0

0

0

Cash from operations (CFO)

 

 

(3,036)

(2,599)

(3,732)

(4,565)

(3,308)

Capex (includes acquisitions)

 

 

(10)

0

0

0

0

Other investing activities

 

 

(61)

(0)

7

0

0

Cash used in investing activities (CFIA)

 

 

(71)

(0)

7

0

0

Net proceeds from issue of shares

 

 

0

4,680

0

9,953

0

Movements in debt

 

 

0

0

509

851

0

Other financing activities

 

 

396

492

0

0

0

Cash from financing activities (CFF)

 

 

396

5,172

509

10,804

0

Currency translation differences and other

 

 

0

0

0

0

0

Increase/(decrease) in cash and equivalents

 

 

(2,711)

2,573

(3,216)

6,239

(3,308)

Cash and equivalents at beginning of period

 

 

5,541

2,829

5,402

2,186

8,424

Cash and equivalents at end of period

 

 

2,829

5,402

2,186

8,424

5,117

Net (debt)/cash

 

 

(5,291)

(1,168)

(4,200)

1,188

(2,120)

Movement in net (debt)/cash over period

 

 

N/A

4,123

(3,033)

5,388

(3,308)

Source: Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Herantis Pharma and prepared and issued by Edison, in consideration of a fee payable by Herantis Pharma. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Herantis Pharma and prepared and issued by Edison, in consideration of a fee payable by Herantis Pharma. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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