Abzena has announced another licensing deal for its proprietary site-specific ThioBridge antibody drug conjugate (ADC) linker technology. This time it is with a Taiwanese biopharmaceutical company (OBI Pharma). The agreement enables the development of OBI Pharma’s proprietary ADC, OBI-999. The deal also allows OBI to develop further ADCs as potential treatments for cancer and includes a master services and clinical supply agreement. This again provides important validation of Abzena’s ADC technology and hybrid business model. Our rNPV valuation increases slightly to £134m (vs £132m) following inclusion of one ADC being developed through this deal and we note there is potential for more.
Written by
Abzena |
Another licence agreement that validates model |
ThioBridge deal |
Pharma & biotech |
11 July 2017 |
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Abzena is a research client of Edison Investment Research Limited |
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Abzena has announced another licensing deal for its proprietary site-specific ThioBridge antibody drug conjugate (ADC) linker technology. This time it is with a Taiwanese biopharmaceutical company (OBI Pharma). The agreement enables the development of OBI Pharma’s proprietary ADC, OBI-999. The deal also allows OBI to develop further ADCs as potential treatments for cancer and includes a master services and clinical supply agreement. This again provides important validation of Abzena’s ADC technology and hybrid business model. Our rNPV valuation increases slightly to £134m (vs £132m) following inclusion of one ADC being developed through this deal and we note there is potential for more.
Year end |
Revenue (£m) |
PBT* (£m) |
EPS* (p) |
DPS (p) |
P/E (x) |
Yield (%) |
03/16 |
9.9 |
(7.4) |
(5.86) |
0.0 |
N/A |
N/A |
03/17 |
18.7 |
(8.3) |
(5.82) |
0.0 |
N/A |
N/A |
03/18e |
29.7 |
(10.1) |
(4.52) |
0.0 |
N/A |
N/A |
03/19e |
41.1 |
(2.6) |
(1.04) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Another ThioBridge licensing deal
Abzena has announced a licensing deal with OBI Pharma, a Taiwanese biopharmaceutical company for its novel site-specific ThioBridge technology, which links antibodies/proteins to cytotoxic agents. Alongside this, both parties have also entered into a master services and clinical supply agreement for Abzena to provide further manufacturing process development and GMP manufacture of OBI-999 and other ADCs as they are developed. According to the company, the value of the agreement has the potential to reach up to £128m in development/commercial milestones if the partner successfully develops the ADC products. In addition, Abzena would also receive royalties on sales of any approved products that incorporate the ThioBridge technology.
Continued validation of the business model
This is the third ADC deal announced and in a similar vein to the last deal in early 2017 with the addition of a service agreement. This is another positive step and continues to provide validation of Abzena’s hybrid business model – to leverage a broader service, while maintaining potential upside through Abzena inside.
Valuation: Slight increase to £134m, 63p per share
We have increased our valuation slightly to £134m (from £132m) or 63p per share (vs 62p). This is due to the inclusion of a potential ADC product (OBI-999) resulting from this ThioBridge agreement. We include it based on the following assumptions: royalty rate 2.5%; peak sales £1bn; Phase I start 2018 (Phase I IND preparations underway); and developmental milestones c 40% of the possible aggregate value of £128m. We note there is potential for further ADCs to be developed. We believe Abzena is well positioned to grow its integrated service offering following its recent fund-raising (£23.9m net), which should move Abzena’s service business to profitability over the next three years. For details please see here.
Exhibit 1: Financial summary
£000s |
2015 |
2016 |
2017 |
2018e |
2019e |
2020e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|
|
|
||||
Revenue |
|
|
5,667 |
9,854 |
18,654 |
29,667 |
41,140 |
55,443 |
of which: Biology |
4,158 |
5,299 |
5,719 |
8,237 |
9,061 |
11,132 |
||
Manufacturing |
594 |
2,096 |
5,316 |
11,789 |
19,571 |
27,992 |
||
Chemistry |
657 |
2,174 |
6,961 |
8,891 |
10,669 |
11,942 |
||
Total service revenues |
5,409 |
9,569 |
17,996 |
28,917 |
39,301 |
51,066 |
||
Licenses/milestones/royalties |
258 |
285 |
658 |
750 |
1,839 |
4,377 |
||
Cost of sales |
(2,532) |
(5,319) |
(10,547) |
(17,350) |
(20,830) |
(25,533) |
||
Gross profit |
3,135 |
4,535 |
8,107 |
12,317 |
20,310 |
29,910 |
||
R&D expenses |
(2,989) |
(4,216) |
(3,849) |
(3,984) |
(4,183) |
(4,392) |
||
SG&A expenses |
(5,634) |
(9,047) |
(14,611) |
(19,492) |
(19,784) |
(22,950) |
||
EBITDA |
|
|
(4,510) |
(6,817) |
(7,450) |
(7,208) |
127 |
6,345 |
Operating profit (before GW and except) |
|
(4,795) |
(7,618) |
(8,607) |
(10,093) |
(2,650) |
3,523 |
|
Intangible amortisation |
(504) |
(588) |
(723) |
(666) |
(607) |
(554) |
||
Depreciation |
(285) |
(801) |
(1,157) |
(2,885) |
(2,777) |
(2,822) |
||
Exceptionals |
0 |
(2,542) |
0 |
0 |
0 |
0 |
||
Other |
0 |
(155) |
(412) |
(400) |
(400) |
(400) |
||
Operating profit |
(5,299) |
(10,903) |
(9,742) |
(11,159) |
(3,657) |
2,568 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net interest |
79 |
244 |
277 |
9 |
52 |
27 |
||
Profit before tax (norm) |
|
|
(4,716) |
(7,374) |
(8,330) |
(10,084) |
(2,598) |
3,549 |
Profit before tax (reported) |
|
|
(5,220) |
(10,659) |
(9,465) |
(11,150) |
(3,605) |
2,595 |
Tax |
498 |
961 |
347 |
431 |
384 |
486 |
||
Profit after tax (norm) |
(4,218) |
(6,413) |
(7,983) |
(9,653) |
(2,214) |
4,035 |
||
Profit after tax (reported) |
(4,722) |
(9,698) |
(9,118) |
(10,719) |
(3,221) |
3,081 |
||
Average number of shares outstanding (m) |
71.6 |
109.4 |
137.2 |
213.6 |
213.6 |
213.6 |
||
EPS - normalised (p) |
|
|
(5.89) |
(5.86) |
(5.82) |
(4.52) |
(1.04) |
1.89 |
EPS - reported (p) |
|
|
(6.59) |
(8.86) |
(6.65) |
(5.02) |
(1.51) |
1.44 |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||||
Fixed assets |
|
|
10,432 |
27,347 |
33,494 |
40,951 |
40,575 |
39,207 |
Intangible assets |
8,942 |
23,177 |
25,882 |
25,224 |
24,625 |
24,080 |
||
Tangible assets |
1,490 |
4,170 |
7,612 |
15,727 |
15,950 |
15,127 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current assets |
|
|
20,924 |
22,108 |
11,267 |
17,338 |
14,840 |
19,636 |
Stocks |
817 |
1,379 |
1,876 |
1,876 |
1,876 |
1,876 |
||
Debtors |
3,161 |
5,436 |
4,982 |
4,982 |
4,982 |
4,982 |
||
Cash |
15,799 |
13,724 |
4,135 |
10,480 |
7,982 |
12,778 |
||
Other |
1,147 |
1,569 |
274 |
0 |
0 |
0 |
||
Current liabilities |
|
|
(2,354) |
(5,850) |
(6,319) |
(6,319) |
(6,319) |
(6,319) |
Creditors |
(2,354) |
(5,488) |
(6,032) |
(6,032) |
(6,032) |
(6,032) |
||
Short-term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Short-term leases |
0 |
0 |
(169) |
(169) |
(169) |
(169) |
||
Other |
0 |
(362) |
(118) |
(118) |
(118) |
(118) |
||
Long-term liabilities |
|
|
(1,153) |
(2,549) |
(2,508) |
(2,455) |
(2,402) |
(2,349) |
Long-term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long-term leases |
0 |
0 |
(494) |
(441) |
(388) |
(335) |
||
Other long-term liabilities |
(1,153) |
(2,549) |
(2,014) |
(2,014) |
(2,014) |
(2,014) |
||
Net ssets |
|
|
27,849 |
41,056 |
35,934 |
49,515 |
46,694 |
50,175 |
CASH FLOW |
||||||||
Operating cash flow |
|
|
(4,938) |
(11,330) |
(8,100) |
(7,429) |
(137) |
6,106 |
Net Interest |
79 |
244 |
277 |
115 |
158 |
133 |
||
Tax |
(133) |
371 |
1,665 |
705 |
384 |
486 |
||
Capex |
(1,082) |
(2,047) |
(3,320) |
(11,008) |
(3,008) |
(2,008) |
||
Acquisitions/disposals |
0 |
(9,357) |
0 |
0 |
0 |
0 |
||
Financing |
19,037 |
20,013 |
(89) |
23,900 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
79 |
31 |
(22) |
62 |
105 |
80 |
||
Net cash flow |
13,042 |
(2,075) |
(9,589) |
6,345 |
(2,498) |
4,796 |
||
Opening net debt/(cash) |
|
|
(2,757) |
(15,799) |
(13,724) |
(4,135) |
(10,480) |
(7,982) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(15,799) |
(13,724) |
(4,135) |
(10,480) |
(7,982) |
(12,778) |
Source: Abzena, Edison Investment Research
|
|
Abzena has announced another licensing deal, this time involving its Composite Human Antibody technology. The deal is with Telix Pharmaceuticals, a biopharmaceutical company which specialises in the development and commercialisation of radiopharmaceuticals. The agreement is the third announced this year, which includes royalties and milestone payments, based on successful development, alongside a service contract. We have reviewed our service business valuation as we expect these deals to enable benefits of scale. As a result we have increased our valuation to £160m or 75p per share. We note the potential for further advances as more deals come through and if forecasts are met.