Cerulean Pharma
Written by
Cerulean Pharma |
Collaborating with big pharma |
Q3 results and collaboration |
Pharma & biotech |
19 November 2015 |
Share price performance
Business description
Next events
Analysts
Cerulean Pharma is a research client of Edison Investment Research Limited |
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Cerulean reported in-line Q3 results on 16 November followed by an investor call highlighting its growing clinical program for treatments using its unique nanoparticle drug conjugation NDC delivery system. If successful, lead compound CRLX101 will launch as a new mechanism of action in third- and fourth-line renal cell cancer where there are few treatment options. Its technology holds the potential for numerous NDC combinations with currently marketed drugs, underlined by its newly announced collaboration with AstraZeneca.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
0.0 |
(17.3) |
(25.35) |
0.0 |
N/A |
N/A |
12/14 |
0.0 |
(21.4) |
(1.64) |
0.0 |
N/A |
N/A |
12/15e |
0.0 |
(39.4) |
(1.56) |
0.0 |
N/A |
N/A |
12/16e |
0.0 |
(40.4) |
(1.55) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalized, excluding intangible amortization, exceptional items and share-based payments.
Agreement with AstraZeneca
On 17 November Cerulean announced a clinical collaboration with AstraZeneca (AZ) and the National Cancer Institute (NCI) to evaluate a combination of AZ’s parp inhibitor, LynParza, and its (Top-1 inhibitor) CRLX-101. A Phase I/IIa trial in ~55 patients with small cell lung cancer will explore the compounds' potential complementarity. The trial’s enrollment will start in H116 and will be funded and conducted by the NCI. AZ and Cerulean will supply their respective treatments. AZ has commented that the collaboration will be "the first of several studies to explore the potential of combining CRLX-101 with (AZ) drug candidates". The initial study establishes a relationship between the two companies, which we believe holds the potential for an eventual broader commercial partnership.
Fully on track ahead of a newsflow-rich H116
Cerulean’s Q3 financials were reassuring and we adjust our forecasts slightly on the results. The company reported a net loss of $10.6m (net loss/share of $0.39) nearly in line with our expectations. Management confirmed that its extensive clinical program, which focuses on CRLX101 and CRLX301, is fully on track. Key Phase II data for lead compound CRLX101 in RCC will be reported in H1 and, if positive, a Phase III RCC trial is planned to begin by the end of 2016. We currently forecast peak sales of $490m for CRLX101 with Avastin in mRCC (and $340m and $770m respectively in follow-on indications of ovarian and rectal cancers).
Valuation: Unchanged at $273m ($10.0/share)
Our fair value for Cerulean, $273m or $10.0 per share, is derived though our NPV-based methodology, applying our standard 12.5% discount. Cerulean reported cash holdings of $78m at 30 September 2015, and management confirmed prior statements that its cash runway extends into 2017. With 74% of its market cap underpinned by cash, we reiterate our view that multiple data read-outs in the coming months, if positive, should re-rate the shares.
Exhibit 1: Financial summary
$000s |
2013 |
2014 |
2015e |
2016e |
2017e |
||
Year-end 31 December |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
6 |
80 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
6 |
80 |
0 |
0 |
0 |
||
Research and development |
(9,700) |
(11,772) |
(25,791) |
(27,500) |
(28,500) |
||
General & administrative |
(6,166) |
(8,587) |
(11,352) |
(12,487) |
(13,736) |
||
EBITDA |
|
|
(16,057) |
(20,405) |
(37,272) |
(40,163) |
(42,473) |
Operating Profit (before GW and except.) |
|
|
(15,860) |
(20,279) |
(37,143) |
(39,987) |
(42,236) |
Intangible Amortization |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals/Other |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(15,860) |
(20,279) |
(37,143) |
(39,987) |
(42,236) |
||
Net Interest |
(1,485) |
(1,074) |
(2,227) |
(435) |
(443) |
||
Other (includes change in fair value of warrants) |
202 |
(1,989) |
(8) |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(17,345) |
(21,353) |
(39,370) |
(40,422) |
(42,679) |
Profit Before Tax (FRS 3) |
|
|
(17,143) |
(23,342) |
(39,378) |
(40,422) |
(42,679) |
Tax |
0 |
0 |
0 |
0 |
0 |
||
Deferred tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(17,345) |
(21,353) |
(39,370) |
(40,422) |
(42,679) |
||
Profit After Tax (FRS 3) |
(17,143) |
(23,342) |
(39,378) |
(40,422) |
(42,679) |
||
Average Number of Shares Outstanding (m) |
0.7 |
14.5 |
25.3 |
26.1 |
26.8 |
||
EPS - normalized fully diluted ($) |
|
|
(25.35) |
(1.64) |
(1.56) |
(1.55) |
(1.59) |
EPS - FRS 3 ($) |
|
|
(25.35) |
(1.64) |
(1.56) |
(1.55) |
(1.59) |
Dividend per share ($) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
380 |
557 |
1,195 |
1,400 |
1,554 |
Intangible Assets |
0 |
0 |
0 |
0 |
0 |
||
Tangible Assets |
245 |
342 |
585 |
790 |
944 |
||
Other |
135 |
215 |
610 |
610 |
610 |
||
Current Assets |
|
|
6,447 |
52,836 |
68,899 |
30,840 |
30,627 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
959 |
1,662 |
1,522 |
1,522 |
1,522 |
||
Cash |
5,488 |
51,174 |
67,377 |
29,318 |
29,105 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(15,146) |
(8,061) |
(10,608) |
(10,608) |
(10,608) |
Creditors |
(12,012) |
(4,937) |
(6,577) |
(6,577) |
(6,577) |
||
Short term borrowings |
(3,134) |
(3,124) |
(4,031) |
(4,031) |
(4,031) |
||
Long Term Liabilities |
|
|
(85,980) |
(7) |
(11,031) |
(11,177) |
(51,324) |
Long term borrowings |
(3,124) |
0 |
(10,695) |
(10,841) |
(50,988) |
||
Other long term liabilities |
(82,856) |
(7) |
(336) |
(336) |
(336) |
||
Net Assets |
|
|
(94,299) |
45,325 |
48,454 |
10,456 |
(29,751) |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(17,202) |
(19,477) |
(34,405) |
(37,674) |
(39,820) |
Net Interest |
588 |
416 |
1,520 |
442 |
446 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(7) |
(225) |
(372) |
(381) |
(390) |
||
Acquisitions/disposals |
0 |
40 |
0 |
0 |
0 |
||
Equity Financing |
35 |
60,002 |
39,813 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
8,236 |
8,064 |
(1,932) |
(867) |
0 |
||
Net Cash Flow |
(8,350) |
48,820 |
4,624 |
(38,480) |
(39,764) |
||
Opening net debt/(cash) |
|
|
(7,580) |
770 |
(48,050) |
(52,651) |
(14,446) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
(23) |
276 |
287 |
||
Closing net debt/(cash) |
|
|
770 |
(48,050) |
(52,651) |
(14,446) |
25,031 |
Source: Company accounts, Edison Investment Research
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