Chinese progress and US lawyers

Adocia 19 March 2019 Update
Download PDF

Adocia

Chinese progress and US lawyers

Pharma & biotech

Spotlight – Update

19 March 2019

Price

€15.24

Market cap

€105m

Share price graph

Share details

Code

ADOC

Listing

Euronext Paris

Shares in issue

6.91m

Cash (€m) at 31 December 2018

39.8

Business description

Adocia is a French biotech company focused on innovative formulations of approved proteins. The company owns BioChaperone technology and has generated six products in clinical stage; the most advanced is Phase III-ready BioChaperone Lispro.

Bull

Proprietary versatile technology platform.

Clinical-stage pipeline addressing the large diabetes market.

Deal with Tonghua Dongbao.

Bear

Need of partnerships to advance to late stage.

Competition from large pharma companies.

Uncertainty regarding litigation against Lilly.

Analyst

Dr John Savin MBA

+44 (0)20 3077 2500

Adocia is a research client of Edison Investment Research Limited

FY18 accounts show cash of €39.8m after the April 2018 payment of €37.2m ($50m) for the deal with Tonghua Dongbao (THDB) in China. The €11.9m 2018 arbitration award ($11.6m plus $1.6m interest) against Lilly should be received in 2019 after further legal aspects are cleared. A successful single-dose Phase I of BioChaperone (BC) pramlintide insulin could lead to a multiple-dose study in Q219. A European/US Phase III of BC Lispro can be run after a short bridging study and if a partner is found.

China key to current strategy

The deal with THDB provided an upfront of $50m ($40m for BC Combo and $10m for BC Lispro). Adocia could receive an additional $85m ($50m for BC Combo and $35m for BC Lispro) and double-digit royalties. Pre-mixed insulins are bestsellers in China (see our initiation report). In China, a Phase III of BC Lispro is planned by THDB starting in 2019 and a Phase I of BC Combo may start in late 2019. THDB manufactures lispro and insulin glargine in China and supplies Adocia.

European trials

BC Lispro is stated to be Phase III ready once a European bridging study to show THDB Lispro’s equivalence to Lilly’s lispro is run, but a Phase III will need a partner. Adocia retains rights to the US, Europe and Japan. A multiple-dose BC pramlintide insulin study is planned to start in Q219 after the successful 2018 single-dose Phase I showed a 97% decrease in glucose excursions compared to Humalog.

Legal matters grind on

Adocia is due to receive $11.6m (revenue) plus $1.6m interest (an accrual) from Lilly (€11.9m total) subject to ongoing arbitration; it also claims legal costs, it spent €8.3m in 2018. The cash could provide the funds to develop BC Lispro. Adocia also claims $1.3bn in damages; Lilly has filed counterclaims for $188m. There are also US civil patent actions initiated by Lilly. Hence, legal outcomes could have major value impacts, but can be slow to resolve and require significant cash.

Valuation: Legal may be as key as clinical outcomes

Away from the focus on legal issues, the pipeline is being developed and partnering seems essential in the US and European diabetes markets. China might be the key initial market as THDB is pushing ahead on Phase III. In the US and Europe, Adocia will need a partner to rapidly progress trials and enable marketing against well-established competitors. Adocia’s market cap (12 March) was €101m with debt of €7.1m and cash of €39.8m, making an enterprise value of €68.3m.

Historical financials

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

27.2

(8.2)

(1.2)

0.0

N/A

N/A

12/18

53.9

9.7

1.1

0.0

13.9

N/A

Source: Company data

General disclaimer and copyright

This report has been commissioned by Adocia and prepared and issued by Edison, in consideration of a fee payable by Adocia. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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 Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

Share this with friends and colleagues