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Last close As at 02/06/2023
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Market capitalisation
EUR84m
Research: Healthcare
Sequana Medical reported H122 financials with expenditure mildly above our forecasts and confirmed previous guidance for its cash runway to last into Q323, including €10m in potential proceeds from its Kreos loan facility. Most importantly, it maintained guidance for key upcoming catalysts, namely its expectation to report top-line data for its North American POSEIDON study of alfapump in recurrent and refractory ascites (RRA) in Q422 and to submit a US premarket approval (PMA) application in H223, assuming positive data. Sequana also expects to commence enrolment in H123 for the MOJAVE Phase Ib/IIa US trial assessing DSR 2.0 as short-term direct sodium removal (DSR) therapy in chronic heart failure patients with persistent congestion.
Sequana Medical |
Approaching key inflection points |
H122 update |
Pharma and biotech |
12 September 2022 |
Share price performance
Business description
Next events
Analysts
Sequana Medical is a research client of Edison Investment Research Limited |
Sequana Medical reported H122 financials with expenditure mildly above our forecasts and confirmed previous guidance for its cash runway to last into Q323, including €10m in potential proceeds from its Kreos loan facility. Most importantly, it maintained guidance for key upcoming catalysts, namely its expectation to report top-line data for its North American POSEIDON study of alfapump in recurrent and refractory ascites (RRA) in Q422 and to submit a US premarket approval (PMA) application in H223, assuming positive data. Sequana also expects to commence enrolment in H123 for the MOJAVE Phase Ib/IIa US trial assessing DSR 2.0 as short-term direct sodium removal (DSR) therapy in chronic heart failure patients with persistent congestion.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
1.0 |
(19.0) |
(1.25) |
0.0 |
N/A |
N/A |
12/21 |
0.4 |
(24.4) |
(1.36) |
0.0 |
N/A |
N/A |
12/22e |
0.8 |
(26.3) |
(1.12) |
0.0 |
N/A |
N/A |
12/23e |
0.8 |
(25.1) |
(1.05) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
No major surprises in H122 financials
Sequana reported an EBITDA loss of €13.2m in H122 (+15% y-o-y) and a net operating cash burn rate of €13.7m (+15% y-o-y), above our estimates of €11.2m and €12.1m, respectively. The main H122 variances were in SG&A costs (€4.7m versus our €3.4m estimate) and gross R&D-related expenses (€9.2m versus our €8.3m estimate). Despite these variances, we are not materially revising our projections, given that the company’s cash runway guidance is unchanged and remains consistent with our projections.
European alfapump sales exceeded our expectations
H122 alfapump sales in Europe were €0.46m (versus €0.02m in H121), above our €0.3m estimate and up 33% from H221. The relaxing of COVID-19 restrictions in Europe helped restore alfapump commercial activity in Europe. While we slightly raised our FY22e and FY23e sales forecasts in this region, we may further revisit our assumptions if sales outperformance continues. We view the North American commercial opportunity as potentially much stronger, as discussed in our recent Outlook report, given the rising prevalence of non-alcoholic steatohepatitis (NASH).
Valuation: Minor adjustments
We have increased our FY22 and FY23 SG&A estimates, and our post-FY23e sales forecasts in local currency terms are essentially unchanged. We have revised our forecasts to reflect €/$ parity (versus $1.02/€ previously). These changes result in a pipeline rNPV valuation of €273.8m (vs €276.4m previously). After adding H122 net cash of €16.2m (€23.8m gross cash offset by €7.6m in debt excluding lease liabilities), we obtain an equity valuation of €290m or €12.21/share (€10.96 fully diluted) versus €12.38 per share previously (€11.11 fully diluted).
Exhibit 1: Financial summary
€000s |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
1,029 |
971 |
963 |
371 |
764 |
795 |
3,178 |
Cost of Sales |
(158) |
(198) |
(202) |
(77) |
(163) |
(159) |
(636) |
||
Gross Profit |
871 |
773 |
761 |
294 |
601 |
636 |
2,542 |
||
General & Administrative |
(8,206) |
(7,102) |
(6,738) |
(7,177) |
(8,205) |
(9,364) |
(15,583) |
||
Net Research & Development |
(5,816) |
(7,652) |
(11,835) |
(16,935) |
(17,211) |
(14,900) |
(9,300) |
||
Operating profit before exceptionals |
(13,150) |
(13,981) |
(17,813) |
(23,818) |
(24,815) |
(23,628) |
(22,340) |
||
EBITDA |
|
|
(13,070) |
(13,737) |
(17,506) |
(23,409) |
(24,347) |
(23,008) |
(21,823) |
Depreciation & other |
(81) |
(244) |
(307) |
(409) |
(467) |
(620) |
(517) |
||
Operating Profit (before amort. and except.) |
(13,150) |
(13,981) |
(17,813) |
(23,818) |
(24,815) |
(23,628) |
(22,340) |
||
Exceptionals including asset impairment |
74 |
18 |
41 |
1,205 |
0 |
0 |
0 |
||
Operating Profit |
(13,077) |
(13,964) |
(17,771) |
(22,613) |
(24,815) |
(23,628) |
(22,340) |
||
Net Interest |
(883) |
(878) |
(1,178) |
(608) |
(1,456) |
(1,430) |
(3,542) |
||
Profit Before Tax (norm) |
|
|
(14,033) |
(14,859) |
(18,991) |
(24,426) |
(26,270) |
(25,059) |
(25,883) |
Profit Before Tax (FRS 3) |
|
|
(13,960) |
(14,841) |
(18,949) |
(23,221) |
(26,270) |
(25,059) |
(25,883) |
Tax |
(24) |
(136) |
(157) |
(393) |
(257) |
0 |
0 |
||
Profit After Tax and minority interests (norm) |
(14,057) |
(14,995) |
(19,148) |
(24,819) |
(26,527) |
(25,059) |
(25,883) |
||
Profit After Tax and minority interests (FRS 3) |
(13,983) |
(14,977) |
(19,106) |
(23,614) |
(26,527) |
(25,059) |
(25,883) |
||
Average Number of Shares Outstanding (m) |
10.0 |
12.3 |
15.3 |
18.2 |
23.8 |
23.9 |
23.9 |
||
EPS - normalised (€) |
|
|
(1.41) |
(1.22) |
(1.25) |
(1.36) |
(1.12) |
(1.05) |
(1.08) |
EPS - normalised and fully diluted (€) |
|
(1.41) |
(1.22) |
(1.25) |
(1.36) |
(1.12) |
(1.05) |
(1.08) |
|
EPS - (IFRS) (€) |
|
|
(1.40) |
(1.22) |
(1.25) |
(1.30) |
(1.12) |
(1.05) |
(1.08) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
242 |
829 |
772 |
1,814 |
2,465 |
2,163 |
2,361 |
Tangible Assets |
184 |
765 |
705 |
1,732 |
2,377 |
2,075 |
2,273 |
||
Investments in long-term financial assets |
58 |
63 |
67 |
82 |
88 |
88 |
88 |
||
Current Assets |
|
|
3,099 |
8,522 |
13,441 |
12,890 |
12,909 |
13,225 |
13,194 |
Short-term investments |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Cash |
1,318 |
5,586 |
11,016 |
9,600 |
12,247 |
12,919 |
11,485 |
||
Other |
1,782 |
2,935 |
2,425 |
3,290 |
661 |
307 |
1,709 |
||
Current Liabilities |
|
|
(18,727) |
(5,315) |
(5,966) |
(7,180) |
(4,867) |
(4,360) |
(4,819) |
Creditors |
(6,654) |
(4,855) |
(5,966) |
(7,180) |
(4,867) |
(4,360) |
(4,819) |
||
Short term borrowings |
(12,073) |
(459) |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(3,374) |
(3,110) |
(8,135) |
(8,312) |
(9,003) |
(34,003) |
(59,003) |
Long term borrowings |
(2,582) |
(2,261) |
(7,473) |
(7,325) |
(7,582) |
(32,582) |
(57,582) |
||
Other long term liabilities |
(792) |
(849) |
(662) |
(987) |
(1,421) |
(1,421) |
(1,421) |
||
Net Assets |
|
|
(18,760) |
926 |
113 |
(788) |
1,504 |
(22,975) |
(48,266) |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
(8,987) |
(17,596) |
(15,791) |
(22,786) |
(23,638) |
(22,580) |
(22,177) |
Net interest and financing income (expense) |
(883) |
(878) |
(1,178) |
(608) |
(1,456) |
(1,430) |
(3,542) |
||
Tax |
(5) |
(9) |
(36) |
(222) |
0 |
0 |
0 |
||
Net Operating Cash Flow |
|
|
(9,875) |
(18,482) |
(17,005) |
(23,616) |
(25,094) |
(24,011) |
(25,719) |
Capex |
(39) |
(106) |
(138) |
(326) |
(575) |
(318) |
(715) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing (net of costs) |
2 |
26,165 |
19,000 |
22,771 |
28,427 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(9,912) |
7,576 |
1,857 |
(1,171) |
2,758 |
(24,329) |
(26,434) |
||
Opening net debt/(cash) |
|
|
0 |
13,337 |
(2,866) |
(3,543) |
(2,275) |
(4,665) |
19,663 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(3,425) |
8,627 |
(1,179) |
(97) |
(368) |
(0) |
0 |
||
Closing net debt/(cash) |
|
|
13,337 |
(2,866) |
(3,543) |
(2,275) |
(4,665) |
19,663 |
46,097 |
Lease debt |
N/A |
504 |
387 |
760 |
1,074 |
1,074 |
1,074 |
||
Closing net debt/(cash) inclusive of IFRS16 lease debt |
13,337 |
(2,362) |
(3,157) |
(1,515) |
(3,591) |
20,737 |
47,171 |
Source: company data, Edison Investment Research
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Research: Investment Companies
CVC Income & Growth’s (CVC IG; formerly Credit Partners European Opportunities) share price and NAV have been affected by the turbulent markets. The two classes of shares (euro and sterling) are down 6% and 5% over the last 12 months, with NAV total negative returns of 5% and 7%, respectively. At the same time, CVC IG’s asset quality has been holding up and yields have been boosted by the floating rate nature of leveraged loans. At current prices, CVC IG’s portfolio has a yield to maturity (YTM) of 13.8% (euros) and 15.7% (sterling). Current (running cash) yields are 9.1% and 10.9%, which gives space for a dividend increase (current dividend yields are 5.3% and 5.8%) if the board wished to do so. Looking ahead, continued market volatility is likely given the uncertainty regarding inflation, the central banks’ actions on interest rates and the overall impact on economies. However, since most of CVC IG’s assets are senior and secured and leveraged loan recovery rates are typically 60–75%, the market valuation seems to be quite cautious in our opinion.
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