Bioasis Technologies — Shifting gears to R&D

Bioasis Technologies (CN: BTI)

Last close As at 24/04/2024

0.26

−0.04 (−13.33%)

Market capitalisation

19m

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Research: Healthcare

Bioasis Technologies — Shifting gears to R&D

We are expecting a major shift in day-to-day operations for Bioasis going into the second half of FY21 (year ending February) as it transitions to developing a pathway to the clinic for xB3-001 and the advancement of its preclinical programs. Progress on the business front has been encouraging over the first half, with the signing of the licensing agreement with Chiesi Group in June. This will offset some of Bioasis’s costs, but we expect more partnering activity and other fund-raising to bridge that gap.

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Written by

Healthcare

Bioasis Technologies

Shifting gears to R&D

Earnings update

Pharma & biotech

4 November 2020

Price

C$0.31

Market cap

C$21m

C$1.36/US$

Net cash (C$m) at 31 August 2020

1.9

Shares in issue

68.0m

Free float

99%

Code

BTI

Primary exchange

TSX Venture

Secondary exchange

OTCQB

Share price performance

%

1m

3m

12m

Abs

(10.0)

12.5

65.8

Rel (local)

(8.5)

14.1

72.6

52-week high/low

C$0.45

C$0.15

Business description

Bioasis Technologies is a biopharma company developing the xB3 platform to aid in the delivery of molecules to the brain using receptor mediated transcytosis. The company’s lead program is xB3001, which is in preclinical development for brain metastases in HER2+ metastatic breast cancer patients. The company has additional preclinical programs in pain, neurodegenerative diseases and rare diseases.

Next events

xB3-001 IND

2021

Analyst

Nathaniel Calloway

+1 646 653 7036

Bioasis Technologies is a research client of Edison Investment Research Limited

We are expecting a major shift in day-to-day operations for Bioasis going into the second half of FY21 (year ending February) as it transitions to developing a pathway to the clinic for xB3-001 and the advancement of its preclinical programs. Progress on the business front has been encouraging over the first half, with the signing of the licensing agreement with Chiesi Group in June. This will offset some of Bioasis’s costs, but we expect more partnering activity and other fund-raising to bridge that gap.

Year end

Revenue (C$m)

PBT*
(C$m)

EPS*
(C$)

DPS
(C$)

P/E
(x)

Yield
(%)

02/19

1.4

(2.4)

(0.04)

0.00

N/A

N/A

02/20

0.6

(3.4)

(0.06)

0.00

N/A

N/A

02/21e

8.7

(0.2)

(0.00)

0.00

N/A

N/A

02/22e

3.7

(9.8)

(0.13)

0.00

N/A

N/A

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

Reigniting the R&D engine

The next step for xB3-001 is the initiation of a GLP toxicology study and manufacture of sufficient doses for the toxicology study as well as the planned Phase Ib/II study over the coming year. This will prepare the company for an IND filing at the end of calendar 2021. At present R&D costs are minimal (C$0.1m in Q221), but we expect all of these activities to increase R&D costs significantly, and we forecast C$5.4m in R&D in FY21 (down from C$6.6m previously) and C$8.6m in FY22.

Expect to hear more on deeper pipeline

In its quarterly update, Bioasis also indicated that it is advancing three preclinical programs: xB3-004 to target neuroinflammation; xB3-007, an xB3 derivative of Cerezyme for Gaucher’s disease, and potentially Parkinson’s disease and Lewy body dementia; and an undisclosed drug for frontotemporal lobe dementia.

Partnering efforts continue to pay off

The biggest development from Q221 was signing the collaboration agreement with Chiesi Group in June 2020 for US$3m upfront, up to US$138m in future potential milestones, in addition to royalties for a series of assets targeting lysosomal storage disorders. Xoma had a pre-existing option agreement on these assets, which it announced on 3 November 2020 that it would be exercising. Xoma will acquire a royalty stream (low single digits) and an undisclosed share of the milestones in exchange for a US$1.2m payment.

Valuation: C$60m or C$0.88 per basic share

Our valuation is C$60.0m or C$0.88 per basic share, compared to C$60.1m or C$0.89 previously. We have rolled forward our NPVs and adjusted for the new cash balance (C$3.6m). We expect the company will need to raise additional capital to complete the preclinical activities necessary for xB3-001 to enter the clinic: we include C$20m in financing in FY21, as part of a C$110m total future funding need to bring xB3-001 to market (recorded as illustrative debt).

Where it stands and future directions

Bioasis reported its results for fiscal Q221 (ending in August 2020) on 29 October 2020. The company reported a profitable quarter (C$1.9m net income) following the receipt of the US$3m upfront payment from Chiesi Group (previously, we amortized this payment in our prior forecast, but it was wholly recognized in the quarter in the company’s report and we have adjusted our estimates accordingly). Operating expenses were only C$1.0m, which was lower than our expectations due to the timing of some of the company’s R&D activities. R&D spending was only C$0.1m for the quarter.

The company has not yet initiated some of the significant preclinical development projects necessary to prepare xB3-001 for an IND application and for the clinic. We do not consider this a major delay but rather an issue of timing between quarters. Over the coming months, we expect Bioasis to initiate manufacturing of product for the remaining preclinical studies and the upcoming Phase Ib/II study. Additionally, the company will need to perform an animal GLP toxicology study to support the IND.

Additionally, Bioasis has highlighted three preclinical development programs that we expect to be an increased focus going forward. The first is xB3-004, a brain-targeted antibody against Interleukin 1 receptor antagonist (IL1RA). This product was previously licensed by MedImmune, where it was being investigated for neuroinflammatory disorders and neurodegeneration. It also highlighted xB3007, which the company believes has potential in Gaucher's disease, Parkinson's disease or Lewy body dementia. xB3-007 is an xB3 derivative of the enzyme replacement drug β-glucocerebrosidase (aka Cerezyme) used in the treatment of Gaucher’s. And finally, the company mentioned an ‘as yet undisclosed’ target for the treatment of frontotemporal lobe dementia. We expect to have a better sense of the potential for these programs after the company performs some initial preclinical testing in the coming months.

We forecast R&D spending of C$4.9m for H221 to cover these costs. We have reduced our expected R&D spend for FY21 to $5.4m (from $6.6m previously) to reflect the current timing of events and spending to date (including on undisclosed programs). We may further delay these costs into FY22 if the company does not secure additional financing to support these development efforts soon.

We expect the company to need C$110m in additional capital to reach profitability under the current development plan. For our model, this includes C$20m in FY21 to support the company through IND filing and into the dosing portion of the planned Phase Ib/II study. Additionally, we include C$50m in FY23 and C$40m in FY26 (both unchanged) as illustrative debt. We expect the company to be pursuing this financing immediately through a number of avenues, including additional partnering deals. We are highly encouraged by the Chiesi Group deal and believe that there is a wide-open field of additional opportunities to license the platform. Additional milestones from this program or the collaboration with Prothena may also offset future financing needs. We include provisional milestone payments from Prothena of US$3m in each of FY21 and FY22 (before the 10% royalty payable to Xoma).

Xoma exercises option on drugs in Chiesi Group collaboration

On 3 November 2020, Xoma announced that it would be exercising an option it held to receive a royalty stream on the four products currently being developed in collaboration with Chiesi Group. As a reminder, the development collaboration between Bioasis and Chiesi Group was for four products to treat lysosomal storage disorders, with Bioasis to receive a US$3m upfront, up to $138m in milestones in addition to royalties. The option being exercised by Xoma would entitle it to a low single-digit royalty on net sales and an undisclosed portion of future milestones in exchange for US$1.2m. We are encouraged by the participation of Xoma and its willingness to invest in the program, although it will reduce the economic benefit to Bioasis from the Chiesi Group deal slightly. Additionally, it is worth noting that Xoma has similar rights on an additional future licensing agreement entered into by Bioasis, so we may see a similar option exercised by Xoma on Bioasis’s next deal.

Valuation

Our valuation is roughly flat following minor adjustments: C$60.0m or C$0.88 per basic share vs C$60.1m or C$0.89 per share, previously. Changes to our model include rolling forward our NPVs, which was offset by lower net cash (C$3.6m for Q221 + the Xoma payment, from a previously estimated C$4.0m). We have reduced the royalty payments to be received for the Chiesi Group collaboration by 1% and the milestones by 20% to account for the Xoma deal. Our model has also been adjusted for the above changes to spending, but the impact on the valuation is small.

Exhibit 1: Valuation of Bioasis

Development Program

Indication

Clinical stage

Geography

Prob. of success

Launch year

Launch pricing ($/month)

Peak sales (US$m)

Patent/ exclusivity protection

Royalty/ margin

rNPV (C$m)

xB3-001

Treatment of mBC BMs

IND

US

10%

2027

11500

125

2039

52%

$16.94

Europe

10%

2027

7500

115

2039

52%

$15.72

R&D

10%

($11.38)

1st line, prevention of BCBMs

Planned

US

5%

2032

12700

397

2039

57%

$13.63

Europe

5%

2032

8200

437

2039

57%

$15.32

R&D

5%

($3.63)

Prothena milestones

Undisclosed

Discovery

2.5%

2028

$3.50

Chiesi Group

4 lysosomal storage disorders

Discovery

2.5%

2029

*400

2041

*7–11%

$6.29

Total

 

 

 

 

 

 

 

 

 

$56.4

Net cash and equivalents (Q221 + Xoma upfront) (C$m)

$3.6

Total firm value (C$m)

$60.0

Total basic shares (m)

68.0

Value per basic share (C$)

$0.88

Dilutive warrants and options (m)

27.0

Total diluted shares (m)

95.0

Value per diluted share (C$)

$0.74

Source: Bioasis reports, Edison Investment Research. Note: *Peak sales are a placeholder, royalty rates estimated. BCBMs = breast cancer brain metastases.

Exhibit 2: Financial summary

C$’000s

2019

2020

2021e

2022e

Year end 28 February

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,422.0

606.4

8,694.0

3,726.0

Cost of Sales

(10.4)

0.0

0.0

0.0

Gross Profit

1,411.6

606.4

8,694.0

3,726.0

R&D

(1,954.3)

(2,033.6)

(5,435.1)

(8,645.2)

SG&A

(4,314.5)

(3,174.4)

(4,076.3)

(5,503.0)

EBITDA

 

 

(3,805.0)

(3,965.4)

(188.8)

(9,794.5)

Normalised operating profit

 

 

(3,815.8)

(3,977.4)

(193.0)

(9,797.8)

Amortisation of acquired intangibles

(61.1)

(58.8)

(58.8)

(58.8)

Exceptionals

0.0

0.0

0.0

0.0

Share-based payments

(980.2)

(565.6)

(565.6)

(565.6)

Reported operating profit

(4,857.2)

(4,601.7)

(817.4)

(10,422.2)

Net Interest

1.8

(46.9)

0.0

0.0

Other income

986.9

592.2

0.0

0.0

Exceptionals

395.1

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(2,432.1)

(3,432.1)

(193.0)

(9,797.8)

Profit Before Tax (reported)

 

 

(3,473.4)

(4,056.4)

(817.4)

(10,422.2)

Reported tax

0.0

0.0

0.0

0.0

Profit After Tax (norm)

(2,432.1)

(3,432.1)

(193.0)

(9,797.8)

Profit After Tax (reported)

(3,473.4)

(4,056.4)

(817.4)

(10,422.2)

Minority interests

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

Net income (normalised)

(2,432.1)

(3,427.1)

(187.0)

(9,790.8)

Net income (reported)

(3,473.4)

(4,056.4)

(817.4)

(10,422.2)

Basic average number of shares outstanding (m)

56,675

62,271

69,886

73,380

EPS - basic normalised (C$)

 

 

(0.04)

(0.06)

(0.00)

(0.13)

EPS - diluted normalised (C$)

 

 

(0.04)

(0.06)

(0.00)

(0.13)

EPS - basic reported (C$)

 

 

(0.06)

(0.07)

(0.01)

(0.14)

Dividend (C$)

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

360.9

290.2

227.1

165.0

Intangible Assets

327.8

269.0

210.2

151.4

Tangible Assets

33.1

21.1

16.9

13.5

Investments & other

0.0

0.0

0.0

0.0

Current Assets

 

 

1,382.3

651.6

22,190.1

14,145.7

Stocks

0.0

0.0

0.0

0.0

Debtors

9.7

13.4

0.0

0.0

Cash & cash equivalents

1,360.0

576.4

22,128.2

14,083.8

Other

12.6

61.9

61.9

61.9

Current Liabilities

 

 

(1,262.9)

(2,476.7)

(3,352.0)

(5,102.1)

Creditors

(998.5)

(1,991.1)

(3,352.0)

(5,102.1)

Tax and social security

0.0

0.0

0.0

0.0

Short term borrowings

0.0

(485.6)

0.0

0.0

Other

(264.4)

0.0

0.0

0.0

Long Term Liabilities

 

 

(1,027.0)

(951.3)

(20,951.3)

(20,951.3)

Long term borrowings

0.0

(517.9)

(20,517.9)

(20,517.9)

Other long term liabilities

(1,027.0)

(433.4)

(433.4)

(433.4)

Net Assets

 

 

(546.7)

(2,486.3)

(1,886.1)

(11,742.7)

Minority interests

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

(546.7)

(2,486.3)

(1,886.1)

(11,742.7)

CASH FLOW

Op Cash Flow before WC and tax

(3,805.0)

(3,965.4)

(188.8)

(9,794.5)

Working capital

568.4

691.5

1,374.3

1,750.1

Exceptional & other

6.9

(24.8)

0.0

0.0

Tax

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(3,229.7)

(3,298.7)

1,185.5

(8,044.4)

Capex

(2.1)

0.0

0.0

0.0

Acquisitions/disposals

395.1

0.0

0.0

0.0

Net interest

0.0

0.0

0.0

0.0

Equity financing

3,526.7

1,205.0

852.0

0.0

Dividends

0.0

0.0

0.0

0.0

Other

0.0

0.0

(485.6)

0.0

Net Cash Flow

690.0

(2,093.6)

1,551.8

(8,044.4)

Opening net debt/(cash)

 

 

(678.0)

(1,360.0)

427.4

(1,610.4)

FX

(7.9)

22.2

0.0

0.0

Other non-cash movements

0.0

284.0

486.0

0.0

Closing net debt/(cash)

 

 

(1,360.0)

427.4

(1,610.4)

6,434.0

Source: Bioasis reports, Edison Investment Research.


General disclaimer and copyright

This report has been commissioned by Bioasis Technologies and prepared and issued by Edison, in consideration of a fee payable by Bioasis Technologies. 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.

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This report has been commissioned by Bioasis Technologies and prepared and issued by Edison, in consideration of a fee payable by Bioasis Technologies. 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.

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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.

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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

1185 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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Acorn Income Fund Limited — Looking ahead with cautious optimism

Acorn Income Fund (AIF) has seen its NAV performance stabilise since the COVID-19 driven sell-off earlier this year, although it remains considerably below its 12-month high, suggesting significant recovery potential. Small-cap portfolio managers Simon Moon and Fraser Mackersie point to the robust balance sheets of the companies they own, many of which have continued to pay dividends while some UK blue-chips have cut payments; they have also added to their own holdings in AIF given the attractive 8.8% dividend yield. In the income portfolio (c 25% of assets), managers Chun Lee and Robin Willis have taken advantage of better-value sterling bonds and high-yielding investment companies at deep discounts, helping AIF to support another year of dividend growth (part-funded from reserves).

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