BioPorto Diagnostics |
FDA – more data needed for paediatric AKI |
Clinical update |
Healthcare equipment & services |
2 December 2019 |
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BioPorto Diagnostics is a research client of Edison Investment Research Limited |
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Following an interaction with the FDA, BioPorto announced on 18 November 2019 that it will need to gather more data to complete the 510(k) application for the paediatric NGAL Test. The company expects this process to take several months and to resubmit its application in Q220. The feedback from the FDA has implications relating to the ongoing adult NGAL study, which is now expected to be submitted after the paediatric application (pushed back from Q419).
Year end |
Revenue (DKKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
25.2 |
(34.2) |
(0.21) |
0.0 |
N/A |
N/A |
12/18 |
26.0 |
(42.5) |
(0.24) |
0.0 |
N/A |
N/A |
12/19e |
28.5 |
(66.4) |
(0.36) |
0.0 |
N/A |
N/A |
12/20e |
42.1 |
(73.2) |
(0.38) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FDA worried that enrolment method introduced bias
The data on paediatric AKI that were submitted to the FDA were from samples collected during the AWARE study, the largest study examining paediatric AKI (and renal angina) performed to date. The major issue raised by the FDA in the recent feedback was that only patients who expected to stay in the ICU for at least 48 hours were included in the study, and this assessment was made by individual investigators. The worry is that this assessment lacked rigour and introduced too much investigator bias into the dataset.
New study to be completed after several months
The company will have to perform a clinical study to gather sufficient data to support its 510(k) application. Based on our communication with the company, it expects to include approximately 300 paediatric intensive care unit (PICU) admissions in the new dataset, which it anticipates will take several months to complete. The company expects a full revised data package will be submitted to the FDA in Q220.
Completion of adult study also pushed back
BioPorto has also revised its outlook on the ongoing adult AKI clinical study following the FDA’s feedback on the paediatric application. The company previously guided to the study being complete and the application submitted in Q419, but it is now expected after the submission for paediatric AKI. The company told us that this was in part to ensure equal enrolment between sites in an effort to shore up statistical rigour in the submitted data.
Valuation: Lowered to DKK942m or DKK5.39
We have lowered our valuation to DKK942m or DKK5.39 per share from DKK993m or DKK5.67 previously. This is driven by the delay in approval timelines and lower expected growth in research products. We have increased our financing requirement to DKK50m from DKK35m based on the revised timelines.
Back and forth on paediatric AKI
The most recent announcement regarding the paediatric AKI programme is one of many such announcements BioPorto has made throughout 2019 since it submitted the initial 510(k) application in May. The initial submission used data solely derived from previously gathered patient samples. The company then changed its plans following the FDA’s request for additional information in July 2019, and stated that it would need to withdraw and resubmit its application after collecting additional samples. However, in October 2019, it again revised its outlook, stating that it believed the old dataset should be sufficient to satisfy the agency’s requests. This appears not to have been the case, as the most recent FDA feedback suggests the only way forward is the initiation of a new clinical study and the collection of additional data. This type of back-and-forth dealing with the FDA is not unusual, but most companies are not as transparent regarding their dealings with the agency and the current thinking regarding the process. However, it is unfortunate that the process has delayed the collection of these data and the submission of the application.
Primary issue stems from enrolment bias
To add some clarity to this process, we took the opportunity to speak with management regarding the data, its discussions with the FDA and the path forward. The FDA’s major objection was in regard to the enrolment of patients in the study, which it believes introduced excess investigator bias. The data submitted to the FDA were derived from patient samples and histories in the AWARE clinical study, a major survey of AKI in paediatric and young adults, which was published in the New England Journal of Medicine in 2017.1 The study was not designed to examine NGAL specifically, but instead to provide insight into the epidemiology, treatment and outcomes in this population. The study evaluated 4,683 patients across 32 PICUs over the course of three months and identified 1,261 patients who developed AKI. Patients were eligible for the study if their PICU stays were estimated to be greater than 48 hours at the time of admission. We believe the 48-hour rule requirement was included to limit the study to patients who could meet the required follow-up examinations to confirm the presence of AKI and provide data on outcomes. However, the 48-hour requirement was the sticking point identified by the FDA, as it required a patient assessment that was wholly determined at the discretion of the doctor examining them. It appears there could be a high degree of variation in how doctors made this assessment, which could introduce bias into the dataset. Interestingly, this protocol is slightly different from what was initially proposed for the AWARE study,2 which suggested culling patients that were not in the ICU for 48 hours after the fact, instead of pre-emptively. We believe this protocol was adjusted to save resources. The situation highlights some of the risks and limitations of depending on third-party data for approval.
Kaddourah A, et al. (2017) Epidemiology of Acute Kidney Injury in Critically Ill Children and Young Adults. N Eng J Med 376, 11-20.
Basu RK et al. (2015) Assessment of Worldwide Acute Kidney Injury, Renal Angina and Epidemiology in Critically Ill Children (AWARE): study protocol for a prospective observational study. BMC Nephrol 16, 24.
BioPorto’s path forward is to perform an additional clinical study. According to feedback provided by the company, it will need to identify a minimum of 20 AKI-positive individuals. To do this, it expects it will need to screen 300 paediatric patients presenting at the PICU, after accounting for expected exclusions and a margin of safety. Although it is unfortunate that the company needs to perform an additional study, it should progress very quickly given the nature of the condition and the screening population. Patients only need to be observed for a short time, and most PICU patients should be eligible.
Doubling down on rigour for adult AKI
Concurrent with the announcement of the delay in the paediatric AKI programme, BioPorto also announced that it would be delaying the submission of the adult AKI programme until after the submission of the paediatric application. It had previously guided towards submission of the 510(k) application in Q419. Based on our conversation with BioPorto, the primary cause for this delay was to ensure balanced enrolment between participating clinical sites. Although some sites are enrolling quickly, the company wants to ensure that the study population is balanced across different centres, which should provide less biased data in the eventual readout. We suspect this was a reaction to the feedback on the paediatric application as the company is now better acquainted with the degree of rigour it can expect from the agency in this process. In this way, the paediatric programme is being used to anticipate which issues might arise with the much higher-stakes adult application.
Valuation
We have lowered our valuation to DKK942m or DKK5.39 per share from DKK993m or DKK5.67 previously. This is driven by pushing back the timelines for the paediatric and adult 510(k) applications to submission in mid-2020. In addition, we have adjusted for slower than expected growth in non-NGAL research products, which has lowered that valuation to DKK7.7m from DKK19.2m. Finally, we have adjusted for lower net cash (DKK34.1m at end Q319 from DKK51.4m at end Q219). This was offset by exchange rate effects and rolling forward our NPVs.
Exhibit 1: Valuation of BioPorto
Programme |
Market |
Prob. of success |
Peak revenue ($m) |
Valuation (DKKm) |
The NGAL Test |
ICU |
50% |
185.1 |
691.5 |
ED |
30% |
172.9 |
320.3 |
|
Post-surgery |
30% |
55.4 |
96.3 |
|
Research |
100% |
2.1 |
6.0 |
|
Paediatrics |
50% |
16.8 |
17.2 |
|
Other products |
Research |
100% |
2.6 |
7.7 |
Unallocated costs |
(230.9) |
|||
Total |
908.1 |
|||
Net cash and equivalents (Q319) (DKKm) |
34.1 |
|||
Total firm value (DKKm) |
942.3 |
|||
Total shares (m) |
174.9 |
|||
Value per share (DKK) |
5.39 |
|||
Dilutive warrants (m) |
16.5 |
|||
Total diluted shares |
191.5 |
|||
Value per diluted share (DKK) |
5.24 |
|||
Source: BioPorto reports, Edison Investment Research
Financials
Although BioPorto’s operational focus remains firmly on the approval of The NGAL Test in the US, it continues to generate revenue from its suite of research products. Revenue for Q319 was DKK6.6m, up 29% year-on-year. US sales of The NGAL Test for research use continue to expand and are up 29% year-on-year (DKK1.9m), which is more important as an indicator of interest in the technology than as a revenue source and we continue to be encouraged by its trajectory. Following the recent developments with the 510(k) process in the US, BioPorto has revised its guidance for 2019 to DKK29m in revenue and an EBIT loss of DKK70m. We have increased our expected R&D spend for 2020 by approximately DKK10m to DKK47.5m to account for the adult and paediatric AKI studies. These adjustments have increased our expected financing requirement to DKK50m from DKK35m, which we include as illustrative debt in 2020.
Exhibit 2: Financial summary
DKK'000s |
2017 |
2018 |
2019e |
2020e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Revenue |
|
|
25,155 |
26,016 |
28,532 |
42,094 |
Cost of Sales |
(6,907) |
(8,181) |
(8,922) |
(10,506) |
||
Gross Profit |
18,248 |
17,835 |
19,610 |
31,589 |
||
Sales |
(18,545) |
(20,935) |
(36,654) |
(31,050) |
||
R&D |
(21,930) |
(18,676) |
(23,759) |
(47,473) |
||
Administrative |
(14,267) |
(20,005) |
(28,986) |
(29,276) |
||
EBITDA |
|
|
(33,134) |
(42,103) |
(63,931) |
(73,119) |
Operating Profit (before amort. and except.) |
|
|
(33,638) |
(42,646) |
(66,934) |
(73,354) |
Amortisation of acquired intangibles |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Share-based payments |
(2,856) |
865 |
(2,856) |
(2,856) |
||
Reported operating profit |
(36,494) |
(41,781) |
(69,790) |
(76,210) |
||
Net Interest |
(570) |
164 |
536 |
116 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(34,208) |
(42,482) |
(66,398) |
(73,238) |
Profit Before Tax (reported) |
|
|
(37,064) |
(41,617) |
(69,254) |
(76,094) |
Reported tax |
4,821 |
3,569 |
3,973 |
4,366 |
||
Profit After Tax (norm) |
(29,758) |
(38,124) |
(62,596) |
(69,036) |
||
Profit After Tax (reported) |
(32,243) |
(38,048) |
(65,280) |
(71,728) |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
(29,758) |
(38,124) |
(62,596) |
(69,036) |
||
Net income (reported) |
(32,243) |
(38,048) |
(65,280) |
(71,728) |
||
Average Number of Shares Outstanding (m) |
145 |
157 |
174 |
183 |
||
EPS - normalised (DKK) |
|
|
(0.21) |
(0.24) |
(0.36) |
(0.38) |
EPS - diluted normalised (DKK) |
|
|
(0.21) |
(0.24) |
(0.36) |
(0.38) |
EPS - basic reported (DKK) |
|
|
(0.22) |
(0.24) |
(0.38) |
(0.39) |
Dividend (DKK) |
0.00 |
0.00 |
0.00 |
0.00 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
2,623 |
3,563 |
8,113 |
7,878 |
Intangible Assets |
1,629 |
1,374 |
4,970 |
4,970 |
||
Tangible Assets |
263 |
1,437 |
2,344 |
2,109 |
||
Investments & other |
731 |
752 |
799 |
799 |
||
Current Assets |
|
|
62,981 |
62,638 |
41,498 |
28,846 |
Stocks |
3,434 |
3,631 |
2,933 |
3,454 |
||
Debtors |
6,380 |
8,036 |
7,035 |
10,379 |
||
Cash & cash equivalents |
47,080 |
46,709 |
23,130 |
6,614 |
||
Other |
6,087 |
4,262 |
8,398 |
8,398 |
||
Current Liabilities |
|
|
(8,653) |
(9,217) |
(18,989) |
(74,974) |
Creditors |
(3,412) |
(4,451) |
(3,800) |
(9,785) |
||
Tax and social security |
(182) |
(141) |
(2,796) |
(2,796) |
||
Short term borrowings |
0 |
0 |
0 |
(50,000) |
||
Other |
(5,059) |
(4,625) |
(12,393) |
(12,393) |
||
Long Term Liabilities |
|
|
(883) |
(787) |
(1,220) |
(1,220) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(883) |
(787) |
(1,220) |
(1,220) |
||
Net Assets |
|
|
56,068 |
56,197 |
29,402 |
(39,470) |
Minority interests |
0 |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
56,068 |
56,197 |
29,402 |
(39,470) |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
(33,134) |
(42,103) |
(63,931) |
(73,119) |
||
Working capital |
2,325 |
(631) |
7,812 |
2,121 |
||
Exceptional & other |
(595) |
(74) |
719 |
116 |
||
Tax |
2,005 |
4,799 |
(54) |
4,366 |
||
Net operating cash flow |
|
|
(29,399) |
(38,009) |
(55,453) |
(66,516) |
Capex |
(38) |
(1,483) |
(2,443) |
0 |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Net interest |
0 |
0 |
0 |
0 |
||
Equity financing |
40,921 |
39,319 |
36,749 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(45) |
(198) |
(2,596) |
0 |
||
Net Cash Flow |
11,439 |
(371) |
(23,743) |
(66,516) |
||
Opening net debt/(cash) |
|
|
(35,641) |
(47,080) |
(46,709) |
(23,130) |
FX |
0 |
0 |
0 |
0 |
||
Other non-cash movements |
0 |
0 |
165 |
0 |
||
Closing net debt/(cash) |
|
|
(47,080) |
(46,709) |
(23,130) |
43,386 |
Source: BioPorto Reports, Edison Investment Research
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