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Research: Healthcare
Shield Therapeutics (STX) has announced it is broadening its strategy for commercialising Accrufer in the US (oral therapy for iron deficiency, approved by the FDA in July 2019) and no longer expects to conclude a US partnering deal by year end. As STX’s cash runway extends into Q221, an upfront licensing payment from a US deal would have ameliorated the need for further capital. It has also arranged an extension to its cash runway until the end of 2021. STX’s revised strategy is now two pronged and it will continue ongoing discussions with potential partners while exploring the benefits of marketing Accrufer itself in the US. However, the uncertainty of which route it will take has weighed on the share price. Access to funding is key for self-marketing, either through debt facilities or equity raises. Our forecasts are under review.
Written by
Shield Therapeutics |
Close but no cigar |
US partnering update |
Pharma & biotech |
11 December 2020 |
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Shield Therapeutics is a research client of Edison Investment Research Limited |
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Shield Therapeutics (STX) has announced it is broadening its strategy for commercialising Accrufer in the US (oral therapy for iron deficiency, approved by the FDA in July 2019) and no longer expects to conclude a US partnering deal by year end. As STX’s cash runway extends into Q221, an upfront licensing payment from a US deal would have ameliorated the need for further capital. It has also arranged an extension to its cash runway until the end of 2021. STX’s revised strategy is now two pronged and it will continue ongoing discussions with potential partners while exploring the benefits of marketing Accrufer itself in the US. However, the uncertainty of which route it will take has weighed on the share price. Access to funding is key for self-marketing, either through debt facilities or equity raises. Our forecasts are under review.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
0.3 |
(13.4) |
(12.7) |
0.0 |
N/A |
N/A |
12/17 |
0.6 |
(18.4) |
(15.1) |
0.0 |
N/A |
N/A |
12/18 |
11.9 |
(5.2) |
(1.5) |
0.0 |
N/A |
N/A |
12/19 |
0.7 |
(9.1) |
(7.5) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
US commercialisation strategy broadened
STX’s focus in 2020 was finding a US commercialisation partner for Accrufer/Feraccru. Management has cited that the length of time taken and late-stage setbacks (unrelated to the asset) combined with STX’s now deeper understanding of the US iron replacement market has led the board to review all options for a US launch. Partnering discussions continue, but alongside this the board will review the economics of self-marketing/co-marketing strategies. Longer term, this could lead to improved shareholder returns; however, until we have clarity on the investment required to launch in the US, significant uncertainty remains.
Financials: Cash runway to the end of 2021
STX reported an unaudited cash position of £3.8m at 30 November 2020, implying a cash runway to Q221. This could be extended until the end of 2021 through two loan facilities agreements totalling c £4.4m, with major shareholder AOP Orphan (owns 10.7% of STX) and board member Dr Christian Schweiger (owns 3.5% of STX). STX estimates ‘the amount required for the group to reach the point at which it generates cash is $30–40m’, which includes potential US launch costs, expenses related to non-US operations and funding for the ongoing paediatric study. We had forecast that sustainable profitability is achievable from 2022 (assuming US launch in 2020). This could still be possible with either route to market but the impact on profitability is unclear until we have further clarity on the effect on the financials.
Valuation: Our forecasts are under review
Our valuation and forecasts are under review. We will revisit our assumptions post the trading update, expected in January 2021.
Exhibit 1: Financial summary
Accounts: IFRS, Year-end: 31 December |
£000s |
|
2016 |
2017 |
2018 |
2019 |
Revenue |
|
|
304 |
637 |
11,881 |
719 |
Cost of sales |
|
|
(100) |
(155) |
(311) |
(485) |
Gross profit |
|
|
204 |
482 |
11,570 |
234 |
Gross margin % |
|
|
67% |
76% |
97% |
33% |
SG&A (expenses) |
|
|
(10,675) |
(16,722) |
(12,429) |
(6,773) |
R&D costs |
|
|
(2,029) |
(4,711) |
(4,300) |
(2,496) |
Other income/(expense) |
|
|
40 |
0 |
0 |
0 |
EBITDA |
|
|
(10,524) |
(18,514) |
(2,469) |
(6,414) |
Depreciation and amortisation |
|
|
(1,936) |
(2,437) |
(2,690) |
(2,621) |
Reported Operating Income |
|
|
(12,460) |
(20,951) |
(5,159) |
(9,035) |
Exceptionals and adjustments |
|
|
(2,157) |
(2,571) |
0 |
0 |
Adjusted Operating Income |
|
|
(10,303) |
(18,380) |
(5,159) |
(9,035) |
Finance income/(expense) |
|
|
(3,143) |
(43) |
8 |
(31) |
Reported PBT |
|
|
(15,603) |
(20,994) |
(5,151) |
(9,066) |
Profit Before Tax (norm) |
|
|
(13,446) |
(18,423) |
(5,151) |
(9,066) |
Income tax expense |
|
|
587 |
1,406 |
3,359 |
266 |
Reported net income |
|
|
(15,016) |
(19,588) |
(1,792) |
(8,800) |
Average Number of Shares Outstanding (m) |
|
|
101.2 |
112.4 |
116.4 |
117.0 |
Year-end number of shares, m |
|
|
101.2 |
112.4 |
116.4 |
117.0 |
Basic EPS (p) |
|
|
(14.8) |
(17.4) |
(2.0) |
(7.5) |
EPS - normalised (p) |
|
|
(12.7) |
(15.1) |
(1.5) |
(7.5) |
Dividend per share (p) |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
|
|
|
|
|
|
|
Balance sheet |
|
|
|
|
|
|
Property, plant and equipment |
|
|
19 |
13 |
155 |
26 |
Goodwill |
|
|
0 |
0 |
0 |
0 |
Intangible assets |
|
|
28,984 |
29,961 |
30,957 |
29,898 |
Other non-current assets |
|
|
0 |
0 |
0 |
0 |
Total non-current assets |
|
|
29,003 |
29,974 |
31,112 |
29,924 |
Cash and equivalents |
|
|
20,978 |
13,299 |
9,776 |
4,141 |
Inventories |
|
|
418 |
125 |
109 |
948 |
Trade and other receivables |
|
|
1,985 |
1,572 |
1,031 |
356 |
Other current assets |
|
|
0 |
0 |
1,500 |
950 |
Total current assets |
|
|
23,381 |
14,996 |
12,416 |
6,395 |
Non-current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
Other non-current liabilities |
|
|
0 |
0 |
0 |
0 |
Total non-current liabilities |
|
|
0 |
0 |
0 |
0 |
Trade and other payables |
|
|
3,827 |
3,501 |
2,548 |
3,547 |
Current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
Other current liabilities |
|
|
161 |
262 |
403 |
607 |
Total current liabilities |
|
|
3,988 |
3,763 |
3,098 |
4,174 |
Equity attributable to company |
|
|
48,396 |
41,207 |
40,430 |
32,145 |
|
|
|
|
|
|
|
Cashflow statement |
|
|
|
|
|
|
Reported net income |
|
|
(15,016) |
(19,588) |
(1,792) |
(8,800) |
Depreciation and amortisation |
|
|
1,936 |
2,437 |
2,690 |
2,621 |
Share based payments |
|
|
288 |
560 |
1,013 |
456 |
Other adjustments |
|
|
3,382 |
39 |
4 |
33 |
Movements in working capital |
|
|
(846) |
(186) |
(255) |
555 |
Interest paid / received |
|
|
0 |
0 |
0 |
0 |
Income taxes paid / received |
|
|
0 |
587 |
(1,500) |
1,040 |
Cash from operations (CFO) |
|
|
(10,256) |
(16,151) |
151 |
(4,066) |
Capex |
|
|
(3,175) |
(3,408) |
(3,345) |
(1,384) |
Acquisitions & disposals net |
|
|
0 |
0 |
0 |
0 |
Other investing activities |
|
|
177 |
0 |
50 |
18 |
Cash used in investing activities (CFIA) |
|
|
(2,998) |
(3,408) |
(3,295) |
(1,366) |
Net proceeds from issue of shares |
|
|
33,507 |
11,880 |
0 |
0 |
Movements in debt |
|
|
0 |
0 |
0 |
0 |
Other financing activities |
|
|
0 |
0 |
0 |
0 |
Cash from financing activities (CFF) |
|
|
33,507 |
11,880 |
(379) |
(203) |
Cash and equivalents at beginning of period |
|
|
725 |
20,978 |
13,299 |
9,776 |
Increase/(decrease) in cash and equivalents |
|
|
20,253 |
(7,679) |
(3,523) |
(5,635) |
Cash and equivalents at end of period |
|
|
20,978 |
13,299 |
9,776 |
4,141 |
Closing net (debt)/cash |
|
|
20,978 |
13,299 |
9,776 |
4,141 |
Source: Company accounts, Edison Investment Research
|
|
Research: Real Estate
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