4SC |
First patient enrolled in pivotal RESMAIN study |
Pivotal study initiated |
Pharma & biotech |
19 December 2016 |
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4SC has announced the enrolment of the first patient in its RESMAIN study. This is a pivotal study to evaluate resminostat (RES), an epigenetic cancer drug for maintenance treatment (MAIN) in patients with advanced-stage cutaneous T-cell lymphoma (CTCL). We expect early data to be reported in 2019. We increase our rNPV to €120m from €117m as we have raised the probability of the CTCL programme in Europe to 30% (from 20%) following the initiation of the trial.
Year |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
7.1 |
(8.8) |
(0.88) |
0.0 |
N/A |
N/A |
12/15 |
3.3 |
(8.4) |
(0.59) |
0.0 |
N/A |
N/A |
12/16e |
3.8 |
(12.9) |
(0.68) |
0.0 |
N/A |
N/A |
12/17e |
4.0 |
(6.0) |
(0.31) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Pivotal RESMAIN study initiated
The pivotal trial of resminostat in advanced-stage CTCL has been initiated with an announcement that the first patient has been enrolled. The study is a 150-patient, double-blind, randomised placebo-controlled study being conducted in 50 centres, across 10 European countries. Patients who are eligible to be part of the study will have achieved disease control with systemic therapy. The patients will be randomised 1:1 to receive either resminostat or a placebo. The primary endpoint will be progression-free survival and the secondary endpoint time to symptom worsening (itching). We forecast cash reach into 2018, at which time 4SC will need to raise further funding to complete the trial.
Pipeline progression overview
Alongside the CTCL trial, 4SC has a number of other developing parts to its pipeline. It announced potentially positive Phase II results from a more detailed analysis of the HCC Yakult Phase II trial data and has reported that there was a substantial improvement in overall survival in a large subgroup. As a result, 4SC is discussing plans for continued clinical development of resminostat in Japan with its partner Yakult. We expect further data analysis in early 2017. Alongside this, developments during 2016 in its earlier-stage pipeline include a partnership with Link Health in China for its oncology Eg5 inhibitor (4SC-205) and promising preclinical data for its epigenetic HDAC/LSD1 inhibitor (4SC-202), demonstrating preclinical evidence that it could be an effective combination partner for checkpoint inhibitor therapies.
Valuation: Increased to €120m
We have increased our rNPV-based valuation to €120m or €6.3 per share (vs €6.2), as we have raised our probability of resminostat in the CTCL programme in Europe to 30% (vs 20%) following the initiation of the trial. We now use Q316 reported cash of €12.3m. We have also tweaked R&D and SG&A spend down slightly for FY16 and increased R&D in FY17 following updated guidance at the Q3 results. We have not altered our cash reach, which we continue to forecast to 2018.
Exhibit 1: Financial summary
€'000s |
2013 |
2014 |
2015 |
2016e |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
4,904 |
7,055 |
3,266 |
3,800 |
4,000 |
5,000 |
Cost of sales |
(1,474) |
(4,080) |
(1,763) |
(1,710) |
(1,600) |
(1,750) |
||
Gross profit |
3,430 |
2,975 |
1,503 |
2,090 |
2,400 |
3,250 |
||
R&D expenditure |
(10,243) |
(8,504) |
(7,255) |
(12,000) |
(7,000) |
(5,250) |
||
Administrative, distribution and other |
(3,779) |
(3,908) |
(3,163) |
(3,957) |
(2,369) |
(2,440) |
||
Operating profit |
(10,592) |
(9,437) |
(8,915) |
(13,867) |
(6,969) |
(4,440) |
||
Intangible amortisation |
(1,593) |
(819) |
(827) |
(827) |
(827) |
(827) |
||
Exceptionals (impairment / restructuring costs) |
(862) |
0 |
0 |
0 |
0 |
0 |
||
Share-based payments |
(53) |
(3) |
2 |
(20) |
(20) |
(20) |
||
EBITDA |
|
|
(7,804) |
(8,339) |
(7,914) |
(12,795) |
(5,897) |
(3,368) |
Operating profit (before GW and except.) |
|
(8,084) |
(8,615) |
(8,090) |
(13,020) |
(6,122) |
(3,593) |
|
Net interest |
48 |
(228) |
(331) |
75 |
150 |
100 |
||
Other (profit/loss from associates) |
19 |
39 |
58 |
75 |
75 |
75 |
||
Profit before tax (norm) |
|
|
(8,036) |
(8,843) |
(8,421) |
(12,946) |
(5,972) |
(3,493) |
Profit before tax (FRS 3) |
|
|
(10,525) |
(9,626) |
(9,188) |
(13,718) |
(6,744) |
(4,265) |
Tax |
0 |
(70) |
(40) |
0 |
0 |
0 |
||
Profit after tax (norm) |
(8,017) |
(8,874) |
(8,403) |
(12,871) |
(5,897) |
(3,418) |
||
Profit after tax (FRS 3) |
(10,525) |
(9,696) |
(9,228) |
(13,718) |
(6,744) |
(4,265) |
||
Average number of shares outstanding (m) |
10.1 |
10.1 |
14.3 |
19.0 |
19.0 |
19.0 |
||
EPS - normalised (€) |
|
|
(0.80) |
(0.88) |
(0.59) |
(0.68) |
(0.31) |
(0.18) |
EPS - FRS 3 (€) |
|
|
(1.04) |
(0.96) |
(0.64) |
(0.72) |
(0.36) |
(0.22) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||||
Fixed assets |
|
|
11,591 |
10,639 |
11,077 |
10,043 |
9,280 |
8,542 |
Intangible assets |
10,651 |
9,836 |
9,123 |
8,164 |
7,451 |
6,738 |
||
Tangible assets |
602 |
425 |
357 |
282 |
232 |
207 |
||
Investments and other |
338 |
378 |
1,597 |
1,597 |
1,597 |
1,597 |
||
Current assets |
|
|
6,114 |
4,295 |
22,415 |
9,156 |
12,873 |
8,693 |
Stocks |
23 |
25 |
20 |
20 |
20 |
20 |
||
Debtors |
346 |
652 |
94 |
94 |
94 |
94 |
||
Cash |
4,899 |
3,202 |
21,476 |
8,419 |
12,136 |
7,956 |
||
Other current assets |
846 |
393 |
817 |
623 |
623 |
623 |
||
Current liabilities |
|
|
(3,587) |
(4,842) |
(5,593) |
(3,187) |
(3,437) |
(3,937) |
Creditors |
(675) |
(993) |
(688) |
(688) |
(688) |
(688) |
||
Short-term borrowings |
0 |
(317) |
(1,962) |
0 |
0 |
0 |
||
Deferred revenue (short term) |
(1,589) |
(2,638) |
(1,779) |
(1,750) |
(2,000) |
(2,500) |
||
Other current liabilities |
(1,323) |
(894) |
(1,164) |
(749) |
(749) |
(749) |
||
Long-term liabilities |
|
|
(2,836) |
(8,042) |
(1,471) |
(188) |
(10,038) |
(10,038) |
Long-term borrowings |
0 |
(6,131) |
0 |
0 |
(10,000) |
(10,000) |
||
Deferred revenue (long term) |
(2,682) |
(1,788) |
(1,433) |
(150) |
0 |
0 |
||
Other long-term liabilities |
(154) |
(123) |
(38) |
(38) |
(38) |
(38) |
||
Net assets |
|
|
11,282 |
2,050 |
26,428 |
15,824 |
8,678 |
3,260 |
CASH FLOW |
||||||||
Operating cash flow |
|
|
(7,052) |
(8,302) |
(8,916) |
(11,483) |
(5,997) |
(3,868) |
Net interest |
66 |
0 |
(2) |
2 |
4 |
3 |
||
Tax |
0 |
(70) |
(40) |
0 |
0 |
0 |
||
Capex |
(99) |
(100) |
(109) |
(150) |
(175) |
(200) |
||
Expenditure on intangibles |
(21) |
(3) |
(114) |
(114) |
(114) |
(114) |
||
Acquisitions/disposals |
10 |
0 |
0 |
650 |
0 |
0 |
||
Financing |
0 |
477 |
27,608 |
0 |
0 |
0 |
||
Other |
0 |
0 |
4,333 |
0 |
0 |
0 |
||
Net cash flow |
(7,096) |
(7,998) |
22,760 |
(11,095) |
(6,282) |
(4,180) |
||
Opening net debt/(cash) |
|
|
(12,064) |
(4,899) |
3,246 |
(19,514) |
(8,419) |
(2,136) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(69) |
(147) |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(4,899) |
3,246 |
(19,514) |
(8,419) |
(2,136) |
2,044 |
Source: 4SC and Edison Investment Research
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