Shield Therapeutics Edison

2021 focus on Accrufer

Shield Therapeutics 23 August 2021 Update
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Shield Therapeutics

2021 focus on Accrufer

Interim results

Pharma & biotech

23 August 2021

Price

43.5p

Market cap

£94m

£0.72/US$; £0.87/€

Reported net cash (£m) at 30 June 2021

22.6

Shares in issue

215.9m

Free float

55%

Code

STX

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.2

(24.7)

(62.4)

Rel (local)

(2.6)

(26.2)

(69.1)

52-week high/low

139p

33p

Business description

Shield Therapeutics is a commercial-stage pharmaceutical company. Its proprietary product, Feraccru, is approved by the EMA and FDA for the treatment of iron deficiency. Outside of the United States, Feraccru is marketed through partners Norgine, AOP Orphan and Ewopharma.

Next events

Launches in additional EU states as covered by Norgine

End 2021/ early 2022

Start of Phase III paediatric study

H221

Completion of China Phase III study

End 2022

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr John Priestner

+44 (0)20 3077 5700

Shield Therapeutics is a research client of Edison Investment Research Limited

Shield Therapeutics (STX) successfully launched its key asset, Accrufer (oral ferric maltol for iron deficiency), in the US market on 1 July, in line with previous guidance. The US commercialisation of Accrufer is key to unlocking value (the US iron market is a huge market at ~10 million patients per year and is the key value driver) and FDA approval in 2019 led to the broadest possible label, which encompasses iron deficiency from any cause. The H121 results reported total revenue of £0.5m entirely from royalties on Feraccru sales from European partner Norgine (versus £8.9m in H120, of which £8.7m related to a milestone payment from ASK Pharm for China rights). We value STX at £631.3m or 293p/share.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/19

0.7

(9.1)

(7.5)

0.0

N/A

N/A

12/20

10.4

(1.9)

(2.2)

0.0

N/A

N/A

12/21e

3.9

(23.6)

(11.7)

0.0

N/A

N/A

12/22e

19.3

(13.0)

(5.1)

0.0

N/A

N/A

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

Accrufer now launched in the US

With Accrufer now available in the US market, the immediate focus for STX is to continue to build on market access coverage (STX expects over the next six to 12 months to increase formulary coverage by signing reimbursement agreements with numerous payors) and physician awareness of Accrufer’s benefits to drive sales in the US. In Europe, Feraccru sales volumes increased 51% versus H220, however royalties received from partner Norgine were flat at £0.5m. We revise our FY21 revenue forecasts to reflect slower sales momentum in Europe. Launches in additional countries could aid uplift, albeit slowly. The product was launched in Belgium and Luxembourg in early 2021. We maintain our European peak sales forecasts of €130m in 2028 and will monitor this as uptake develops. Post period, STX signed a licensing deal with Korea Pharma for South Korea (£0.5m upfront, £5.5m in sales and development milestones and 15% royalties on sales). Negotiations with potential partners in other territories are ongoing and could provide further upside to our current forecasts.

Financials: Cash runway to FY23

STX raised net funds of £27.7m in March 2021, extending the cash runway to forecast break-even in FY23. The primary use of these funds is to support the commercialisation of Accrufer in the US. The appointment of a US-based CEO (Greg Madison) highlights the focus on the key US market.

Valuation: £631.3m or 293p/share

Our revised valuation is £631.3m or 293p/share, versus £505.7m or 234p/share previously. The main changes are a slower sales evolution in Europe offset by reflecting the product’s launched status in the US. Our other underlying assumptions are unchanged. We have rolled our model forward and include net cash of £22.6m at 30 June 2021. Our NPV calculation is based on Feraccru achieving peak sales of €130m in Europe, $256m in the US and $126m in China.

Accrufer launches in the United States

Following launch of Accrufer in the United States in July 2021, STX is working to increase physician awareness and expand market access. The COVID-19 pandemic has provided some headwinds to the initial phase of launch, limiting face-to-face contact with physicians. Importantly, STX market research demonstrates that US prescribers believe there is unmet need and Accrufer is viewed positively in terms of a clinically meaningful profile and improvement versus existing oral iron salts (good tolerability and efficacy). While 460,000 US physicians prescribe mostly oral iron tablets, STX is specifically targeting 11,000 physicians who write approximately 30% of all US prescriptions initially, through a salesforce of 30 reps in FY21 rising to 60 reps in FY22. Accrufer could offer an improved value proposition to patients and payors compared to existing oral treatments or the alternative, an intravenous treatment in the hospital setting.

The commercialisation of Feraccru in Europe, Australia (recently approved) and New Zealand is in the hands of partner Norgine, and the product is now marketed in Germany, the UK, Scandinavia (taken over from AOP Orphan), Belgium and Luxemburg. Despite the significant headwind from the pandemic, sales volumes increased by 51% in H121 versus H220 (Germany and the UK accounted for 87% of packs sold), Exhibit 1. We have lowered our forecast sales trajectory in Europe due to the lack of visibility on additional launches (ex Germany and UK) by Norgine. This has affected our royalty expectations from Norgine and we now forecast £1.4m in FY21 (vs £3.2m) and £2.9m in FY22 (vs £9.8m). Launching and obtaining pricing and reimbursement in additional European countries (key markets include France, Italy and Spain) is paramount to driving adoption in future years. Based on Feraccru’s competitive profile in our view, we maintain our European peak sales forecast of €130m in 2028 and will monitor this as uptake develops. Timely sales growth over the next few quarters is critical to achieving this.

Exhibit 1: European sales evolution of Feraccru

Source: STX company presentation

Feraccru is not yet approved in China, and this territory is covered by partner ASK Pharm (the deal covers China, Hong Kong, Macau and Taiwan). The Chinese regulatory authority (CDE) has approved the IND for a short (12-week) Phase III study in c 120 inflammatory bowel disease (IBD) patients and a pharmacokinetic/pharmacodynamic study (to be conducted in parallel) that will be sufficient to support an NDA application. ASK Pharm has started to screen patients for the IBD study, which is expected to complete by the end of 2022, leading to potential approval and launch in 2023. STX is eligible to receive a further $11.4m milestone upon regulatory approval in China, plus royalties of 10% or 15% on net sales (depending on the level), and up to $40m in cumulative sales-related milestones. Furthermore, in August 2021 STX out-licensed the Accrufer development and commercial rights in South Korea to Korea Pharma, netting an upfront payment of £0.5m, and is due a £1.5m milestone on first sales in the territory plus 15% royalties on sales and up to £4m in sales milestones. Negotiations with potential partners in other territories are ongoing and could provide further upside to our current forecasts.

Valuation

Our revised STX valuation of £631.3m or 293p/share (versus £505.7m or 234p/share previously) is based on a risk-adjusted net present value (NPV) model of Feraccru/Accrufer (Exhibit 2) for the treatment of iron deficiency anaemia (IDA) in Europe (as covered by Norgine), the United States (STX-led commercialisation) and China (as covered by ASK Pharm). We have increased the probability of success to 100% in the United States following launch and use a discount rate of 10% for Europe and the United States, where the product is launched, and 12.5% in China. However, sales execution risk remains, as for any company launching products, and we will closely monitor the US sales evolution versus our early years sales ramp-up expectations. The US opportunity is a key value driver and represents ~70% of our valuation. We have lowered our near-term sales trajectory in Europe but maintain our peak sales forecasts. Timely sales growth over the next few quarters is critical to achieving this. All other forecasts are unchanged. We have rolled forward our model and reflect reported net cash at 30 June 2021 of £22.6m.

Exhibit 2: Valuation

Product

Market

Indication

Launch

Peak

Peak
sales

NPV
(£m)

Probability

rNPV
(£m)

rNPV/share
(p)

Feraccru/Accrufer

EU5

IDA

2019

2028

€130m

111.3

100%

111.3

51.6

US

IDA

2021

2027

$256m

438.5

100%

438.5

203.1

China

IDA

2023

2031

$126m

78.6

75%

58.9

27.3

Net cash at 30 June 2021

 

 

 

22.6

100%

22.6

10.5

Valuation

 

 

 

 

651.0

631.3

292.5

Source: Edison Investment Research

Financials

STX’s revenues remain wholly dependent on the success of Feraccru/Accrufer. STX reported H121 revenues of £0.5m vs £8.9m in H120, as the prior year benefited from the £8.7m ($11.4m) upfront licence payment from ASK Pharm. Royalties received from partner Norgine relating to Feraccru sales in Europe were flat at £0.5m vs H220. We forecast total revenues of £3.9m in FY21 (this includes £2.0m US Accrufer sales, plus £1.4m in royalties from partner Norgine on European Feraccru sales and a £0.5m upfront payment from Korea Pharma). We expect total revenues to increase to £19.3m in FY22 (this includes US sales of £16.4m, plus £2.9m in royalties from Norgine). We note that Accrufer is still in the early phases of launch in the United States and the timing of achieving payor coverage will have a significant impact on our sales trajectory and revenue forecasts.

During H121 SG&A expenses increased to £6.1m (H120: £4.8m) due to pre-launch costs in the United States. R&D expenses increased to £1.6m (H120: £0.7m) predominately due to the paediatric study (Stage 1 completed). This resulted in an operating loss for the period of £7.6m (H120: £2.4m profit). We expect expenditure to increase significantly as the US launch gathers momentum and the final stage of the paediatric study starts, offset by growing sales in the United States and Europe. Based on its financial guidance, we expect STX to move into sustainable profitability on an annualised basis from FY23. STX reported an unaudited cash balance of £22.6m at 30 June 2021 following the share placing in March (£27.7m net). Management expects this is sufficient to take it to the point at which it is cash flow positive, which it expects to reach on a monthly basis within 18 months of US launch. Our forecast cash requirement and break-even assumptions are reliant on STX reaching our revenue forecasts and we note that sales are dependent on gaining timely broad market access.

Exhibit 3: Financial summary

Accounts: IFRS, year-end: 31 December

£000s

 

2017

2018

2019

2020

2021e

2022e

PROFIT & LOSS

Revenue

 

 

637

11,881

719

10,387

3,904

19,308

Cost of sales

 

 

(155)

(311)

(485)

(1,354)

(1,067)

(3,396)

Gross profit

 

 

482

11,570

234

9,033

2,837

15,912

Gross margin %

 

 

76%

97%

33%

87%

73%

82%

SG&A (expenses)

 

 

(16,722)

(12,429)

(6,773)

(8,608)

(23,980)

(26,427)

R&D costs

 

 

(4,711)

(4,300)

(2,496)

(2,579)

(2,500)

(2,500)

Other income/(expense)

 

 

0

0

0

0

0

0

EBITDA

 

 

(18,514)

(2,469)

(6,414)

551

(21,588)

(11,098)

Depreciation and amortisation

 

 

(2,437)

(2,690)

(2,621)

(2,705)

(2,055)

(1,917)

Reported operating income

 

 

(20,951)

(5,159)

(9,035)

(2,154)

(23,642)

(13,015)

Exceptionals and adjustments

 

 

(2,571)

0

0

0

0

0

Adjusted operating income

 

 

(18,380)

(5,159)

(9,035)

(2,154)

(23,642)

(13,015)

Finance income/(expense)

 

 

(43)

8

(31)

268

90

0

Reported profit before tax

 

 

(20,994)

(5,151)

(9,066)

(1,886)

(23,552)

(13,015)

Adjusted profit before tax

 

 

(18,423)

(5,151)

(9,066)

(1,886)

(23,552)

(13,015)

Income tax expense

 

 

1,406

3,359

266

(744)

600

1,952

Reported net income

 

 

(19,588)

(1,792)

(8,800)

(2,630)

(22,952)

(11,062)

Average number of shares outstanding (m)

 

112.4

116.4

117.0

117.2

195.5

215.9

Year-end number of shares, m

 

 

116.4

116.4

117.2

117.6

215.9

215.9

Basic EPS (p)

 

 

(17.4)

(2.0)

(7.5)

(2.2)

(11.7)

(5.1)

EPS - normalised (p)

 

 

(15.1)

(1.5)

(7.5)

(2.2)

(11.7)

(5.1)

Dividend per share (p)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

13

155

26

32

22

16

Intangible assets

 

 

29,961

30,957

29,898

27,266

25,471

23,811

Other non-current assets

 

 

0

0

0

0

0

0

Total non-current assets

 

 

29,974

31,112

29,924

27,298

25,493

23,826

Cash and equivalents

 

 

13,299

9,776

4,141

2,940

8,483

2,386

Inventories

 

 

125

109

948

1,379

586

933

Trade and other receivables

 

 

1,572

1,031

356

619

4,676

5,304

Other current assets

 

 

0

1,500

950

292

292

292

Total current assets

 

 

14,996

12,416

6,395

5,230

14,037

8,915

Non-current loans and borrowings

 

 

0

0

0

0

0

0

Other non-current liabilities

 

 

0

0

0

0

0

0

Total non-current liabilities

 

 

0

0

0

0

0

0

Trade and other payables

 

 

3,501

2,548

3,547

1,471

3,224

6,997

Current loans and borrowings

 

 

0

0

0

0

0

0

Other current liabilities

 

 

262

550

627

781

781

781

Total current liabilities

 

 

3,763

3,098

4,174

2,252

4,005

7,778

Equity attributable to company

 

 

41,207

40,430

32,145

30,276

35,526

24,963

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

Reported net income

 

 

(19,588)

(1,792)

(8,800)

(2,630)

(22,952)

(11,062)

Depreciation and amortisation

 

 

2,437

2,690

2,621

2,705

2,055

1,917

Share based payments

 

 

560

1,013

456

771

500

500

Other adjustments

 

 

39

3

31

(3)

0

0

Movements in working capital

 

 

(186)

(255)

555

(2,630)

(1,511)

2,798

Interest paid/received

 

 

0

(8)

31

(268)

0

0

Income taxes paid/received

 

 

587

(1,500)

1,040

655

0

0

Cash from operations (CFO)

 

 

(16,151)

151

(4,066)

(1,400)

(21,909)

(5,847)

Capex

 

 

(3,408)

(3,345)

(1,384)

(23)

(250)

(250)

Acquisitions & disposals net

 

 

0

0

0

0

0

0

Other investing activities

 

 

0

50

18

3

0

0

Cash used in investing activities (CFIA)

 

 

(3,408)

(3,295)

(1,366)

(20)

(250)

(250)

Net proceeds from issue of shares

 

 

11,880

0

0

0

27,702

0

Movements in debt

 

 

0

0

0

0

0

0

Other financing activities

 

 

0

(379)

(203)

(47)

0

0

Cash from financing activities (CFF)

 

 

11,880

(379)

(203)

(47)

27,702

0

Cash and equivalents at beginning of period

 

 

20,978

13,299

9,776

4,141

2,940

8,483

Increase/(decrease) in cash and equivalents

 

 

(7,679)

(3,523)

(5,635)

(1,467)

5,543

(6,097)

Effect of FX on cash and equivalents

 

 

0

0

0

266

0

0

Cash and equivalents at end of period

 

 

13,299

9,776

4,141

2,940

8,483

2,386

Closing net (debt)/cash

 

 

13,299

9,776

4,141

2,940

8,483

2,386

Source: Company accounts, Edison Investment Research


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This report has been commissioned by Shield Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Shield Therapeutics. 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.

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This report has been commissioned by Shield Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Shield Therapeutics. 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.

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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.

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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

1185 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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