Destiny Pharma |
Careful resourcing, supportive environment |
H119 results |
Pharma & biotech |
24 September 2019 |
Share price performance
Business description
Next events
Analyst
Destiny Pharma is a research client of Edison Investment Research Limited |
Results for the US Phase IIb clinical study have been delayed by a quarter to mid-2020, so investors’ attention will now turn to the YE19 study update. However, Destiny’s H119 results showed continuing prudent management and targeted resourcing of the clinical programme, with grant income and a regulatory backdrop that supports novel antimicrobial development.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.00 |
(3.21) |
(8.45) |
0.00 |
N/A |
N/A |
12/18 |
0.00 |
(6.01) |
(11.86) |
0.00 |
N/A |
N/A |
12/19e |
0.30 |
(6.65) |
(13.37) |
0.00 |
N/A |
N/A |
12/20e |
0.00 |
(5.67) |
(10.68) |
0.00 |
N/A |
N/A |
Note: *PBT and EPS are as reported.
Prudent financial management
Destiny’s H119 operating loss was £2.5m (vs £2.6m in H118), despite the investment in the US Phase IIb study. The largest component of operational spend was R&D, which accounted for £1.7m (£1.3m in H118) or 68% of the H119 operating loss. We have adjusted our R&D and administrative spend forecasts for FY19–20 accordingly. This was countered by £0.24m in grant and finance income to give a £2.1m loss for the period (£2.3m in H118). End-H119 cash was £9.1m (£15.1m at the end of H118). We forecast cash lasting into 2021 not including a $10m licensing transaction in 2020. After the interim period, Destiny announced the receipt of a grant on ophthalmic infections. We had already anticipated £0.25m in grant income this year, which is unchanged, but have adjusted our R&D spend hence our FY19 operational loss moves from £8.6m to £6.7m.
Supportive environment shows no signs of slowing
The public relations tempo and mainstream news stories that warn about the impending antibiotics crisis show no signs of abating. Destiny’s CMO recently presented on XF-73 – Destiny’s lead product for the prevention of staphylococcal post-operative infections − at the prestigious invitation-only Gordon Research Conference on staphylococcal diseases in Spain. More commercially important for Destiny, the US Centers for Medicare & Medicaid Services, which is responsible for public healthcare provision in the US (outside the veterans administration), has proposed improvements to its initiatives on the new technology add-on payments and severity adjustments for the ICD-10 codes (used for the reimbursement of antimicrobial resistant infections and their prevention) as well as other programmes that are wholly supportive of Destiny’s discovery and development efforts.
Valuation: Minor changes
Our next major valuation revision is expected to be after the Phase IIb study results when we expect XF-73 will be Phase III ready. The H119 valuation changes have been minor, updating for exchange rates, Destiny’s H119 cash position and the expected £0.8m FY19 R&D tax rebate. The three-month delay to the Phase IIb study, the consequent cost containment and deferral means that our valuation has changed slightly from £86.7m or 199p per share to £83.2m or 191p per share.
Exhibit 1: Financial summary
Accounts: IFRS, year-end: December, £’000s |
|
2017 |
2018 |
2019e |
2020e |
2021e |
||
INCOME STATEMENT |
|
|
|
|
|
|
|
|
Total revenues |
|
|
- |
- |
250 |
- |
- |
|
Cost of sales |
|
|
- |
- |
- |
- |
- |
|
Gross profit |
|
|
- |
- |
250 |
- |
- |
|
SG&A (expenses) |
|
|
(1,011) |
(7,146) |
(2,057) |
(1,700) |
(1,700) |
|
R&D costs |
|
|
(387) |
(3,546) |
(4,900) |
(4,000) |
(1,900) |
|
Other income/(expense) |
|
|
(613) |
- |
- |
- |
- |
|
Exceptionals and adjustments |
|
(710) |
(738) |
(219) |
(25) |
(25) |
||
Depreciation and amortisation |
|
|
(2.1) |
(3.9) |
(2.3) |
(2.3) |
(2.4) |
|
Reported EBIT |
|
|
(3,222) |
(6,084) |
(6,729) |
(5,727) |
(3,627) |
|
Finance income/(expense) |
|
|
10.5 |
76.0 |
80.6 |
54.8 |
98.3 |
|
Reported PBT |
|
|
(3,211) |
(6,008) |
(6,649) |
(5,673) |
(3,529) |
|
Income tax expense (includes exceptionals) |
|
|
234 |
841 |
800 |
1,000 |
840 |
|
Reported net income |
|
|
(2,977) |
(5,167) |
(5,849) |
(4,673) |
(2,689) |
|
Basic average number of shares, m |
|
|
35,254 |
43,563 |
43,563 |
43,563 |
43,563 |
|
Basic EPS (p) |
|
|
(8.45) |
(11.86) |
(13.37) |
(10.68) |
(6.15) |
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
22.3 |
30.4 |
38.0 |
36.2 |
34.3 |
|
Goodwill |
|
|
- |
- |
- |
- |
- |
|
Intangible assets |
|
|
- |
- |
- |
- |
- |
|
Other non-current assets |
|
|
- |
- |
- |
- |
- |
|
Total non-current assets |
|
|
22.3 |
30.4 |
38.0 |
36.2 |
34.3 |
|
Cash and equivalents |
|
|
11,724 |
7,061 |
984 |
4,940 |
2,278 |
|
Other financial assets (term deposits) |
|
|
5,000 |
5,000 |
4,000 |
4,000 |
4,000 |
|
Inventories |
|
|
- |
- |
- |
- |
- |
|
Trade and other receivables |
|
|
277 |
931 |
1,259 |
277 |
277 |
|
Other current assets |
|
|
60 |
36 |
186 |
186 |
186 |
|
Total current assets |
|
|
17,061 |
13,028 |
6,363 |
9,404 |
6,741 |
|
Non-current loans and borrowings |
|
|
- |
- |
- |
7,752 |
7,752 |
|
Other non-current liabilities |
|
|
- |
- |
- |
- |
- |
|
Total non-current liabilities |
|
|
- |
- |
- |
7,752 |
7,752 |
|
Trade and other payables |
|
|
152 |
404 |
283 |
152 |
152 |
|
Current loans and borrowings |
|
|
- |
- |
- |
- |
- |
|
Other current liabilities |
|
|
246 |
398 |
246 |
246 |
246 |
|
Total current liabilities |
|
|
397 |
802 |
529 |
397 |
397 |
|
Equity attributable to company |
|
|
16,686 |
12,257 |
675 |
(3,975) |
(6,639) |
|
Non-controlling interest |
|
|
- |
- |
- |
- |
- |
|
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
|
Profit for the year |
|
|
(3,211) |
(6,008) |
(6,649) |
(5,673) |
(3,529) |
|
Taxation expenses |
|
|
- |
- |
- |
- |
- |
|
Profit before tax |
|
|
(3,211) |
(6,008) |
(6,649) |
(5,673) |
(3,529) |
|
Net finance expenses |
|
|
(10) |
(76) |
(81) |
(55) |
(98) |
|
EBIT |
|
|
(3,222) |
(6,084) |
(6,729) |
(5,727) |
(3,627) |
|
Depreciation and amortisation |
|
|
2.1 |
9.7 |
9.7 |
2.3 |
2.4 |
|
Share based payments |
|
|
710 |
738 |
219 |
25 |
25 |
|
Other adjustments |
|
|
- |
- |
- |
- |
- |
|
Movements in working capital |
|
|
165 |
381 |
(449) |
850 |
- |
|
Interest paid / received |
|
|
- |
- |
- |
- |
- |
|
Income taxes paid |
|
|
192 |
234 |
800 |
1,000 |
840 |
|
Cash from operations (CFO) |
|
|
(2,153) |
(4,721) |
(6,150) |
(3,850) |
(2,670) |
|
Capex |
|
|
(23.2) |
(17.8) |
(15.2) |
(0.5) |
(0.5) |
|
Acquisitions & disposals net |
|
|
- |
- |
- |
- |
- |
|
Other investing activities |
|
|
(4,990) |
76 |
81 |
55 |
98 |
|
Cash used in investing activities (CFIA) |
|
|
(5,013) |
58 |
54 |
98 |
(0.5) |
|
Net proceeds from issue of shares |
|
|
17,409 |
- |
7 |
- |
- |
|
Movements in debt |
|
|
- |
- |
- |
7,752 |
- |
|
Dividends paid |
|
|
- |
- |
- |
- |
- |
|
Other financing activities |
|
|
- |
- |
- |
- |
- |
|
Cash from financing activities (CFF) |
|
|
17,409 |
- |
7 |
7,752 |
- |
|
Increase/(decrease) in cash and equivalents |
|
|
10,243 |
(4,663) |
(6,077) |
3,957 |
(2,662) |
|
Currency translation differences and other |
|
|
- |
- |
- |
- |
- |
|
Cash and equivalents at end of period |
|
|
11,724 |
7,061 |
984 |
4,940 |
2,278 |
|
Net (debt)/cash (includes Term Deposits) |
|
|
16,724 |
12,061 |
4,918 |
1,188 |
(1,478) |
|
Movement in net/(debt) cash over period |
|
|
15,243 |
(4,663) |
(7,143) |
(3,729) |
(2,662) |
Source: Destiny Pharma, Edison Investment Research
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