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Research: Healthcare
Quantum Genomics continues to sign partnership deals for firibastat in difficult-to-treat/treatment-resistant hypertension, including two in the month of October. One of the agreements is with Qilu Pharmaceutical for the Greater China region, Hong Kong and Macau while the other is with Xediton Pharmaceuticals for Canada. Quantum Genomics announced its first partnership, with Biolab Sanus covering Latin America, in December 2019 and one covering South East Asia, Australia and New Zealand with Orient Europharma (OEP) in September. We expect additional agreements to be announced in the coming months, potentially covering the US and EU markets.
Written by
Maxim Jacobs
Quantum Genomics |
An accelerated pace of partnership agreements |
Development update |
Pharma & biotech |
16 November 2020 |
Share price performance
Business description
Next events
Analysts
Quantum Genomics is a research client of Edison Investment Research Limited |
Quantum Genomics continues to sign partnership deals for firibastat in difficult-to-treat/treatment-resistant hypertension, including two in the month of October. One of the agreements is with Qilu Pharmaceutical for the Greater China region, Hong Kong and Macau while the other is with Xediton Pharmaceuticals for Canada. Quantum Genomics announced its first partnership, with Biolab Sanus covering Latin America, in December 2019 and one covering South East Asia, Australia and New Zealand with Orient Europharma (OEP) in September. We expect additional agreements to be announced in the coming months, potentially covering the US and EU markets.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
0.0 |
(13.6) |
(0.94) |
0.0 |
N/A |
N/A |
12/19 |
0.0 |
(10.8) |
(0.53) |
0.0 |
N/A |
N/A |
12/20e |
0.0 |
(15.6) |
(0.64) |
0.0 |
N/A |
N/A |
12/21e |
0.0 |
(21.6) |
(0.84) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Qilu agreement for Greater China
Quantum Genomics has signed a licensing and collaboration agreement with Qilu Pharmaceutical covering Greater China, Hong Kong and Macau. As part of the agreement, Quantum Genomics will receive upfront and milestone payments of up to US$50m and double-digit royalties. Importantly, Qilu plans to join the Phase III programme in hypertension, which will enable recruitment in the region.
A Canadian deal with Xediton
Xediton Pharmaceuticals signed an agreement to develop and commercialise firibastat in Canada. As part of the agreement, Quantum Genomics will receive up to US$11.35m in upfront and milestone payments as well as double-digit royalties.
Additional agreements likely to be announced soon
There are now four regional agreements in place covering firibastat for difficult-to-treat/treatment-resistant hypertension. However, the company has yet to license the candidate for either the major EU or US regions for hypertension, nor any region for heart failure. Based on recent management comments, we would expect additional licensing announcements in the near term.
Valuation: €1,030m or €46.34 per share
We have slightly adjusted our valuation to €1,030m or €46.34 per share from €1,028m or €47.63 per share. The higher total valuation is due to increased net cash as the short-term debt owed to Negma Group has been repaid in warrants, which were exercised. The lower per share value is due to an increased share count. We have not adjusted the valuation for the licensing deals as the specific upfront payments have not been disclosed. We may increase our probability of success in the future depending on the size and scope of future agreements.
Two additional partnerships and more to come
Quantum Genomics continues to sign licensing agreements for firibastat in difficult-to-treat/treatment-resistant hypertension. One of the recently announced partnerships is with Qilu Pharmaceutical for the Greater China region, Hong Kong and Macau. As part of the agreement, Quantum Genomics will receive upfront and milestone payments of up to US$50m and double-digit royalties. Importantly, Qilu plans to join the Phase III programme in difficult-to-treat/treatment-resistant hypertension, which will enable recruitment in the region. Qilu is an established vertically integrated company that develops, manufactures and commercialises novel pharmaceuticals and biologics along with generics and biosimilars. Qilu has 23,000 employees worldwide spread across 12 subsidiaries and 10 manufacturing sites. The company has launched over 200 products and had revenue of over US$3.3bn in 2019.
Additionally, Xediton Pharmaceuticals has signed an agreement with Quantum Genomics to develop and commercialise firibastat in Canada. As part of the agreement, Quantum Genomics will receive up to US$11.35m in upfront and milestone payments as well as double-digit royalties.
In September Quantum Genomics announced it had signed a licensing and collaboration agreement with OEP to develop and commercialise firibastat for difficult-to-treat/treatment-resistant hypertension in South East Asia (specifically, Taiwan, Malaysia, the Philippines, Singapore, Vietnam, Indonesia, Myanmar and Cambodia), Australia and New Zealand. As part of the agreement, Quantum Genomics will receive US$19m in upfront and milestone payments as well as double-digit royalties. Additionally, OEP will fund part of the Phase III programme in difficult-to-treat/treatment-resistant hypertension patients in Taiwan. OEP has over 1,000 employees worldwide (40% of which are outside of Taiwan) and had revenues of NT$6.1bn (over US$200m) in 2019.
Previously, in December 2019, Quantum Genomics had announced it has licensed firibastat for the treatment of hypertension to Biolab Sanus covering the Latin American region. Biolab Sanus is one of the largest pharmaceutical companies in Brazil, with over 140 products and 3,200 employees. In 2019 it had revenues of around US$600m. As part of the agreement, Biolab Sanus is obligated to pay US$21.2m in upfront and milestone payments as well as royalties. Additionally, Biolab Sanus will be responsible for clinical trial costs in Latin America, which are expected to account for around 20% of the patients enrolled in the Phase III FRESH trial.
There are now four regional agreements in place covering firibastat for difficult-to-treat/treatment-resistant hypertension. However, the company has yet to license the candidate in either the major EU or US regions for hypertension, nor any region for heart failure. Based on management comments on our Edison Talks podcast, we would expect additional licensing announcements in the near term.
Valuation
We have slightly adjusted our valuation to €1,030m or €46.34 per share from €1,028m or €47.63 per share due. The higher total valuation is due to higher net cash as the short-term debt owed to Negma Group (around €1.7m was owed as of the end of September) has been repaid in shares. The lower per share value is due to an increased share count. We have not adjusted the valuation for the licensing deals as the specific upfront payments have not been disclosed. We may increase our probability of success in the future depending on the size and scope of future agreements.
Exhibit 1: Quantum Genomics valuation table
Product |
Main Indication |
Local |
Status |
Prob. of success |
Launch |
Peak sales (US$m) |
Patent protection |
rNPV |
Firibastat (QGC001) |
Hypertension |
US |
Phase III |
50% |
2023 |
1,110 |
2031 |
526.69 |
Firibastat (QGC001) |
Hypertension |
Europe |
Phase III |
50% |
2023 |
959 |
2031 |
446.86 |
Firibastat (QGC001) |
Development costs |
|
|
|
|
(164.06) |
||
Firibastat (QGC001) |
Heart failure |
US |
Phase IIb |
20% |
2023 |
574 |
2031 |
134.49 |
Firibastat (QGC001) |
Heart failure |
Europe |
Phase IIb |
20% |
2023 |
687 |
2031 |
159.57 |
Firibastat (QGC001) |
Development costs |
(88.61) |
||||||
Total |
|
|
|
|
|
|
|
1,014.94 |
Pro forma net cash (30 June 2020 + financing) (€m) |
15.13 |
|||||||
Total firm value (€m) |
1,030 |
|||||||
Total shares (31 October 2020) (m) |
22.23 |
|||||||
Value per basic share (€) |
46.34 |
Source: Edison Investment Research
Financials
Quantum had €13.2m in cash and investments and €2.4m in debt at the end of H120. The company raised €1.7m through an equity line of credit with Kepler Cheuvreux in March and €6m through its Negma Group financing arrangement in the first half. It raised an additional €2m from Negma after the end of H120, bringing the total raised from that financial group to €8m, all of which has now been repaid. The Negma financings were loans that were repaid with warrants that were then exercised by Negma.
The company has stated it has cash to Q321. We forecast €28m in additional financing to the end of 2021, which we model as illustrative debt. The need for additional funding past this point will depend on the FRESH data and the company’s ability to sign additional licensing agreements.
Exhibit 2: Financial summary
€000s |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
PCG |
PCG |
PCG |
PCG |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
||
EBITDA |
|
|
(13,598) |
(10,760) |
(15,617) |
(21,572) |
Operating Profit (before amort. and except.) |
|
|
(13,598) |
(10,760) |
(15,617) |
(21,572) |
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Other |
0 |
(0) |
15 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Operating Profit |
(13,598) |
(10,760) |
(15,617) |
(21,572) |
||
Net Interest |
0 |
0 |
0 |
0 |
||
Other |
150 |
134 |
17 |
0 |
||
Profit Before Tax (norm) |
|
|
(13,598) |
(10,760) |
(15,617) |
(21,572) |
Profit Before Tax (FRS 3) |
|
|
(13,448) |
(10,626) |
(15,601) |
(21,572) |
Tax |
1,458 |
1,547 |
2,028 |
2,804 |
||
Deferred tax |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(12,140) |
(9,213) |
(13,589) |
(18,768) |
||
Profit After Tax (FRS 3) |
(11,990) |
(9,078) |
(13,572) |
(18,768) |
||
Average Number of Shares Outstanding (m) |
12.8 |
17.5 |
21.2 |
22.4 |
||
EPS - normalised (c) |
|
|
(93.94) |
(52.69) |
(64.07) |
(83.78) |
EPS - FRS 3 (€) |
|
|
(0.94) |
(0.52) |
(0.64) |
(0.84) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
626 |
884 |
968 |
960 |
Intangible Assets |
0 |
360 |
360 |
360 |
||
Tangible Assets |
24 |
27 |
107 |
99 |
||
Other |
602 |
497 |
501 |
501 |
||
Current Assets |
|
|
17,855 |
14,222 |
18,922 |
20,162 |
Stocks |
422 |
333 |
1,070 |
1,070 |
||
Debtors |
2,636 |
2,486 |
3,163 |
3,163 |
||
Cash |
14,797 |
11,164 |
14,456 |
15,696 |
||
Other |
0 |
239 |
232 |
232 |
||
Current Liabilities |
|
|
(5,764) |
(4,061) |
(5,057) |
(5,057) |
Creditors |
(5,762) |
(4,060) |
(5,057) |
(5,057) |
||
Short term borrowings |
(2) |
(1) |
0 |
0 |
||
Long Term Liabilities |
|
|
(849) |
(874) |
(8,755) |
(28,755) |
Long term borrowings |
(12) |
(6) |
(8,061) |
(28,061) |
||
Other long term liabilities |
(837) |
(869) |
(695) |
(695) |
||
Net Assets |
|
|
11,868 |
10,171 |
6,078 |
(12,690) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(10,901) |
(10,665) |
(14,324) |
(18,742) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(16) |
(118) |
(18) |
(18) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
15,071 |
7,382 |
5,293 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(446) |
(232) |
(9) |
0 |
||
Net Cash Flow |
3,708 |
(3,633) |
(9,058) |
(18,760) |
||
Opening net debt/(cash) |
|
|
(11,069) |
(14,783) |
(11,157) |
(6,396) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
||
Other |
6 |
7 |
4296 |
0 |
||
Closing net debt/(cash) |
|
|
(14,783) |
(11,157) |
(6,396) |
12,364 |
Source: company accounts, Edison Investment Research
|
|
Research: Consumer
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