Abzena has announced the progression of one of the Abzena inside Composite Human Antibody products into a Phase II clinical trial. The product is being developed by a major US pharmaceutical company for the treatment of neurodegenerative conditions. We have increased our valuation to £105m (vs £102m) as a result of an increase of the Abzena inside product’s assigned probability (to 35% from 15%).
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Abzena |
Abzena inside product progresses to Phase II |
Abzena inside update |
Pharma & biotech |
7 March 2017 |
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Business description
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Abzena is a research client of Edison Investment Research Limited |
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Abzena has announced the progression of one of the Abzena inside Composite Human Antibody products into a Phase II clinical trial. The product is being developed by a major US pharmaceutical company for the treatment of neurodegenerative conditions. We have increased our valuation to £105m (vs £102m) as a result of an increase of the Abzena inside product’s assigned probability (to 35% from 15%).
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 |
(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.
Progression of Abzena inside pipeline
Abzena has announced the progression of one of its Abzena inside products into a Phase II clinical trial. The product is being developed by a major US pharmaceutical company for the treatment of neurodegenerative conditions. To date, the product has been studied in two Phase I clinical trials. Other recent newsflow includes a 12th Abzena inside product entering the clinic, a manufacturing agreement with UCL for Magacizumab, an antibody previously created using the Abzena inside technology, and a grant awarded to a UCL research group to progress development of a novel treatment that uses Abzena’s proprietary conjugation technology.
Recent services business update
Abzena indicated recently that FY17 revenue was currently in line with its expectations; however, costs were higher due to investment in increasing its US capacity being affected by a strong $/£ rate. 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. If achieved, it could enable Abzena to leverage the integrated service offering more fully.
Valuation: Increased to £105m (vs £102m)
We have increased our valuation to £105m (vs £102m) or 76p per share (vs 74p). This is due to the increase in probability that we assign to one of the Abzena inside products included in the clinical pipeline within our model. As it has moved into Phase II, we increase the probability of success from 15% to 35% in line with parameters used for previous Abzena inside products in Phase II. We currently include peak sales of $1bn, which could prove conservative if this product becomes successful in neurodegenerative conditions. We continue to expect potential uplifts to our valuation as the benefits from its US investment programme are realised and its Abzena inside products progress.
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: Edison Investment Research and Abzena
|
|
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