In a transparent announcement, ASIT Biotech’s board has released the conclusions from its recent meeting. Recruitment for the pivotal Phase III study of gpASIT+ for grass pollen allergies is ahead of schedule with the first patient dosed in January and top-line results are expected before the end of 2019. A €9.0m two-tranche convertible debt placing will extend ASIT’s cash runway to Q320, whereas cash at the end of FY18 was €8.5m.
Written by
ASIT biotech |
Ahead of schedule on gp-ASIT+ |
Board announcement |
Pharma & biotech |
26 February 2019 |
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In a transparent announcement, ASIT Biotech’s board has released the conclusions from its recent meeting. Recruitment for the pivotal Phase III study of gpASIT+ for grass pollen allergies is ahead of schedule with the first patient dosed in January and top-line results are expected before the end of 2019. A €9.0m two-tranche convertible debt placing will extend ASIT’s cash runway to Q320, whereas cash at the end of FY18 was €8.5m.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.0 |
(12.0) |
(0.94) |
0.0 |
N/A |
N/A |
12/18e |
0.0 |
(13.8) |
(0.83) |
0.0 |
N/A |
N/A |
12/19e |
0.0 |
(9.5) |
(0.52) |
0.0 |
N/A |
N/A |
12/20e |
0.0 |
(5.3) |
(0.20) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are both as reported.
Laser-like focus on gp-ASIT+
The nine improvements implemented to secure success in the larger ASIT011 Phase III study in grass allergy patients and the recruitment of patients ahead of schedule increased costs for FY18 by c €1.5m more than our estimates, with €9.9m spent on the ASIT011 study last year. The first patient was dosed at the end of January, by when 450 patients in 73 European centres had been enrolled. Cash at the end of FY18 was reported at €8.5m (vs €2.1m at end FY17). The new note financing extends ASIT’s cash runway to at least Q320, by which time we expect gp-ASIT+ to be closer to approval and for partnerships to have been signed.
Out-licensing and business development
ASIT’s earlier products – hdm-ASIT+ and pnt-ASIT+ for house dust mite and peanut allergies, respectively – will enter Phase I in partnership or with co-financing. This aspect of business development (BD) dovetails well with the ongoing BD effort to secure a marketing partner for gp-ASIT+ in the US, and both the CEO and chief commercial officer have significant BD experience. Early expressions of interest from potential partners have already been received. This has decreased our estimates of operational spend, royalties and milestones from 2019. We had already modelled the out-licensing of these products after Phase I (and gp-ASIT+ in the US), so our changes give the partners greater commercial participation and ASIT less near-term expense and lower longer-term royalties.
Valuation: A modest increase
We have updated our valuation of ASIT for the YE18 cash, exchange rates and the closer proximity of gp-ASIT+ cash flows. We have reduced FY19 R&D spend by c €6.0m to reflect the earlier investment of gp-ASIT+, which we apportioned in FY18, but we have reduced the cash flows from partnering by 25%. Our valuation moves modestly from €118m, or €6.3 per share, to €119m or €6.4 per share. ASIT’s cash will increase from Q319 due to the new convertible note offering. We have assumed the launch of gp-ASIT+ in Germany prior the allergy season in Q122 although a H221 approval could allow significant marketing launch preparation.
Busy behind the scenes
The board of ASIT Biotech has continued its transparency on developments at the company since the management changes and focus on its lead product announced early in January 2019.
Strategic and tactical changes
We summarised ASIT’s earlier changes to its senior management team and the increased focus on its lead product in our recent note. In an additional announcement, ASIT has updated its YE18 cash position to reflect the earlier investment in the Phase III ASIT011 study, which has resulted in patient recruitment being ahead of schedule and the study remaining on track for a top-line results announcement before the end of 2019. We have therefore assumed a full year for the German marketing approval preparation, submission and review, which could place a first launch in the spring of 2021, although this would require commercial-scale manufacture ahead of German approval. For the sake of prudence, we therefore assume first launch in spring 2022; ASIT exceeding these timelines would lead to a material upgrade in our valuation and the approval before the 2022 allergy season, in the summer of 2021 for example, could enable significant marketing effort in Germany to prepare the market.
The continued focus on gp-ASIT+ and the partnering of ASIT’s earlier products (hdm-ASIT+ and pnt-ASIT+ for house dust mite and peanut allergies, respectively) before Phase I has reduced the planned R&D spend in FY19 by €6.0m. Success in the Phase III ASIT011 study will be very visible and aid these partnering efforts and the partnering of the US rights to gp-ASIT+.
The increased focus and investment in gp-ASIT+ in FY18 that resulted in a cash balance at the end of FY18 c €0.5m lower than our estimates has already been addressed by the board’s announcement of a two-tranche €9.0m convertible note financing and the €6.0m lower spend in FY19. The convertible note private placement will be for a minimum of €9.0m split over two tranches with the first tranche representing a third of the total raised and a conversion price of €1.2680 per share. The second tranche will represent up to two-thirds of the issue, with the pricing determined at the closing of the offering in Q319. This extends ASIT’s cash runway until at least Q320 and puts ASIT in a more robust position in partnering discussions. The minimisation of dilution for investors has been well received by investors because the only near-term dilution will come from the drawdowns and warrant exercises from the previous financing. In addition, the larger second tranche of the convertible note financing is contingent on the success of the ASIT011 study and clinical success would be associated with a higher share price that would limit dilution to the existing investors.
Changes to our valuation
Our valuation has been updated for the reported €8.5m YE18 cash position and the increased investment in R&D in H218, changes in exchange rates and the closer proximity of gp-ASIT+ cash flows by advancing our rNPV valuation to start from 2019. As ASIT is now only spending on gp-ASIT+, we have eliminated the R&D expense on the earlier-stage products while reducing the milestone and royalties from the earlier products by 25% to reflect greater partner participation.
We have aligned with the board’s announcement by reducing R&D spend by c €6.0m in FY19 to reflect the earlier investment in gp-ASIT+ in FY18. Our valuation moves modestly from €118m, or €6.3 per share, to €119m or €6.4 per share; this includes the new convertible note financing from Q319, which we illustrate in our model as debt. ASIT’s YE18 cash comprises 7% of our valuation although this will increase from Q319. Any partnering transactions accompanied by upfront payments will be upsides to our forecasts. ASIT’s FY18 financial results will be published on 26 April, when we will be able to refine our estimates of its FY19 cash position and share count.
Recent management changes
In mid-January 2019 ASIT announced a number of changes to the senior management team that include the CEO and CFO. The previous CFO remains on the board of the company. The optimal partnering strategy for shareholders may result in different partners for each product and implies a number of transactions with perhaps different terms. This also means additional and broader BD resource will be required and we assume the new CEO will be involved. In any event, clinical success in the ASIT011 Phase III study that reports at the end of 2019 will validate the platform and likely assist all ASIT’s BD efforts.
Michel Baijot, CEO
Dr Baijot is a life sciences executive with 25 years’ experience of building biologics businesses, having contributed in the areas of strategy, licensing, M&A and technology transfer. Dr Baijot previously served as executive director at the Serum Institute of India, head of Cipla Global Vaccines and as chief business officer at Crucell during and after its acquisition by Janssen, a Johnson & Johnson company. Dr Baijot has also been vice president, worldwide strategic alliances and business development at GlaxoSmithKline Biologicals, Rixensart, and vice president, business development at Innogenetics. Dr Baijot has served as chairman of the Belgium Biotech Association for five years and holds board director positions at IRE-Elit, the radiopharmaceuticals division of IRE, (Institut des radioéléments) and OncoRadiomics.
Yves Désiront
Mr Désiront is the managing partner of a private equity fund based in Luxembourg and has been acting group CFO of BGP Investment since October 2014. Mr Désiront was previously group CFO of Orco Property Group and prior to this held various positions at Groupe Bruxelles Lambert and Générale de Banque. Mr Désiront has a master’s degree as Ingénieur Commercial in Business Administration and Technology Interface.
Exhibit 1: Financial summary
|
|
|
(€000) |
2017 |
2018e |
2019e |
2020e |
2021e |
2022e |
Year end 31 December |
|
|
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
INCOME STATEMENT |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
0 |
0 |
0 |
0 |
0 |
12,748 |
Cost of Sales |
|
|
|
0 |
0 |
0 |
0 |
0 |
0 |
Gross Profit |
|
|
|
0 |
0 |
0 |
0 |
0 |
12,748 |
General and Administrative Expenses |
|
(1,676) |
(2,547) |
(2,522) |
(2,497) |
(2,472) |
(2,447) |
||
Research and Development Expenses |
|
(10,903) |
(12,000) |
(8,000) |
(3,480) |
(2,000) |
0 |
||
Other Operating Income |
|
|
604 |
789 |
829 |
870 |
914 |
959 |
|
Reported operating profit |
|
|
(11,975) |
(13,758) |
(9,693) |
(5,106) |
(3,558) |
11,261 |
|
Net Interest |
|
|
|
(9) |
(40) |
159 |
(161) |
(289) |
(295) |
Profit before tax (as reported) |
|
|
(11,984) |
(13,798) |
(9,534) |
(5,267) |
(3,846) |
10,966 |
|
Reported tax |
|
|
|
(2) |
(1) |
2 |
1,580 |
1,154 |
(3,290) |
Profit after tax (reported) |
|
|
(11,986) |
(13,799) |
(9,532) |
(3,687) |
(2,692) |
7,676 |
|
Minority interests |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
|
Net income (reported) |
|
|
(11,986) |
(13,799) |
(9,532) |
(3,687) |
(2,692) |
7,676 |
|
|
|
|
|
|
|
|
|
|
|
Basic average number of shares outstanding (m) |
|
12,806 |
16,704 |
18,434 |
18,434 |
18,434 |
18,434 |
||
EPS - basic, as reported (€) |
|
(0.94) |
(0.83) |
(0.52) |
(0.20) |
(0.15) |
0.42 |
||
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
Non Current Assets |
|
|
1,837 |
2,018 |
2,022 |
1,940 |
1,850 |
1,926 |
|
Property Plant and equipment, net |
|
691 |
703 |
707 |
625 |
535 |
611 |
||
Other intangible assets |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
|
Other Non Current Assets |
|
|
1,146 |
1,315 |
1,315 |
1,315 |
1,315 |
1,315 |
|
Current Assets |
|
|
2,448 |
8,753 |
16,257 |
27,796 |
24,977 |
32,285 |
|
Cash and cash equivalents |
|
|
2,126 |
8,500 |
16,004 |
27,543 |
24,724 |
32,032 |
|
Accounts receivable |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
|
Inventories |
|
|
|
0 |
0 |
0 |
0 |
0 |
0 |
Other current assets |
|
|
322 |
253 |
253 |
253 |
253 |
253 |
|
Current Liabilities |
|
|
2,654 |
4,196 |
3,359 |
2,703 |
2,486 |
2,193 |
|
Accounts payable |
|
|
1,264 |
2,354 |
1,517 |
861 |
644 |
351 |
|
Short term debt and borrowings |
|
34 |
38 |
38 |
38 |
38 |
38 |
||
Other current liabilities |
|
|
1,356 |
1,804 |
1,804 |
1,804 |
1,804 |
1,804 |
|
Non Current Liabilities |
|
|
432 |
446 |
9,446 |
16,446 |
16,446 |
16,446 |
|
Loans and borrowings |
|
|
432 |
446 |
9,446 |
16,446 |
16,446 |
16,446 |
|
Other non-current liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
|
Equity |
|
|
|
1,199 |
5,625 |
3,294 |
1,407 |
(1,286) |
6,390 |
Common stock / Capital |
|
|
9,989 |
13,125 |
13,125 |
13,125 |
13,125 |
13,125 |
|
Additional paid-in capital / Share premium |
|
21,957 |
26,457 |
24,126 |
22,239 |
19,546 |
27,222 |
||
Other reserves and surplus |
|
|
(28,645) |
(33,957) |
(33,957) |
(33,957) |
(33,957) |
(33,957) |
|
Other Equity |
|
|
|
(2,102) |
0 |
0 |
0 |
0 |
0 |
CASH FLOW |
|
|
|
|
|
|
|
|
|
Cash Flow from Operations |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(11,986) |
(13,799) |
(9,532) |
(3,687) |
(2,692) |
7,676 |
|
Depreciation and Amortization |
|
|
205 |
176 |
189 |
184 |
162 |
149 |
|
Interest income/expense |
|
|
9 |
40 |
(159) |
161 |
289 |
295 |
|
Stock-based compensation |
|
|
54 |
0 |
0 |
0 |
0 |
0 |
|
Non Cash Adjustments |
|
|
(492) |
0 |
0 |
0 |
0 |
0 |
|
(Increase) decrease in inventories |
|
0 |
0 |
0 |
0 |
0 |
0 |
||
(Increase) decrease in trade receivables |
|
74 |
0 |
0 |
0 |
0 |
0 |
||
(Increase) decrease in other current assets |
|
(112) |
69 |
0 |
0 |
0 |
0 |
||
Increase (decrease) in trade payables |
|
(586) |
2,180 |
(837) |
(656) |
(217) |
(292) |
||
Net cash used in Operating activities |
|
(12,834) |
(11,334) |
(10,339) |
(3,998) |
(2,460) |
7,828 |
||
Cash Flow from Investing |
|
|
|
|
|
|
|
|
|
Purchases of fixed assets |
|
|
(161) |
(275) |
(194) |
(102) |
(71) |
(225) |
|
Other Investing Activities |
|
|
0 |
0 |
0 |
0 |
0 |
0 |
|
Net cash used in Investing activities |
|
(161) |
(275) |
(194) |
(102) |
(71) |
(225) |
||
Cash Flow from Financing |
|
|
|
|
|
|
|
|
|
Change in Debt |
|
|
0 |
0 |
9,000 |
7,000 |
0 |
0 |
|
Change in Capital Stock |
|
|
0 |
16,900 |
7,200 |
1,800 |
0 |
0 |
|
Interest paid |
|
|
|
(10) |
(42) |
(24) |
(474) |
(824) |
(824) |
Other Financing Activities |
|
|
1,743 |
2 |
183 |
313 |
536 |
529 |
|
Net cash used in Financing activities |
|
1,733 |
16,860 |
16,359 |
8,639 |
(289) |
(295) |
||
Net Changes in Cash and Cash Equivalent |
|
(11,262) |
5,251 |
5,827 |
4,539 |
(2,819) |
7,308 |
||
Net cash (debt) at the beginning of the period |
|
12,968 |
1,694 |
8,054 |
6,558 |
11,097 |
8,278 |
||
Net cash (debt) at the end of the period |
|
1,694 |
8,054 |
6,558 |
11,097 |
8,278 |
15,586 |
||
Source: ASIT Biotech, Edison Investment Management
|
|
Research: TMT
Keywords’ recent trading update indicated that the company continues to perform robustly despite industry turbulence. The acquisition of GetSocial, a cloud marketing services platform, for an undisclosed sum highlights the potential for Keywords’ M&A strategy to benefit from the weaker funding environment. We adjust our estimates to reflect slightly greater investment of profit back into the business in FY19 (EPS -3%), while adjusting working capital and deferred consideration payments upwards. We retain our view that Keywords remains strongly positioned, with an undemanding rating given the company’s leading market position, track record and potential.