Year-end update highlights transaction potential

ReNeuron Group 20 May 2019 Update
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ReNeuron Group

Year-end update highlights transaction potential

Year-end update

Pharma & biotech

20 May 2019

Price

302.5p

Market cap

£96m

$1.31/£

Cash (£m) at 31 March 2019

26.39

Shares in issue

31.6m

Free float

100%

Code

RENE

Primary exchange

LSE

Secondary exchange

NA

Share price performance

%

1m

3m

12m

Abs

31.5

487.4

341.6

Rel (local)

33.7

477.1

369.4

52-week high/low

325.00p

47.50p

Business description

ReNeuron is a UK biotech company developing allogeneic cell therapies. The first pivotal Phase IIb trial for CTX neural stem cells for chronic stroke disability is underway. Human retinal progenitor cells are also being studied for RP (in Phase I/IIa).

Next events

FY19 results

11 July 2019

Additional Phase I/IIa hRPC data

H119

Phase I/IIa hRPC study results

H219

Chronic stroke readout

H220

Analyst

Andy Smith

+44 (0)20 3077 5700

ReNeuron Group is a research client of Edison Investment Research Limited

ReNeuron’s year-end update summarised its recent clinical progress in the human retinal progenitor cell (hRPC) programme in retinitis pigmentosa (RP), which has become the focus for investors, and a slight delay to its CTX programme for stroke disability. The announced £26.4m cash position was slightly higher than our prior YE19 forecast of £25.7m and will help ReNeuron’s position in any further partnering discussions.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/17

0.9

(18.2)

(0.49)**

0.0

N/A

N/A

03/18

0.9

(21.0)

(55.66)

0.0

N/A

N/A

03/19e

0.0

(15.8)

(40.14)

0.0

N/A

N/A

03/20e

0.0

(14.4)

(35.38)

0.0

N/A

N/A

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

hRPC moves to centre stage

The recent early but striking data on ReNeuron's hRPC product for treating RP has become the focus of investor attention. This is because the data reported so far are good, the study has a placebo-controlled element (with one of the patient’s eyes untreated) and the results for all 12 of the patients in the Phase IIa study are expected to be reported in H219. We have not changed the timelines for the first regulatory approval for the hRPC product, which we had estimated to be in 2023, but the possibility exists that this timeline could accelerate if the data continue to prove compelling. In a similar way, the clinical trial results to date have raised the profile of this programme and, bearing in mind the cash-rich, innovative product-poor status of many big pharmaceutical and biotechnology companies, we would not be surprised to see another licensing transaction for the hRPC product.

Minor delay on CTX but robust cash position

In its year-end update, ReNeuron announced a minor delay to its lead CTX programme for stroke disability with results from the PISCES III study now expected in H220, rather than H1. We have not changed our launch timing of 2023 for the CTX product. We had included relatively conservative assumptions in our model that could absorb a six-month delay and, in any event, approval is expected to require two pivotal studies. ReNeuron’s update also noted the increase in business development activities and its £26.4m cash position – sufficient to support operations for at least the next year. This should enable ReNeuron to maintain a robust stance in any business development discussions that could include hRPC, CTX products, or the exosome drug delivery platform.

Valuation: Minor changes prior to FY19 results in July

We have moved the recognition of the Fosun upfront payment, which we had previously estimated in FY19, to FY20. We have also trimmed FY19 R&D spend by c £7m to take into account the slower start of the CTX study. Our valuation has changed slightly due to these modifications and the revised FY19 cash balance from £199m or 630p per share to £193m or 610p per share.

Exhibit 1: Financial summary

£'000s

2017

2018

2019e

2020e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

900

897

43

43

Cost of Sales

0

0

0

0

Gross Profit

900

897

43

43

R&D expenses

(16,648)

(16,657)

(15,356)

(16,123)

SG&A expenses

(4,139)

(4,616)

(4,078)

(4,485)

EBITDA

 

 

(19,814)

(20,222)

(17,337)

(14,393)

Operating Profit (before amort. and except.)

 

(19,887)

(20,376)

(17,482)

(14,566)

Intangible Amortisation

0

0

0

0

Exceptionals

0

0

0

0

Operating Profit

(19,887)

(20,376)

(17,482)

(14,566)

Other

0

0

0

0

Net Interest

1,722

(591)

1,693

130

Profit Before Tax (norm)

 

 

(18,165)

(20,967)

(15,789)

(14,436)

Profit Before Tax (FRS 3)

 

 

(18,165)

(20,967)

(15,789)

(14,436)

Tax

2,592

3,352

3,086

3,241

Profit After Tax (norm)

(15,573)

(17,615)

(12,702)

(11,195)

Profit After Tax (FRS 3)

(15,573)

(17,615)

(12,702)

(11,195)

Average Number of Shares Outstanding (m)

3,164.6

31.6

31.6

31.6

EPS - normalised (p)

 

 

(0.49)

(55.66)

(40.14)

(35.38)

EPS - FRS 3 (p)

 

 

(0.49)

(55.66)

(40.14)

(35.38)

Dividend per share (p)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

724

912

1,050

1,215

Intangible Assets

0

186

186

186

Tangible Assets

724

726

864

1,029

Other

0

0

0

0

Current Assets

 

 

58,136

41,706

30,337

20,127

Stocks

0

0

0

0

Debtors

1,060

1,285

1,285

1,285

Cash

53,061

37,411

25,965

15,601

Other

4,015

3,010

3,086

3,241

Current Liabilities

 

 

(5,703)

(5,949)

(5,949)

(5,949)

Creditors

(5,703)

(5,949)

(5,949)

(5,949)

Short term borrowings

0

0

0

0

Short term leases

0

0

0

0

Other

0

0

0

0

Long Term Liabilities

 

 

0

0

0

0

Long term borrowings

0

0

0

0

Long term leases

0

0

0

0

Other long term liabilities

0

0

0

0

Net Assets

 

 

53,157

36,669

25,438

15,393

CASH FLOW

Operating Cash Flow

 

 

(13,976)

(19,244)

(16,209)

(13,242)

Net Interest

520

383

1,693

130

Tax

1,340

4,357

3,352

3,086

Capex

(532)

(235)

(282)

(338)

Acquisitions/disposals

0

0

0

0

Financing

0

0

0

0

Dividends

0

0

0

0

Other

0

0

0

0

Net Cash Flow

(12,648)

(14,739)

(11,446)

(10,364)

Opening net debt/(cash)

 

 

(65,708)

(53,060)

(37,410)

(25,964)

HP finance leases initiated

0

0

0

0

Other

(0)

(911)

0

0

Closing net debt/(cash)

 

 

(53,060)

(37,410)

(25,964)

(15,600)

Source: ReNeuron, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by ReNeuron Group and prepared and issued by Edison, in consideration of a fee payable by ReNeuron Group. 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 Edison analyst 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 Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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 by ReNeuron Group and prepared and issued by Edison, in consideration of a fee payable by ReNeuron Group. 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 Edison analyst 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 Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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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