Cerulean Pharma
Written by
Cerulean Pharma |
Approaching release of Phase II renal data |
Full year results |
Pharma & biotech |
16 March 2016 |
Share price performance
Business description
Next events
Analysts
Cerulean Pharma is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||||||
On 10 March Cerulean reassured the market by reporting in-line full-year 2015 results, reiterating an expected cash runway into 2017 and confirming timelines for releasing clinical data for key pipeline projects in H116 are on track. Phase II data in renal cancer are expected by end June for its high-profile CRLX101, which uses its nanoparticle drug delivery system.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
0.0 |
(21.4) |
(1.64) |
0.0 |
N/A |
N/A |
12/15 |
0.0 |
(39.6) |
(1.56) |
0.0 |
N/A |
N/A |
12/16e |
0.0 |
(40.4) |
(1.48) |
0.0 |
N/A |
N/A |
12/17e |
0.0 |
(42.7) |
(1.52) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalized, excluding amortization of acquired intangibles, exceptional items and share-based payments.
Critical newsflow concentrated into coming weeks
Management has reassured that the battery of clinic-related events for CRLX101 and CRLX301 expected in H1 are well on track. By 30 June Cerulean will report highly awaited top-line data (progression-free survival and overall response rates) from its Phase II trial of CRLX101 in combination with Avastin in advanced renal cell carcinoma. If positive, this will lead to the initiation of a Phase III study in metastatic renal cell carcinoma (mRCC) by year end. Other key upcoming news includes preliminary results for CRLX101 with weekly paclitaxel from the ongoing Phase Ib trial in relapsed ovarian cancer with the GOG Foundation, and additional CRLX301 data from a Phase I trial at the International Congress on Target Anticancer Therapies in April. Cerulean also plans to initiate a Phase IIa trial of CRLX301 in solid tumors (at a maximum tolerated dose of 75/mg2 once every three weeks) and dose first patients in a Phase Ib/II trial for the Cerulean-AZ-NCI collaboration. We forecast peak sales of $490m for CRLX-101 with Avastin in mRCC ($340m and $770m in follow-on indications of ovarian and rectal cancers respectively) and $550m for CRLX301.
Full-year results confirm company on track
Full-year 2015 results were announced with little surprise, falling in line with our own and market expectations. Cerulean reported a net loss of $10.7m in Q4 (net loss/share of $0.30). Cash holdings of $75.9m at end 2015 were shored up in Q4 through a $6m drawdown in the second tranche of the Hercules Loan Agreement – we forecast a cash burn of $38.4m in 2016. Management confirms that cash utilization expected in the coming quarters should enable a cash runway into 2017.
Valuation: Moves to $264m from $273m ($9.65/share)
We value Cerulean at $264m or $9.65/share, down slightly since our last note in November 2015 as we roll our valuation forward one quarter. Our fair value offers significant upside on the current share price of $2.15, which has fallen considerably in recent months, influenced by the re-rating of worldwide biotech indices amid a stretch at Cerulean with little news to stimulate investor interest. We see numerous forthcoming share price inflection points that, if positive, have the capacity to catalyze a re-rating of the shares, now trading just slightly above net cash.
Financial summary
Exhibit 1: Financial summary
$000s |
2013 |
2014 |
2015 |
2016e |
2017e |
||
Year end 31 December |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
6 |
80 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
6 |
80 |
0 |
0 |
0 |
||
Research and development |
(9,700) |
(11,772) |
(25,948) |
(27,500) |
(28,500) |
||
General & administrative |
(6,166) |
(8,587) |
(11,224) |
(12,346) |
(13,581) |
||
EBITDA |
|
|
(16,057) |
(20,405) |
(37,364) |
(40,019) |
(42,287) |
Operating Profit (before GW and except.) |
|
|
(15,860) |
(20,279) |
(37,172) |
(39,846) |
(42,081) |
Intangible Amortization |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals/Other |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(15,860) |
(20,279) |
(37,172) |
(39,846) |
(42,081) |
||
Net Interest |
(1,485) |
(1,074) |
(2,422) |
(602) |
(612) |
||
Other (includes change in fair value of warrants) |
202 |
(1,989) |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(17,345) |
(21,353) |
(39,594) |
(40,449) |
(42,693) |
Profit Before Tax (FRS 3) |
|
|
(17,143) |
(23,342) |
(39,594) |
(40,449) |
(42,693) |
Tax |
0 |
0 |
0 |
0 |
0 |
||
Deferred tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(17,345) |
(21,353) |
(39,594) |
(40,449) |
(42,693) |
||
Profit After Tax (FRS 3) |
(17,143) |
(23,342) |
(39,594) |
(40,449) |
(42,693) |
||
Average Number of Shares Outstanding (m) |
0.7 |
14.5 |
25.4 |
27.3 |
28.1 |
||
EPS - normalized fully diluted (c) |
|
|
(25.35) |
(1.64) |
(1.56) |
(1.48) |
(1.52) |
EPS - FRS 3 (c) |
|
|
(25.35) |
(1.64) |
(1.56) |
(1.48) |
(1.52) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
380 |
557 |
923 |
1,034 |
1,119 |
Intangible Assets |
0 |
0 |
0 |
0 |
0 |
||
Tangible Assets |
245 |
342 |
576 |
687 |
772 |
||
Other |
135 |
215 |
347 |
347 |
347 |
||
Current Assets |
|
|
6,447 |
52,836 |
77,302 |
39,020 |
38,914 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
959 |
1,662 |
1,394 |
1,394 |
1,394 |
||
Cash |
5,488 |
51,174 |
75,908 |
37,626 |
37,520 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(15,146) |
(8,061) |
(16,337) |
(16,337) |
(16,337) |
Creditors |
(12,012) |
(4,937) |
(8,685) |
(8,685) |
(8,685) |
||
Short term borrowings |
(3,134) |
(3,124) |
(7,652) |
(7,652) |
(7,652) |
||
Long Term Liabilities |
|
|
(85,980) |
(7) |
(13,145) |
(13,346) |
(53,549) |
Long term borrowings |
(3,124) |
0 |
(12,672) |
(12,873) |
(53,076) |
||
Other long term liabilities |
(82,856) |
(7) |
(473) |
(473) |
(473) |
||
Net Assets |
|
|
(94,299) |
45,325 |
48,743 |
10,370 |
(29,853) |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(17,202) |
(19,477) |
(31,915) |
(37,706) |
(39,868) |
Net Interest |
588 |
416 |
0 |
610 |
616 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(7) |
(225) |
(277) |
(284) |
(291) |
||
Acquisitions/disposals |
0 |
40 |
23 |
0 |
0 |
||
Equity Financing |
35 |
60,002 |
39,813 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
8,236 |
8,064 |
(412) |
(1,035) |
0 |
||
Net Cash Flow |
(8,350) |
48,820 |
7,232 |
(38,415) |
(39,543) |
||
Opening net debt/(cash) |
|
|
(7,580) |
770 |
(48,050) |
(55,584) |
(17,100) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
302 |
(69) |
288 |
||
Closing net debt/(cash) |
|
|
770 |
(48,050) |
(55,584) |
(17,100) |
22,155 |
Source: Cerulean Pharma accounts, Edison Investment Research
|
Foreign & Colonial Investment Trust