Milestones expected as pipeline progresses

ReNeuron Group 6 July 2017 Update
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ReNeuron Group

Milestones expected as pipeline progresses

FY17 results

Pharma & biotech

6 July 2017

Price

1.83p

Market cap

£58m

$1.28/£

Net cash (£m) at 31 March 2017

53

Shares in issue

3,164.6m

Free float

60.5%

Code

RENE

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.4)

(22.3)

(30.5)

Rel (local)

0.7

(23.0)

(39.4)

52-week high/low

3.4p

1.7p

Business description

ReNeuron Group is a UK biotech company developing allogeneic cell therapies. CTX neural stem cells are in development for ischaemic stroke disability (Phase III planned) and human retinal progenitor cells (hRPCs) are being studied for retinitis pigmentosa (Phase I/II) and shortly in cone-rod dystrophy.

Next events

IND filing with FDA for Phase III stroke trial

H217

Initiation of Phase III stroke trial

H118

hRPC safety data

H217

12-month follow-up from PISCES II stroke trial

H217

Analyst

Dr Linda Pomeroy

+44 (0)20 3077 5738

ReNeuron Group is a research client of Edison Investment Research Limited

The highlight of FY17 was positive Phase II efficacy data from ReNeuron’s PISCES II clinical trial. As this and its other clinical programmes in ophthalmology and its earlier stage exosome platform progress, ReNeuron is entering a period of potentially significant milestones over the next 12 to 18 months. We maintain our valuation of £291m, adjusting for FY17 cash and rolling the model forward, which is offset by moving out the clinical timeline for the Phase III pivotal trial in stroke, now expected to start in early 2018 (vs H217).

Year end

Revenue (£m)

PBT* (£m)

EPS* (p)

DPS (p)

P/E (x)

Yield (%)

03/16

0.0

(12.8)

(0.44)

0.0

N/A

N/A

03/17

0.0

(18.2)

(0.49)

0.0

N/A

N/A

03/18e

0.0

(32.3)

(0.96)

0.0

N/A

N/A

03/19e

0.0

(34.5)

(1.03)

0.0

N/A

N/A

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

Pivotal Phase III clinical trial planned early CY18

ReNeuron received positive feedback from its end-of-Phase II meeting with the FDA for its Phase III stroke trial design. Alongside this it received a recommendation from the FDA to apply for a special protocol assessment (SPA) for the Phase III study. This is particularly encouraging as it indicates that, provided the endpoints are met, FDA approval should follow. ReNeuron has indicated that it now plans to apply for an SPA alongside a Regenerative Medicine Advanced Therapy (RMAT) designation (which would enable more interaction with the FDA during development and the possibility of accelerated review and approval) and an IND submission by the end of CY17 with the intention of starting a Phase III trial in the US in early 2018.

Ophthalmology pipeline also set to deliver newsflow

ReNeuron expanded its ophthalmology programme in FY17, following successful development of a cryopreserved formulation of its hRP cells, which was approved by the FDA for use in clinical trials. We expect efficacy data readouts in H218 from its Phase I/II trial in retinitis pigmentosa and Phase I data in H217. Alongside this, it is also expanding development of hRPCs into cone-rod dystrophy, with a Phase II trial application planned in H217.

Valuation: Maintained at £291m

We maintain our valuation at £291m or 9p per share. We have rolled the model forward to H217 (CY) and now use FY17 reported cash of £53m. This is offset by moving out the clinical timeline as we now expect the pivotal trial to start in CY18 (vs H217). We currently forecast cash into early FY19, which should enable ReNeuron to execute on its expanding clinical trial programme. We include an illustrative loan of £10m in FY19 in our forecasts. ReNeuron has a number of key inflection points over the next 12 to 18 months, which we believe could offer upside to its current level.

Financial summary

Exhibit 1: Financial summary

£'000s

2013

2014

2015

2016

2017

2018e

2019e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

17

22

30

29

46

46

46

Cost of Sales

0

0

0

0

0

0

0

Gross Profit

17

22

30

29

46

46

46

R&D expenses

(4,786)

(5,829)

(7,250)

(10,272)

(16,648)

(29,300)

(30,766)

SG&A expenses

(2,319)

(2,824)

(3,693)

(4,015)

(4,139)

(4,346)

(4,781)

EBITDA

 

 

(6,966)

(7,857)

(10,269)

(13,632)

(19,717)

(32,602)

(33,998)

Operating Profit (before GW and except)

 

(7,088)

(7,969)

(10,394)

(13,724)

(19,887)

(32,746)

(34,646)

Intangible Amortisation

0

0

0

0

0

0

0

Exceptionals

0

0

0

0

0

0

0

Operating Profit

(7,088)

(7,969)

(10,394)

(13,724)

(19,887)

(32,746)

(34,646)

Other

0

0

0

0

0

0

0

Net Interest

29

149

91

878

1,722

398

107

Profit Before Tax (norm)

 

 

(7,059)

(7,820)

(10,303)

(12,846)

(18,165)

(32,348)

(34,540)

Profit Before Tax (FRS 3)

 

 

(7,059)

(7,820)

(10,303)

(12,846)

(18,165)

(32,348)

(34,540)

Tax

714

754

1,397

1,492

2,592

1,941

2,072

Profit After Tax (norm)

(6,345)

(7,066)

(8,906)

(11,354)

(15,573)

(30,408)

(32,467)

Profit After Tax (FRS 3)

(6,345)

(7,066)

(8,906)

(11,354)

(15,573)

(30,408)

(32,467)

Average Number of Shares Outstanding (m)

748.7

1,425.0

1,788.8

2,609.3

3,164.6

3,164.6

3,164.6

EPS - normalised (p)

 

 

(0.85)

(0.50)

(0.50)

(0.44)

(0.49)

(0.96)

(1.03)

EPS - FRS 3 (p)

 

 

(0.85)

(0.50)

(0.50)

(0.44)

(0.49)

(0.96)

(1.03)

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

1,620

1,772

2,033

6,963

724

3,239

5,783

Intangible Assets

1,272

1,272

1,591

1,591

0

0

0

Tangible Assets

213

225

161

361

724

3,239

5,783

Other

135

275

281

5,011

0

0

0

Current Assets

 

 

4,602

22,347

14,054

64,894

58,136

24,306

410

Stocks

0

0

0

0

0

0

0

Debtors

341

676

400

1,421

1,060

1,060

1,060

Cash

3,547

20,917

12,382

60,709

53,061

21,306

(2,722)

Other

714

754

1,272

2,764

4,015

1,941

2,072

Current Liabilities

 

 

(1,164)

(2,036)

(2,345)

(4,199)

(5,702)

(3,702)

(13,702)

Creditors

(539)

(1,234)

(1,150)

(3,700)

(5,701)

(3,701)

(3,701)

Short term borrowings

0

0

0

0

0

0

(10,000)

Short term leases

(1)

(1)

(1)

(1)

(1)

(1)

(1)

Other

(624)

(801)

(1,194)

(498)

0

0

0

Long Term Liabilities

 

 

(150)

(366)

(606)

0

(1)

(1)

(1)

Long term borrowings

0

0

0

0

0

0

0

Long term leases

0

(2)

(1)

0

(1)

(1)

(1)

Other long term liabilities

(150)

(364)

(605)

0

0

0

0

Net Assets

 

 

4,908

21,717

13,136

67,658

53,157

23,843

(7,509)

CASH FLOW

Operating Cash Flow

 

 

(6,637)

(6,718)

(9,124)

(11,920)

(13,976)

(33,508)

(32,883)

Net Interest

(1)

0

0

0

0

0

0

Tax

616

714

879

0

1,340

4,015

1,941

Capex

(37)

(121)

(380)

(293)

(532)

(2,660)

(3,192)

Acquisitions/disposals

0

0

0

0

0

0

0

Financing

5,601

23,435

0

65,195

0

0

0

Dividends

0

0

0

0

0

0

0

Other

30

61

91

345

520

398

122

Net Cash Flow

(428)

17,371

(8,534)

53,327

(12,648)

(31,755)

(34,012)

Opening net debt/(cash)

 

 

(3,974)

(3,546)

(20,914)

(12,380)

(65,708)

(53,059)

(21,304)

HP finance leases initiated

0

(3)

0

1

(1)

0

0

Other

0

0

0

(0)

(0)

(0)

(0)

Closing net debt/(cash)

 

 

(3,546)

(20,914)

(12,380)

(65,708)

(53,059)

(21,304)

12,708

Source: ReNeuron Group accounts, Edison Investment Research

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 ReNeuron Group 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

New York, NY10017

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

New York, NY10017

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 ReNeuron Group 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

New York, NY10017

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

New York, NY10017

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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