BioPorto Diagnostics |
COVID-19 test to enter the clinic |
Earnings update |
Healthcare equipment |
19 November 2020 |
Share price performance
Business description
Next events
Analyst
BioPorto Diagnostics is a research client of Edison Investment Research Limited |
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With its Q320 earnings, BioPorto announced that its COVID-19 antigen test it has under development would be entering the clinic. The gathering of samples is expected to start imminently and to be complete by the end of December 2020. The company believes that this timeline supports the potential commercialisation of the product in early 2021, if the results of the study are compelling.
Year end |
Revenue (DKKm) |
PBT* |
EPS* |
DPS |
P/E |
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 |
23.5 |
(70.4) |
(0.31) |
0.0 |
N/A |
N/A |
12/21e |
82.5 |
(31.2) |
(0.11) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Sample collection to start imminently at UC Davis
BioPorto is currently developing an antigen-based rapid assay for COVID-19 using antibodies developed in collaboration with the University of Southern Denmark in combination with the company’s generic Rapid Assay Device (gRAD) platform. The site of the new study will the University of California, Davis, where patient sample collection is expected to begin before the end of November 2020. Based on guidance provided by the FDA, the study will include a target of 150 patient samples, of which at least 30 will need to be COVID-19 positive.
NGAL RUO growth steady
The company reported Q320 revenue of DKK4.7m, of which DKK2.7m is attributable to research use only (RUO) sales of the NGAL Test, including DKK1.8m from US NGAL sales. RUO sales are down sequentially, primarily due to the uncommonly large RUO sales in Q220 (DKK5.0m), but the NGAL Test continues its upward trajectory, up 18% year-on-year in Q320 and 58% year-to-date (DKK9.8m).
Slight delay to PAEDIATRIC NGAL
BioPorto also provided an update on its ongoing NGAL development efforts and noted that its ongoing pivotal NGAL study for paediatric acute kidney injury (AKI) is progressing steadily, albeit with some delays due to the pandemic. The second wave of infections is affecting enrolment at the children’s hospitals where the study is taking place, and the company has delayed the expected submission of the marketing application for the product until Q121 (from H220).
Valuation: Increased to DKK939m
We have increased our valuation to DKK939m from DKK896m, but it is lower per share, DKK3.52 from DKK4.48. This is on account of the company’s DKK93.6m (net) rights offering completed in October (66.6m new shares). We have also adjusted our clinical timelines to account for the COVID-19 delay, which reduced our valuation for the NGAL Test in the ICU to DKK618.5m from DKK671.9m.
COVID-19 test in the clinic
On 18 November 2020 BioPorto announced that it is initiating a new clinical program for its COVID-19 rapid diagnostic test. The protocol for the study is based on FDA guidance on the development of tests to detect the SARS-CoV-2 virus and will have a target enrolment of 150 individuals, of whom at least 30 will need to be infected with the virus. The study should be very quick given that it only requires the collection of samples from patients presenting at the hospital. The study is expected to begin by the end of November and to be completed by the end of 2020.
On the company’s conference call, management stated that once the results from the study are in, it believes that it can analyse the findings and submit an application for emergency use authorization (EUA) as early as Q121. The review times for EUA applications vary but can be as short as days or weeks. The company has some manufacturing capacity for the test in house, so some small-scale commercialisation could begin immediately afterwards. At the moment, the company is looking at targeting smaller markets initially, where current testing capacity is inadequate. This includes settings where rapid diagnosis is necessary but immediate access to the infrastructure for rapid nucleotide amplification tests (NATs) is not available, such as field triage or surveillance. We expect the company to provide more information regarding its commercial plan for the test if the current study is successful.
The marketability of the test will largely depend on the statistical performance in the upcoming clinical study. The product will not necessarily need to outperform NATs such as the RT-PCR testing, which has become the standard of care for routine screening. However, there are two antigen-based, point-of-care tests that have already received an EUA and multiple other products in development that are targeting a similar niche. For our purposes we are only including visually read (as opposed to instrument read) tests, similar to the gRAD platform. A selection of products with strong performance are presented in Exhibit 1.
Exhibit 1: Selection of rapid point-of-care COVID-19 tests
Test |
Company |
EUA? |
Sensitivity |
Specificity |
BinaxNOW |
Abbott |
Yes |
97.1% |
98.5% |
CareStart |
Access Bio |
Yes |
88.4% |
100.0% |
Panbio |
Abbott |
No |
91.4% |
99.8% |
Respi-Strip |
Coris BioConcept |
No |
91.2% |
99.4% |
Rapid COVID-19 test |
Healgen |
No |
96.7% |
99.2% |
Source: Company websites, FDA
Commercial and clinical update
We continue to closely track the trajectory of the RUO sales of the NGAL Test in order to gauge the interest in the technology. Sales of the NGAL product continue to grow on a year-on-year basis (Exhibit 2) to DKK2.7m (18% growth year-on-year), albeit are down from the exceptionally high Q220 sales (DKK5.0m). RUO sales for the product in the US were DKK1.8m, which is flat from Q319. Total companywide revenue was down year-on-year (DKK4.7m in Q320 vs DKK6.6m for Q319), but this attributable to the company’s decision in 2019 to wind down some of its non-proprietary products in favour of internal development and the NGAL Test. The company maintained its guidance of DKK30m sales for 2020 (and a DKK73m operating loss), which implies DKK14m in sales in Q420. We remain more conservative in our estimates and forecast DKK23m in total sales in 2020 (down from DKK26m previously).
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Exhibit 2: The NGAL Test, research use only sales |
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Source: BioPorto reports. |
The company also provided an update on its ongoing pivotal study of the NGAL Test for paediatric AKI. The study is currently ongoing at children’s hospitals in the US. However, the recent increase in COVID-19 cases in the US has slowed the pace of enrolment, resulting in a delay in the completion of the study from H220 to Q121. BioPorto expects to complete the data analysis and submit a De Novo application to the FDA in Q121. The company is waiting on this submission and the response from the FDA to initiate its clinical program for adult AKI, so this delay may have impacts on that program as well, albeit a small delay.
Finally, the company announced that it is moving forward with plans to commercialise its dipstick NGAL test (NGALds), essentially an application of NGAL to the gRAD platform. The goal of this product is to similarly provide a rapid, point of care solution for the testing for kidney damage, a testing paradigm that currently does not exist. The company noted that it plans to self-declare a CE mark by the end of 2020 for the product and begin commercialisation ‘in select countries through established distribution channels.’ We can envision this product being used in a range of scenarios, such as in regions underserved by hospitals, where testing for AKI typically occurs. We will be excited to learn more about the product and more detail of the commercial plans in the future.
Valuation
We have increased our valuation to DKK939m from DKK896m, although it is lower on a per share basis: DKK3.52 from DKK4.48. This is a result primarily of the rights offering that was concluded in October 2020, with net proceeds of DK93.6m (66.6m new shares). Additionally, we have rolled forward our NPV, and these effects are offset by adjustments to our timelines to account for the delay in the submission of the paediatric NGAL test. This reduced our valuation for the NGAL test in the ICU setting to DKK618.5m from DKK671.9m.
We currently do not include the COVID-19 rapid test in our valuation. Given the uncertainties regarding this market we are not valuing any diagnostic product without first seeing its performance statistics. We expect to make this determination shortly after the release of such details following the completion of the ongoing clinical study.
Exhibit 3: Valuation of BioPorto
Program |
Market |
Prob. of success |
Peak revenue ($m) |
Valuation (DKKm) |
The NGAL Test |
ICU |
50% |
176.6 |
618.5 |
ED |
30% |
167.1 |
304.3 |
|
Post-surgery |
30% |
54.1 |
87.3 |
|
Research |
100% |
4.1 |
7.1 |
|
Paediatrics |
50% |
15.4 |
11.2 |
|
Other products |
Research |
100% |
1.2 |
1.1 |
Unallocated costs |
(208.8) |
|||
Total |
820.7 |
|||
Net cash and equivalents (Q320 + offering) (DKKm) excluding lease obligations |
118.1 |
|||
Total firm value (DKKm) |
938.8 |
|||
Total shares (m) |
266.6 |
|||
Value per share (DKK) |
3.52 |
|||
Dilutive warrants (m) |
6.5 |
|||
Total diluted shares (m) |
273.1 |
|||
Value per diluted share (DKK) |
3.52 |
|||
Source: BioPorto reports, Edison Investment Research
Financials
As we mentioned above the company completed a rights offering of 66.6m new shares for DKK93.6m net proceeds in October. Based on our forecasts, this should remove the financial overhang for the company as it should be sufficient in our view to finance the company into 2022 (although company guidance is that the firm is funded until Q421), when we predict that the company should begin profitability. We previously included DKK20m in illustrative debt to cover the overhang. Other changes to the financial forecasts include lower revenue for 2021 (DKK82.5m from DKK102.3) primarily on account of the clinical delays. There is still a high degree of uncertainty regarding the timing for the submission of the adult NGAL test, which has an oversized impact on revenue estimates. We are currently forecasting a marketing application in mid-2021 and approval in H221, but we may further adjust this depending on the timing of any of the intervening events. We note that the company has not provided guidance for this submission timing aside from the year ‘2021’. Other changes to our forecasts include some rebalancing of costs between SG&A and R&D with little net impact.
Exhibit 4: Financial summary
DKK'k |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
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INCOME STATEMENT |
||||||
Revenue |
|
|
26,016 |
26,622 |
23,477 |
82,515 |
Cost of Sales |
(8,181) |
(9,293) |
(10,195) |
(13,946) |
||
Gross Profit |
17,835 |
17,329 |
13,282 |
68,570 |
||
Sales costs |
(20,935) |
(39,268) |
(25,527) |
(43,256) |
||
R&D |
(18,676) |
(24,556) |
(34,147) |
(34,629) |
||
Administrative |
(20,005) |
(27,804) |
(26,437) |
(26,701) |
||
EBITDA |
|
|
(42,103) |
(68,333) |
(63,914) |
(30,005) |
Operating Profit (before amort. and except.) |
|
|
(42,646) |
(71,190) |
(68,493) |
(31,682) |
Amortisation of acquired intangibles |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Share-based payments |
865 |
(3,109) |
(4,335) |
(4,335) |
||
Reported operating profit |
(41,781) |
(74,299) |
(72,828) |
(36,017) |
||
Net Interest |
164 |
52 |
(1,925) |
506 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(42,482) |
(71,138) |
(70,418) |
(31,176) |
Profit Before Tax (reported) |
|
|
(41,617) |
(74,247) |
(74,753) |
(35,511) |
Reported tax |
3,569 |
4,605 |
4,636 |
2,202 |
||
Profit After Tax (norm) |
(38,124) |
(66,726) |
(66,051) |
(29,242) |
||
Profit After Tax (reported) |
(38,048) |
(69,642) |
(70,117) |
(33,308) |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
(38,124) |
(66,726) |
(66,051) |
(29,242) |
||
Net income (reported) |
(38,048) |
(69,642) |
(70,117) |
(33,308) |
||
Average Number of Shares Outstanding (m) |
157 |
170 |
210 |
277 |
||
EPS - normalised (DKK) |
|
|
(0.24) |
(0.39) |
(0.31) |
(0.11) |
EPS - diluted normalised (DKK) |
|
|
(0.24) |
(0.39) |
(0.31) |
(0.11) |
EPS - basic reported (DKK) |
|
|
(0.24) |
(0.41) |
(0.33) |
(0.12) |
Dividend (DKK) |
0.00 |
0.00 |
0.00 |
0.00 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
3,563 |
8,218 |
14,985 |
14,353 |
Intangible Assets |
1,374 |
4,799 |
11,995 |
11,363 |
||
Tangible Assets |
1,437 |
1,710 |
1,302 |
1,302 |
||
Investments & other |
752 |
1,709 |
1,688 |
1,688 |
||
Current Assets |
|
|
62,638 |
34,464 |
114,920 |
93,432 |
Stocks |
3,631 |
4,155 |
3,352 |
4,585 |
||
Debtors |
8,036 |
5,695 |
2,894 |
10,173 |
||
Cash & cash equivalents |
46,709 |
18,122 |
101,296 |
71,297 |
||
Other |
4,262 |
6,492 |
7,377 |
7,377 |
||
Current Liabilities |
|
|
(9,217) |
(14,858) |
(29,002) |
(35,856) |
Creditors |
(4,451) |
(3,237) |
(2,394) |
(9,248) |
||
Tax and social security |
(141) |
(2,306) |
(3,348) |
(3,348) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Other |
(4,625) |
(9,315) |
(23,260) |
(23,260) |
||
Long Term Liabilities |
|
|
(787) |
(2,502) |
(10,275) |
(10,275) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(787) |
(2,502) |
(10,275) |
(10,275) |
||
Net Assets |
|
|
56,197 |
25,322 |
90,627 |
61,654 |
Minority interests |
0 |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
56,197 |
25,322 |
90,627 |
61,654 |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
(42,103) |
(68,333) |
(63,914) |
(30,005) |
||
Working capital |
(631) |
4,453 |
15,804 |
(1,658) |
||
Exceptional & other |
(74) |
159 |
113 |
506 |
||
Tax |
4,799 |
3,557 |
5,249 |
2,202 |
||
Net operating cash flow |
|
|
(38,009) |
(60,164) |
(42,748) |
(28,953) |
Capex |
(1,483) |
(1,106) |
(1,071) |
(1,046) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Net interest |
0 |
0 |
0 |
0 |
||
Equity financing |
39,319 |
35,983 |
129,894 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(198) |
(3,332) |
(2,861) |
0 |
||
Net Cash Flow |
(371) |
(28,619) |
83,214 |
(29,999) |
||
Opening net debt/(cash) |
|
|
(47,080) |
(46,709) |
(18,122) |
(101,353) |
FX |
0 |
0 |
0 |
0 |
||
Other non-cash movements |
0 |
32 |
17 |
0 |
||
Closing net debt/(cash) |
|
|
(46,709) |
(18,122) |
(101,353) |
(71,354) |
Source: BioPorto accounts, Edison Investment Research
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