Abzena
Written by
Abzena |
Solid trading update despite increased costs |
FY17 trading update |
Pharma & biotech |
23 February 2017 |
Share price performance
Business description
Next events
Analyst
Abzena is a research client of Edison Investment Research Limited |
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Abzena announced a solid business update including a 12th Abzena inside product entering the clinic. FY17 revenue is in line with expectations; however, costs are higher due to investment in increasing its US capacity being affected by a strong $/£ rate. Due to a revision of FY17 costs and using a FY17e cash position, our valuation decreases to £102m (74p per share), with upside expected as the increased investment delivers.
Year |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/15 |
5.7 |
(4.7) |
(5.89) |
0.0 |
N/A |
N/A |
03/16 |
9.9 |
(7.5) |
(6.00) |
0.0 |
N/A |
N/A |
03/17e |
19.1 |
(9.1) |
(6.17) |
0.0 |
N/A |
N/A |
03/18e |
25.0 |
(6.6) |
(4.17) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Dominated by restructuring and expansion in the US
Abzena has announced that its FY17 revenue is in line with its expectations, although the geographical revenue mix has proved to be different with the UK business performing more strongly, offsetting the lower than expected contribution from the US. The company has indicated that this is primarily due to timing, as it has invested in repositioning and enhancing its US offering over the past 12 months, and it expects the subsequent impact on revenues to come through moving forward. Abzena also indicated that its group costs in FY17 will be higher than expected primarily due to the impact of the current strong $/£ rate.
Integrated service offering outlook
Abzena has increased capacity in the US with two new biomanufacturing cleanroom suites, office and lab space and developed GMP capability for the manufacture of ADC linker-payloads, which now enables it to manufacture for ThioBridge partners. It has indicated that it is exploring options to fund the growth of the manufacturing business through a significant expansion programme. Once executed, this could enable it to leverage the integrated service offering more fully. An example of this is its recent manufacturing agreement with UCL for Magacizumab, an antibody previously created using the Abzena inside technology.
Valuation: Reduced to £102m, due to increased costs
We have decreased our valuation to £102m (vs £117m) or 74p per share (vs 85p). This is due to the increase in our forecast SG&A spend in FY17 (£14m vs £13m), due to a high $/£ rate. We also now use our estimated FY17 cash position of £4m (vs £9m), which is unchanged due to a reduction in our forecast capex (£4m to £3m) due to delayed expenditure. Also included is the 12th Abzena inside product, with similar parameters to previous Abzena inside products in Phase I: peak sales of $750m, 1% royalty, launch in 2025 and a 15% probability of success. We expect potential uplifts to valuation as the benefits from its US investment programme are realised and its Abzena inside products progress towards commercialisation.
Exhibit 1: Financial summary
£'000s |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|
|||||
Revenue |
|
|
5,261 |
5,667 |
9,854 |
19,076 |
25,008 |
of which: Biology |
3,128 |
4,158 |
5,299 |
6,422.5 |
8,237 |
||
Manufacturing |
419 |
594 |
2,096 |
5,658.0 |
9,006 |
||
Chemistry |
165 |
657 |
2,174 |
6,395.2 |
7,015 |
||
Total Service revenues |
3,712 |
5,409 |
9,569 |
18,476 |
24,258 |
||
Licenses/milestones/royalties |
1,549 |
258 |
285 |
600 |
750 |
||
Cost of Sales |
(1,697) |
(2,532) |
(5,319) |
(11,233) |
(13,342) |
||
Gross Profit |
3,564 |
3,135 |
4,535 |
7,842 |
11,666 |
||
R&D expenses |
(2,601) |
(2,989) |
(4,216) |
(3,794) |
(3,984) |
||
SG&A expenses |
(4,787) |
(5,634) |
(9,047) |
(14,023) |
(15,075) |
||
EBITDA |
|
|
(3,116) |
(4,510) |
(6,972) |
(7,893) |
(5,473) |
Operating Profit (before GW and except) |
|
(3,394) |
(4,795) |
(7,773) |
(9,144) |
(6,627) |
|
Intangible Amortisation |
(304) |
(504) |
(588) |
(731) |
(666) |
||
Depreciation |
(278) |
(285) |
(801) |
(1,251) |
(1,154) |
||
Exceptionals |
(426) |
0 |
(2,542) |
0 |
0 |
||
Operating Profit |
(4,124) |
(5,299) |
(10,903) |
(9,875) |
(7,293) |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Net Interest |
27 |
79 |
244 |
50 |
2 |
||
Profit Before Tax (norm) |
|
|
(3,367) |
(4,716) |
(7,529) |
(9,095) |
(6,625) |
Profit Before Tax (FRS 3) |
|
|
(4,097) |
(5,220) |
(10,659) |
(9,825) |
(7,291) |
Tax |
548 |
498 |
961 |
590 |
875 |
||
Profit After Tax (norm) |
(2,819) |
(4,218) |
(6,568) |
(8,505) |
(5,750) |
||
Profit After Tax (FRS 3) |
(3,549) |
(4,722) |
(9,698) |
(9,236) |
(6,416) |
||
Average Number of Shares Outstanding (m) |
1.4 |
71.6 |
109.4 |
137.8 |
137.8 |
||
EPS - normalised (p) |
|
|
N/A |
(5.89) |
(6.00) |
(6.17) |
(4.17) |
EPS - FRS 3 (p) |
|
|
N/A |
(6.59) |
(8.86) |
(6.70) |
(4.65) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
10,139 |
10,432 |
27,347 |
28,230 |
28,924 |
Intangible Assets |
9,446 |
8,942 |
23,177 |
22,461 |
21,809 |
||
Tangible Assets |
693 |
1,490 |
4,170 |
5,769 |
7,115 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
5,856 |
20,924 |
22,108 |
11,540 |
14,590 |
Stocks |
295 |
817 |
1,379 |
1,379 |
1,379 |
||
Debtors |
2,263 |
3,161 |
5,436 |
5,436 |
5,436 |
||
Cash |
2,757 |
15,799 |
13,724 |
4,135 |
6,900 |
||
Other |
541 |
1,147 |
1,569 |
590 |
875 |
||
Current Liabilities |
|
|
(1,278) |
(2,354) |
(5,850) |
(5,850) |
(5,850) |
Creditors |
(1,160) |
(2,354) |
(5,488) |
(5,488) |
(5,488) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Short term leases |
0 |
0 |
0 |
0 |
0 |
||
Other |
(118) |
0 |
(362) |
(362) |
(362) |
||
Long Term Liabilities |
|
|
(1,183) |
(1,153) |
(2,549) |
(2,549) |
(12,549) |
Long term borrowings |
0 |
0 |
0 |
0 |
(10,000) |
||
Long term leases |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(1,183) |
(1,153) |
(2,549) |
(2,549) |
(2,549) |
||
Net Assets |
|
|
13,534 |
27,849 |
41,056 |
31,370 |
25,116 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(4,328) |
(4,859) |
(10,870) |
(7,774) |
(5,350) |
Net Interest |
0 |
0 |
0 |
0 |
0 |
||
Tax |
251 |
(133) |
371 |
961 |
590 |
||
Capex |
(264) |
(1,082) |
(2,047) |
(2,864) |
(2,515) |
||
Acquisitions/disposals |
(6,133) |
0 |
(9,357) |
0 |
0 |
||
Financing |
10,670 |
19,037 |
20,013 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
(6) |
79 |
(185) |
89 |
41 |
||
Net Cash Flow |
190 |
13,042 |
(2,075) |
(9,589) |
(7,235) |
||
Opening net debt/(cash) |
|
|
(2,754) |
(2,757) |
(15,799) |
(13,724) |
(4,135) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
(187) |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(2,757) |
(15,799) |
(13,724) |
(4,135) |
3,100 |
Source: Company accounts, Edison Investment Research
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