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Research: Healthcare
Shield Therapeutics reported FY18 results in line with our expectations. Total revenue of £11.9m included the £11.0m upfront payment from European partner Norgine. Operating expenses were substantially reduced as Shield moved from a direct selling model to out-licensing deals for Feraccru commercialisation. Norgine will roll out Feraccru across additional European countries in 2020, subject to country-by-country reimbursement negotiations. In the US, we expect Feraccru approval in 2019 and that Shield will seek a marketing partner thereafter. The positive AEGIS-H2H data (non-inferiority to IV iron) announced recently should strengthen Feraccru’s appeal. We value Shield at £177m (from £178m).
Written by
Shield Therapeutics |
Next step US Feraccru approval |
FY18 results |
Pharma & biotech |
3 April 2019 |
Share price performance
Business description
Next events
Analysts
Shield Therapeutics is a research client of Edison Investment Research Limited |
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Shield Therapeutics reported FY18 results in line with our expectations. Total revenue of £11.9m included the £11.0m upfront payment from European partner Norgine. Operating expenses were substantially reduced as Shield moved from a direct selling model to out-licensing deals for Feraccru commercialisation. Norgine will roll out Feraccru across additional European countries in 2020, subject to country-by-country reimbursement negotiations. In the US, we expect Feraccru approval in 2019 and that Shield will seek a marketing partner thereafter. The positive AEGIS-H2H data (non-inferiority to IV iron) announced recently should strengthen Feraccru’s appeal. We value Shield at £177m (from £178m).
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.64 |
(18.42) |
(15.2) |
0.0 |
N/A |
N/A |
12/18 |
11.88 |
(5.15) |
(2.0) |
0.0 |
N/A |
N/A |
12/19e |
2.98 |
(9.37) |
(6.5) |
0.0 |
N/A |
N/A |
12/20e |
2.66 |
(10.0) |
(7.8) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
2019 US approval and marketing partner
Key inflections in 2019–20 include potential regulatory approval in the US (and a partnering deal), sales growth across Europe and the US, and potential China out-licensing of Feraccru (discussions with Chinese companies are underway). Partnering strategies enhance economic returns and de-risk the investment case. The AEGIS-H2H marketing study, comparing Feraccru (an oral iron treatment) to the market-leading IV iron (Ferinject), has reported promising top-line data, demonstrating that Feraccru is a non-inferior treatment option for patients with iron deficiency anaemia compared to Ferinject. We believe these data will increase clinical uptake, and positively affect pricing negotiations and reimbursement.
Financials: Cash runway into 2020
Shield reported a net loss of £1.8m in FY18 (FY17: £19.6m), benefiting from the £11m upfront licence payment from Norgine and a significant reduction in operating expenses following the restructuring of the company in 2018. The year-end cash position of £9.8m implies a cash runway into 2020. We forecast a 2019 cash burn of £5.1m and sustainable profitability from 2022. Shield is dependent in the near term on royalty and milestone income from partners. A US partnering deal in 2019 should enable an upfront licensing payment to extend cash runway further.
Valuation: £177m or 152p/share
Our valuation of Shield is at £177.4m or 152p/share (153p/share before). We have rolled forward our model and updated FX rates. As detailed in our initiation note, Fortified for growth, our valuation is based on a risk-adjusted NPV model of Feraccru for IDA in Europe and for CKD/IBD-related IDA in the US market. Our NPV calculation is based on Feraccru achieving 2029 peak sales of €133m in Europe and $251m in the US, utilises a 10% discount rate and risk-adjusts the US opportunity accordingly (75% probability of success).
Exhibit 1: Financial summary
Accounts: IFRS, year-end: December, £000s |
|
|
2016 |
2017 |
2018 |
2019e |
2020e |
PROFIT & LOSS |
|||||||
Revenue |
|
|
304.0 |
637.0 |
11,881.0 |
2,980.8 |
2,663.6 |
Operating revenues |
|
|
304.0 |
637.0 |
11,881.0 |
2,980.8 |
2,663.6 |
Cost of sales |
|
|
(100.0) |
(155.0) |
(311.0) |
(527.9) |
(1,524.5) |
Gross profit |
|
|
204.0 |
482.0 |
11,570.0 |
2,452.9 |
1,139.1 |
Gross margin % |
|
|
n/a |
n/a |
n/a |
n/a |
0.9 |
SG&A (expenses) |
|
|
(10,675.0) |
(16,722.0) |
(12,438.0) |
(7,324.2) |
(6,668.1) |
R&D costs |
|
|
(2,029.0) |
(4,711.0) |
(4,300.0) |
(4,500.0) |
(4,500.0) |
Other income/(expense) |
|
|
40.0 |
0.0 |
0.0 |
0.0 |
0.0 |
EBITDA (reported) |
|
|
(10,524.0) |
(18,514.0) |
(2,814.0) |
(7,047.1) |
(7,860.9) |
Depreciation and amortisation |
|
|
(1,936.0) |
(2,437.0) |
(2,354.0) |
(2,324.2) |
(2,168.1) |
Reported Operating Income |
|
|
(12,460.0) |
(20,951.0) |
(5,168.0) |
(9,371.3) |
(10,028.9) |
Exceptionals and adjustments |
|
|
(2,157.0) |
(2,571.0) |
0.0 |
0.0 |
0.0 |
Adjusted Operating Income |
|
|
(10,303.0) |
(18,380.0) |
(5,168.0) |
(9,371.3) |
(10,028.9) |
Finance income/(expense) |
|
|
(3,143.0) |
(43.0) |
15.0 |
0.0 |
(200.0) |
Reported PBT |
|
|
(15,603.0) |
(20,994.0) |
(5,153.0) |
(9,371.3) |
(10,228.9) |
Adjusted PBT |
|
|
(13,446.0) |
(18,423.0) |
(5,153.0) |
(9,371.3) |
(10,228.9) |
Income tax expense |
|
|
587.0 |
1,406.0 |
3,359.0 |
1,800.0 |
1,200.0 |
Reported net income |
|
|
(15,016.0) |
(19,588.0) |
(1,794.0) |
(7,571.3) |
(9,028.9) |
Basic average number of shares, m |
|
|
101.2 |
112.4 |
116.4 |
116.4 |
116.4 |
Year-end number of shares, m |
|
|
101.2 |
112.4 |
116.4 |
116.4 |
116.4 |
Basic EPS (p) |
|
|
(14.84) |
(17.43) |
(2.00) |
(6.50) |
(7.76) |
Adjusted EPS (p) |
|
|
(12.71) |
(15.15) |
(1.54) |
(6.50) |
(7.76) |
Dividend per share (p) |
|
|
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
BALANCE SHEET |
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
19.0 |
13.0 |
8.0 |
5.6 |
3.9 |
Goodwill |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Intangible assets |
|
|
28,984.0 |
29,961.0 |
30,957.0 |
28,885.2 |
26,968.8 |
Other non-current assets |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Total non-current assets |
|
|
29,003.0 |
29,974.0 |
30,965.0 |
28,890.8 |
26,972.8 |
Cash and equivalents |
|
|
20,978.0 |
13,299.0 |
9,776.0 |
4,706.5 |
6,444.7 |
Inventories |
|
|
418.0 |
125.0 |
109.0 |
580.1 |
1,675.3 |
Trade and other receivables |
|
|
1,985.0 |
1,572.0 |
1,031.0 |
1,855.0 |
5,854.1 |
Other current assets |
|
|
0.0 |
0.0 |
1,500.0 |
1,500.0 |
1,500.0 |
Total current assets |
|
|
23,381.0 |
14,996.0 |
12,416.0 |
8,641.7 |
15,474.1 |
Non-current loans and borrowings |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
8,000.0 |
Other non-current liabilities |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Total non-current liabilities |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
8,000.0 |
Trade and other payables |
|
|
3,827.0 |
3,501.0 |
2,548.0 |
3,770.8 |
9,214.1 |
Current loans and borrowings |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other current liabilities |
|
|
161.0 |
262.0 |
403.0 |
403.0 |
403.0 |
Total current liabilities |
|
|
3,988.0 |
3,763.0 |
2,951.0 |
4,173.8 |
9,617.1 |
Equity attributable to company |
|
|
48,396.0 |
41,207.0 |
40,430.0 |
33,358.7 |
24,829.8 |
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
Reported net income |
|
|
(15,016.0) |
(19,588.0) |
(1,794.0) |
(7,571.3) |
(9,028.9) |
Depreciation and amortisation |
|
|
1,936.0 |
2,437.0 |
2,354.0 |
2,324.2 |
2,168.1 |
Share based payments |
|
|
288.0 |
560.0 |
1,013.0 |
500.0 |
500.0 |
Other adjustments |
|
|
3,382.0 |
39.0 |
4.0 |
0.5 |
0.5 |
Movements in working capital |
|
|
(846.0) |
(186.0) |
(255.0) |
(72.4) |
349.0 |
Interest paid / received |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Income taxes paid / received |
|
|
0.0 |
587.0 |
(1,500.0) |
0.0 |
0.0 |
Cash from operations (CFO) |
|
|
(10,256.0) |
(16,151.0) |
(178.0) |
(4,819.5) |
(6,011.8) |
Capex |
|
|
(3,175.0) |
(3,408.0) |
(3,345.0) |
(250.0) |
(250.0) |
Acquisitions & disposals net |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other investing activities |
|
|
177.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Cash used in investing activities (CFIA) |
|
|
(2,998.0) |
(3,408.0) |
(3,345.0) |
(250.0) |
(250.0) |
Net proceeds from issue of shares |
|
|
33,507.0 |
11,880.0 |
0.0 |
0.0 |
0.0 |
Movements in debt |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
8,000.0 |
Other financing activities |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Cash from financing activities (CFF) |
|
|
33,507.0 |
11,880.0 |
0.0 |
0.0 |
8,000.0 |
Cash and equivalents at beginning of period |
|
|
725.0 |
20,978.0 |
13,299.0 |
9,776.0 |
4,706.5 |
Increase/(decrease) in cash and equivalents |
|
|
20,253.0 |
(7,679.0) |
(3,523.0) |
(5,069.5) |
1,738.2 |
Cash and equivalents at end of period |
|
|
20,978.0 |
13,299.0 |
9,776.0 |
4,706.5 |
6,444.7 |
Net (debt)/cash |
|
|
20,978.0 |
13,299.0 |
9,776.0 |
4,706.5 |
(1,555.3) |
Source: Shield, Edison Investment Research
|
|
Research: Investment Companies
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