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Last close As at 09/06/2023
USD1.32
▲ 0.04 (3.13%)
Market capitalisation
USD22m
Research: Healthcare
Kazia Therapeutics’ FY22 results recapped a busy year focused on strengthening its oncology-focused pipeline. While the year was marked by encouraging data readouts from several preclinical/clinical programs (particularly in rare childhood brain cancers and brain metastases), this was partially offset by recent news that lead asset paxalisib (PI3K/mTOR inhibitor) has not graduated to Stage 2 of the Phase III GBM AGILE study in glioblastoma multiforme (GBM). Final survival and response data from the fully blinded study are expected in H2 CY23. Net cash at the end of FY22 was US$5.3m, bolstered by a US$2.5m injection from the at-the-market (ATM) facility and we estimate the need of another c US$50m before break-even. Our valuation remains largely unchanged at US$146.6m and the per basic ADR calculation decreases to US$9.79, reflecting the updated share count with the recent equity raise.
Kazia Therapeutics |
Doubling down on clinical development |
FY22 results |
Pharma and biotech |
6 September 2022 |
ADR research
ADR share price performance
Business description
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Analysts
Kazia Therapeutics is a research client of Edison Investment Research Limited |
Kazia Therapeutics’ FY22 results recapped a busy year focused on strengthening its oncology-focused pipeline. While the year was marked by encouraging data readouts from several preclinical/clinical programs (particularly in rare childhood brain cancers and brain metastases), this was partially offset by recent news that lead asset paxalisib (PI3K/mTOR inhibitor) has not graduated to Stage 2 of the Phase III GBM AGILE study in glioblastoma multiforme (GBM). Final survival and response data from the fully blinded study are expected in H2 CY23. Net cash at the end of FY22 was US$5.3m, bolstered by a US$2.5m injection from the at-the-market (ATM) facility and we estimate the need of another c US$50m before break-even. Our valuation remains largely unchanged at US$146.6m and the per basic ADR calculation decreases to US$9.79, reflecting the updated share count with the recent equity raise.
Year end |
Revenue (US$m) |
PTP* |
EPADR* |
DPADR |
P/E |
Gross yield |
06/21 |
10.5 |
(3.1) |
(0.25) |
0.0 |
N/A |
N/A |
06/22 |
0.0 |
(14.6) |
(1.08) |
0.0 |
N/A |
N/A |
06/23e |
0.0 |
(18.6) |
(1.23) |
0.0 |
N/A |
N/A |
06/24e |
10.6 |
(16.8) |
(1.11) |
0.0 |
N/A |
N/A |
Note: *Converted at A$1.45/US$. Dividend yield excludes withholding tax. Investors should consult their tax advisor regarding the application of any domestic and foreign tax laws.
More than a GBM play
While paxalisib in GBM was Kazia’s most clinically advanced asset, it boasts a broad clinical pipeline with as many as seven other investigator-sponsored clinical trials ongoing (involving paxalisib), both in other primary brain cancers (diffuse intrinsic pontine glioma (DIPG) and primary central nervous system lymphoma) and secondary cancers that have metastasized to the brain. Most recently, interim data released from a Phase I study assessing paxalisib in the treatment of brain metastases recorded an impressive overall response rate of 100% in the nine-patient cohort. We expect forthcoming interim data from EVT801’s Phase I trial (H1 CY23) and final results for the GBM AGILE study (H2 CY23) to be the next catalysts for Kazia.
Funding support crucial to progress pipeline
At the current quarterly cash burn run rate of US$3.5–4m, the current cash balance of US$7.6m (including US$2.5m raised post-period end) provides a six-month operating runway that could be extended slightly by drawing on the ATM facility. However, given the early-stage pipeline, we anticipate the need for c US$51m in the coming years, including US$22m in each of FY23 and FY24. We expect Kazia to seek strategic partnering opportunities as a possible alternative to dilutive equity raising to support its clinical development plans.
Valuation: US$146.6m or US$9.79 per basic ADR
We have rolled forward our model to include the FY22 results, reflect the latest FX rates and incorporate the latest pro forma net cash figure in our valuation. Our overall valuation for Kazia remains largely unchanged at US$146.6m. However, the per ADR valuation decreases to US$9.42 (US$10.86/ADR previously) with the additional c 10 million shares due to the utilization of the ATM facility.
Exhibit 1: Financial summary
US$'000s |
2021 |
2022 |
2023e |
2024e |
||
30-June |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Revenue |
|
|
10,501.5 |
18.7 |
0.0 |
10,620.7 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
(1,149.0) |
||
Gross Profit |
10,501.5 |
18.7 |
0.0 |
9,471.7 |
||
R&D |
10,028.5 |
13,967.0 |
17,669.0 |
20,420.7 |
||
SG&A |
4,842.6 |
3,111.4 |
3,480.9 |
8,378.1 |
||
EBITDA |
|
|
(3,058.2) |
(14,558.0) |
(18,648.1) |
(16,825.3) |
Operating profit (before amort. and excepts.) |
|
(3,058.2) |
(14,558.0) |
(18,648.1) |
(16,825.3) |
|
Amortization of acquired intangibles |
(872.6) |
(1,346.9) |
(1,346.9) |
(1,346.9) |
||
Exceptionals |
(1,772.6) |
(192.6) |
0.0 |
0.0 |
||
Share-based payments |
(438.9) |
(1,154.9) |
(1,154.9) |
(1,154.9) |
||
Reported operating profit |
(6,142.3) |
(17,252.3) |
(21,149.8) |
(19,327.0) |
||
Net Interest |
0.0 |
0.0 |
0.0 |
0.0 |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
||
Pre-Tax Profit (norm) |
|
|
(3,058.2) |
(14,558.0) |
(18,648.1) |
(16,825.3) |
Pre-Tax Profit (reported) |
|
|
(6,142.3) |
(17,252.3) |
(21,149.8) |
(19,327.0) |
Reported tax |
334.0 |
253.8 |
311.2 |
284.4 |
||
Profit After Tax (norm) |
(2,891.9) |
(14,343.8) |
(18,373.7) |
(16,577.7) |
||
Profit After Tax (reported) |
(5,808.2) |
(16,998.5) |
(20,838.6) |
(19,042.7) |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalized) |
(2,891.9) |
(14,343.8) |
(18,373.7) |
(16,577.7) |
||
Net income (reported) |
(5,808.2) |
(16,998.5) |
(20,838.6) |
(19,042.7) |
||
Average Number of ADRs Outstanding (m) |
11.8 |
13.2 |
15.0 |
15.0 |
||
EPADR - diluted normalized (US$) |
|
|
(0.25) |
(1.08) |
(1.23) |
(1.11) |
EPADR - basic reported (US$) |
|
|
(0.49) |
(1.28) |
(1.39) |
(1.27) |
Dividend (US$) |
0.00 |
0.00 |
0.00 |
0.00 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
19,790.5 |
18,862.4 |
16,136.3 |
13,410.1 |
Intangible Assets |
15,174.2 |
13,827.3 |
12,480.5 |
11,133.6 |
||
Tangible Assets |
0.0 |
0.0 |
0.0 |
0.0 |
||
Investments & other |
4,616.3 |
5,035.1 |
3,655.8 |
2,276.5 |
||
Current Assets |
|
|
20,269.5 |
5,247.1 |
13,204.0 |
20,617.0 |
Stocks |
0.0 |
0.0 |
0.0 |
283.3 |
||
Debtors |
58.2 |
62.7 |
0.0 |
6,983.5 |
||
Cash & cash equivalents |
19,025.4 |
5,076.6 |
13,096.3 |
13,242.5 |
||
Other |
1,186.0 |
107.7 |
107.7 |
107.7 |
||
Current Liabilities |
|
|
(5,742.5) |
(3,231.1) |
(5,236.1) |
(7,405.5) |
Creditors |
(3,401.8) |
(2,593.2) |
(4,598.2) |
(6,767.5) |
||
Tax and social security |
0.0 |
0.0 |
0.0 |
0.0 |
||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(2,340.6) |
(638.0) |
(638.0) |
(638.0) |
||
Long Term Liabilities |
|
|
(8,213.6) |
(8,024.4) |
(28,402.8) |
(48,808.1) |
Long term borrowings |
0.0 |
0.0 |
(20,689.7) |
(41,379.3) |
||
Other long-term liabilities |
(8,213.6) |
(8,024.4) |
(7,713.2) |
(7,428.8) |
||
Net Assets |
|
|
26,103.9 |
12,854.0 |
(4,298.7) |
(22,186.5) |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
26,103.9 |
12,854.0 |
(4,298.7) |
(22,186.5) |
CASH FLOW |
||||||
Operating Cash Flow |
(3,058.2) |
(14,558.0) |
(18,648.1) |
(16,825.3) |
||
Working capital |
(3,855.7) |
(72.5) |
3,135.8 |
(4,002.5) |
||
Exceptional & other |
630.8 |
(1,067.9) |
311.2 |
284.4 |
||
Tax |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net operating cash flow |
|
|
(6,283.1) |
(15,698.4) |
(15,201.1) |
(20,543.4) |
Capex |
0.0 |
0.0 |
0.0 |
0.0 |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net interest |
0.0 |
0.0 |
0.0 |
0.0 |
||
Equity financing |
19,385.4 |
2,569.8 |
2,531.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
(1,630.8) |
0.0 |
0.0 |
||
Net Cash Flow |
13,102.3 |
(14,759.5) |
(12,670.0) |
(20,543.4) |
||
Opening net debt/(cash) |
|
|
(6,234.3) |
(19,215.4) |
(5,266.7) |
7,403.3 |
FX |
(121.1) |
810.7 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(19,215.4) |
(5,266.7) |
7,403.3 |
27,946.7 |
Source: Kazia Therapeutics company accounts, Edison Investment Research
|
|
Research: Investment Companies
The Biotech Growth Trust (BIOG) is managed by global healthcare specialist OrbiMed Capital. Despite a reversal in the trust’s relative performance following a very successful FY21 (ending 31 March 2021), manager Geoff Hsu is continuing to favour smaller-cap, emerging biotech stocks, as he says these companies are where the bulk of industry innovation occurs, and this is the primary driver of the biotech sector’s long-term positive performance. The manager believes that the latest drawdown in biotech stocks, which is unprecedented in both magnitude and duration, has led to a very large disconnect between favourable industry fundamentals and very low biotech company valuations. Over the last year, BIOG’s portfolio has become increasingly concentrated as Hsu and his team are focusing more on their highest-conviction investments.
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