Angle
Written by
Angle |
Funds for new clinical trials and more sales to KOL |
Private placing |
Pharma & biotech |
27 May 2016 |
Share price performance
Business description
Next events
Analysts
Angle is a research client of Edison Investment Research Limited |
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Angle has raised £9.6m (net) via a private placing. This supports Angle’s focus on commercialising Parsortix, with the funds being applied to a range of clinical studies to demonstrate utility of the Parsortix system. Additionally, Angle announced that Cancer Research UK Manchester Institute is adopting Parsortix for routine research use, which will provide recurring sales. FY16 results in July will provide a trading update and more details on the R&D expansion strategy, likely to be scaled up with the benefit of the fund raising.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
04/14 |
0.0 |
(2.0) |
(2.4) |
0.0 |
N/A |
N/A |
04/15 |
0.0 |
(3.6) |
(7.5) |
0.0 |
N/A |
N/A |
04/16e |
0.3 |
(5.2) |
(8.5) |
0.0 |
N/A |
N/A |
04/17e |
2.2 |
(3.2) |
(5.1) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
New funds add safety margin to reach profitability
Angle has raised a net £9.6m by issuing 15.8m new shares at 64.5p. The fact the shares were priced with no discount shows a strong demand, in our view. The new shares trade from 31 May and the post-raise cash position will be c 13.1m. In addition to existing investors who backed the issue, the placing also brought in three new major shareholders, which indicates growing interest from institutional investors. Our existing forecast had assumed reaching net profitability in 2019 and a funding need of £1.3m. The new funds provide not only a comfortable financing margin, but also give scope to scale up the operations. Management states that the funds will be used to advance planned indications (additional ovarian cancer study in the US), and to initiate clinical studies in new indications that recently received positive KOL evaluations: prostate cancer and metastatic breast cancer. Angle will also ramp up efforts in research use sales before the data from clinical trials start driving clinical sales (we expect in 2019).
Update on trading hints decent progress with sales
Angle’s near term commercial opportunity lies in research use sales with the first orders announced in December 2015. On 25 May, management indicated that the sales pipeline is progressing to plan. When FY16 results are released in July, we expect to see some £340k in first commercial revenues from Parsortix. Angle also announced that the Clinical and Experimental Pharmacology group at Cancer Research UK (CRUK) Manchester Institute will adopt Parsortix in routine use in clinical trials and research. Currently it is being used in 10 clinical trials with an additional four planned. Notably, CRUK is running around 620 clinical trials, so there is significant potential for Parsortix to be used in more studies. This is the first KOL that will adopt Parsortix for routine use and will generate recurring revenues for Angle.
Valuation: Strong balance sheet boosts prospects
We will review our forecasts and valuation after the FY16 results in July. We see the private placement as a first step towards initiating clinical trials with new indications, giving scope for future valuation uplift (albeit diluted by the new shares for now).
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015 |
2016e |
2017e |
||
Year end April |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
969 |
0 |
0 |
341 |
2,186 |
Cost of Sales |
0 |
0 |
0 |
(102) |
(648) |
||
Gross Profit |
969 |
0 |
0 |
238 |
1,537 |
||
Research and development |
(300) |
(900) |
(1,600) |
(3,080) |
(2,458) |
||
EBITDA |
|
|
(674) |
(1,994) |
(3,452) |
(5,093) |
(3,059) |
Operating Profit (before amort. and except.) |
(693) |
(2,051) |
(3,563) |
(5,256) |
(3,254) |
||
Intangible Amortisation |
(308) |
(99) |
(204) |
(358) |
(378) |
||
Share-based payments |
(71) |
(61) |
(111) |
(348) |
(480) |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(1,072) |
(2,211) |
(3,878) |
(5,963) |
(4,112) |
||
Net Interest |
42 |
13 |
9 |
33 |
15 |
||
Profit Before Tax (norm) |
|
|
(652) |
(2,038) |
(3,554) |
(5,223) |
(3,239) |
Profit Before Tax (FRS 3) |
|
|
(1,031) |
(2,198) |
(3,869) |
(5,929) |
(4,097) |
Tax |
0 |
0 |
0 |
200 |
200 |
||
Discontinued operations |
960 |
(18) |
|||||
Net Income (norm) |
(652) |
(1,078) |
(3,572) |
(5,023) |
(3,039) |
||
Net Income (FRS 3) |
(1,031) |
(1,238) |
(3,887) |
(5,729) |
(3,897) |
||
Average Number of Shares Outstanding (m) |
40.6 |
45.1 |
47.6 |
59.1 |
59.3 |
||
EPS - normalised (p) |
|
|
(1.61) |
(2.39) |
(7.50) |
(8.50) |
(5.12) |
EPS - normalised and fully diluted (p) |
|
(1.61) |
(2.39) |
(7.50) |
(8.50) |
(5.12) |
|
EPS - (IFRS) (p) |
|
|
(2.54) |
(2.74) |
(8.16) |
(9.69) |
(6.57) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
n/a |
n/a |
n/a |
70.0 |
70.3 |
||
EBITDA Margin (%) |
n/a |
n/a |
n/a |
n/a |
n/a |
||
Operating Margin (before GW and except.) (%) |
n/a |
n/a |
n/a |
n/a |
n/a |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
3,579 |
1,882 |
1,572 |
1,270 |
940 |
Intangible Assets |
1,080 |
1,142 |
1,149 |
899 |
610 |
||
Tangible Assets |
138 |
139 |
423 |
372 |
330 |
||
Investments |
2,361 |
601 |
0 |
0 |
0 |
||
Current Assets |
|
|
3,812 |
4,278 |
9,648 |
4,574 |
1,806 |
Stocks |
62 |
52 |
197 |
196 |
250 |
||
Debtors |
454 |
328 |
1,008 |
486 |
599 |
||
Cash |
1,828 |
3,898 |
8,443 |
3,892 |
957 |
||
Other |
1,468 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(604) |
(645) |
(1,131) |
(934) |
(1,252) |
Creditors |
(604) |
(645) |
(1,131) |
(934) |
(1,252) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
6,787 |
5,515 |
10,089 |
4,911 |
1,494 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(1,351) |
(1,899) |
(3,413) |
(4,533) |
(2,908) |
Net Interest |
110 |
(4) |
5 |
33 |
15 |
||
Tax |
0 |
0 |
0 |
150 |
200 |
||
Capex |
(139) |
(83) |
(325) |
(112) |
(153) |
||
Acquisitions/disposals |
154 |
4,326 |
126 |
0 |
0 |
||
Financing |
2,065 |
(270) |
8,152 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
839 |
2,070 |
4,545 |
(4,462) |
(2,846) |
||
Opening net debt/(cash) |
|
|
(989) |
(1,828) |
(3,898) |
(8,443) |
(3,892) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
(89) |
(89) |
||
Closing net debt/(cash) |
|
|
(1,828) |
(3,898) |
(8,443) |
(3,892) |
(957) |
Source: Angle accounts, Edison Investment Research. Historic reported revenues relate to the legacy business, which has now been divested. FY14 has been restated to exclude discontinued operations. Note: financials will be updated in due course to reflect the private placement and the investment in the clinical studies and developing research use sales.
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Research: Healthcare
Hutchison China MediTech