TxCell’s novel CAR-modified regulatory T-cell (CAR Treg) platform continues to develop well. TxCell has four indications in preclinical development with the first ever CAR Treg trial, in transplant rejection, anticipated by TxCell to start by late 2018. This could provide powerful clinical proof-of-concept data by 2020. In 2017, an €11.1m gross rights issue provided funding for 2017 with an operational cash use of €13m guided by management. In 2018, warrants could bring a further €10.8m in cash covering costs until the IND is filed for the first ever CAR Treg clinical trial. The indicative market cap remains at €74m.
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TxCell |
Aiming for first CAR Treg |
FY16 results |
Pharma & biotech |
14 March 2017 |
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TxCell’s novel CAR-modified regulatory T-cell (CAR Treg) platform continues to develop well. TxCell has four indications in preclinical development with the first ever CAR Treg trial, in transplant rejection, anticipated by TxCell to start by late 2018. This could provide powerful clinical proof-of-concept data by 2020. In 2017, an €11.1m gross rights issue provided funding for 2017 with an operational cash use of €13m guided by management. In 2018, warrants could bring a further €10.8m in cash covering costs until the IND is filed for the first ever CAR Treg clinical trial. The indicative market cap remains at €74m.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
0.92 |
(10.78) |
(88) |
0.0 |
N/A |
N/A |
12/16 |
0.00 |
(12.73) |
(98) |
0.0 |
N/A |
N/A |
12/17e |
0.00 |
(11.27) |
(56) |
0.0 |
N/A |
N/A |
12/18e |
0.00 |
(10.95) |
(31) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Share issues in 2016, 2017 and 2018 reduce EPS. Revenues shown exclude tax credits.
Focus on CAR Treg with transplant in the lead
TxCell is now focused on the CAR Treg ENTrIA platform technology (see our last published note of 28 February 2017). ENTrIA uses chimeric antigen receptor (CAR) technology similar to that in the CAR T-cell cancer area; TxCell holds a core granted US patent. We expect ENTrIA to be an excellent basis for partnering and technology licensing – although deals are not shown in financial forecasts. The first clinical CAR Treg trial may start in 2018 for transplant, based on a key academic collaboration with published preclinical CAR Treg data. Other potential indications are lupus nephritis, bullous pemphigoid (skin) and multiple sclerosis. Ovasave, using ASTrIA technology with non-modified Tr1 Tregs is on hold.
Financing and funding: Cash into 2018
TxCell had €3.5m cash at the end of 2016 and issued a further 5.5m of shares in the February 2017 €11.1m rights issue. This gave 19.4m shares as of 24 February. TxCell is therefore funded for its estimated 2017 €13m cash burn. By February 2018, TxCell anticipates that conversion of the 4.6m rights issue warrants (four warrants for three shares) will yield up to €10.8m. This could cover 2018 costs until the CAR Treg IND filing, but Edison forecasts that up to €2m additional cash may be needed, perhaps covered by a Treg deal. Edison has updated the financial statements (Exhibit 1) to reflect the figures published on 10 March.
Valuation: Unchanged with good prospects
TxCell is in a transitional phase since the potentially high-value CAR Treg projects are moving through preclinical. The CAR Treg projects have a total nominal value of €30m. Potential CAR Treg deals are valued at €29m using as a benchmark Celgene’s $300m acquisition of Delinia, a preclinical Treg company. After costs and tax, this gives an unchanged NPV of €74m equal to €3.75/share. Assuming full conversion of loans and warrants, the diluted value remains at €2.83/share.
Exhibit 1: Financial summary
€ 000 |
2015 |
2016e |
2017e |
2018e |
||
Year End December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
920 |
0 |
0 |
0 |
||
Tax refund |
3,718 |
2,948 |
3,000 |
3,000 |
||
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
4,638 |
2,948 |
3,000 |
3,000 |
||
EBITDA |
|
|
(10,797) |
(11,946) |
(11,113) |
(10,956) |
Operating Profit (before amort. and except.) |
|
(9,662) |
(12,046) |
(11,213) |
(11,056) |
|
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals |
(1,167) |
(87) |
0 |
0 |
||
Share based payments |
(483) |
(649) |
(650) |
(650) |
||
Operating Profit |
(11,312) |
(12,783) |
(11,863) |
(11,706) |
||
Net Interest |
42 |
(18) |
10 |
2 |
||
Profit Before Tax (norm) |
|
|
(10,782) |
(12,733) |
(11,268) |
(10,954) |
Profit Before Tax (FRS 3) |
|
|
(11,297) |
(13,570) |
(12,018) |
(11,704) |
Tax |
0 |
0 |
0 |
1 |
||
Profit After Tax (norm) |
(10,782) |
(12,733) |
(11,268) |
(7,954) |
||
Profit After Tax (FRS 3) |
(11,297) |
(13,570) |
(12,018) |
(8,704) |
||
Average Number of Shares Outstanding (m) |
12.3 |
13.0 |
20.3 |
25.3 |
||
EPS - normalised (c) |
|
|
(87.7) |
(97.6) |
(55.5) |
(31.4) |
EPS - (IFRS) (c) |
|
|
(91.9) |
(104.0) |
(59.2) |
(34.4) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
1.0 |
||
Gross Margin (%) |
NA |
NA |
NA |
NA |
||
EBITDA Margin (%) |
NA |
NA |
NA |
NA |
||
Operating Margin (before GW and except.) (%) |
NA |
NA |
NA |
NA |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
6,938 |
6,967 |
7,267 |
7,567 |
Intangible Assets |
5,907 |
5,957 |
6,057 |
6,157 |
||
Tangible Assets |
876 |
826 |
1,026 |
1,226 |
||
Other |
155 |
184 |
184 |
184 |
||
Current Assets |
|
|
13,782 |
7,952 |
5,148 |
4,614 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
1,551 |
1,504 |
1,504 |
1,505 |
||
Cash |
9,208 |
3,500 |
644 |
109 |
||
Other |
3,023 |
2,948 |
3,000 |
3,000 |
||
Current Liabilities |
|
|
(7,467) |
(9,000) |
(7,000) |
(5,000) |
Creditors |
(5,859) |
(6,889) |
(4,889) |
(2,889) |
||
Short term borrowings |
(1,608) |
(2,111) |
(2,111) |
(2,111) |
||
Long Term Liabilities |
|
|
(1,664) |
(4,967) |
(1,667) |
(3,668) |
Long term borrowings |
(1,641) |
(4,948) |
(1,648) |
(3,648) |
||
Other long term liabilities |
(23) |
(19) |
(19) |
(20) |
||
Net Assets |
|
|
11,589 |
952 |
3,748 |
3,513 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(10,108) |
(10,379) |
(13,010) |
(12,958) |
Net Interest |
42 |
(18) |
10 |
2 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(214) |
(100) |
(400) |
(400) |
||
Acquisitions/disposals |
(5,879) |
0 |
0 |
0 |
||
Equity financing |
7,631 |
1,700 |
13,845 |
10,821 |
||
Other |
3,813 |
3,089 |
(3,300) |
2,000 |
||
Net Cash Flow |
(4,715) |
(5,708) |
(2,855) |
(535) |
||
Opening net debt/(cash) |
|
|
(10,895) |
(5,959) |
3,559 |
3,115 |
HP finance leases initiated |
0 |
0 |
0 |
1 |
||
Other |
(221) |
(3,810) |
3,300 |
(2,000) |
||
Closing net debt/(cash) |
|
|
(5,959) |
3,559 |
3,115 |
5,649 |
Source: TxCell accounts, Edison Investment Research. Note: *Equity in 2017 is €3.3m loan conversion and the €11 rights issue. Equity in 2018 assumes full rights warrant conversion, although this could happen progressively over the period to February 2018. A €2m nominal long-term loan is indicated in 2018 covered possible additional funding needs. FY16 accounts have not been fully published. FY15 has been adjusted in line with the headline 2016 figures.
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Research: Real Estate
Palace continues to demonstrate its ability to grow NAV per share through its strategic recycling of assets. The disposal of a property in Maldon has realised value created through recent asset management initiatives. As with two other recent sales, this is in line with the company’s strategy to increase shareholder value through active management of the investment portfolio. We have adjusted our forecasts for the £1.56m gain in value and, although we have not assumed any additional acquisitions, would expect Palace to reinvest the proceeds in other regional property assets at attractive yields and with further scope for capital gains.