4SC |
Focus on Phase II CTCL launch, Q416 |
H1 results |
Pharma & biotech |
15 August 2016 |
Share price performance
Business description
Next events
Analysts
4SC is a research client of Edison Investment Research Limited |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
H1 results were in line with our expectations and primarily underscored the potential importance of more detailed analysis of the Phase II Yakult Phase I/II trial data (expected early 2017) and the launch of its potentially pivotal Phase II study with resminostat in CTCL (Q416). 4SC is also progressing its earlier-stage assets such as 4SC-205, being developed in China with partner Link Health, and indicates that it is actively pursuing a partner for 4SC-202. We slightly raise our rNPV to €110m.
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 |
(14.8) |
(0.78) |
0.0 |
N/A |
N/A |
12/17e |
4.0 |
(4.0) |
(0.21) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Important step forward expected in H216
The potentially pivotal Phase II trial of resminostat in CTCL is expected to start in Q416. This 150-patient, double-blind, randomised controlled study will be conducted in 50 centres, across 10 countries. 4SC has funding to enable the majority of the trial to be completed. We forecast that it has enough cash into 2018, at which time it will need to raise further funding to complete the trial.
Potential for further newsflow from HCC Yakult trial
Japanese partner Yakult Honsha (Yakult) announced that its Phase II study did not meet its primary endpoint of prolonged time to disease progression (TTP) compared to sorafenib monotherapy. The company has highlighted that early data appears to show that patients with certain expression levels of the ZFP64 biomarker at baseline had longer TTP when treated in combination with resminostat. We expect the outcome of this analysis early in 2017.
Early pipeline licensing and development partnership
4SC entered into a licensing and development partnership with Link Health in China for its oncology Eg5 inhibitor, 4SC-205. This agreement enables Link Health to develop 4SC-205 further and conduct the regulatory process, while 4SC receives developmental milestones (up to €76m) and double-digit royalties.
Valuation: Slightly increased to €110m
Our rNPV-based valuation has increased slightly to €110m or €5.8 per share (previously €104m or €5.5/share), as we have rolled the model forward by three months, pushed out the potential milestone income from Menarini (from 2016 to 2017) and used H116 reported cash of €13.8m. We note that the projected milestones from Yakult and Menarini are delayed while the analysis of the Yakult trial data is ongoing. We have also increased our R&D spend estimate, and therefore cash burn, in 2016 and reduced it in 2017 in line with the expected profile of CTCL clinical trial cost.
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) |
(13,300) |
(5,000) |
(3,750) |
||
Administrative, distribution and other |
(3,779) |
(3,908) |
(3,163) |
(4,557) |
(2,369) |
(2,440) |
||
Operating profit |
(10,592) |
(9,437) |
(8,915) |
(15,767) |
(4,969) |
(2,940) |
||
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) |
(14,695) |
(3,897) |
(1,868) |
Operating profit (before GW and except.) |
|
(8,084) |
(8,615) |
(8,090) |
(14,920) |
(4,122) |
(2,093) |
|
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) |
(14,845) |
(3,972) |
(1,993) |
Profit before tax (FRS 3) |
|
|
(10,525) |
(9,626) |
(9,188) |
(15,617) |
(4,744) |
(2,765) |
Tax |
0 |
(70) |
(40) |
0 |
0 |
0 |
||
Profit after tax (norm) |
(8,017) |
(8,874) |
(8,403) |
(14,770) |
(3,897) |
(1,918) |
||
Profit after tax (FRS 3) |
(10,525) |
(9,696) |
(9,228) |
(15,617) |
(4,744) |
(2,765) |
||
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) |
(0.78) |
(0.21) |
(0.10) |
EPS - FRS 3 (€) |
|
|
(1.04) |
(0.96) |
(0.64) |
(0.82) |
(0.25) |
(0.15) |
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 |
7,256 |
12,973 |
10,294 |
Stocks |
23 |
25 |
20 |
20 |
20 |
20 |
||
Debtors |
346 |
652 |
94 |
94 |
94 |
94 |
||
Cash |
4,899 |
3,202 |
21,476 |
6,519 |
12,236* |
9,557 |
||
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 |
13,924 |
8,778 |
4,861 |
CASH FLOW |
||||||||
Operating cash flow |
|
|
(7,052) |
(8,302) |
(8,916) |
(13,383) |
(3,997) |
(2,368) |
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 |
(12,995) |
(4,282) |
(2,680) |
||
Opening net debt/(cash) |
|
|
(12,064) |
(4,899) |
3,246 |
(19,514) |
(6,519) |
(2,236) |
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) |
(6,519) |
(2,236) |
443 |
Source: 4SC accounts, Edison Investment Research
|
|
