Abzena
Written by
Abzena |
Strong start to H117 |
Business update |
Pharma & biotech |
14 September 2016 |
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 strong business update including a twelfth Abzena inside product entering Phase I clinical development and positive momentum in trading. This continues to underpin the rationale behind expanding the company to provide a broader range of services. We now use an estimated H117 cash position, which decreases the valuation slightly to £140m, offset slightly by the twelfth Abzena inside product.
Year |
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.
Strong start to FY17 in services business
Abzena announced (13 September) that trading was strong at the start of H117, with growth in revenues from cell line development and bioconjugation projects. It also indicated a strong order book, which gives us confidence in our forecasts. In addition, Abzena has been investing to increase capacity at its US manufacturing sites, with completion expected end 2016, and announced the first product (Faron Pharmaceuticals’ Clevegen) to have been humanised by Abzena’s technology, which it will also manufacture for clinical development.
Abzena inside portfolio continues to progress
The number of Abzena inside products continues to increase with the announcement of the twelfth product to enter Phase I clinical development for a private US biotech company, up from 10 in September 2015.
Hybrid business model shows growing promise
Abzena’s broader service offering is gaining traction and the company indicated that it is expanding relationships alongside increasing return custom. In addition, the number of Abzena inside products in clinical development continues to progress increasing the risk-free potential upside for investors.
Valuation: Slight reduction due to updated cash
We have slightly decreased our valuation to £140m (vs £143m) or 102p per share (vs 104p). This is primarily due to updating our estimated H117 cash position of £9.6m (vs £13.7m). We have also included the twelfth Abzena inside product entering Phase I clinical development, which adds $1.7m to our rNPV. We assume similar parameters to previous Abzena inside products in Phase I: peak sales of $750m, 1% royalty, launch in 2023 and a 15% probability of success. Abzena continues to demonstrate the potential in its integrated service offering and we expect potential uplifts to valuation as its Abzena inside products progress towards commercialisation, most notably GS-5745 in gastric cancer (Phase III).
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 and Edison Investment Research
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