Porphyrins ring time on antibiotic resistance

Destiny Pharma 1 October 2018 Update
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Destiny Pharma

Porphyrins ring time on antibiotic resistance

Interim results

Pharma & biotech

1 October 2018

Price

87p

Market cap

£38m

$/£1.32

Net cash (£m) at 30 June 30 2018

15.1m

Shares in issue

43.6m

Free float

92.7%

Code

DEST

Primary exchange

LSE AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.8)

(18.3)

(45.1)

Rel (local)

(1.2)

(17.1)

(46.5)

52-week high/low

166p

87p

Business description

Destiny Pharma is dedicated to the discovery, development and commercialisation of new antimicrobial agents that have unique properties to improve outcomes for patients. Destiny’s first product, XF-73, is about to start a US Phase IIb clinical study.

Next events

FY results

March 2019

US Phase IIb XF-73 study start

Q119

Final US Phase IIb study results

Q419

Analyst

Andy Smith

+44 (0)20 3077 5700

Destiny Pharma is a research client of Edison Investment Research Limited

Destiny Pharma’s H118 financial results were less about the numbers and more about the preparation for XF-73’s US Phase IIb study in the prevention of post-surgical infections. Destiny’s operating loss was £2.7m, largely due to the build-up to the US Phase IIb study, which is expected to continue into FY19. The net loss was £2.3m. Cash at the end of H118 was £15.1m, which we estimate provides a runway through to 2020.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/16

0.0

(1.45)

(3.94)

0.0

N/A

N/A

12/17

0.0

(3.21)

(8.45)

0.0

N/A

N/A

12/18e

0.0

(7.32)

(14.28)

0.0

N/A

N/A

12/19e

0.5

(8.26)

(15.29)

0.0

N/A

N/A

Note: *PBT and EPS are on an as-reported basis.

On track, funded through 2020

Destiny’s interim results, less than a year after its IPO, confirmed that it is on track with preparations for XF-73’s US Phase IIb clinical study and, in addition, a new dermatology programme was announced. The H118 operating loss was £2.7m (vs £1.0m in H117), reflecting increasing expenses for the Phase IIb study. End-June cash was £15.1m (£0.9m at the end of H117), which we forecast gives Destiny a reach past 2020, well before when we expect a licensing transaction on XF-73.

Global need for antimicrobial resistance drugs

The US Centers for Disease Control estimates that at least two million Americans develop serious infections a year caused by bacteria resistant to antibacterial drugs, resulting in c 23,000 deaths annually. Thus, the tempo of public comment and government and industry incentives to combat antimicrobial resistance (AMR) by developing new agents is accelerating. This puts XF-73 and Destiny Pharma front and centre of these efforts. The FDA is currently discussing a range of reimbursement reforms that would incentivise the development of drugs with activity against multi-drug-resistant (MDR) organisms linked to proven clinical outcomes that could almost have been written for Destiny’s lead drug – XF-73, for the prevention of Staphylococcal post-surgical infections (by either MDR or sensitive bacteria). In addition, the UK government is reviewing push and pull rewards to incentivise AMR drug development, and Novo has set up the REPAIR Impact Fund to help replenish the anti-infective pipeline.

Virtually no change in valuation

We have made no changes to the expected FY18 cash balance and spend in our model. The new XF-73 dermatology programme will not enter Phase I until 2019 and we estimate that it will not have a material impact until 2020. We have made minor changes to working capital and exchange rates carried forward, which had a small negative effect on our valuation. This was balanced by a small revision to our forecasts of the opportunity of XF-73 in China, where peak annual sales move from $3m in our initiation to $24m. The net change to our valuation is minor, moving from £89.1m or £2.04 per share to £86.7m or £1.99 per share.

Exhibit 1: Financial summary

Accounts: IFRS, year-end December (£000s)

 

2014

2015

2016

2017

2018e

2019e

2020e

Income statement

 

 

 

 

 

 

 

 

 

Total revenues

 

 

-

-

-

-

-

500

-

Cost of sales

 

 

-

-

-

-

-

-

-

Gross profit

 

 

-

-

-

-

-

500

-

SG&A (expenses)

 

 

(441)

(482)

(505)

(1,011)

(2,100)

(1,900)

(1,700)

R&D costs

 

 

(1,090)

(274)

(496)

(387)

(4,700)

(6,900)

(1,900)

Other income/(expense)

 

 

(176)

(163)

(246)

(613)

-

-

-

Exceptionals and adjustments

 

(367)

(284)

(201)

(710)

(700)

(85)

(25)

Depreciation and amortisation

 

 

(0.8)

(0.8)

(1.3)

(2.1)

(3.9)

(2.3)

(2.3)

Reported EBIT

 

 

(2,076)

(1,205)

(1,450)

(3,222)

(7,504)

(8,387)

(3,627)

Finance income/(expense)

 

 

10.5

7.7

0.4

10.5

184.0

126.0

49.9

Reported PBT

 

 

(2,065)

(1,197)

(1,449)

(3,211)

(7,320)

(8,261)

(3,577)

Income tax expense (includes exceptionals)

 

 

303

182

192

234

1,100

1,600

500

Reported net income

 

 

(1,762)

(1,015)

(1,258)

(2,977)

(6,220)

(6,661)

(3,077)

Basic average number of shares, m

 

 

62

62

62

35,254

43,563

43,563

43,563

Basic EPS

 

 

(5.52)

(3.18)

(3.94)

(8.45)

(14.28)

(15.29)

(7.06)

Balance sheet

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

0.6

2.5

1.2

22.3

29.5

27.7

25.9

Goodwill

 

 

-

-

-

-

-

-

-

Intangible assets

 

 

-

-

-

-

-

-

-

Other non-current assets

 

 

-

-

-

-

-

-

-

Total non-current assets

 

 

0.6

2.5

1.2

22.3

29.5

27.7

25.9

Cash and equivalents

 

 

2,004

1,119

1,481

11,724

7,457

537

5,148

Other financial assets (term deposits)

 

 

0

-

-

5,000

4,000

4,000

4,000

Inventories

 

 

-

-

-

-

-

-

-

Trade and other receivables

 

 

397

201

217

277

634

466

277

Other current assets

 

 

28

23

0

60

38

38

38

Total current assets

 

 

2,429

1,343

1,698

17,061

12,129

5,041

9,463

Non-current loans and borrowings

 

 

-

-

-

-

-

-

7,576

Other non-current liabilities

 

 

-

-

-

-

-

-

-

Total non-current liabilities

 

 

-

-

-

-

-

-

7,576

Trade and other payables

 

 

302

39

58

152

769

255

152

Current loans and borrowings

 

 

-

-

-

-

-

-

-

Other current liabilities

 

 

156

55

97

246

246

246

246

Total current liabilities

 

 

458

94

155

397

1,015

501

397

Equity attributable to company

 

 

1,972

1,251

1,544

16,686

11,166

4,590

1,537

Non-controlling interest

 

 

-

-

-

-

-

-

-

Cashflow statement

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

(2,065)

(1,197)

(1,449)

(3,211)

(7,320)

(8,261)

(3,577)

Taxation expenses

 

 

-

-

-

-

-

-

-

Profit before tax

 

 

(2,065)

(1,197)

(1,449)

(3,211)

(7,320)

(8,261)

(3,577)

Net finance expenses

 

 

(11)

(8)

(0)

(10)

(184)

(126)

(50)

EBIT

 

 

(2,076)

(1,205)

(1,450)

(3,222)

(7,504)

(8,387)

(3,627)

Depreciation and amortisation

 

 

0.8

0.8

1.3

2.1

3.9

2.3

2.3

Share based payments

 

 

367

284

201

710

700

85

25

Other adjustments

 

 

-

-

-

-

-

-

-

Movements in working capital

 

 

(150)

(163)

78

165

260

(346)

85

Interest paid / received

 

 

-

-

-

-

-

-

-

Income taxes paid

 

 

303

182

182

192

1,100

1,600

500

Cash from operations (CFO)

 

 

(1,554)

(901)

(988)

(2,153)

(5,440)

(7,046)

(3,015)

Capex

 

 

(0.8)

(2.7)

0.0

(23.2)

(11.1)

(0.5)

(0.5)

Acquisitions & disposals net

 

 

-

-

-

-

-

-

-

Other investing activities

 

 

11

8

0

(4,990)

1,184

126

50

Cash used in investing activities (CFIA)

 

 

9.7

5.1

0.4

(5,013)

1,172.9

125.6

49.4

Net proceeds from issue of shares

 

 

3,011

10

1,351

17,409

-

-

-

Movements in debt

 

 

-

-

-

-

-

-

7,576

Dividends paid

 

 

-

-

-

-

-

-

-

Other financing activities

 

 

-

-

-

-

-

-

-

Cash from financing activities (CFF)

 

 

3,011

10

1,351

17,409

-

0

7,576

Currency translation differences and other

 

 

-

-

-

-

-

-

-

Increase/(decrease) in cash and equivalents

 

 

1,467

(885)

363

10,243

(4,267)

(6,920)

4,611

Currency translation differences and other

 

 

-

-

-

-

-

-

-

Cash and equivalents at end of period

 

 

2,004

1,119

1,481

11,724

7,457

537

5,148

Net (debt) cash (includes Term Deposits)

 

 

2,004

1,119

1,481

16,724

11,457

4,537

1,572

Movement in net (debt) cash over period

 

 

2,004

(885)

363

15,243

(5,267)

(6,920)

(2,965)

Source: Destiny Pharma, 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. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Destiny Pharma 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2018. “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

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, 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. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Destiny Pharma 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2018. “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

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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