PTSD programme on track for results in Q3

Bionomics 24 August 2018 Update
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Bionomics

PTSD programme on track for results in Q3

Earnings update

Pharma & biotech

 

24 August 2018

Price

A$0.48

Market cap

A$232m

A$1.37/US$

Net cash (A$m) at 30 June 2018

3.5

Shares in issue

482.4m

Free float

84.03%

Code

BNO

Primary exchange

ASX

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

0.0

(16.5)

(4.0)

Rel (local)

(0.6)

(19.4)

(12.6)

52-week high/low

A$0.63

A$0.35

Business description

Bionomics is a clinical-stage pharmaceutical company with two small molecule discovery platforms: ionX for ion channel targets and MultiCore chemistry for rapid candidate identification. The company is testing BNC210 in Phase IIb for post-traumatic stress disorder and Phase IIa for agitation. It also has a programme licensed to Merck in Phase I for royalties and up to US$465m in future milestones.

Next events

PTSD Phase II results

Late Q318

Merck collaboration Phase I complete

H218

Agitation Phase I results

Q119

Analysts

Nathaniel Calloway

+1 646 653 7036

Maxim Jacobs

+1 646 653 7027

Bionomics is a research client of Edison Investment Research Limited

The fiscal year 2018, which ended in June, was a major transition for Bionomics as it realigned itself to focus on disorders of the central nervous system. This strategy hinges on the company’s lead asset BNC210, a negative allosteric modulator of the α7 nicotinic acetylcholine receptor, which has a potentially novel anxiolytic mechanism of action. The drug is in Phase IIb for post-traumatic stress disorder (PTSD) (with a readout expected in this quarter) and Phase IIa for agitation in the elderly.

Year end

Revenue (A$m)

PBT* (A$m)

EPS* (A$)

DPS (A$)

P/E (x)

Yield (%)

06/17

18.6

(4.4)

(0.01)

0.00

N/A

N/A

06/18

4.0

(24.4)

(0.05)

0.00

N/A

N/A

06/19e

17.9

(19.3)

(0.04)

0.00

N/A

N/A

06/20e

4.3

(32.5)

(0.06)

0.00

N/A

N/A

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

PTSD treatment complete, results coming

The company previously announced it completed treatment for its Phase IIb study of BNC210 in patients with PTSD in July 2018. The study enrolled 193 patients across three doses compared to placebo over 12 weeks. The primary endpoint of the study will be the CAPS-5 rating, which is the approvable endpoint for the disorder, but will also have readouts for common comorbidities such as depression and anxiety. The company has confirmed that data should be available in late Q3 CY2018.

Agitation study ongoing

The company has also confirmed that data should be available for its Phase IIa study of BNC210 in Q1 CY2019 for agitation in the elderly. The randomised, double-blind, placebo-controlled study is enrolling 40 patients from hospital wards across Australia. Agitation is a common symptom of patients with dementia and there is a significant need for non-sedating treatments for the condition.

Potential licensing: Legacy assets and Merck collab.

A part of the shift towards a focus exclusively on diseases of the central nervous system, the company has made the strategic decision to divest its legacy oncology assets: BNC101 for colorectal cancer, and BN105 for chronic lymphocytic leukaemia and melanoma. Bionomics also has an ongoing collaboration with Merck for the development of a drug to treat cognitive dysfunction, which has US$465m in future milestones attached. Phase I is expected to complete in H2 CY18.

Valuation: Increased to A$562m or A$1.16 per share

We have increased our valuation to A$562m or A$1.16 per basic share from A$491m or A$1.02 per basic share. This is driven by advancing our NPVs and exchange rate effects (A$/US$1.37 vs 1.25 before) and is offset by lower net cash. The company ended FY18 with A$24.9m in gross cash (A$3.5m net), and we expect it to require an additional A$40m to reach profitability in 2022.

Programme updates

Bionomics recently presented its fiscal year 2018 results and provided an update on its operations. The company’s core focus is the development of its drug BNC210, which is in Phase II clinical trials for PTSD and agitation. In the company update, it reiterated that results from these studies will be available at the end of calendar Q318 and calendar Q119 respectively. BNC210 is a negative allosteric modulator of the α7 nicotinic acetylcholine receptor and there is preliminary evidence that the drug may provide anxiolytic effects. Most importantly, the drug has a novel mechanism of action that may avoid the adverse effect profile typical of other anxiolytics in the GABA agonist class, such as benzodiazepines, which include sedation, cognitive impairment and loss of co-ordination. We expect the readout for the PTSD study to be highly informative for the prospects of this molecule in this and other indications. The Phase IIb study was initiated in June 2016 and completion of enrolment (at 193 patients) was announced in April 2018. Subsequently it was announced that treatment of these patients was completed in July 2018. Three doses of BNC210 (150mg, 300mg, 600mg) are being compared against placebo over 12 weeks of twice-daily treatment. The primary endpoint of the study is improvement in Clinician-Administered PTSD Scale for DSM-5 (CAPS-5), the approvable endpoint for PTSD.

In May 2018, the company initiated a Phase IIa clinical programme to investigate BNC210 for the treatment of agitation in the elderly. Agitation is a common symptom associated with dementia, affecting 13% to 24% of these patients.1 The Phase IIa study will be randomised, double-blind and placebo controlled. In total, 40 patients from geriatric hospital wards in Australia will be enrolled and monitored over a five-day treatment and a two-day follow-up period. The company confirmed in its earnings update that data from the study should be available in Q1 CY19.

Steinberg M, et al. (2008) Point and 5-year period prevalence of neuropsychiatric symptoms in dementia: the Cache County Study. Int J Geriatr Psychiatry 23, 170-177.

In the past fiscal year, the company made the strategic decision to shift its focus to exclusively diseases of the central nervous system, which out BNC210 in the spotlight. Historically, however, the company has developed drugs for other indications and it has two legacy assets BNC101 for colorectal cancer (CRC) and BNC105 for chronic lymphocytic leukaemia and melanoma. The company has completed the Phase I clinical study of BNC101. Detailed safety data from the trial have not been released, but the company previously stated at an interim update that no safety issues were observed, and it provided an update in a poster presentation at the AACR 2018 meeting that no biomarkers of gut toxicity were observed. We expect to update our valuation following the release of any additional data. The company has stated its intension to out-license both BNC101 and BNC105, which remains an ongoing strategic goal.

Finally, the company has an ongoing collaboration with Merck, which is developing a drug licensed from Bionomics in Phase I. Few details of the collaboration or the drug have been released, although it has been confirmed that it is a candidate for the treatment of cognitive dysfunction. The company has already received US$30m in milestones with the potential for US$465m more.

Valuation

We have increased our valuation to A$562m or A$1.16 per basic share from A$491m or A$1.02 per basic share. This change is driven by advancing our NPVs to the most recent period and exchange rate effects and is offset by lower net cash. On a constant currency basis (at previous A$1.25/US$ forex), our valuation would be A$514m. The fundamentals of our model remain unchanged. The upcoming readout from the PTSD Phase II study will be a major inflection point in our valuation, depending on its outcome.

Exhibit 1: Valuation of Bionomics

Program

Market

Prob. of success

Launch year

Peak sales (A$m)

Margin/ Royalty

rNPV (A$m)

BNC210

PTSD

30%

2022

1004.3

54%

410.2

BNC210

Agitation

20%

2023

283.9

52%

55.4

BNC101

CRC

10%

2025

1209.3

55%

94.9

Merck collaboration milestones

Alzheimer's associated cognitive dysfunction

10%

2025

1995.8

5%

18.8

CRO business

5.4

4%

1.1

Unallocated costs

-21.5

Total

 

 

 

 

 

558.9

Net cash and equivalents (FY18) (A$m)

3.5

Total firm value (A$m)

562.4

Total shares (m)

482.8

Value per share (A$)

1.16

Dilutive warrants and options (m)

51.51

Total diluted shares

534.3

Value per diluted share (A$)

1.11

Source: Bionomics reports, Edison Investment Research

Financials

The company reported a loss of A$24.6m in its fiscal year ending 30 June 2018. The majority of this loss is attributable to the company’s ongoing development programmes, with an R&D expenditure of A$25.2m. The company did report some revenue from its CRO business (A$3.8m), although this value has been steadily declining (A$5.3m in 2017). The majority of the remainder of the company’s income was from R&D incentives and grants (A$8.2m). Operational cash burn for the year was A$20.5m, which came in slightly higher than our expectations (A$17.5m), due to a mix of reasons (operational spend, exchange rate effects, financing costs, etc). Adjusting our future burn rate on this basis, we expect the company to require A$40m in additional capital to reach profitability in 2022, which is an increase from our previous estimate of A$35m. The company ended FY18 with A$24.9m in gross cash, which we expect to be able to support the company through the upcoming clinical results for PTSD and agitation. The company has A$21.4m in outstanding debt, predominantly associated with the company’s bank loan facility (at 9%).

Exhibit 1: Financial summary

$'000

2017

2018

2019e

2020e

30-June

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

18,606

3,954

17,896

4,280

Cost of Sales

0

0

0

0

Gross Profit

18,606

3,954

17,896

4,280

EBITDA

 

 

(3,214)

(22,539)

(17,696)

(28,396)

Normalised operating profit

 

 

(3,671)

(22,947)

(18,104)

(28,805)

Amortisation of acquired intangibles

(1,286)

(1,259)

(1,259)

(1,259)

Exceptionals

0

(20)

0

0

Share-based payments

(504)

(537)

(537)

(537)

Reported operating profit

(5,461)

(24,764)

(19,901)

(30,601)

Net Interest

(766)

(1,483)

(1,204)

(3,741)

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

(4,437)

(24,430)

(19,309)

(32,546)

Profit Before Tax (reported)

 

 

(6,227)

(26,247)

(21,105)

(34,343)

Reported tax

(523)

1,161

891

1,451

Profit After Tax (norm)

(4,810)

(23,349)

(18,493)

(31,171)

Profit After Tax (reported)

(6,750)

(25,086)

(20,214)

(32,892)

Minority interests

0

0

0

0

Other comprehensive income

(114)

502

0

0

Net income (normalised)

(4,924)

(22,847)

(18,493)

(31,170)

Net income (reported)

(6,864)

(24,583)

(20,214)

(32,892)

Basic average number of shares outstanding (m)

481

482

506

532

EPS - basic normalised (c)

 

 

(1.00)

(4.84)

(3.65)

(5.86)

EPS - diluted normalised (c)

 

 

(0.98)

(4.74)

(3.58)

(5.75)

EPS - basic reported (c)

 

 

(1.40)

(5.20)

(3.99)

(6.19)

Dividend (c)

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

29,597

29,146

27,965

26,785

Intangible Assets

26,595

26,017

24,758

23,499

Tangible Assets

2,618

2,744

2,823

2,902

Investments & other

384

384

384

384

Current Assets

 

 

54,478

35,920

17,266

24,957

Stocks

426

490

490

490

Debtors

9,893

8,982

12,791

14,080

Cash & cash equivalents

42,874

24,930

2,467

8,868

Other

1,286

1,518

1,518

1,518

Current Liabilities

 

 

(13,889)

(13,285)

(9,198)

(9,299)

Creditors

(3,673)

(5,860)

(7,470)

(7,570)

Tax and social security

0

0

0

0

Short term borrowings

(8,496)

(5,696)

0

0

Other

(1,720)

(1,729)

(1,729)

(1,729)

Long Term Liabilities

 

 

(29,733)

(34,823)

(38,752)

(77,516)

Long term borrowings

(10,014)

(15,736)

(21,433)

(61,433)

Other long term liabilities

(19,719)

(19,087)

(17,319)

(16,084)

Net Assets

 

 

40,454

16,958

(2,719)

(35,074)

Minority interests

0

0

0

0

Shareholders' equity

 

 

40,454

16,958

(2,719)

(35,074)

CASH FLOW

Op Cash Flow before WC and tax

(3,214)

(22,539)

(17,696)

(28,396)

Working capital

51

2,251

(619)

2,339

Exceptional & other

1,723

(166)

(4,585)

(7,427)

Tax

0

0

0

0

Net operating cash flow

 

 

(1,440)

(20,453)

(22,900)

(33,485)

Capex

(248)

(487)

(487)

(487)

Acquisitions/disposals

0

0

0

0

Net interest

1,201

569

924

373

Equity financing

144

411

0

0

Dividends

0

0

0

0

Other

0

0

0

0

Net Cash Flow

(342)

(19,960)

(22,463)

(33,599)

Opening net debt/(cash)

 

 

(24,281)

(24,364)

(3,498)

18,965

FX

(10)

(206)

0

0

Other non-cash movements

435

(700)

0

0

Closing net debt/(cash)

 

 

(24,364)

(3,498)

18,965

52,564

Source: Bionomics, 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 Bionomics 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

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United Kingdom

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295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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 Bionomics 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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