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Research: Healthcare
BioPorto announced in its Q120 earnings update that the timeline for submission of its paediatric NGAL Test would be delayed to H220 (from previous guidance of Q220) on account of COVID-19. The planned clinical study to investigate the test for risk assessment of acute kidney injury (AKI) has been put on hold due to the ongoing pandemic. This will also delay the submission of the adult NGAL Test as it was planned to occur after the paediatric submission.
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BioPorto Diagnostics |
COVID-19 delays clinical studies |
Earnings update |
Healthcare equipment |
11 May 2020 |
Share price performance
Business description
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BioPorto Diagnostics is a research client of Edison Investment Research Limited |
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BioPorto announced in its Q120 earnings update that the timeline for submission of its paediatric NGAL Test would be delayed to H220 (from previous guidance of Q220) on account of COVID-19. The planned clinical study to investigate the test for risk assessment of acute kidney injury (AKI) has been put on hold due to the ongoing pandemic. This will also delay the submission of the adult NGAL Test as it was planned to occur after the paediatric submission.
Year end |
Revenue (DKKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
26.0 |
(42.5) |
(0.24) |
0.0 |
N/A |
N/A |
12/19 |
26.6 |
(71.1) |
(0.39) |
0.0 |
N/A |
N/A |
12/20e |
27.0 |
(63.4) |
(0.31) |
0.0 |
N/A |
N/A |
12/21e |
101.2 |
(9.7) |
(0.05) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Paediatric application delayed to H220
The company successfully recruited 10 clinical sites for the pivotal paediatric NGAL study during Q120 as well as finalising the study protocol after meeting with the FDA. However, due to the reprioritisation of medical resources because of COVID-19, it was unable to start enrolling patients. The trial is currently on hold until later in 2020, but we believe it should be quick to perform and the company is guiding toward a submission of a marketing application in H220. This is in line with our current outlook for COVID-19 reopening, which assumes that clinical trials we be open to enrolment again in the autumn of 2020.The company had been waiting on the feedback on the paediatric submission to commence its pivotal study of The NGAL Test for adult patients, so we also expect this timeline to be delayed as well.
NGAL sales up 67% annually in Q1
The company reported revenue of DKK4.2m for Q120, driven by DKK2.1m in sales of The NGAL Test for research purposes. NGAL sales are up 67% on a year-on-year basis (Q119: DKK1.3m). Q1 has historically been a slow quarter for NGAL so it is encouraging to see continued growth in the face of potential COVID-19 disruptions. AKI is a known complication of COVID-19 and the need for new methods of identifying AKI are even higher than before. The company is maintaining its guidance of DKK30m in sales in 2020, although we are slightly more conservative with an estimate of DKK27m.
Valuation: Lowered to DKK896m or DKK4.48/share
We have decreased our valuation to DKK896m or DKK4.48 per basic share, from DKK932m or DKK5.33 per share. We have pushed back timelines for the initial approval of The NGAL Test by approximately six months to early 2021, and expect a filing for adult AKI shortly thereafter. The company ended the quarter with DKK3.3m cash and subsequently completed a rights offering of DKK37.5m net. We expect the company to require DKK20m in additional financing in 2020.
Valuation
We have decreased our valuation to DKK896m or DKK4.48 per basic share, from DKK932m or DKK5.33 per share. This is driven by delays to commercialization of The NGAL test and offset by rolling forward our NPVs and higher net cash (DKK40.8m pro forma including rights proceeds, compared to DKK18.1m at end-2019). Our current outlook for the COVID-19 crisis is that clinical trials will be able to enrol at close to normal capacity by autumn 2020. We have delayed the expected approval of NGAL for paediatrics and adult ICU patients into 2021 (from H220 previously) and our delayed expectations are carried through to later-stage label expansions (emergency department and post-surgery indications both moved to 2022 approval, from 2021 previously).
Exhibit 1: Valuation of BioPorto
Program |
Market |
Probability of success |
Peak revenue ($m) |
Valuation (DKKm) |
The NGAL Test |
ICU |
50% |
180.8 |
652.4 |
ED |
30% |
167.1 |
286.9 |
|
Post-surgery |
30% |
54.1 |
82.4 |
|
Research |
100% |
3.1 |
5.7 |
|
Paediatrics |
50% |
15.9 |
12.7 |
|
Other products |
Research |
100% |
1.7 |
3.0 |
Unallocated costs |
(188.0) |
|||
Total |
855.2 |
|||
Net cash and equivalents (Q120 + rights offering) (DKKm) |
40.8 |
|||
Total firm value (DKKm) |
896.0 |
|||
Total shares (m) |
199.9 |
|||
Value per share (DKK) |
4.48 |
|||
Dilutive warrants (m) |
16.5 |
|||
Total diluted shares (m) |
216.5 |
|||
Value per diluted share (DKK) |
4.42 |
|||
Source: BioPorto Diagnostics reports, Edison Investment Research
Financials
Revenue was DKK4.2m for Q120, DKK2.1m of which were sales of The NGAL Test for research purposes. NGAL sales are up 67% on a year-on-year basis (Q119: DKK1.3m), but down sequentially (Q419: DKK4.3m), in line with previous seasonality effects (Exhibit 2). We are encouraged by the growth in the product, as we consider it indicative of interest in NGAL as an alternative test for AKI detection. The company has maintained guidance of approximately DKK30m in total sales for the year, which we believe is potentially achievable on the back of this growth, although we however are slightly more conservative and forecast DKK27m in sales in 2020. This is down from our previous FY20 forecast of DKK35.5m due to the delays in NGAL US approval. It is still too early to gauge the impact of COVID-19 on sales, but it is possible that if medical systems are overwhelmed that there may be reduced motivation to try new technology. However, at this time, the firm’s sales effort is less about generating revenue and more about increasing awareness of NGAL and engaging physicians who can be converted into customers of the approved diagnostic test.
|
Exhibit 2: Sales of The NGAL Test for research |
|
|
Source: BioPorto Diagnostics |
The company reported a comprehensive loss of DKK15.7m for the quarter, which we expect to remain relatively steady throughout the year (DKK66.6m reported operating loss estimated for 2020). Company guidance for the 2020 loss is slightly higher (DKK73m EBIT loss), which we assume is because of lower estimates of deferred costs on account of COVID-19. The company ended the quarter with DKK3.3m, which was subsequently increased with the completion of a rights offering in April 2020: 24,992,053 shares at DKK1.60 per share, net proceeds of DKK37.5m. We expect the company to require DKK20m (versus our DKK55m previous estimate, which was prior to the rights offering) in additional financing to reach break-even in 2022, which we include as illustrative debt in 2020.
Exhibit 3: Financial summary
DKK000s |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Revenue |
|
|
26,016 |
26,622 |
26,997 |
101,193 |
Cost of Sales |
(8,181) |
(9,293) |
(8,749) |
(14,536) |
||
Gross Profit |
17,835 |
17,329 |
18,248 |
86,657 |
||
Sales |
(20,935) |
(39,268) |
(34,218) |
(45,103) |
||
R&D |
(18,676) |
(24,556) |
(27,941) |
(31,597) |
||
Administrative |
(20,005) |
(27,804) |
(22,676) |
(22,902) |
||
EBITDA |
|
|
(42,103) |
(68,333) |
(60,146) |
(8,280) |
Operating Profit (before amort. and except.) |
|
|
(42,646) |
(71,190) |
(63,479) |
(9,836) |
Share-based payments |
865 |
(3,109) |
(3,109) |
(3,109) |
||
Reported operating profit |
(41,781) |
(74,299) |
(66,588) |
(12,945) |
||
Net Interest |
164 |
52 |
91 |
100 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(42,482) |
(71,138) |
(63,388) |
(9,736) |
Profit Before Tax (reported) |
|
|
(41,617) |
(74,247) |
(66,497) |
(12,845) |
Reported tax |
3,569 |
4,605 |
4,124 |
797 |
||
Profit After Tax (norm) |
(38,124) |
(66,726) |
(59,456) |
(9,132) |
||
Profit After Tax (reported) |
(38,048) |
(69,642) |
(62,373) |
(12,049) |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
(38,124) |
(66,726) |
(59,456) |
(9,132) |
||
Net income (reported) |
(38,048) |
(69,642) |
(62,373) |
(12,049) |
||
Average Number of Shares Outstanding (m) |
157 |
170 |
192 |
201 |
||
EPS - normalised (ore) |
|
|
(0.24) |
(0.39) |
(0.31) |
(0.05) |
EPS - diluted normalised (DKK) |
|
|
(0.24) |
(0.39) |
(0.31) |
(0.05) |
EPS - basic reported (DKK) |
|
|
(0.24) |
(0.41) |
(0.33) |
(0.06) |
Dividend (DKK) |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
3.4 |
2.3 |
0.0 |
0.0 |
||
Gross Margin (%) |
68.6 |
65.1 |
67.6 |
85.6 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
3,563 |
8,218 |
6,897 |
6,897 |
Intangible Assets |
1,374 |
4,799 |
4,222 |
4,222 |
||
Tangible Assets |
1,437 |
1,710 |
946 |
946 |
||
Investments & other |
752 |
1,709 |
1,729 |
1,729 |
||
Current Assets |
|
|
62,638 |
34,464 |
34,053 |
31,129 |
Stocks |
3,631 |
4,155 |
2,876 |
4,779 |
||
Debtors |
8,036 |
5,695 |
3,328 |
12,476 |
||
Cash & cash equivalents |
46,709 |
18,122 |
20,002 |
6,029 |
||
Other |
4,262 |
6,492 |
7,846 |
7,846 |
||
Current Liabilities |
|
|
(9,217) |
(14,858) |
(35,695) |
(41,712) |
Creditors |
(4,451) |
(3,237) |
(3,581) |
(9,598) |
||
Tax and social security |
(141) |
(2,306) |
(2,366) |
(2,366) |
||
Short term borrowings |
0 |
0 |
(20,000) |
(20,000) |
||
Other |
(4,625) |
(9,315) |
(9,748) |
(9,748) |
||
Long Term Liabilities |
|
|
(787) |
(2,502) |
(1,953) |
(1,953) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(787) |
(2,502) |
(1,953) |
(1,953) |
||
Net Assets |
|
|
56,197 |
25,322 |
3,301 |
(5,638) |
Minority interests |
0 |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
56,197 |
25,322 |
3,301 |
(5,638) |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
(42,103) |
(68,333) |
(60,146) |
(8,280) |
||
Working capital |
(631) |
4,453 |
4,051 |
(5,033) |
||
Exceptional & other |
(74) |
159 |
1,166 |
100 |
||
Tax |
4,799 |
3,557 |
3,141 |
797 |
||
Net operating cash flow |
|
|
(38,009) |
(60,164) |
(51,787) |
(12,417) |
Capex |
(1,483) |
(1,106) |
(1,556) |
(1,556) |
||
Equity financing |
39,319 |
35,983 |
37,500 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(198) |
(3,332) |
(2,294) |
0 |
||
Net Cash Flow |
(371) |
(28,619) |
(18,137) |
(13,973) |
||
Opening net debt/(cash) |
|
|
(47,080) |
(46,709) |
(18,122) |
(2) |
FX |
0 |
0 |
0 |
0 |
||
Other non-cash movements |
0 |
32 |
17 |
0 |
||
Closing net debt/(cash) |
|
|
(46,709) |
(18,122) |
(2) |
13,971 |
Source: BioPorto Diagnostics accounts, Edison Investment Research
|
|
Research: Financials
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