BioPorto Diagnostics |
Paediatric AKI application pulled, Q4 resubmission |
Clinical update |
Healthcare equipment |
19 July 2019 |
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BioPorto Diagnostics is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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
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