Paediatric AKI application pulled, Q4 resubmission

BioPorto Diagnostics 19 July 2019 Update
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BioPorto Diagnostics

Paediatric AKI application pulled, Q4 resubmission

Clinical update

Healthcare equipment
& services

19 July 2019

Price

DKK3.34

Market cap

DKK584m

DKK6.58/US$

Net cash (DKKm) at Q119 + offering

68.2

Shares in issue

174.9m

Free float

79.5%

Code

BIOPOR

Primary exchange

NASDAQ Copenhagen

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(15.6)

(16.4)

6.2

Rel (local)

(13.8)

(15.9)

7.5

52-week high/low

DKK6.21

DKK3.18

Business description

BioPorto Diagnostics is a diagnostic company focused on the development and marketing of antibodies and other products for research and diagnostics. This includes a portfolio of products marketed for research use and the NGAL Test, for prediction of acute kidney injury.

Next events

Adult AKI application

H219

Paediatric AKI application

Q419

Analyst

Nathaniel Calloway

+1 646 653 7036

BioPorto Diagnostics is a research client of Edison Investment Research Limited

In July 2019 BioPorto announced that the FDA had requested additional information for The NGAL Test’s 510(k) application for paediatric acute kidney injury (AKI), although few other details were disclosed. Unfortunately, the existing clinical data set does not include the requested information, so the company will need to withdraw its current application and collect additional samples, which carries additional risk (probability of success lowered to 50% from 60%). The company forecasts that it will be able to refile an application in Q419 if sample collection goes smoothly.

Year end

Revenue (DKKm)

PBT*
(DKKm)

EPS*
(DKK)

DPS
(DKK)

P/E
(x)

Yield
(%)

12/17

25.2

(34.2)

(0.21)

0.0

N/A

N/A

12/18

26.0

(42.5)

(0.24)

0.0

N/A

N/A

12/19e

38.6

(45.9)

(0.24)

0.0

N/A

N/A

12/20e

53.7

(48.3)

(0.24)

0.0

N/A

N/A

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

Details sparse on data request

We have very little information regarding what the FDA requested besides that it related to ‘the clinical study data and collection of retrospective samples’. This could be because certain subgroups of patients were underrepresented, the manner in which samples were collected, or a number of other possibilities. The original collection of samples had previously been tested with the NGAL ELISA test, so the results were roughly known in advance, although now this will not be the case. Thankfully, given guidance that the new data the company is gathering will also use retrospective samples, we know the request was not for a prospective trial, which would be prohibitively difficult given the indication.

No impact on adult AKI clinical programme

The delay in the paediatric programme, although unfortunate, will not have an impact on the way forward for the adult AKI indication, the application for which is still planned to be submitted in H219 following completion of the ongoing pivotal clinical trial. Adult AKI is the primary value driver for The NGAL Test: there are over 20 times as many adult ICU patients and we additionally expect the test to enter the emergency room and post-surgical markets. The adult AKI programme is being examined in an ongoing prospective clinical study and the company is targeting a 510(k) application in the second half of 2019.

Valuation: Increased to DKK993 from DKK966m

We have increased our valuation to DKK993 from DKK966m although it is lower on a per-share basis: DKK5.68 from DKK5.83 per share. The increase is driven by the recent offering (9.3m shares for DKK36.7m gross), but offset by adjustments to our paediatric AKI model. We have delayed approval to the end of 2019, added $0.5m in additional R&D expense, and lowered our probability of success to 50% (from 60%) because the new samples have not been previously examined for NGAL like the original sample set.

Paediatric AKI pushed back to Q419

In another incremental delay, BioPorto announced on 13 July 2019 it was withdrawing the paediatric 510(k) application it had submitted for The NGAL Test. The application was specifically for the risk assessment of AKI in critically ill patients under the age of 22 using urine NGAL concentrations. It decided to withdraw the application after the FDA sent an Additional Information (AI) request letter to the company that it knew could not be answered with the current clinical data set. The only details we have on the nature of the information request is that it concerned the clinical study data and collection of samples. The company intends to source the additional samples it needs to complete the application from its clinical collaborators at Cincinnati Children’s Hospital and resubmit its application by the end of 2019.

It is difficult to speculate about what information was requested and how this delay will affect the eventual chances of marketing clearance. Given that additional samples need to be collected, it is possible the agency requested additional data on the accuracy of the test in a particular group of patients. This could be in patients with a particular type of AKI (such as drug-induced AKI) or patients with other complicating factors (such as patients with infections that might complicate test results). An additional possibility is that the collection of samples lacked certain controls to prevent bias and therefore the collection process must be redone. It must be noted, however, that these additional information requests are not unusual and not necessarily an indication that the application will ultimately be rejected. However, they do place an additional burden on the company, which comes with extra expense and risk. For instance, the previous samples were culled from a clinical trial in which each patient received the NGAL ELISA test (not to be confused with The NGAL Test being examined here) and, as such, the content of the collection was already known to some degree, whereas we doubt this will be the case with the new samples.

Valuation

We have increased our valuation to DKK993m from DKK966m, although it is lower on a per-share basis: DKK5.68 from DKK5.83 per share. We have pushed back the timeline for paediatric AKI by six months to align with the new guidance and included an additional $0.5m in R&D expense to cover the collection and process of new samples. We have also lowered the probability of success to 50% from 60% given the increased uncertainty with gathering additional clinical data. We may adjust these expectations if more information regarding the FDA submission becomes available. These factors combined have reduced our valuation for the programme to DKK15.7m from DKK24.6m. These factors are offset by increased net cash following the recent private placement (details below).

Exhibit 1: Valuation of BioPorto

Programme

Market

Probability of success

Peak revenue ($m)

Valuation (DKKm)

The NGAL Test

ICU

50%

185.4

674.8

ED

30%

173.8

313.6

Post-surgery

30%

55.7

94.2

Research

100%

3.1

19.7

Paediatrics

50%

16.8

15.7

Other products

Research

100%

2.8

18.3

Unallocated costs

(211.2)

Total

925.1

Net cash and equivalents (Q119 + offering) (DKKm)

68.2

Total firm value (DKKm)

993.3

Total shares (m)

174.9

Value per share (DKK)

5.68

Dilutive warrants (m)

15.0

Total diluted shares (m)

190.0

Value per diluted share (DKK)

5.53

Source: BioPorto reports, Edison Investment Research

Financials

The company performed a private placement in June 2019 of 9.3m shares for gross proceeds of DKK36.7m. Under our previous assumptions, this new cash would have been sufficient to bring the company to profitability. However, we have adjusted our earnings expectations due to the delay in the paediatric programme, which has increased our expected financing requirement. Our expected normalised net loss for 2019 has increased to DKK41.2m from DKK38.3m. We expect the company to need a minimum of DKK10m in additional capital (recorded in 2020 as illustrative debt) to reach profitability in 2021 with the launch of the adult NGAL Test.

Exhibit 2: Financial summary

DKK000s

2017

2018

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

25,155

26,016

38,597

53,727

Cost of Sales

(6,907)

(8,181)

(10,357)

(12,329)

Gross Profit

18,248

17,835

28,240

41,398

Sales

(18,545)

(20,935)

(30,484)

(32,056)

R&D

(21,930)

(18,676)

(23,777)

(36,578)

Administrative

(14,267)

(20,005)

(23,006)

(24,156)

EBITDA

 

 

(33,134)

(42,103)

(45,936)

(48,300)

Normalised operating profit

 

 

(33,638)

(42,646)

(46,171)

(48,535)

Amortisation of acquired intangibles

0

0

0

0

Exceptionals

0

0

0

0

Share-based payments

(2,856)

865

(2,856)

(2,856)

Reported operating profit

(36,494)

(41,781)

(49,027)

(51,391)

Net Interest

(570)

164

234

215

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

(34,208)

(42,482)

(45,937)

(48,320)

Profit Before Tax (reported)

 

 

(37,064)

(41,617)

(48,793)

(51,176)

Reported tax

4,821

3,569

5,004

5,249

Profit After Tax (norm)

(29,758)

(38,124)

(41,226)

(43,364)

Profit After Tax (reported)

(32,243)

(38,048)

(43,789)

(45,928)

Minority interests

0

0

0

0

Discontinued operations

0

0

0

0

Net income (normalised)

(29,758)

(38,124)

(41,226)

(43,364)

Net income (reported)

(32,243)

(38,048)

(43,789)

(45,928)

Basic average number of shares outstanding (m)

145

157

174

183

EPS - basic normalised (DKK)

 

 

(0.21)

(0.24)

(0.24)

(0.24)

EPS - diluted normalised (DKK)

 

 

(0.21)

(0.24)

(0.24)

(0.24)

EBITDA Margin (%)

-131.7

-161.8

-119.0

-89.9

Normalised Operating Margin

-133.7

-163.9

-119.6

-90.3

BALANCE SHEET

Fixed Assets

 

 

2,623

3,563

7,757

7,522

Intangible Assets

1,629

1,374

5,803

5,803

Tangible Assets

263

1,437

1,202

967

Investments & other

731

752

752

752

Current Assets

 

 

62,981

62,638

60,198

29,079

Stocks

3,434

3,631

3,405

4,053

Debtors

6,380

8,036

9,517

13,248

Cash & cash equivalents

47,080

46,709

43,014

7,516

Other

6,087

4,262

4,262

4,262

Current Liabilities

 

 

(8,653)

(9,217)

(13,906)

(25,623)

Creditors

(3,412)

(4,451)

(6,948)

(8,665)

Tax and social security

(182)

(141)

(2,333)

(2,333)

Short term borrowings

0

0

0

(10,000)

Other

(5,059)

(4,625)

(4,625)

(4,625)

Long Term Liabilities

 

 

(883)

(787)

(2,772)

(2,772)

Long term borrowings

0

0

0

0

Other long term liabilities

(883)

(787)

(2,772)

(2,772)

Net Assets

 

 

56,068

56,197

51,278

8,206

Minority interests

0

0

0

0

Shareholders' equity

 

 

56,068

56,197

51,278

8,206

CASH FLOW

Op Cash Flow before WC and tax

(33,134)

(42,103)

(45,936)

(48,300)

Working capital

2,325

(631)

1,242

(2,661)

Exceptional & other

(595)

(74)

234

215

Tax

2,005

4,799

5,004

5,249

Net operating cash flow

 

 

(29,399)

(38,009)

(39,456)

(45,498)

Capex

(38)

(1,483)

0

0

Acquisitions/disposals

0

0

0

0

Net interest

0

0

0

0

Equity financing

40,921

39,319

36,014

0

Dividends

0

0

0

0

Other

(45)

(198)

(252)

0

Net Cash Flow

11,439

(371)

(3,695)

(45,498)

Opening net debt/(cash)

 

 

(35,641)

(47,080)

(46,709)

(43,014)

FX

0

0

0

0

Other non-cash movements

0

0

0

0

Closing net debt/(cash)

 

 

(47,080)

(46,709)

(43,014)

2,484

Source: BioPorto reports, Edison Investment Research

General disclaimer and copyright

This report has been commissioned BioPorto Diagnostics and prepared and issued by Edison, in consideration of a fee payable by BioPorto Diagnostics. 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 research department of Edison 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 Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison 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.

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.

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 BioPorto Diagnostics and prepared and issued by Edison, in consideration of a fee payable by BioPorto Diagnostics. 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 research department of Edison 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 Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison 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.

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.

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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