e-Therapeutics
e-Therapeutics |
Light at the end of the funnel |
Clinical data |
Pharma & biotech |
18 February 2016 |
Share price performance
Business description
Next events
Analysts
e-Therapeutics is a research client of Edison Investment Research Limited |
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e-Therapeutics’ (ETX) share price fell c 30% on news that the ETS6103 Phase IIb trial as a second-line therapy for major depressive disorder (MDD) failed to meet its primary efficacy endpoint. However, this does not necessarily equate to a negative read-across for the network pharmacology platform and remaining pipeline (ETS2101 in cancer). Significant investment in expansion of discovery capabilities and infrastructure has generated 10 active discovery projects, with potential for early-stage out-licensing deals or discovery collaborations in the near term. Deal execution would provide robust validation to this approach, and unlocking valuation upside.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
01/14 |
0.0 |
(6.1) |
(2.0) |
0.0 |
N/A |
N/A |
01/15 |
0.0 |
(9.7) |
(2.9) |
0.0 |
N/A |
N/A |
01/16e |
0.0 |
(12.0) |
(3.5) |
0.0 |
N/A |
N/A |
01/17e |
0.0 |
(12.2) |
(3.5) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items.
ETS6103: Depressing news in MDD
Top-line data from the 164-pt eight-week Phase IIb study in MDD patients refractory to SSRI (selective serotonin reuptake inhibitor) therapy showed low-dose ETS6103 was not non-inferior to amitriptyline. Further analysis, particularly given a higher dose had shown non-inferiority in 2009, should determine whether development/ out-licensing potential remains; full data will be presented at prelims in March.
Not a negative read-across to platform and pipeline
Since identifying ETS6103 and ETS2101, sizeable investment and progress has been made in expanding ETX’s platform’s discovery capabilities and infrastructure. Positively, despite missing its primary endpoint, ETS6103’s expected overall profile was confirmed. It showed efficacy, with responders in both arms (albeit with fewer remissions than amitriptyline) and a more benign side effect/tolerability profile.
Discovery pipeline: A funnel of opportunity
ETX’s discovery platform has to date generated 10 ongoing projects in cancer immunotherapy and targeted cancer resistance rescue. At last disclosure, two preclinical projects were in lead optimisation, with formal preclinical development expected to begin before end H116. The value inherent in these discovery projects and platform could be unlocked via preclinical out-licensing deals or discovery collaborations, providing important validation and portfolio diversification.
Valuation: Risk-adjusted rNPV of £114m
Pending confirmation of next steps, conservatively removing ETS6103 from our pipeline rNPV lowers our valuation to £114m from £125m. However, with ETX’s stated intention to commercialise its discovery platform, potential deals would represent upside, as would positive Phase II ETS2101 data due in 2017 and discovery projects moving into preclinical development. Our model suggests that ETX is fully funded into FY19, beyond these potential valuation inflection points.
Exhibit 1: Financial summary
£000s |
2014 |
2015 |
2016e |
2017e |
2018e |
||
Year ending 31 January |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
0 |
EBITDA |
|
|
(6,633) |
(9,997) |
(12,210) |
(12,384) |
(10,848) |
Operating profit (pre GW and except.) |
|
|
(6,684) |
(10,069) |
(12,282) |
(12,449) |
(10,893) |
Share-based payment |
(35) |
(106) |
(120) |
(140) |
(150) |
||
Operating profit |
(6,719) |
(10,175) |
(12,402) |
(12,589) |
(11,043) |
||
Net interest |
617 |
357 |
250 |
200 |
150 |
||
Profit before tax (norm) |
|
|
(6,067) |
(9,712) |
(12,032) |
(12,249) |
(10,743) |
Profit before tax (FRS 3) |
|
|
(6,102) |
(9,818) |
(12,152) |
(12,389) |
(10,893) |
Tax |
1,063 |
2,041 |
2,832 |
2,916 |
2,208 |
||
Profit after tax (norm.) |
(5,004) |
(7,671) |
(9,200) |
(9,333) |
(8,535) |
||
Profit after tax (FRS3) |
(5,039) |
(7,777) |
(9,320) |
(9,473) |
(8,685) |
||
Average number of shares outstanding (m) |
252.4 |
264.3 |
264.8 |
264.8 |
264.8 |
||
EPS - normalised (p) |
|
|
(2.0) |
(2.9) |
(3.5) |
(3.5) |
(3.2) |
EPS - FRS 3 (p) |
|
|
(2.0) |
(2.9) |
(3.5) |
(3.6) |
(3.3) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
EBITDA margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Operating margin (before GW and except) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
|||||||
Fixed assets |
|
|
617 |
733 |
820 |
914 |
1,028 |
Intangible assets |
496 |
637 |
766 |
895 |
1,024 |
||
Tangible assets |
121 |
96 |
54 |
19 |
4 |
||
Current assets |
|
|
45,004 |
37,424 |
27,410 |
17,864 |
9,808 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
1,857 |
3,602 |
3,602 |
3,602 |
3,602 |
||
Cash |
43,147 |
33,822 |
23,808 |
14,262 |
6,206 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Current liabilities |
|
|
(1,003) |
(1,133) |
(1,133) |
(1,133) |
(1,133) |
Creditors |
(1,003) |
(1,133) |
(1,133) |
(1,133) |
(1,133) |
||
Other creditors |
0 |
0 |
0 |
0 |
0 |
||
Short-term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long-term liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Long-term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Deferred taxation |
0 |
0 |
0 |
0 |
0 |
||
Other long-term liabilities |
0 |
0 |
0 |
0 |
0 |
||
Net assets |
|
|
44,618 |
37,024 |
27,097 |
17,645 |
9,703 |
CASH FLOW |
|||||||
Operating cash flow |
|
|
(6,550) |
(11,013) |
(12,210) |
(12,384) |
(10,848) |
Net interest |
222 |
642 |
314 |
165 |
35 |
||
Tax |
830 |
1,087 |
2,041 |
2,832 |
2,916 |
||
Capex |
(22) |
(31) |
(30) |
(30) |
(30) |
||
Purchase of intangibles |
(150) |
(158) |
(129) |
(129) |
(129) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Financing |
39,400 |
77 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
(358) |
71 |
0 |
0 |
0 |
||
Net cash flow |
33,372 |
(9,325) |
(10,014) |
(9,546) |
(8,056) |
||
Opening net debt/(cash) |
|
|
(9,775) |
(43,147) |
(33,822) |
(23,808) |
(14,262) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
(0) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(43,147) |
(33,822) |
(23,808) |
(14,262) |
(6,206) |
|
Source: Company accounts, Edison Investment Research |
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