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Research: Healthcare
ReNeuron reported in December 2016 positive Phase II trial data for its CTX cells in chronic stroke patients, despite not meeting the three-month time frame of a two-point improvement in its primary outcome measure, the Action Research Arm Test (ARAT). As a result, the company has confirmed that it will progress to a pivotal controlled clinical study in 2017. Beyond CTX, we expect safety and efficacy data from its retinitis pigmentosa (RP) trial in 2017 and Phase I data from its critical limb ischaemia (CLI) trial. Our rNPV has increased to £291m.
Written by
ReNeuron Group |
Milestones expected as pipeline progresses |
FY17 results |
Pharma & biotech |
6 July 2017 |
Share price performance
Business description
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Analyst
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The highlight of FY17 was positive Phase II efficacy data from ReNeuron’s PISCES II clinical trial. As this and its other clinical programmes in ophthalmology and its earlier stage exosome platform progress, ReNeuron is entering a period of potentially significant milestones over the next 12 to 18 months. We maintain our valuation of £291m, adjusting for FY17 cash and rolling the model forward, which is offset by moving out the clinical timeline for the Phase III pivotal trial in stroke, now expected to start in early 2018 (vs H217).
Year end |
Revenue (£m) |
PBT* (£m) |
EPS* (p) |
DPS (p) |
P/E (x) |
Yield (%) |
03/16 |
0.0 |
(12.8) |
(0.44) |
0.0 |
N/A |
N/A |
03/17 |
0.0 |
(18.2) |
(0.49) |
0.0 |
N/A |
N/A |
03/18e |
0.0 |
(32.3) |
(0.96) |
0.0 |
N/A |
N/A |
03/19e |
0.0 |
(34.5) |
(1.03) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Pivotal Phase III clinical trial planned early CY18
ReNeuron received positive feedback from its end-of-Phase II meeting with the FDA for its Phase III stroke trial design. Alongside this it received a recommendation from the FDA to apply for a special protocol assessment (SPA) for the Phase III study. This is particularly encouraging as it indicates that, provided the endpoints are met, FDA approval should follow. ReNeuron has indicated that it now plans to apply for an SPA alongside a Regenerative Medicine Advanced Therapy (RMAT) designation (which would enable more interaction with the FDA during development and the possibility of accelerated review and approval) and an IND submission by the end of CY17 with the intention of starting a Phase III trial in the US in early 2018.
Ophthalmology pipeline also set to deliver newsflow
ReNeuron expanded its ophthalmology programme in FY17, following successful development of a cryopreserved formulation of its hRP cells, which was approved by the FDA for use in clinical trials. We expect efficacy data readouts in H218 from its Phase I/II trial in retinitis pigmentosa and Phase I data in H217. Alongside this, it is also expanding development of hRPCs into cone-rod dystrophy, with a Phase II trial application planned in H217.
Valuation: Maintained at £291m
We maintain our valuation at £291m or 9p per share. We have rolled the model forward to H217 (CY) and now use FY17 reported cash of £53m. This is offset by moving out the clinical timeline as we now expect the pivotal trial to start in CY18 (vs H217). We currently forecast cash into early FY19, which should enable ReNeuron to execute on its expanding clinical trial programme. We include an illustrative loan of £10m in FY19 in our forecasts. ReNeuron has a number of key inflection points over the next 12 to 18 months, which we believe could offer upside to its current level.
Financial summary
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015 |
2016 |
2017 |
2018e |
2019e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
17 |
22 |
30 |
29 |
46 |
46 |
46 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
17 |
22 |
30 |
29 |
46 |
46 |
46 |
||
R&D expenses |
(4,786) |
(5,829) |
(7,250) |
(10,272) |
(16,648) |
(29,300) |
(30,766) |
||
SG&A expenses |
(2,319) |
(2,824) |
(3,693) |
(4,015) |
(4,139) |
(4,346) |
(4,781) |
||
EBITDA |
|
|
(6,966) |
(7,857) |
(10,269) |
(13,632) |
(19,717) |
(32,602) |
(33,998) |
Operating Profit (before GW and except) |
|
(7,088) |
(7,969) |
(10,394) |
(13,724) |
(19,887) |
(32,746) |
(34,646) |
|
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(7,088) |
(7,969) |
(10,394) |
(13,724) |
(19,887) |
(32,746) |
(34,646) |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Interest |
29 |
149 |
91 |
878 |
1,722 |
398 |
107 |
||
Profit Before Tax (norm) |
|
|
(7,059) |
(7,820) |
(10,303) |
(12,846) |
(18,165) |
(32,348) |
(34,540) |
Profit Before Tax (FRS 3) |
|
|
(7,059) |
(7,820) |
(10,303) |
(12,846) |
(18,165) |
(32,348) |
(34,540) |
Tax |
714 |
754 |
1,397 |
1,492 |
2,592 |
1,941 |
2,072 |
||
Profit After Tax (norm) |
(6,345) |
(7,066) |
(8,906) |
(11,354) |
(15,573) |
(30,408) |
(32,467) |
||
Profit After Tax (FRS 3) |
(6,345) |
(7,066) |
(8,906) |
(11,354) |
(15,573) |
(30,408) |
(32,467) |
||
Average Number of Shares Outstanding (m) |
748.7 |
1,425.0 |
1,788.8 |
2,609.3 |
3,164.6 |
3,164.6 |
3,164.6 |
||
EPS - normalised (p) |
|
|
(0.85) |
(0.50) |
(0.50) |
(0.44) |
(0.49) |
(0.96) |
(1.03) |
EPS - FRS 3 (p) |
|
|
(0.85) |
(0.50) |
(0.50) |
(0.44) |
(0.49) |
(0.96) |
(1.03) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
1,620 |
1,772 |
2,033 |
6,963 |
724 |
3,239 |
5,783 |
Intangible Assets |
1,272 |
1,272 |
1,591 |
1,591 |
0 |
0 |
0 |
||
Tangible Assets |
213 |
225 |
161 |
361 |
724 |
3,239 |
5,783 |
||
Other |
135 |
275 |
281 |
5,011 |
0 |
0 |
0 |
||
Current Assets |
|
|
4,602 |
22,347 |
14,054 |
64,894 |
58,136 |
24,306 |
410 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
341 |
676 |
400 |
1,421 |
1,060 |
1,060 |
1,060 |
||
Cash |
3,547 |
20,917 |
12,382 |
60,709 |
53,061 |
21,306 |
(2,722) |
||
Other |
714 |
754 |
1,272 |
2,764 |
4,015 |
1,941 |
2,072 |
||
Current Liabilities |
|
|
(1,164) |
(2,036) |
(2,345) |
(4,199) |
(5,702) |
(3,702) |
(13,702) |
Creditors |
(539) |
(1,234) |
(1,150) |
(3,700) |
(5,701) |
(3,701) |
(3,701) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
(10,000) |
||
Short term leases |
(1) |
(1) |
(1) |
(1) |
(1) |
(1) |
(1) |
||
Other |
(624) |
(801) |
(1,194) |
(498) |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(150) |
(366) |
(606) |
0 |
(1) |
(1) |
(1) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long term leases |
0 |
(2) |
(1) |
0 |
(1) |
(1) |
(1) |
||
Other long term liabilities |
(150) |
(364) |
(605) |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
4,908 |
21,717 |
13,136 |
67,658 |
53,157 |
23,843 |
(7,509) |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
(6,637) |
(6,718) |
(9,124) |
(11,920) |
(13,976) |
(33,508) |
(32,883) |
Net Interest |
(1) |
0 |
0 |
0 |
0 |
0 |
0 |
||
Tax |
616 |
714 |
879 |
0 |
1,340 |
4,015 |
1,941 |
||
Capex |
(37) |
(121) |
(380) |
(293) |
(532) |
(2,660) |
(3,192) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
5,601 |
23,435 |
0 |
65,195 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
30 |
61 |
91 |
345 |
520 |
398 |
122 |
||
Net Cash Flow |
(428) |
17,371 |
(8,534) |
53,327 |
(12,648) |
(31,755) |
(34,012) |
||
Opening net debt/(cash) |
|
|
(3,974) |
(3,546) |
(20,914) |
(12,380) |
(65,708) |
(53,059) |
(21,304) |
HP finance leases initiated |
0 |
(3) |
0 |
1 |
(1) |
0 |
0 |
||
Other |
0 |
0 |
0 |
(0) |
(0) |
(0) |
(0) |
||
Closing net debt/(cash) |
|
|
(3,546) |
(20,914) |
(12,380) |
(65,708) |
(53,059) |
(21,304) |
12,708 |
Source: ReNeuron Group accounts, Edison Investment Research
|
|
Slower than expected trading combined with continued restructuring of the business in H117 has resulted in a reduction in our forecasts for FY17. Management is confident that the pipeline has strengthened and should support a pick-up in revenues in H217. The HomeSend joint venture (JV) has extended its application to the cross-border bank payments market, which should support its target to break even in CY17 and drive growth in the value of the JV.