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Research: Healthcare
The year 2020 was a very productive year for Telix, in spite of the difficulties of COVID-19, but it is safe to say that 2021 could be an even more transformative year for the company as it potentially launches its first commercial product, TLX591-CDx (now branded as Illuccix). Moreover, the company will undertake its biggest clinical challenge yet with the advancement of its lead therapeutic program TLX591 to Phase III.
Written by
Telix Pharmaceuticals |
2021 is a major year commercially and clinically |
Financial update |
Pharma & biotech |
11 March 2021 |
Share price performance
Business description
Next events
Analyst
Telix Pharmaceuticals is a research client of Edison Investment Research Limited |
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The year 2020 was a very productive year for Telix, in spite of the difficulties of COVID-19, but it is safe to say that 2021 could be an even more transformative year for the company as it potentially launches its first commercial product, TLX591-CDx (now branded as Illuccix). Moreover, the company will undertake its biggest clinical challenge yet with the advancement of its lead therapeutic program TLX591 to Phase III.
Year end |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
15.2 |
(31.1) |
(0.12) |
0.00 |
N/A |
N/A |
12/20 |
17.5 |
(47.9) |
(0.17) |
0.00 |
N/A |
N/A |
12/21e |
23.6 |
(45.9) |
(0.16) |
0.00 |
N/A |
N/A |
12/22e |
33.6 |
(46.0) |
(0.15) |
0.00 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortization of acquired intangibles, exceptional items and share-based payments.
Revenue increase driven by licensing
Product related revenue for 2020 was A$5.2m, with the increase over 2019 (A$3.5m) due to the amortization of the upfront payment from the China Grand Pharma (CGP) transaction. Revenue from direct sales ($3.3m) was down 6%, but cash receipts ($3.9m) were up 15% on the year, which is surprising given the impact of COVID-19 on clinical research. These revenues are associated with the research sales of the TLX591-CDx kit to hospitals, and we expect this interest to translate into initial market traction as we anticipate approval of the product in early H221.
ProstACT to become major focus
ProstACT is the company’s planned Phase III study of TLX591 for the treatment of prostate cancer. The clinical development plan was finalized in an FDA meeting in November 2020, and the company is ready to start the clinical study. Sites in Australia will begin enrolling in Q221, followed by sites in the US and Europe in the later part of the year. The target enrolment of the study will be 390 patients.
Still waiting on TRALA data
Management previously guided to the imminent release of data from the TRALA Phase I study of TLX66 (aka. besilesomab) in systemic amyloid light chain amyloidosis (SALA). Following the acquisition of TheraPharm in December 2020 (A$16.5m), Telix indicated the study was complete with data to be available shortly. Although the data have not been released yet, the company reaffirmed that it will be released in the coming weeks.
Valuation: Increased to A$1,072m or $3.82/share
We have increased our valuation significantly to A$1,072m or $3.82 per basic share, from A$671.0m or A$2.44 per share, previously. The increase is driven by no longer assuming the company will need a partner to advance TLX591 or TLX250, although we now expect the company to need A$30m in additional capital before profitability. The valuation was previously suspended pending outcomes of TRALA, although we have now decided to value the TLX66 program at cost until this data is released.
Financial and operational update
Product related revenue for 2020 was A$5.2m, with the increase over 2019 (A$3.5m) due to the amortization of the upfront payment from CGP. Revenue from direct sales (A$3.2m) was down 6%, but cash receipts (from TLX591-CDx kit sales) were up 15% on the year (to A$3.9m), which is a positive surprise given the impact of COVID-19 on clinical research. These revenues are associated with the research sales of the TLX591-CDx kit to hospitals, and we expect this interest to translate into initial market traction with the approval of the product expected in H221. The PDUFA date for the product is in September 2021, but the company stated that it is expecting a response before that. European product approval is expected on a country-by-country basis starting in Q321.
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Exhibit 1: TLX-591-CDx kit sales |
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Source: Telix |
The company ended the year with A$77.6m in net cash (A$77.9m gross cash). This was bolstered by the company’s deal with CGP in November, which included a US$25m upfront and a US$25m equity investment (along with royalties and US$400m in additional milestones). In our models we previously assumed that the company would need partnerships at this stage to advance the TLX591 and TLX250 therapeutic programs, but the company now has both the cash and the intent to move these products forward independently without a deal at this development stage. We still believe it is likely that these programs will be partnered for their eventual commercialization, but the company will have significantly more bargaining power by partnering them at a later stage. More cash may be needed if the company is to fully develop both programs without outside support (and hence our model includes $30m illustrative debt financing in 2022).
Of these programs, TLX591 is poised to be the lead development program for the company. The ProstACT clinical study is a pivotal Phase III clinical trial with a target enrolment of 390 patients with PSMA+ metastatic castration resistant prostate cancer (mCRPC). The FDA has confirmed with the company that the primary endpoint can be radiologic progression free survival (rPFS). The company will begin enrolling patients in Australia starting in Q221 and in the US and Europe later in the year in H221. In other clinical work, the company continues to enroll its pivotal Phase III study for TLX250-CDx (the ZIRCON study), which recently opened enrolment in the US after COVID-19 related delays. The company will also be starting its Phase II study of the therapeutic TLX250 for the treatment of kidney cancer in May 2021 following the FDA review of its IND. The company’s other ongoing development programs are detailed in Exhibit 2.
Exhibit 2: Telix ongoing and planned studies
Trial |
Product |
Indication |
Type |
Stage |
Status |
ProstACT |
TLX591 |
Prostate Cancer |
Therapeutic |
Phase III |
Starting Q221 |
Starlite |
TLX250 |
Kidney Cancer |
Therapeutic |
Phase II |
Starting May 2021 |
ZIRCON |
TLX250-CDx |
Kidney Cancer |
Imaging |
Phase III |
Ongoing |
Cupid |
TLX592 |
Prostate Cancer |
Therapeutic |
Phase I |
Starting March 2021 |
Noble |
TLX599-CDx |
Prostate Cancer |
Imaging |
Phase II |
Starting early 2021 |
IPAX-1 |
TLX101 |
GBM |
Therapeutic |
Phase I/II |
Ongoing |
Source: Telix
The company provided a clinical update on the Phase I/II study for TLX101 or the treatment of glioblastoma multiforme (GBM) in December 2020. A total of eight patients have been enrolled in the study to date. These are patients with severe relapse and refractory GBM, whose typical PFS is 2–2.5 months according to the company. Even though only the lowest dose has been tested, PFS (4.33 months) was longer than this historical control. It can be difficult to draw definitive conclusions with such low patient numbers, but this is the response that would be expected if the drug was providing a benefit. Moreover, GBM is a notoriously hard disease to treat so any activity is notable.
Lastly, the company has provided an update on its recent acquisition of TheraPharm and TLX66 (aka 90Y-besilesomab). Shortly before the acquisition, TheraPharm had completed the TRALA study of the product for the treatment of SALA, a rare disease due to misfolded antibody proteins. The company previously guided towards this data being released shortly after the December acquisition, but the study’s authors are still analyzing the data. The company reaffirmed that it expects these results to be out very shortly, at a time measured in weeks.
Valuation
Our valuation was suspended as of the last report because data from the TRALA trial was expected imminently. Considering this data has not been released (although management suggests it should be very soon), we have decided to update our valuation but are now valuing the TheraPharm acquisition at cost (A$16.7m) at least until the data is released.
We have increased our valuation significantly to A$1,072m or $3.82 per basic share from A$671.0m or A$2.44 per share previously. The main reason for this increase in our valuation is that with the company’s current financial position, we believe it would be able to develop its therapeutic assets TLX591 and TLX250 without partnership support. We still consider it a high probability that these programs will be partnered, but it is not an obligation for their continued development. This has allowed us to remove the financing/partnering risk adjustment from these programs, which has increased the probabilitys of success to 40% and 30% respectively from (from 20%). TLX250 remains higher risk because it will need to complete the Phase II Starlight trial. Initial enrolment in the Starlight trial was negatively affected by COVID-19, and so part of this upgraded valuation is offset by delaying the potential approval of the product to 2026 (from 2025 previously). Other changes to our valuation include rolling forward our NPVs and updated net cash (A$77.6m at the end of Q420, from A$95.1m previously).
Exhibit 3: Valuation of Telix
|
Peak sales (US$m) |
Likelihood |
rNPV |
rNPV/share |
TLX250-CDx kidney cancer imaging |
80 |
85% |
105.4 |
$0.38 |
TLX250 kidney cancer therapeutic |
490 |
30% |
140.0 |
$0.50 |
TLX591-CDx prostate cancer imaging |
180 |
80% |
240.4 |
$0.86 |
TLX591 prostate cancer therapeutic |
1,190 |
40% |
486.0 |
$1.73 |
TLX101 brain cancer therapeutic |
580 |
10% |
59.4 |
$0.21 |
TheraPharm |
16.7 |
$0.06 |
||
SG&A |
(53.4) |
($0.19) |
||
Portfolio total |
994.4 |
$3.55 |
||
Net cash (Q420) |
77.6 |
$0.28 |
||
Enterprise total |
1072.0 |
$3.82 |
Source: Telix reports, Edison Investment Research
Exhibit 4: Financial summary
|
A$'000s |
|
2019 |
2020 |
2021e |
2022e |
Year end 31 December |
AASB |
AASB |
AASB |
AASB |
||
PROFIT & LOSS |
||||||
Sales, royalties, milestones |
3,485 |
5,213 |
6,561 |
13,914 |
||
Other (includes R&D tax rebate) |
11,693 |
12,318 |
17,010 |
19,664 |
||
Revenue |
|
|
15,178 |
17,531 |
23,571 |
33,578 |
R&D expenses |
(21,162) |
(23,085) |
(43,250) |
(55,200) |
||
SG&A expenses |
(15,800) |
(24,475) |
(19,762) |
(15,266) |
||
Other |
(2,543) |
(9,315) |
(1,968) |
(4,174) |
||
EBITDA |
|
|
(24,327) |
(39,344) |
(41,410) |
(41,062) |
Operating Profit (before amort. and except.) |
|
(24,078) |
(40,680) |
(42,374) |
(41,928) |
|
Intangible Amortization |
(4,236) |
(4,882) |
(4,309) |
(4,309) |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Operating Profit |
(28,314) |
(45,562) |
(46,683) |
(46,237) |
||
Net Interest |
(2,310) |
(1,108) |
779 |
228 |
||
Profit Before Tax (norm) |
|
|
(31,122) |
(47,935) |
(45,904) |
(46,009) |
Profit Before Tax (reported) |
|
|
(31,122) |
(47,935) |
(45,904) |
(46,009) |
Tax benefit |
3,255 |
3,048 |
0 |
0 |
||
Profit After Tax (norm) |
(27,867) |
(44,887) |
(45,904) |
(46,009) |
||
Profit After Tax (reported) |
(27,867) |
(44,887) |
(45,904) |
(46,009) |
||
Average Number of Shares Outstanding (m) |
233.4 |
257.3 |
291.6 |
303.3 |
||
EPS - normalised (c) |
|
|
(11.94) |
(17.45) |
(15.74) |
(15.17) |
EPS - diluted (c) |
|
|
(11.94) |
(17.45) |
(15.18) |
(15.17) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
43,928 |
64,193 |
59,391 |
54,316 |
Intangible Assets |
41,948 |
59,189 |
54,880 |
50,571 |
||
Tangible Assets |
1,899 |
4,821 |
4,328 |
3,562 |
||
Investments |
82 |
183 |
183 |
183 |
||
Other |
||||||
Current Assets |
|
|
58,679 |
93,628 |
41,194 |
29,897 |
Stocks |
542 |
633 |
633 |
633 |
||
Debtors |
12,071 |
12,399 |
15,091 |
17,745 |
||
Cash |
44,598 |
77,945 |
22,819 |
8,868 |
||
Other |
1,468 |
2,651 |
2,651 |
2,651 |
||
Current Liabilities |
|
|
(10,625) |
(19,956) |
(9,392) |
(9,760) |
Creditors |
(9,218) |
(10,892) |
(328) |
(696) |
||
Short term borrowings |
(469) |
(264) |
(264) |
(264) |
||
Other |
(938) |
(8,800) |
(8,800) |
(8,800) |
||
Long Term Liabilities |
|
|
(21,902) |
(58,849) |
(56,849) |
(84,849) |
Long term borrowings |
(292) |
(95) |
(95) |
(30,095) |
||
Other long term liabilities |
(21,610) |
(58,754) |
(56,754) |
(54,754) |
||
Net Assets |
|
|
70,080 |
79,016 |
34,344 |
(10,396) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(23,314) |
2,084 |
(55,434) |
(44,080) |
Net Interest |
(19) |
(124) |
779 |
228 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(403) |
(695) |
(471) |
(100) |
||
Acquisitions/disposals |
(65) |
(396) |
0 |
0 |
||
Equity Financing |
43,890 |
35,151 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
(632) |
0 |
0 |
||
Net Cash Flow |
20,089 |
35,388 |
(55,126) |
(43,952) |
||
Opening net debt/(cash) |
|
|
(24,042) |
(43,837) |
(77,586) |
(22,460) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(294) |
(1,639) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(43,837) |
(77,586) |
(22,460) |
21,491 |
Source: Telix reports, Edison Investment Research
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Research: Healthcare
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