Abzena
Written by
Abzena |
Validating the rationale and positive newsflow |
Newsflow update |
Pharma & biotech |
28 July 2016 |
Share price performance
4
Business description
Next events
Analyst
Abzena is a research client of Edison Investment Research Limited |
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Abzena has announced the formation of a JV company, Denceptor Therapeutics, and an agreement with Faron to manufacture Clevegen (an Abzena inside product). Both deals validate the rationale behind expanding the company last year to provide a broader range of services. Meanwhile, Annexon Biosciences has recently raised funds and indicated it will be taking ANX-005 (another Abzena inside product) forward. We have increased our valuation to £143m (vs £133m) to reflect FX changes.
Year end |
Revenue (£m) |
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 |
(6.8) |
(4.32) |
0.0 |
N/A |
N/A |
03/18e |
25.0 |
(4.2) |
(2.63) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Formation of a JV: Denceptor Therapeutics
Abzena has announced the formation of a JV with Baylor Scott & White Research Institute, focusing on dendritic cell (DC) receptor-targeting antibodies. There is potential to target autoimmune (tolerogenic DC) or oncology (cytotoxic t-cells) indications. The lead programme is preclinical, targeting head and neck cancer (HPV E6/E7), and is expected to be in the clinic (funding dependent) in H117. Abzena has indicated that it has planned for the JV over the past year by adding to its management team to enable Abzena’s CSO to head up the JV. The JV will independently raise capital. We consider this move positive as it enables Abzena to retain a licence interest, generates service revenues (because Denceptor will outsource development and manufacturing activities), and gain potential upside by retaining a small equity stake. Importantly, it achieves this while retaining its core business model (service and technology provider), thereby lowering the risk profile.
Agreement for the manufacture of Clevegen
Abzena has also announced an agreement to manufacture Clevegen, a novel therapeutic antibody developed by Faron to reduce immune suppression in cancer. Clevegen is currently preclinical and will become the first product to have been humanised by Abzena’s technology and will also be manufactured by Abzena for clinical development. This provides validation of the rationale for expanding the company, last year, to be able to offer and leverage a broader service offering.
Valuation: Increased to £143m, or 104p per share
We have not altered our valuation in light of these announcements as the programmes need to progress further before we would include them. However, we have increased our valuation to £143m (vs £133m) or 104p per share (vs 98p), due to a change in the $/£ rate used (1.3 vs 1.5) for the Abzena inside portfolio. Abzena is starting to demonstrate the potential in its integrated service offering and we expect potential uplifts to valuation as its Abzena inside products move through the clinic and to the market; for example, we note the recent fundraising and intention to advance the currently preclinical ANX-005 programme by Annexon Biosciences.
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: Immunology |
2,196 |
2,940 |
3,978 |
5,569 |
6,015 |
||
Protein engineering |
932 |
1,218 |
1,321 |
1,849 |
1,960 |
||
Bioconjugation |
165 |
657 |
1,376 |
1,926 |
2,023 |
||
Cell line development |
419 |
594 |
525 |
735 |
772 |
||
Biomanufacturing (PacificGMP) |
1,571 |
3,928 |
5,891 |
||||
TCRS |
798 |
4,469 |
7,597 |
||||
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) |
(11,234) |
(13,342) |
||
Gross Profit |
3,564 |
3,135 |
4,535 |
7,843 |
11,666 |
||
R&D expenses |
(2,601) |
(2,989) |
(4,216) |
(3,794) |
(3,984) |
||
SG&A expenses |
(4,787) |
(5,634) |
(9,047) |
(11,761) |
(12,643) |
||
EBITDA |
|
|
(3,116) |
(4,510) |
(6,972) |
(5,423) |
(2,853) |
Operating Profit (before GW and except) |
|
(3,394) |
(4,795) |
(7,773) |
(6,882) |
(4,195) |
|
Intangible Amortisation |
(304) |
(504) |
(588) |
(731) |
(666) |
||
Depreciation |
(278) |
(285) |
(801) |
(1,460) |
(1,342) |
||
Exceptionals |
(426) |
0 |
(2,542) |
0 |
0 |
||
Operating Profit |
(4,124) |
(5,299) |
(10,903) |
(7,613) |
(4,861) |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Net Interest |
27 |
79 |
244 |
50 |
8 |
||
Profit Before Tax (norm) |
|
|
(3,367) |
(4,716) |
(7,529) |
(6,833) |
(4,187) |
Profit Before Tax (FRS 3) |
|
|
(4,097) |
(5,220) |
(10,659) |
(7,563) |
(4,853) |
Tax |
548 |
498 |
961 |
908 |
582 |
||
Profit After Tax (norm) |
(2,819) |
(4,218) |
(6,568) |
(5,925) |
(3,605) |
||
Profit After Tax (FRS 3) |
(3,549) |
(4,722) |
(9,698) |
(6,656) |
(4,271) |
||
Average Number of Shares Outstanding (m) |
1.4 |
71.6 |
109.4 |
137.0 |
137.0 |
||
EPS - normalised (p) |
|
|
N/A |
(5.89) |
(6.00) |
(4.32) |
(2.63) |
EPS - FRS 3 (p) |
|
|
N/A |
(6.59) |
(8.86) |
(4.86) |
(3.12) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
10,139 |
10,432 |
27,347 |
29,171 |
29,678 |
Intangible Assets |
9,446 |
8,942 |
23,177 |
22,461 |
21,809 |
||
Tangible Assets |
693 |
1,490 |
4,170 |
6,711 |
7,868 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
5,856 |
20,924 |
22,108 |
13,178 |
8,562 |
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 |
5,456 |
1,165 |
||
Other |
541 |
1,147 |
1,569 |
908 |
582 |
||
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) |
(2,549) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
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 |
33,951 |
29,841 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(4,328) |
(4,859) |
(10,870) |
(5,304) |
(2,731) |
Net Interest |
0 |
0 |
0 |
0 |
0 |
||
Tax |
251 |
(133) |
371 |
961 |
908 |
||
Capex |
(264) |
(1,082) |
(2,047) |
(4,014) |
(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 |
47 |
||
Net Cash Flow |
190 |
13,042 |
(2,075) |
(8,268) |
(4,291) |
||
Opening net debt/(cash) |
|
|
(2,754) |
(2,757) |
(15,799) |
(13,724) |
(5,456) |
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) |
(5,456) |
(1,165) |
Source: Abzena accounts, Edison Investment Research
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