Ongoing third-party interest in BioInk

Collplant Holdings 3 October 2018 Update
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CollPlant Holdings

Ongoing third-party interest in BioInk

Earnings update

Pharma & biotech

3 October 2018

Price*

NIS0.38

Market cap

NIS72m

NIS3.57/US$

*Priced at 1 October 2018

Net cash ($m) at June 2018,
plus private placement

3.9

Shares in issue/ADS in issue

190.53m/3.81m

Free float

43%

Code

CLGN

Primary exchange

NASDAQ

Secondary exchange

TASE

Share price performance

%

1m

3m

12m

Abs

(5.5)

(9.3)

(29.0)

Rel (local)

(9.2)

(16.5)

(38.9)

52-week high/low

NIS0.6

NIS0.4

Business description

CollPlant is an Israel-based regenerative medicine company. It is focused on developing and commercialising tissue repair products with its plant-based technology, rhCollagen. It has two products on the market, VergenixSTR and VergenixFG, and has received several orders for its 3D bioprinting product, BioInk.

Next events

Last trading day on the TASE

29 October 2018

Continued sales ramp-up

2018

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Briana Warschun

+1 646 653 7031

CollPlant demonstrated another productive quarter with a 209% increase in reported revenue over the same period in 2017, mainly attributed to sales of its BioInk product in the US and its Vergenix product brands, primarily its VergenixSTR for tendinopathy, in Europe. The rhCollagen-based BioInk continues to demonstrate that it is a strategic area of development for CollPlant with repeat sales to third parties.

Year end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/16

0.3

(27.9)

(0.28)

0.0

N/A

N/A

12/17

1.7

(20.9)

(0.16)

0.0

N/A

N/A

12/18e

3.3

(21.7)

(0.10)

0.0

N/A

N/A

12/19e

7.3

(20.1)

(0.09)

0.0

N/A

N/A

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

A productive quarter

The company recently announced its Q218 results. Revenues, which are based on sales of CollPlant’s BioInk for the development of 3D bioprinting organs in the US as well as sales of its Vergenix product brand in Europe, were $170,000 (NIS653,000), which is a 209% increase from Q217 ($55,000).

BioInk sales for research continue

Previously, CollPlant announced that it had received multiple orders of its BioInk product from a biotechnology and medical device company, intended for research into the development of bioprinted organs and orthopaedic implants, respectively. BioInk is attractive for these applications because it can produce an organized collagen matrix with tuneable properties.

Voluntarily de-listing from the TASE

In early August, CollPlant confirmed its plans to de-list its ordinary shares, Series I warrants and Series K warrants from the TASE and that the last day of trading on the TASE will be on 29 October 2018. The company’s American depository shares (ADS) (ie ADSs trade at a 1 to 50 ratio of ordinary shares) will continue to trade on the NASDAQ.

Valuation: $79.9m or $20.96 per ADS (NIS1.50 per share)

We have slightly adjusted our valuation to $79.9m or $20.96 per ADS from $79m or $22.96 per ADS. This was driven by rolling forward our NPVs and partially offset by lower net cash. We expect CollPlant to require $7m in additional capital to reach profitability in 2021.

Potential for BioInk

BioInk continues to demonstrate that it is a key area of development for CollPlant. Instead of internally developing printed tissue products, the company supplies biotechnology and medical device companies for their development purposes. The company previously announced that it had received multiple orders of its BioInk product from a biotechnology and medical device company, intended for research into the development of bioprinted organs and orthopaedic implants, respectively. The first sales of the product were in Q417 and the company has delivered repeat orders in H118; however, the details of these orders have not been fully disclosed. CollPlant’s BioInk is of interest to third parties because the unique properties of the rhCollagen used in the product make it attractive as a matrix for bioprinting. Collagen is a major component of the extracellular matrix in natural tissue that provides structural support. CollPlant’s rhCollagen produces a highly organised collagen matrix with tuneable properties and a well-controlled number of cell-binding sites, unlike collagen reclaimed from animal sources. A potential co-development agreement between CollPlant and a third party would provide further validation of CollPlant’s technology.

Valuation

We have slightly adjusted our valuation to $79.9m or $20.96 from $79m or $22.96 per ADS. This increase in overall valuation was driven by rolling forward our NPVs, offset by lower net cash. The decrease in price per share is due to the increase in number of shares as of 25 September 2018. We do not include recurring revenue from the BioInk product in our model, although we may add this at a later date if the company continues to receive orders or if the technology is licensed and integrated into a product.

Exhibit 1: Valuation of CollPlant

Product

Status

NPV ($m)

rNPV ($m)

VergenixFG: Woundcare

Europe market

29.1

29.1

VergenixSTR: Tendonopathy

Europe market

58.3

58.3

Portfolio total

87.5

87.5

R&D

-7.1

SG&A

-4.4

Cash (Q218 + private placement)

3.9

Overall valuation

79.9

ADSs

3.81

Value per basic ADS

20.96

Warrants, Options, and Debentures

3.5

Total diluted ADSs

7.3

Diluted value

104.5

Value per diluted ADS

14.22

Source: CollPlant reports, Edison Investment Research

Financials

CollPlant reported revenue of $170,000 (NIS653,000) in Q218 from sales of its BioInk product in the US as well as sales of its Vergenix product brands in Europe (primarily its VergenixSTR for tendinopathy). Operating expenses were $1.4m, down from $1.6m in Q117. This decrease is mainly attributable to the grant from the Israel Innovation Authority during Q218, which supports the rhCollagen-based BioInk for 3D bioprinting of tissues and organs development programme. The company ended the quarter with $2.6m in cash and cash equivalents, and received an additional $1.25m through a private placement of 11.1m ordinary shares from another investor. We forecast that the company will need $7m (NIS25m) in additional capital to reach profitability in 2021, which we record as illustrative debt in 2019. The company includes prefunded warrants in its basic shares outstanding and in its EPS calculations, and our estimates reflect this calculation.

Exhibit 2: Financial summary

NIS000s

2015

2016

2017

2018e

2019e

Year-end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

0

292

1,668.00

3,272.56

7,311.60

Cost of Sales

0

0

(52)

(1,244)

(3,656)

Gross Profit

0

292

1,616

2,028

3,656

R&D expenses,net

0

(16,789)

(14,066)

(14,064)

(14,767)

SG&A expenses

0

(11,048)

(8,303)

(9,727)

(9,050)

EBITDA

 

(18,026)

(27,023)

(19,670)

(20,688)

(18,743)

Operating Profit (before amort. and except)

(18,814)

(27,545)

(20,753)

(21,763)

(20,161)

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Operating Profit

(18,814)

(27,545)

(20,753)

(21,763)

(20,161)

Other

0

0

0

0

0

Net Interest

164

(348)

(127)

90

65

Profit Before Tax (norm)

 

(18,650)

(27,893)

(20,880)

(21,673)

(20,097)

Profit Before Tax (FRS 3)

 

(18,650)

(27,893)

(20,880)

(21,673)

(20,097)

Tax

0

0

0

0

0

Profit After Tax (norm)

(18,650)

(27,893)

(20,880)

(21,673)

(20,097)

Profit After Tax (FRS 3)

(18,650)

(27,893)

(20,880)

(21,673)

(20,097)

Average Number of Shares Outstanding (m)

84.7

100.6

133.2

209.0

234.1

EPS - normalised (NIS)

 

(22.03)

(27.72)

(15.68)

(10.37)

(8.59)

EPS - FRS 3 (NIS)

 

(0.22)

(0.28)

(0.16)

(0.10)

(0.09)

Dividend per share (NIS)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

4,971

6,364

5,631

6,779

6,233

Intangible Assets

1,721

1,631

1,454

1,363

1,363

Tangible Assets

2,612

4,008

3,582

4,729

4,183

Other

638

725

595

687

687

Current Assets

 

8,558

8,069

22,414

16,264

26,888

Stocks

0

487

700

1,038

2,983

Debtors

3,241

3,785

3,897

2,483

3,147

Cash

5,317

3,797

17,817

12,743

20,758

Other

0

0

0

0

0

Current Liabilities

 

(3,750)

(6,806)

(4,918)

(5,461)

(5,465)

Creditors

(2,496)

(5,189)

(2,922)

(3,911)

(3,915)

Short term borrowings

0

0

0

0

0

Short term leases

0

0

0

0

0

Other

(1,254)

(1,617)

(1,996)

(1,550)

(1,550)

Long Term Liabilities

 

0

(2,467)

(14,044)

(6,011)

(31,011)

Long term borrowings

0

(286)

(12,700)

0

(25,000)

Long term leases

0

0

0

0

0

Other long term liabilities

0

(2,181)

(1,344)

(6,011)

(6,011)

Net Assets

 

9,779

5,160

9,083

11,571

(3,355)

CASH FLOW

Operating Cash Flow

 

(14,496)

(19,384)

(17,903)

(13,518)

(16,048)

Net Interest

(2)

8

19

562

(65)

Tax

1

0

0

0

0

Capex

(1,389)

(492)

(447)

(2,260)

(873)

Acquisitions/disposals

0

0

0

0

0

Financing

10,010

18,219

20,234

22,573

0

Dividends

0

0

0

0

0

Other

27

0

0

210

0

Net Cash Flow

(5,849)

(1,649)

1,903

7,567

(16,985)

Opening net debt/(cash)

 

(11,062)

(5,317)

(3,511)

(5,117)

(12,743)

HP finance leases initiated

0

0

(253)

0

0

Other

104

(157)

(44)

59

0

Closing net debt/(cash)

 

(5,317)

(3,511)

(5,117)

(12,743)

4,242

Source: CollPlant reports, Edison Investment Research

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

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London, WC1V 7EE

United Kingdom

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Australia

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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street,

Sydney , NSW 2000

Australia

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

Herzilya Pituach, 46766

Israel

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