Abzena
Written by
Abzena |
Newsflow continues validating the rationale |
Newsflow update |
Pharma & biotech |
6 January 2017 |
Share price performance
Business description
Next events
Analyst
Abzena is a research client of Edison Investment Research Limited |
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Recent newsflow includes solid interim results, which demonstrated value in Abzena’s integrated service proposition and hybrid business model, positive updates on a couple of Abzena inside products and a licensing agreement to commercialise a legacy asset to Trieza Therapeutics. We maintain our valuation at £112m, but expect upside as it progresses.
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 |
(8.2) |
(5.20) |
0.0 |
N/A |
N/A |
03/18e |
25.0 |
(5.7) |
(3.57) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Licence agreement for legacy asset
Abzena has announced a licensing agreement with Trieza Therapeutics, a start-up biotechnology company specialising in the discovery and development of immunomodulatory oncolytic viruses. Abzena has granted an exclusive worldwide licence to an undisclosed antibody sequence, which was created using Abzena’s Composite Human Antibody technologies. Trieza intends to exploit this technology in conjunction with its viral vector technology to develop novel therapies in oncology. Abzena has indicated that it could receive up to $35m in milestone payments and a royalty on any resulting sales. We believe Abzena could achieve a higher royalty rate than other Abzena inside products (c 3% vs c 1%) as its input has been higher and therefore we expect a potentially higher return. This is positive as it underlies its rationale of focusing on its core business (service and technology provider), while retaining value from its assets, thereby lowering the risk profile.
Integrated service offering demonstrating value
Abzena announced a solid start to FY17, with 46% H117 revenue growth on an underlying basis. Abzena is building on this by investing in further capacity and growing its customer base, including cross-selling across the expanded group. Importantly, the company has an increasingly strong presence in the US, a significant market in the biopharmaceutical industry, as it now has a significant operating footprint and the majority of its business results from the US.
Encouraging Abzena inside newsflow
Recent newsflow has demonstrated Abzena inside progress with Opsona Therapeutics (OPN-305) and True North Therapeutics (TNT009) presenting promising data (see hyperlinks) and orphan drug designation target indications.
Valuation: Maintained at £112m
We maintain our valuation at £112m or 82p per share, as we do not include the Trieza-led programme at this time. We will review this as it progresses. We believe Abzena is well positioned to grow its integrated service offering and offer a potential uplift as its Abzena inside products move through the clinic and onto the market.
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) |
(13,118) |
(14,102) |
||
EBITDA |
|
|
(3,116) |
(4,510) |
(6,972) |
(6,780) |
(4,312) |
Operating Profit (before GW and except) |
|
(3,394) |
(4,795) |
(7,773) |
(8,240) |
(5,654) |
|
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) |
(8,970) |
(6,320) |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Net Interest |
27 |
79 |
244 |
50 |
1 |
||
Profit Before Tax (norm) |
|
|
(3,367) |
(4,716) |
(7,529) |
(8,190) |
(5,652) |
Profit Before Tax (FRS 3) |
|
|
(4,097) |
(5,220) |
(10,659) |
(8,920) |
(6,319) |
Tax |
548 |
498 |
961 |
1,070 |
758 |
||
Profit After Tax (norm) |
(2,819) |
(4,218) |
(6,568) |
(7,119) |
(4,894) |
||
Profit After Tax (FRS 3) |
(3,549) |
(4,722) |
(9,698) |
(7,850) |
(5,560) |
||
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) |
(5.20) |
(3.57) |
EPS - FRS 3 (p) |
|
|
N/A |
(6.59) |
(8.86) |
(5.73) |
(4.06) |
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 |
11,984 |
6,078 |
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 |
4,098 |
(1,495) |
||
Other |
541 |
1,147 |
1,569 |
1,070 |
758 |
||
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 |
32,756 |
27,357 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(4,328) |
(4,859) |
(10,870) |
(6,661) |
(4,190) |
Net Interest |
0 |
0 |
0 |
0 |
0 |
||
Tax |
251 |
(133) |
371 |
961 |
1,070 |
||
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 |
40 |
||
Net Cash Flow |
190 |
13,042 |
(2,075) |
(9,626) |
(5,593) |
||
Opening net debt/(cash) |
|
|
(2,754) |
(2,757) |
(15,799) |
(13,724) |
(4,098) |
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) |
(4,098) |
1,495 |
Source: Abzena and Edison Investment Research
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