Mammalian movement

Xbrane Biopharma 29 April 2019 Update
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Xbrane Biopharma

Mammalian movement

Strategic update

Pharma & biotech

29 April 2019

Price

SEK45.4

Market cap

SEK377m

SEK9.14/US$

Cash (SEKm) at 31 December 2018

101

Shares in issue (post rights)

8.3m

Free float

69%

Code

XBRANE

Primary exchange

NASDAQ First North

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

25.9

2.5

(21.7)

Rel (local)

18.2

(8.5)

(27.5)

52-week high/low

SEK62.4

SEK33.5

Business description

Xbrane Biopharma is a Swedish developer of biosimilars using more efficient manufacturing systems in bacteria and in mammalian cells. The lead product is Xlucane, a Lucentis biosimilar, partnered with STADA. A further biosimilar, Xdivane for immunoncology could be launched from 2026. Xbrane sells a triptorelin generic, Spherotide, in Iran.

Next events

Phase III data

May 2020

Q119 results

14 May 2019

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Xbrane Biopharma is a research client of Edison Investment Research Limited

Xbrane, a leading innovative biosimilar development company, is moving into mammalian cell culture with announced plans for Xdivane, a biosimilar of the immunoncology blockbuster Opdivo (nivolumab, BMS). The company plans to launch Xdivane from 2026. Xbrane has issued guidance that its share of revenues from Xlucane, partnered with STADA and due for launch by Q122, could reach €100m. The XPLORE Phase III trial has enrolled its first patient, with its primary endpoint due in mid-2020. Our valuation remains SEK581m pending further information on Xdivane.

Year
end

Revenue* (SEKm)

PBT**
(SEKm)

EPS**
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/17

20.77

(44.16)

(8.14)

0.0

N/A

N/A

12/18

20.49

(13.12)

(2.13)

0.0

N/A

N/A

12/19e

20.00

(146.95)

(19.27)

0.0

N/A

N/A

12/20e

20.00

(240.41)

(28.96)

0.0

N/A

N/A

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

Ambition to become a leading biosimilar company

Xbrane has moved decisively away from the previous focus on delivery systems (Spherotide) towards becoming a leading biosimilar company. The lead product, Xlucane, a monthly biosimilar of Lucentis (ranibizumab, Roche (US), Novartis (Eur); 2018 sales: $3.6bn) treats wet age-related macular degeneration. Xlucane is produced (by a contract manufacturer) using Xbrane’s proprietary high yield bacterial fermentation system. Xbrane is now adding a high-yield mammalian fermentation technology; no details are available. Most bio-pharmaceuticals, like monoclonal antibodies, need mammalian cell production so this new technology vastly expands the range of potential biosimilars and partners. Xbrane’s initial mammalian product, Xdivane, is a biosimilar of the immunoncology blockbuster Opdivo (nivolumab, BMS; 2018 sales: $2.9bn). The company plans to launch Xdivane from 2026.

Xlucane revenues guided to start in Q122

Xlucane is partnered with STADA, a private, €2.3bn sales German company. Costs and profits are split 50:50. Xbrane has guided to a revenue share target of €100m based on global sales of €300m by STADA; STADA had no US salesforce in 2018. The global Phase III (NCT03805100, XPLORE) aims to recruit 580 patients and enrolled its first patient on 19 April. Primary endpoint data are due in May 2020 with the first profit share expected by management in Q122. There are two advanced competitors: bioeq – Formycon and Samsung Bioepis; Roche is adding products.

Valuation: Adjusted value per share of SEK68

We maintain our indicative valuation of SEK581m until further details of the proposed mammalian technology and on Xdivane are disclosed; these could add substantially to the value but immunoncology is very competitive. The March rights issue raised SEK59.3m gross at SEK30/share before expenses and a loan repayment of SEK8.1m. Our new post-rights value per share is SEK68/share (formerly SEK92/share). We expect that further funds will be needed in 2020.

Exhibit 1: Financial summary

SEK 000s

2017

2018

2019e

2020e

Year end 31 December

GAAP

GAAP

GAAP

GAAP

PROFIT & LOSS

 

 

 

 

Revenue

 

 

20,771

20,485

20,000

20,000

Cost of Sales

(15,829)

(15,907)

(15,800)

(15,800)

Gross Profit

4,942

4,578

4,200

4,200

Other income

2,515

99,742

0

0

EBITDA

 

 

(40,871)

(7,993)

(140,527)

(233,986)

Operating Profit (before amort. and except.)

 

(43,939)

(11,415)

(143,949)

(237,408)

Intangible Amortisation

(779)

(525)

(525)

(525)

Other

0

0

0

0

Operating Profit

(44,718)

(11,940)

(144,474)

(237,933)

Net Interest

(217)

(1,700)

(3,000)

(3,000)

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

(44,156)

(13,115)

(146,949)

(240,408)

Profit Before Tax (FRS 3)

 

 

(44,935)

(13,115)

(147,474)

(240,933)

Tax

0

(121)

0

0

Profit After Tax (norm)

(44,156)

(13,236)

(146,949)

(240,408)

Profit After Tax (FRS 3)

(44,935)

(13,236)

(147,474)

(240,933)

Average Number of Shares Outstanding (m)

5.4

6.2

7.6

8.3

EPS - normalised (öre)

 

 

(814)

(213)

(1,927)

(2,896)

EPS - normalised fully diluted (öre)

 

 

(814)

(213)

(1,927)

(2,896)

EPS - FRS 3 (öre)

 

 

(828)

(213)

(1,934)

(2,903)

Dividend per share (öre)

0

0

0

0

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

82,861

91,227

83,532

81,610

Intangible Assets

63,657

65,611

59,838

59,838

Tangible Assets

18,569

16,745

14,823

12,901

Investments

635

8,871

8,871

8,871

Current Assets

 

 

28,101

161,658

63,370

44,885

Stocks

3,065

5,525

5,525

5,525

Debtors

8,072

10,489

10,494

10,494

Cash

7,903

100,972

2,684

8,439

Other current assets

9,061

44,672

44,667

20,427

Current Liabilities

 

 

(17,029)

(160,439)

(152,339)

(152,339)

Creditors

(17,029)

(114,878)

(114,878)

(114,878)

Short term borrowings

0

(45,561)

(37,461)

(37,461)

Long Term Liabilities

 

 

(4,664)

(8,434)

(19,171)

(259,578)

Long term borrowings

(1,119)

(4,118)

(4,159)

(224,159)

Other long term liabilities

(3,545)

(4,316)

(4,316)

(4,316)

Net Assets

 

 

89,269

84,012

(24,607)

(285,423)

CASH FLOW

Operating Cash Flow

 

 

(36,848)

46,707

(143,016)

(212,238)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(3,347)

(1,598)

(1,500)

(1,500)

Acquisitions/disposals

0

0

0

0

Financing

20,004

48,238

46,737

220,000

Dividends

0

0

0

0

Other

(2,637)

(278)

(508)

(508)

Net Cash Flow

(22,828)

93,069

(98,288)

5,754

Opening net debt/(cash)

 

 

(29,612)

(6,784)

(51,293)

38,936

HP finance leases initiated

0

0

0

0

Other

0

(48,560)

8,059

(220,000)

Closing net debt/(cash)

 

 

(6,784)

(51,293)

38,936

253,181

Source: Edison Investment Research, Xbrane Biopharma 2018 annual report

General disclaimer and copyright

This report has been commissioned by Xbrane Biopharma and prepared and issued by Edison, in consideration of a fee payable by Xbrane Biopharma. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Xbrane Biopharma and prepared and issued by Edison, in consideration of a fee payable by Xbrane Biopharma. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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