Biolight Life Sciences — IOPtiMate sales slow as Asian distribution on hold

Biolight Life Sciences — IOPtiMate sales slow as Asian distribution on hold

BioLight reported H117 results in late August and IOPtiMate revenue was lower than expected, due to a pause in distributor activity in China. This interruption may last until there is a definitive conclusion in the pending Chengdu transaction. We have decreased our near-term IOPtiMate forecasts and extended the time runway estimated to achieve our peak sales targets for the product. We now derive an rNPV of NIS109.7-130.7m (down from NIS121.6-135.7m, previously).

Written by

Pooya Hemami

Analyst - Healthcare

BioLight Life Sciences

IOPtiMate sales slow as Asian distribution on hold

Financial update

Pharma & biotech

12 September 2017

Price*

NIS14.72

Market cap

NIS54m

NIS3.58/US$

*Priced as at 08 September 2017

Net cash (NISm) at H117

25.5

Shares in issue

3.6m

Free float

43%

Code

BOLT

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(8.5)

20.7

3.5

Rel (local)

(8.0)

24.0

7.4

52-week high/low

NIS16.8

NIS8.4

Business description

Based in Israel, BioLight Life Sciences is an emerging ophthalmic company focused on the development and commercialisation of products and product candidates that address ocular conditions. Lead products IOPtiMate and VS-101 are directed towards the treatment of glaucoma.

Next events

Decision on IOPtiMate US regulatory strategy

H217

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Maxim Jacobs, CFA

+1 646 653 7027

BioLight reported H117 results in late August and IOPtiMate revenue was lower than expected, due to a pause in distributor activity in China. This interruption may last until there is a definitive conclusion in the pending Chengdu transaction. We have decreased our near-term IOPtiMate forecasts and extended the time runway estimated to achieve our peak sales targets for the product. We now derive an rNPV of NIS109.7-130.7m (down from NIS121.6-135.7m, previously).

Year end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/15

1.4

(25.1)

(6.96)

0.0

N/A

N/A

12/16

2.1

(26.3)

(5.55)

0.0

N/A

N/A

12/17e

2.2

(30.1)

(6.88)

0.0

N/A

N/A

12/18e

8.9

(34.6)

(8.81)

0.0

N/A

N/A

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

BioLight reports H117 results

BioLight recently reported H117 revenue of NIS0.574m, an EBITDA loss of NIS13.5m, and a reported net loss of NIS15.32m. As Q117 results were already known, we infer Q217 revenue of NIS0.190m, an EBITDA loss of NIS7.07m, and a reported net loss of NIS7.78m. The Q217 net loss figure included NIS3.04m in losses attributable to non-controlling interests. We had expected Q217 revenue (derived from IOPtiMate sales) of NIS1.16m and an EBITDA loss of NIS5.14m.

IOPtima distribution activities in Asia on hold

IOPtiMate’s Q217 revenue was well below our expectations, as H117 BioLight revenue declined 32% y-o-y to NIS0.574m. Management explains that the current primary distributor for China has halted most of its continuing sales efforts, due to IOPtima’s ongoing negotiations for it to be sold to Chengdu Kanghong Pharma (which would become the new distributor in Asia if the sale were to proceed). Hence, a majority of IOPtima sales in China are on hold pending the result of the IOPtima sale negotiations with Chengdu. If the negotiations terminate without a transaction, the current distributor is expected to recommence sales efforts.

Valuation: Risk-adjusted rNPV of NIS109.7-130.7m

Eye-D VS-101 remains the largest potential source of revenue for the company, and we continue to use a 30% probability of success estimate for this project. After reducing our near-term IOPtiMate estimates, extending the duration needed to achieve peak sales, and adjusting forex assumptions (and the public market value of held Micromedic shares), we now obtain an rNPV of NIS109.7-130.7m (down from NIS121.6-135.7m). BioLight’s H117 net cash position of NIS25.5m (with NIS13.5m held at the parent company and the remainder at its subsidiaries) should be sufficient for the company to maintain operations into Q417. Our base case model assumes that BioLight will raise NIS18m in H217 and NIS30m in 2018 to maintain its operations and development strategy. For modelling purposes, we assign these financings to long-term debt. We have not adjusted our model for the potential IOPtima sale to Chengdu.

BioLight reports H117 financials

BioLight reported H117 financials in late August 2017; H117 revenue was NIS0.574m, the EBITDA loss was NIS13.5m, and the reported net loss was NIS15.32m. Given that BioLight had reported Q117 results in May 2017, we infer Q217 revenue of NIS0.190m, an EBITDA loss of NIS7.07m, and a reported net loss of NIS7.78m. This Q217 net loss figure included NIS3.04m in losses attributable to non-controlling interests, including those attributed to the Micromedic subsidiary (BioLight owns 34% of Micromedic). Excluding the non-controlling interests, the Q217 net loss attributable to BioLight shareholders was NIS4.74m.

While BioLight consolidates the financial results of the Micromedic subsidiary in its financials, our forecasts do not include projections or considerations for Micromedic. Overall, we had expected Q217 BioLight revenue of NIS1.16m, an EBITDA loss of NIS5.14m, and a net loss of NIS5.27m.

While BioLight does not break down its revenue by product line or subsidiary, we estimate that as in prior quarters, the large majority of reported Q217 revenue reflected IOPtima-related sales (including capital equipment sales and per-procedure recurring revenue). We believe that a small proportion of Q217 revenue (proportion undisclosed by the company) was recognised from the analysis services agreement entered by DiagnosTear (one of BioLight’s subsidiaries, with an 82% ownership interest) with an undisclosed pharmaceutical company in February 2017. Under their agreement, the undisclosed partner will use DiagnosTear’s TeaRx multi-parameter diagnostic assays as part of a clinical trial for dry eye syndrome (DES). BioLight indicates this entire contract agreement should provide revenue in the hundreds of thousands of Israeli shekels range, and a positive gross margin, over the term of the services agreement (which we estimate could last into early 2018). BioLight recently also confirmed that as part of its TeaRx development plans, it has started recruitment for a European TeaRx validation study, which could end by YE17 and would be used to support a regulatory filing for the approval of this diagnostic test in Europe.

IOPtima revenue fell below expectations as distributor paused sales efforts

We estimate that IOPtima Q217 revenue was approximately NIS0.15-0.19m, which is well below our Q117 estimate of NIS1.16m. In Q216 BioLight reported revenue (of which IOPtima revenue reflected the large majority) of NIS0.09m. IOPtiMate sales growth has stalled recently, as shown by H117 BioLight revenue declining 32% y-o-y to NIS0.574m. Management explains that the current primary distributor for China has halted most of its continuing sales efforts, due to IOPtima’s ongoing negotiations for it to be sold to Chengdu Kanghong Pharma (which would become the new distributor in China if the sale were to proceed). If a sale occurs, then Chengdu will start distribution activities; if the negotiations terminate without a transaction, the current distributor is expected to recommence sales efforts. Altogether, we estimate that a considerable proportion of ex-US IOPtima sales are currently on hold pending the result of the IOPtima sale negotiations with Chengdu.

Potential IOPtima sale to Chengdu still under consideration

On 19 April 2017, BioLight’s IOPtima subsidiary (of which BioLight holds a 70% ownership stake) signed a non-binding term sheet, which calls for it to be sold to a Chinese company, Chengdu Kanghong Pharma. As detailed in our 2 May 2017 research note, the proposed transaction is arranged in several tranches, whereby existing IOPtima shareholders (eg BioLight) could begin receiving cash proceeds from the sale approximately six months from the formal signing of the transaction.

As a reminder, on signing of a formal transaction, initially Chengdu would invest $7m in IOPtima for a 19% stake in the company. Six months after this initial investment, Chengdu would acquire additional shares in IOPtima from the existing shareholders for $17.2m (about NIS62m), thereby raising its stake to 60% (this would value IOPtima at about $42m at that point). This amount would be allocated to IOPtima shareholders on a pro rata basis and according to the preferences assigned to different classes of IOPtima shares. While BioLight owns 70% of IOPtima equity, the different IOPtima share classes and their assigned preferences have not been disclosed, and hence the potential allocation to BioLight (of this $17.2m payment) has not yet been disclosed. In two further stages, scheduled for 2019 and 2021, respectively, Chengdu would acquire the remaining shares in IOPtima (20% of IOPtima in each stage). The price to be paid by Chengdu in each of these two stages (each corresponding to a purchase of 20% of IOPtima’s equity) would be determined using a pricing formula that is dependent on IOPtima’s profitability at the time (and that price would be calculated separately for each of these two stages), and that can correspond to an IOPtima firm valuation of between $40.5m to $56.25m. We believe BioLight is continuing to work with Chengdu to finalise a formal transaction, but as of yet, there is still no assurance that this process will be completed.

Financials

BioLight’s shareholder rights offering (described in our 19 June 2017 update note) was subscribed at a 96% level, which led to the sale of 1.028m new shares at NIS11.20 per share, and gross proceeds of NIS11.5m. The offering increased BioLight’s shares outstanding by 39%. The completion of the rights offering helped fulfil the firm’s imminent need to raise additional funds, as it finished Q217 with NIS25.5m in net cash (NIS25.1m cash and equivalents and NIS0.4m in short-term deposits). However, NIS11.6m of this cash is held at IOPtima and other BioLight subsidiaries (NIS9.9m at IOPtima, NIS1.3m at Micromedic and NIS0.5m at other subsidiaries), and BioLight prefers to avoid inter-corporate cash transfers to the parent company. Hence, the parent company (BioLight) only had c NIS13.5m in net cash available at Q217.

BioLight had an H117 operating cash burn rate (including all subsidiaries) of NIS12.8m, and we estimate a similar burn rate in future quarters. Hence, we believe BioLight’s cash on hand should last into Q417, assuming that no inter-company transfers will take place. This runway could potentially also be sufficient to allow for the closing or finalisation of the IOPtima sale to Chengdu.

We continue to model that BioLight will raise NIS18.0m in H217 in debt to sustain its operations and R&D projects. We continue to model that BioLight will raise NIS30.0m in 2018 and NIS25.0m in 2019. For modelling purposes, we assign these financings to long-term debt.

Given the uncertainty as to whether the Chengdu transaction will proceed, we have not adjusted our model or valuation for this potential transaction (our model continues to assume that IOPtima will operate as a separate, BioLight-controlled entity). We continue to assume that IOPtiMate ex-US sales will account for the majority of near-term BioLight revenue, and that R&D and other operating costs will exceed sales growth in the near term. We have not materially changed our G&A and R&D estimates for the remainder of 2017 and for 2018. However, given the slowdown in IOPtima sales as the Chinese market distribution activities are on hold, we have decreased our IOPtima sales forecasts for 2017 and 2018, to NIS2.2m and NIS8.6m, respectively, from NIS4.9m and NIS11.0m, respectively. We have not reduced our peak sales estimates, but have extended the amount of time expected to reach peak sales by one year in both the US market (to 2027) and also in ex-US markets (to 2024).

Valuation

As we do not include completion of the Chengdu transaction in our forecasts, our BioLight valuation continues to include the prospects for IOPtiMate, Eye-D VS-101 and TeaRx. We apply a risk-adjusted net present value (rNPV) model with a 12.5% cost of capital. For each of these projects, we provide a weighted rNPV based on BioLight’s ownership of the associated subsidiary company. For IOPtiMate, we continue to apply a lower probability of success for our US forecasts than our ex-US market forecasts, as the product has yet to receive US regulatory clearance, while it is already cleared for sale in Europe and China. As we have decreased our near-term IOPtima revenue estimates and prolonged the time runway needed to achieve our peak sales targets, our IOPtiMate valuation components have mildly decreased. Eye-D VS-101 remains the largest potential source of revenue for the company, and we continue to use a 30% probability of success estimate for this project. After adjusting our IOPtiMate estimates and adjusting forex assumptions (and the public market value of held Micromedic shares), we now obtain an rNPV of NIS109.7-130.7m (down from NIS121.6-135.7m, previously).

Exhibit 1: BioLight Life Sciences rNPV assumptions

Product contributions (net of R&D costs)

Indication

rNPV
(NISm)

rNPV/share (NIS)

Probability of success

Launch year

Peak sales (US$m)

IOPtiMate for ex-US Markets (70% weighted)

Glaucoma

83.5

22.97

70.0%

2015

$22.1 in 2024

IOPtiMate in US Market (70% weighted)

Glaucoma

24.2

6.65

40.0%

2021

$23.4 in 2027

VS-101 (97% weighted)

Glaucoma

122.1

33.60

30.0%

2020

$69.8 in 2026

TeaRx (80% weighted)

DES diagnosis

26.1

7.18

50.0%

2017

$19.8 in 2025

Corporate costs & expenses

SG&A expenses

(58.4)

(16.08)

Net capex, NWC & taxes

(90.4)

(24.88)

Value of Micromedic shares (MCTC, TASE)*

3.3

0.90

Total rNPV

110.3

30.35

Net cash (debt) (H117)

25.5

7.01

Total equity value**

135.8

37.36

FD shares outstanding (000) (H117)

3,634

Source: Edison Investment Research. Note: *5.29m shares held with 6 September 2017 price of NIS0.617 per share. **Excludes the impact from any dilution resulting from any future equity offerings.

Exhibit 2: Financial summary

NIS000s

2014

2015

2016

2017e

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

941

1,391

2,111

2,217

8,937

20,061

Cost of Sales

(538)

(734)

(996)

(1,172)

(4,022)

(9,027)

Sales, General & Administrative

(8,529)

(11,956)

(10,360)

(10,234)

(9,193)

(11,640)

Research & Development

(18,560)

(13,045)

(10,982)

(18,010)

(27,800)

(21,800)

EBITDA

 

 

(26,686)

(24,344)

(20,227)

(27,199)

(32,077)

(22,406)

Depreciation

(3,884)

(1,306)

(3,190)

(1,329)

(2,400)

(2,400)

Amortization

0

0

0

0

0

0

Operating Profit (before exceptionals)

 

(30,570)

(25,650)

(23,417)

(28,528)

(34,477)

(24,806)

Exceptionals

(5,886)

(2,475)

(7,357)

241

0

0

Other

0

0

0

0

0

0

Operating Profit

(36,456)

(28,125)

(30,774)

(28,287)

(34,477)

(24,806)

Net Interest

448

543

(2,836)

(1,563)

(143)

(800)

Profit Before Tax (norm)

 

 

(30,122)

(25,107)

(26,253)

(30,091)

(34,620)

(25,606)

Profit Before Tax (FRS 3)

 

 

(36,008)

(27,582)

(33,610)

(29,850)

(34,620)

(25,606)

Tax

0

0

0

0

0

0

Profit After Tax and minority interests (norm)

(17,216)

(16,784)

(14,467)

(23,224)

(32,024)

(24,744)

Profit After Tax and minority interests (FRS 3)

(23,102)

(19,259)

(21,824)

(22,983)

(32,024)

(24,744)

Average Number of Shares Outstanding (m)

1.9

2.4

2.6

3.4

3.6

3.6

EPS - normalised (NIS)

 

 

(8.91)

(6.96)

(5.55)

(6.88)

(8.81)

(6.81)

EPS - normalised and fully diluted (NIS)

 

(8.91)

(6.96)

(5.55)

(6.88)

(8.81)

(6.81)

EPS - (IFRS) (NIS)

 

 

(11.96)

(7.98)

(8.37)

(6.80)

(8.81)

(6.81)

Dividend per share (NIS)

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

8,002

9,832

5,282

7,910

13,749

17,749

Intangible Assets

7,106

6,869

3,910

3,910

3,910

3,910

Tangible Assets

896

2,963

1,372

4,000

9,839

13,839

Current Assets

 

 

32,432

53,439

30,031

30,501

16,289

13,298

Short-term investments

6,408

385

417

382

382

0

Cash

22,196

50,697

25,057

27,476

9,406

1,928

Other

3,828

2,357

4,557

2,643

6,500

11,370

Current Liabilities

 

 

(6,552)

(6,605)

(6,988)

(7,121)

(772)

(1,525)

Creditors

(6,552)

(6,605)

(6,988)

(7,121)

(772)

(1,525)

Short term borrowings

0

0

0

0

0

0

Long Term Liabilities

 

 

(8,144)

(9,605)

(11,915)

(29,653)

(59,653)

(84,653)

Long term borrowings

0

0

0

(18,000)

(48,000)

(73,000)

Other long term liabilities

(8,144)

(9,605)

(11,915)

(11,653)

(11,653)

(11,653)

Net Assets

 

 

25,738

47,061

16,410

1,637

(30,387)

(55,130)

CASH FLOW

Operating Cash Flow

 

 

(27,435)

(24,580)

(24,106)

(22,885)

(39,687)

(25,279)

Net Interest

448

543

(2,836)

(1,563)

(143)

(800)

Tax

0

0

0

0

0

0

Capex

(402)

(182)

(370)

(4,066)

(8,239)

(6,400)

Acquisitions/disposals

0

(837)

(227)

(192)

0

0

Financing

38,374

47,320

2,554

11,479

0

0

Net Cash Flow

10,985

22,264

(24,985)

(17,227)

(48,070)

(32,478)

Opening net debt/(cash)

 

 

(17,901)

(28,604)

(51,082)

(25,474)

(9,858)

38,212

HP finance leases initiated

0

0

0

0

0

0

Other

(282)

214

(623)

1,611

0

0

Closing net debt/(cash)

 

 

(28,604)

(51,082)

(25,474)

(9,858)

38,212

70,690

Source: BioLight Life Sciences reports, Edison Investment Research. Note: The reported financial results consolidate Micromedic’s

financials, and forecast financial results (2017e and beyond) do not include Micromedic operations.

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, advisors 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

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been 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

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

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

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

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, advisors 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

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been 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

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

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

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Research: Healthcare

Novogen — GDC-0084 Phase II on track to commence Q417

Novogen is on track to commence a Phase II trial of GDC-0084 in glioblastoma in Q4 CY17, in line with previous guidance. It plans to meet with the FDA to discuss trial design as it finalises preparations for the study. A Phase I trial of Cantrixil in ovarian cancer is well underway, with initial data expected in late 2017 or early 2018 – efficacy data from an expansion cohort at the MTD are likely in H2 CY18. We lift our valuation range slightly to between A$87m and A$152m (A$0.18-0.31 per share), while noting that additional funds may be needed in FY18.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free