COVID-19 delays clinical studies

BioPorto Diagnostics 11 May 2020 Update
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BioPorto Diagnostics

COVID-19 delays clinical studies

Earnings update

Healthcare equipment
& services

11 May 2020

Price

DKK2.73

Market cap

DKK546m

DKK6.63/US$

Net cash (DKKm) at 31 March 2020 + rights offering

40.8

Shares in issue

199.9m

Free float

70%

Code

BIOPOR

Primary exchange

NASDAQ Copenhagen

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.8)

(3.9)

(28.8)

Rel (local)

(13.2)

2.5

(37.3)

52-week high/low

DKK 3.93

DKK 1.68

Business description

BioPorto Diagnostics is a diagnostic company focused on the development and commercialisation of biomarker-based assays. The company’s portfolio includes The NGAL Test, for prediction of acute kidney injury, and an extensive antibody library.

Next events

Paediatric NGAL submission

H220

Adult NGAL submission

2021

Analyst

Nathaniel Calloway

+1 646 653 7036

BioPorto Diagnostics is a research client of Edison Investment Research Limited

BioPorto announced in its Q120 earnings update that the timeline for submission of its paediatric NGAL Test would be delayed to H220 (from previous guidance of Q220) on account of COVID-19. The planned clinical study to investigate the test for risk assessment of acute kidney injury (AKI) has been put on hold due to the ongoing pandemic. This will also delay the submission of the adult NGAL Test as it was planned to occur after the paediatric submission.

Year end

Revenue (DKKm)

PBT*
(DKKm)

EPS*
(DKK)

DPS
(DKK)

P/E
(x)

Yield
(%)

12/18

26.0

(42.5)

(0.24)

0.0

N/A

N/A

12/19

26.6

(71.1)

(0.39)

0.0

N/A

N/A

12/20e

27.0

(63.4)

(0.31)

0.0

N/A

N/A

12/21e

101.2

(9.7)

(0.05)

0.0

N/A

N/A

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

Paediatric application delayed to H220

The company successfully recruited 10 clinical sites for the pivotal paediatric NGAL study during Q120 as well as finalising the study protocol after meeting with the FDA. However, due to the reprioritisation of medical resources because of COVID-19, it was unable to start enrolling patients. The trial is currently on hold until later in 2020, but we believe it should be quick to perform and the company is guiding toward a submission of a marketing application in H220. This is in line with our current outlook for COVID-19 reopening, which assumes that clinical trials we be open to enrolment again in the autumn of 2020.The company had been waiting on the feedback on the paediatric submission to commence its pivotal study of The NGAL Test for adult patients, so we also expect this timeline to be delayed as well.

NGAL sales up 67% annually in Q1

The company reported revenue of DKK4.2m for Q120, driven by DKK2.1m in sales of The NGAL Test for research purposes. NGAL sales are up 67% on a year-on-year basis (Q119: DKK1.3m). Q1 has historically been a slow quarter for NGAL so it is encouraging to see continued growth in the face of potential COVID-19 disruptions. AKI is a known complication of COVID-19 and the need for new methods of identifying AKI are even higher than before. The company is maintaining its guidance of DKK30m in sales in 2020, although we are slightly more conservative with an estimate of DKK27m.

Valuation: Lowered to DKK896m or DKK4.48/share

We have decreased our valuation to DKK896m or DKK4.48 per basic share, from DKK932m or DKK5.33 per share. We have pushed back timelines for the initial approval of The NGAL Test by approximately six months to early 2021, and expect a filing for adult AKI shortly thereafter. The company ended the quarter with DKK3.3m cash and subsequently completed a rights offering of DKK37.5m net. We expect the company to require DKK20m in additional financing in 2020.

Valuation

We have decreased our valuation to DKK896m or DKK4.48 per basic share, from DKK932m or DKK5.33 per share. This is driven by delays to commercialization of The NGAL test and offset by rolling forward our NPVs and higher net cash (DKK40.8m pro forma including rights proceeds, compared to DKK18.1m at end-2019). Our current outlook for the COVID-19 crisis is that clinical trials will be able to enrol at close to normal capacity by autumn 2020. We have delayed the expected approval of NGAL for paediatrics and adult ICU patients into 2021 (from H220 previously) and our delayed expectations are carried through to later-stage label expansions (emergency department and post-surgery indications both moved to 2022 approval, from 2021 previously).

Exhibit 1: Valuation of BioPorto

Program

Market

Probability of success

Peak revenue ($m)

Valuation (DKKm)

The NGAL Test

ICU

50%

180.8

652.4

ED

30%

167.1

286.9

Post-surgery

30%

54.1

82.4

Research

100%

3.1

5.7

Paediatrics

50%

15.9

12.7

Other products

Research

100%

1.7

3.0

Unallocated costs

(188.0)

Total

855.2

Net cash and equivalents (Q120 + rights offering) (DKKm)

40.8

Total firm value (DKKm)

896.0

Total shares (m)

199.9

Value per share (DKK)

4.48

Dilutive warrants (m)

16.5

Total diluted shares (m)

216.5

Value per diluted share (DKK)

4.42

Source: BioPorto Diagnostics reports, Edison Investment Research

Financials

Revenue was DKK4.2m for Q120, DKK2.1m of which were sales of The NGAL Test for research purposes. NGAL sales are up 67% on a year-on-year basis (Q119: DKK1.3m), but down sequentially (Q419: DKK4.3m), in line with previous seasonality effects (Exhibit 2). We are encouraged by the growth in the product, as we consider it indicative of interest in NGAL as an alternative test for AKI detection. The company has maintained guidance of approximately DKK30m in total sales for the year, which we believe is potentially achievable on the back of this growth, although we however are slightly more conservative and forecast DKK27m in sales in 2020. This is down from our previous FY20 forecast of DKK35.5m due to the delays in NGAL US approval. It is still too early to gauge the impact of COVID-19 on sales, but it is possible that if medical systems are overwhelmed that there may be reduced motivation to try new technology. However, at this time, the firm’s sales effort is less about generating revenue and more about increasing awareness of NGAL and engaging physicians who can be converted into customers of the approved diagnostic test.

Exhibit 2: Sales of The NGAL Test for research

Source: BioPorto Diagnostics

The company reported a comprehensive loss of DKK15.7m for the quarter, which we expect to remain relatively steady throughout the year (DKK66.6m reported operating loss estimated for 2020). Company guidance for the 2020 loss is slightly higher (DKK73m EBIT loss), which we assume is because of lower estimates of deferred costs on account of COVID-19. The company ended the quarter with DKK3.3m, which was subsequently increased with the completion of a rights offering in April 2020: 24,992,053 shares at DKK1.60 per share, net proceeds of DKK37.5m. We expect the company to require DKK20m (versus our DKK55m previous estimate, which was prior to the rights offering) in additional financing to reach break-even in 2022, which we include as illustrative debt in 2020.

Exhibit 3: Financial summary

DKK000s

2018

2019

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

26,016

26,622

26,997

101,193

Cost of Sales

(8,181)

(9,293)

(8,749)

(14,536)

Gross Profit

17,835

17,329

18,248

86,657

Sales

(20,935)

(39,268)

(34,218)

(45,103)

R&D

(18,676)

(24,556)

(27,941)

(31,597)

Administrative

(20,005)

(27,804)

(22,676)

(22,902)

EBITDA

 

 

(42,103)

(68,333)

(60,146)

(8,280)

Operating Profit (before amort. and except.)

 

 

(42,646)

(71,190)

(63,479)

(9,836)

Share-based payments

865

(3,109)

(3,109)

(3,109)

Reported operating profit

(41,781)

(74,299)

(66,588)

(12,945)

Net Interest

164

52

91

100

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

(42,482)

(71,138)

(63,388)

(9,736)

Profit Before Tax (reported)

 

 

(41,617)

(74,247)

(66,497)

(12,845)

Reported tax

3,569

4,605

4,124

797

Profit After Tax (norm)

(38,124)

(66,726)

(59,456)

(9,132)

Profit After Tax (reported)

(38,048)

(69,642)

(62,373)

(12,049)

Minority interests

0

0

0

0

Discontinued operations

0

0

0

0

Net income (normalised)

(38,124)

(66,726)

(59,456)

(9,132)

Net income (reported)

(38,048)

(69,642)

(62,373)

(12,049)

Average Number of Shares Outstanding (m)

157

170

192

201

EPS - normalised (ore)

 

 

(0.24)

(0.39)

(0.31)

(0.05)

EPS - diluted normalised (DKK)

 

 

(0.24)

(0.39)

(0.31)

(0.05)

EPS - basic reported (DKK)

 

 

(0.24)

(0.41)

(0.33)

(0.06)

Dividend (DKK)

0.00

0.00

0.00

0.00

Revenue growth (%)

3.4

2.3

0.0

0.0

Gross Margin (%)

68.6

65.1

67.6

85.6

BALANCE SHEET

Fixed Assets

 

 

3,563

8,218

6,897

6,897

Intangible Assets

1,374

4,799

4,222

4,222

Tangible Assets

1,437

1,710

946

946

Investments & other

752

1,709

1,729

1,729

Current Assets

 

 

62,638

34,464

34,053

31,129

Stocks

3,631

4,155

2,876

4,779

Debtors

8,036

5,695

3,328

12,476

Cash & cash equivalents

46,709

18,122

20,002

6,029

Other

4,262

6,492

7,846

7,846

Current Liabilities

 

 

(9,217)

(14,858)

(35,695)

(41,712)

Creditors

(4,451)

(3,237)

(3,581)

(9,598)

Tax and social security

(141)

(2,306)

(2,366)

(2,366)

Short term borrowings

0

0

(20,000)

(20,000)

Other

(4,625)

(9,315)

(9,748)

(9,748)

Long Term Liabilities

 

 

(787)

(2,502)

(1,953)

(1,953)

Long term borrowings

0

0

0

0

Other long term liabilities

(787)

(2,502)

(1,953)

(1,953)

Net Assets

 

 

56,197

25,322

3,301

(5,638)

Minority interests

0

0

0

0

Shareholders' equity

 

 

56,197

25,322

3,301

(5,638)

CASH FLOW

Op Cash Flow before WC and tax

(42,103)

(68,333)

(60,146)

(8,280)

Working capital

(631)

4,453

4,051

(5,033)

Exceptional & other

(74)

159

1,166

100

Tax

4,799

3,557

3,141

797

Net operating cash flow

 

 

(38,009)

(60,164)

(51,787)

(12,417)

Capex

(1,483)

(1,106)

(1,556)

(1,556)

Equity financing

39,319

35,983

37,500

0

Dividends

0

0

0

0

Other

(198)

(3,332)

(2,294)

0

Net Cash Flow

(371)

(28,619)

(18,137)

(13,973)

Opening net debt/(cash)

 

 

(47,080)

(46,709)

(18,122)

(2)

FX

0

0

0

0

Other non-cash movements

0

32

17

0

Closing net debt/(cash)

 

 

(46,709)

(18,122)

(2)

13,971

Source: BioPorto Diagnostics accounts, Edison Investment Research


General disclaimer and copyright

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

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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.

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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.

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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

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Germany

London +44 (0)20 3077 5700

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London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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

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 BioPorto Diagnostics and prepared and issued by Edison, in consideration of a fee payable by BioPorto Diagnostics. 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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