Good manufacturing status allows sales to start

Xbrane Biopharma 1 March 2017 Update

Xbrane Biopharma

Good manufacturing status allows sales to start

Update and FY16 results

Pharma & biotech

1 March 2017

Price

SEK40.0

Market cap

SEK190m

SEK9.14/US$

Cash (SEKm) at 31 December 2016

31.3

Shares in issue (Dec 2016)

4.76m

Free float

65%

Code

XBRANE

Primary exchange

NASDAQ First North

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.3)

1.3

37.9

Rel (local)

(9.0)

(5.5)

18.6

52-week high/low

SEK45.5

SEK29.6

Business description

Xbrane Biopharma is a Swedish developer of biosimilars using a patented, more efficient manufacturing system. The lead product is Xlucane, a Lucentis biosimilar. Xbrane’s first product will be a triptorelin generic, Spherotide, for prostate cancer. First sales will be to Iran in 2017. European approval is possible in 2019.

Next events

H117 results

Q317

Analysts

Dr John Savin MBA

+44 (0)20 3077 5735

Juan Pedro Serrate

+44 (0)20 3681 2534

Xbrane Biopharma is a research client of Edison Investment Research Limited

With Italian GMP approval of the Spherotide one-month formulation, Xbrane can ship a SEK7m order to Iran. A Chinese deal worth SEK17m upfront, $8m total, may be signed in H117. European partnering and launches are possible from 2019 after clinical trials. Xbrane (or a partner) may sell Xlucane, its low-cost biosimilar of Lucentis (2015 sales $3.6bn), in the US after 2021 and from 2022 in Europe. A study has been done on pilot scale batches showing high biosimilarity, giving a solid basis for scale up.

Year
end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/15

0.4

(11.0)

(2.5)

0.0

N/A

N/A

12/16

2.5

(29.5)

(5.9)

0.0

N/A

N/A

12/17e

24.0

(16.9)

(3.6)

0.0

N/A

N/A

12/18e

22.1

(95.5)

(20.1)

0.0

N/A

N/A

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

Prostate cancer: GMP status for triptorelin generic

Triptorelin, sold as various brands, is one of a well-known class used to treat advanced prostate cancer, endometriosis and uterine fibroids. Sales in 2015 for these indications were $380m. Initial Spherotide sales are planned in 2017 with a SEK7m order to Iran which can now be shipped as Xbrane has good Manufacturing Practice (GMP) certification from the Italian authorities. An agreed, but not signed, Chinese $8m deal could yield SEK17m cash in H117, with sales perhaps from 2021/22. EU marketing is expected from 2019 via a partner and a further deal.

Xlucane has high biosimilarity to Lucentis

Xlucane is developing a biosimilar of Lucentis (ranibizumab, Roche/Novartis; 2015 sales: $3.6bn) to treat wet age-related macular degeneration. During Q1 2017 Xbrane announced that Xlucane has shown high biosimilarity to Lucentis in the main parameters according to FDA and EMA biosimilarity guidelines. This is an important milestone to scale up production and for the discussion with regulatory authorities to plan clinical trials aimed at main markets. Going forward Xbrane will look to launch Xlucane in Iran via a distributor and gain a worldwide partnership (ex Iran). Formycon (with bioeq GmbH) is running a Phase III trial aiming for H120 data. Pfenex has Phase I/II data on PF582 but now has no partner.

Valuation: Attractive markets

The value of the Edison forecast cash flows between 2017 and 2030 is unchanged at SEK372m and equates to SEK78 per share. We assume a partner is prepared to fund half the SEK230m cost of Xlucane trials from 2017, but there is still potential for further dilution. Year-end accounts show cash of SEK31m, lower than the SEK38m formerly expected partly as a shareholder SEK10m loan to Serendipity was repaid and not converted to equity. With the expected SEK17m Chinese investment in H1 and SEK7m in bulk sales to Iran, this cash covers the expected 2017 cash needs forecast by Edison. Management anticipates that revenue from deals and sales could meet 2018 cash requirements; a Spherotide EU partnering deal is anticipated, similar to the China deal. Delayed or smaller deals could lead to a funding need, which we estimate at up to SEK100m.

Exhibit 1: Financial summary

SEK000s

2015

2016

2017e

2018e

Year end 31 December

GAAP

GAAP

GAAP

GAAP

PROFIT & LOSS

 

 

 

Revenue

 

 

393

2,490

24,000

22,050

Cost of Sales

(257)

(1,180)

(3,500)

(11,025)

Gross Profit

136

1,310

20,500

11,025

EBITDA

 

 

(10,660)

(26,882)

(13,640)

(92,220)

Operating Profit (before GW and except.)

 

(10,710)

(29,975)

(16,733)

(95,314)

Intangible Amortisation

(1,391)

(5,446)

(5,446)

(5,446)

Other

0

544

0

0

Operating Profit

(12,101)

(34,877)

(22,179)

(100,760)

Net Interest

(294)

(67)

(175)

(205)

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

(11,004)

(29,498)

(16,908)

(95,518)

Profit Before Tax (FRS 3)

 

 

(12,395)

(34,944)

(22,354)

(100,964)

Tax

550

1,655

0

0

Profit After Tax (norm)

(10,453)

(27,843)

(16,908)

(95,518)

Profit After Tax (FRS 3)

(11,845)

(33,289)

(22,354)

(100,964)

Average Number of Shares Outstanding (m)

4.1

4.8

4.7

4.8

EPS - normalised (SEK)

 

 

(2.5)

(5.9)

(3.6)

(20.1)

EPS - normalised fully diluted (öre)

 

 

(254.4)

(585.5)

(363.1)

(2,008.6)

EPS - FRS 3 (SEK)

 

 

(2.9)

(7.0)

(4.8)

(21.2)

Dividend per share (öre)

0

0

0

0

BALANCE SHEET

Fixed Assets

 

 

67,897

74,584

72,638

70,692

Intangible Assets

57,873

57,368

55,422

53,476

Tangible Assets

10,024

16,581

16,581

16,581

Investments

0

635

635

635

Current Assets

 

 

7,433

43,526

25,755

29,736

Stocks

161

2,497

2,497

2,497

Debtors

4,585

9,691

7,114

10,877

Cash

2,688

31,338

16,144

16,363

Other current assets

0

0

0

0

Current Liabilities

 

 

(23,405)

(5,884)

(8,521)

(11,521)

Creditors

(13,405)

(5,884)

(8,521)

(11,521)

Short term borrowings

(10,000)

0

0

0

Long Term Liabilities

 

 

(4,064)

(4,286)

(4,286)

(104,286)

Long term borrowings

0

0

0

(100,000)

Other long term liabilities

(4,064)

(4,286)

(4,286)

(4,286)

Net Assets

 

 

47,862

107,940

85,586

(15,378)

CASH FLOW

Operating Cash Flow

 

 

(12,643)

(37,759)

(8,427)

(92,983)

Net Interest

(294)

(67)

(175)

(205)

Tax

550

(1,655)

0

0

Capex

(1,127)

(12,766)

(6,593)

(6,593)

Acquisitions/disposals

0

0

0

0

Financing

0

80,898

0

0

Dividends

0

0

0

0

Net Cash Flow

(13,513)

28,651

(15,195)

(99,781)

Opening net debt/(cash)

 

 

(6,201)

7,312

(31,338)

(16,144)

HP finance leases initiated

0

0

0

0

Other

0

10,000

0

0

Closing net debt/(cash)

 

 

7,312

(31,338)

(16,144)

83,637

Source: Edison Investment Research, Xbrane Biopharma 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 Xbrane Biopharma 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

245 Park Avenue, 39th Floor

10167, 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

245 Park Avenue, 39th Floor

10167, 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 Xbrane Biopharma 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

245 Park Avenue, 39th Floor

10167, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney, NSW 2000

Australia

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