Pharnext — €12m loan to ease funding overhang

Pharnext (PAR: ALPHA)

Last close As at 20/06/2024

EUR0.10

0.03 (42.86%)

Market capitalisation

1m

More on this equity

Research: Healthcare

Pharnext — €12m loan to ease funding overhang

Pharnext announced that it has raised €12m in short-term, fixed-rate financing from Global Tech Opportunities 13, a member of the Alpha Blue Ocean group and the company’s convertible debt (OCEANE-BSA) holder. This refinancing will be used to pay off the outstanding €8m in venture debt obligations to IPF Partners (raised in 2018), releasing Pharnext from the restrictive covenants requiring it to maintain a €8m cash balance. Additionally, the funds will serve as an alternative source of financing for the dilutive drawdown of incremental convertible tranches. In light of this announcement, we are withdrawing our forecasts while we revisit our estimates and valuation.

Jyoti Prakash

Written by

Jyoti Prakash

Analyst, Healthcare

Healthcare

Pharnext

12m loan to ease funding overhang

Funding update

Pharma and biotech

10 June 2022

Price

€0.01

Market cap

€3m

Net debt (€m) at end FY21

13.9

Shares in issue

490m

Free float

8.5%

Code

ALPHA

Primary exchange

Euronext Paris

Secondary exchange

OTC Pink

Share price performance

Business description

Pharnext is an advanced clinical-stage biopharmaceutical company developing novel therapies for neurodegenerative diseases lacking curative and/or disease-modifying treatments using its proprietary Pleotherapy platform, which develops new therapeutic effects from drug combinations. Its lead programme is PXT3003 for Charcot-Marie-Tooth disease type 1A, which has recently completed patient enrolment in a pivotal Phase III trial, with readout expected in Q423 (orphan drug designation in the US and Europe). PXT864 for Alzheimer’s disease has completed Phase IIa and will be further advanced through partnerships.

Analysts

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Soo Romanoff

+44 (0)20 3077 5700

Pharnext is a research client of Edison Investment Research Limited

Pharnext announced that it has raised €12m in short-term, fixed-rate financing from Global Tech Opportunities 13, a member of the Alpha Blue Ocean group and the company’s convertible debt (OCEANE-BSA) holder. This refinancing will be used to pay off the outstanding €8m in venture debt obligations to IPF Partners (raised in 2018), releasing Pharnext from the restrictive covenants requiring it to maintain a €8m cash balance. Additionally, the funds will serve as an alternative source of financing for the dilutive drawdown of incremental convertible tranches. In light of this announcement, we are withdrawing our forecasts while we revisit our estimates and valuation.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/20

2.8

(21.4)

(1.17)

0.00

N/A

N/A

12/21

3.6

(30.6)

(1.01)

0.00

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

The €12m fixed-rate loan with a 9.5% interest rate is anticipated to be disbursed in five instalments (the first is €3m, followed by two instalments of €2.5m and €2m each) from June 2022, and each instalment to be drawn down with at least a one-month gap in between. Pharnext has the flexibility to drawdown the debt between a four- to eight-month period ending February 2023. The repayment period ranges from four to 12 months following each disbursement. One of the key objectives of this new funding is to pay off the €8m venture debt obligations to IPF Partners (of a total €15m), which Pharnext raised in 2018 at a Euribor +11% interest rate. This prior debt agreement was negotiated to include a highly restrictive covenant requiring constant maintenance of a cash balance of €8m, thereby tying up valuable resources. The company’s cash balance of €8m at the end of FY21, along with the remaining proceeds from the new fixed-rate debt, should relieve the near-term funding overhang as it progresses its pivotal Phase III PREMIER trial to data readouts in Q423.

Pharnext also announced that it will be reinstating the initial terms of the June 2021 OCEANE-BSA agreement. As a reminder, the deal covered 35 tranches for total proceeds of €81m, which was truncated to 12 tranches in December 2021. While Pharnext has already utilised €36m of funds (across 11 tranches), the reinstatement means that it would be entitled to an incremental €45m in capital, should it choose to utilise this reinstated facility following completion of the fixed-loan agreement. While we expect the company to pursue alternate, non-dilutive options for future capital raising, the availability of the OCEAN-BSA funds provides management with options in case of contingencies. We will update our estimates to factor in these new developments.

General disclaimer and copyright

This report has been commissioned by Pharnext and prepared and issued by Edison, in consideration of a fee payable by Pharnext. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Pharnext and prepared and issued by Edison, in consideration of a fee payable by Pharnext. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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