Fresh funds to expand clinical studies and R&D

Hybrigenics 29 August 2017 Update
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Hybrigenics

Fresh funds to expand clinical studies and R&D

Fund-raise update

Pharma & biotech

29 August 2017

Price

€0.62

Market cap

€29m

Net cash (€m) at 31 December 2016

8.5

Shares in issue after raise (August 2017)

46.8m

Free float

87%

Code

ALHYG

Primary exchange

Euronext Growth

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.1

(19.9)

(28.0)

Rel (local)

6.0

(16.1)

(37.4)

52-week high/low

€0.98

€0.53

Business description

Hybrigenics is a French biotech company. It is conducting Phase II studies on lead drug inecalcitol in orphan adult leukaemias: chronic myeloid leukaemia and acute myeloid leukaemia. The company has a research programme on USP inhibitors.

Next events

Orphan designation in CML in the EU and US

2017

H117 results

October 2017

CML Phase II completion

H218

AML Phase II data

H119

Analyst

Juan Pedro Serrate

+44 (0)20 3681 2534

Hybrigenics is a research client of Edison Investment Research Limited

Hybrigenics has raised €6.8m in gross proceeds through preferential subscription rights with new and existing investors. We believe the proceeds will provide funding into 2019 and enable Hybrigenics to expand the ongoing Phase II studies with inecalcitol in acute myeloid leukaemia (AML) and chronic myeloid leukaemia (CML). Additionally, the company will use the cash to continue the research in the field of inhibitors of ubiquitin-specific protease 7 (USP7) or 8 (USP8). Our valuation, which does not yet include the offering, stands at €141m.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

2.2

(4.5)

(13.2)

0.0

N/A

N/A

12/16

3.6

(3.9)

(10.8)

0.0

N/A

N/A

12/17e

3.7

(4.9)

(13.8)

0.0

N/A

N/A

12/18e

5.6

(3.6)

(9.9)

0.0

N/A

N/A

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

Inecalcitol Phase II studies to be expanded

The fund-raising will enable Hybrigenics to expand the ongoing Phase II study with inecalcitol in AML beyond the US and France. It will strengthen its Phase II study in CML by combining inecalcitol with other kinase inhibitors in France and will allow the launch of a new Phase II clinical trial in collaboration with the American consortium, Cure CML. The ongoing AML study will read out in H119 and the CML study will complete in H218. We project $118.9m peak sales in AML and $257m in CML, in the US and EU.

Preclinical USP inhibitors programme advances

These funds will allow Hybrigenics to advance its preclinical programme on ubiquitin-specific proteases (USPs). The company’s USP7 inhibitor HBX 19,818 has demonstrated cytotoxic activity on human chronic lymphocytic leukaemia (CLL) cells in vitro and in vivo, as published in the journal Blood. Importantly, HBX 19,818 induced tumour killing independently of resistance mechanisms, making it an interesting product to address chemotherapy-resistant tumours. The company has reinforced its IP position with the grant of a European patent covering a series of small molecules that inhibit USP8. It now has six patents granted in the world’s major markets with protection until 2032. Lead USP8 inhibitor HBX 96,819 has shown potential in EGFR-resistant lung cancer and Cushing’s disease. Hybrigenics has an ongoing R&D collaboration with Servier focused on USP inhibitors in oncology. Up to €12m in potential payments is associated with this programme until registration.

Valuation: rNPV of €141m or €3.9/share maintained

In July 2017 Hybrigenics raised €6.8m in gross proceeds by issuing c 10.9m new shares at €0.62/share (23% dilution). We had a funding gap of €2m in 2018 and now with end-2016 net cash of €8.5m and the recent raise we believe Hybrigenics has some flexibility into 2019. We will update the financials and valuation after the H117 results are published in October 2017. Our valuation is €141m or €3.9/share.

Exhibit 1: Financial summary

€'000s

2015

2016

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,172

3,607

3,670

5,598

Cost of sales

(1,104)

(842)

(1,211)

(1,575)

Gross profit

1,068

2,765

2,459

4,023

EBITDA

 

 

(4,413)

(3,789)

(4,964)

(3,492)

Operating profit (before GW and except)

 

(4,563)

(3,908)

(5,083)

(3,611)

Intangible amortisation

(150)

(119)

(119)

(119)

Exceptionals

0

0

0

0

Share-based payments

(225)

(166)

(174)

(183)

Operating profit

(5,016)

(4,319)

(5,502)

(4,039)

Net interest and other financial items

37

30

152

58

Profit before tax (norm)

 

 

(4,526)

(3,878)

(4,932)

(3,553)

Profit before tax (reported)

 

 

(4,979)

(4,290)

(5,351)

(3,981)

Tax

0

0

0

0

Profit after tax (norm)

(4,526)

(3,878)

(4,932)

(3,552)

Profit after tax (reported)

(4,979)

(4,290)

(5,351)

(3,981)

Discontinued operations

639

(963)

0

0

Net income (norm)

(4,526)

(3,878)

(4,932)

(3,552)

Net income (reported)

(4,340)

(5,254)

(5,351)

(3,981)

Average number of shares outstanding (m)

34.2

35.8

35.8

35.8

EPS - normalised (c)

 

 

(13.2)

(10.8)

(13.8)

(9.9)

EPS - FRS 3 (c)

 

 

(12.7)

(14.7)

(14.9)

(11.1)

Dividend per share (c)

0.0

0.0

0.0

1.0

Gross margin (%)

49%

77%

67%

72%

EBITDA margin (%)

N/A

N/A

N/A

N/A

Operating margin (before GW and except) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed assets

 

 

1,718

1,133

923

707

Intangible assets

820

524

405

286

Tangible assets

585

326

228

130

Investments

313

283

290

291

Current assets

 

 

19,584

15,048

8,217

6,725

Stocks

150

55

33

22

Debtors

1,513

546

556

847

Cash

11,716

8,489

3,795

2,024

Other

6,205

3,833

3,833

3,833

Assets held for sale

0

2,125

0

0

Current liabilities

 

 

(4,698)

(4,955)

(2,965)

(2,967)

Creditors

(1,727)

(1,565)

(1,727)

(1,726)

Short-term borrowings

(288)

(91)

(91)

(91)

Other

(2,683)

(1,145)

(1,147)

(1,150)

Liabilities associated with assets held for sale

0

(2,154)

0

0

Non-current liabilities

 

 

(629)

(346)

(346)

(2,346)

Long-term borrowings

(114)

0

0

(2,000)

Other

(515)

(346)

(346)

(346)

Net assets

 

 

15,976

10,881

5,828

2,120

CASH FLOW

Operating cash flow

 

 

(5,304)

(2,593)

(4,790)

(3,773)

Net interest

56

34

152

58

Tax

0

0

0

0

Capex

(548)

(274)

(147)

(147)

Payment of deferred consideration

0

0

0

0

Capitalisation of development costs

0

0

0

0

Expenditure on intangibles

0

0

0

0

Acquisitions/disposals

0

0

0

0

Financing

8,457

0

0

0

Dividends

0

0

0

0

Net cash flow

2,661

(2,833)

(4,785)

(3,862)

Opening net debt/(cash)

 

 

(9,644)

(11,602)

(8,489)

(3,795)

HP finance leases initiated

0

0

0

0

Other

(703)

(280)

91

91

Closing net debt/(cash)

 

 

(11,602)

(8,489)

(3,795)

(24)

Source: Edison Investment Research, Hybrigenics accounts

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hybrigenics and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Hybrigenics and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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