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Research: Healthcare
ReNeuron is focused on human retinal progenitor cell therapy (hRPC) for retinitis pigmentosa (RP). Ongoing Phase IIa data show a stable average gain in visual acuity. A nine-patient continuation Phase IIa study is underway at a higher dose. A placing of £15m and an open offer of up to £2.5m at 70p/share, totalling up to £17.5m before costs, are planned to give at least 18 months cash to complete the Phase IIa, potentially initiate a pivotal study in H2 CY22 and progress preclinical exosome and other cell therapy projects. The valuation is adjusted to £190m, formerly £170m.
Written by
ReNeuron Group |
Funding to complete Phase IIa and other projects |
Placing and rights issue |
Pharma & biotech |
8 December 2020 |
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ReNeuron is focused on human retinal progenitor cell therapy (hRPC) for retinitis pigmentosa (RP). Ongoing Phase IIa data show a stable average gain in visual acuity. A nine-patient continuation Phase IIa study is underway at a higher dose. A placing of £15m and an open offer of up to £2.5m at 70p/share, totalling up to £17.5m before costs, are planned to give at least 18 months cash to complete the Phase IIa, potentially initiate a pivotal study in H2 CY22 and progress preclinical exosome and other cell therapy projects. The valuation is adjusted to £190m, formerly £170m.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/19 |
2.7 |
(17.2) |
(45.34) |
0.0 |
N/A |
N/A |
03/20 |
6.2 |
(13.9) |
(35.85) |
0.0 |
N/A |
N/A |
03/21e |
0.2 |
(14.4) |
(32.85) |
0.0 |
N/A |
N/A |
03/22e |
0.2 |
(13.3) |
(20.55) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Shares in issue forecast at 56.85m at YE2020
Placing gives funding to at least Q2 CY22
The oversubscribed placing is raising £13.9m with a further £1.1m from directors and associated funds. This is at 70p, a discount of 27% to the November 23 close of 96.45p. There is also a one-for-nine open offer for up to £2.5m; we do not factor this into our current cash forecast as the take-up is unknown. These transactions need EGM approval on 11 December. Total shares in issue could rise by up to 25m to 56.85m from 31.85m. The new shares, if all are issued, will be 43.9% of the new share capital, giving a dilution of about 79%. Management expects the placing, net of costs, to provide cash to at least Q2 CY22.
H121 results and FY21 outlook
In H1 FY21 to 30 September, the loss (after a £0.9m tax credit) was £7.1m. The operating cash outflow, helped by working capital gains, was £5.5m, offset by receipt of the £2.9m FY19 tax credit. This gave a cash outflow of £2.6m. For FY21, we expect operating cash use to be c £13.8m. We assume the raised H1 creditor level (£8m), possibly related to the closed stroke trial, to reduce to £6m. Given £9.8m H1 FY21 cash, we estimate FY21 year-end cash of about £16m based on the placing proceeds, a reduction in working capital and receipt of tax credits from FY19 and FY20. FY22 costs are expected to be lower after the June CY20 restructuring.
Valuation: Revised to £190m
The value has been adjusted to take account of the prospective funding, adjusted after H221 results for income, lower costs and revised cash flow. A hPRC approval (unchanged probability of 30%) is now expected around H2 CY25, formerly by Q4 CY24. The immunotherapy and diabetes cell therapy projects have good deal potential but are preclinical. Exosome evaluation projects to deliver RNA drugs are promising and require early licensing. This takes the indicative value to £190m; the valuation point is now 1 January 2021. If the maximum 25m shares are issued, this would be 3.3p per share (formerly 5.3p). We note current high deal values in the gene and cell retinal therapy area, with one totalling $250m plus royalties in June 2020. Deals on RP from CY22 and on exosomes from CY21 might occur.
Exhibit 1: Financial summary
£'000s |
2019 |
2020 |
2021e |
2022e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
2,720 |
6,165 |
238 |
182 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
2,720 |
6,165 |
238 |
182 |
||
R&D expenses |
(16,246) |
(16,335) |
(10,618) |
(10,500) |
||
SG&A expenses |
(4,773) |
(4,239) |
(3,836) |
(3,028) |
||
EBITDA |
|
|
(18,129) |
(13,997) |
(13,811) |
(12,941) |
Operating Profit (before amort. and except.) |
|
(18,299) |
(14,409) |
(14,216) |
(13,346) |
|
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Operating Profit |
(18,299) |
(14,409) |
(14,216) |
(13,346) |
||
Other |
0 |
0 |
0 |
0 |
||
Net Interest |
1,064 |
551 |
(211) |
64 |
||
Profit Before Tax (norm) |
|
|
(17,235) |
(13,858) |
(14,427) |
(13,282) |
Profit Before Tax (FRS 3) |
|
|
(17,235) |
(13,858) |
(14,427) |
(13,282) |
Tax |
2,887 |
2,446 |
1,600 |
1,600 |
||
Profit After Tax (norm) |
(14,348) |
(11,412) |
(12,827) |
(11,682) |
||
Profit After Tax (FRS 3) |
(14,348) |
(11,412) |
(12,827) |
(11,682) |
||
Average Number of Shares Outstanding (m) |
31.6 |
31.8 |
39.0 |
56.8 |
||
EPS - normalised (p) |
|
|
(45.34) |
(35.85) |
(32.85) |
(20.55) |
EPS - FRS 3 (p) |
|
|
(45.34) |
(35.85) |
(32.85) |
(20.55) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
1,522 |
1,229 |
1,104 |
979 |
Intangible Assets |
186 |
186 |
186 |
186 |
||
Tangible Assets |
632 |
452 |
452 |
452 |
||
Other |
704 |
591 |
466 |
341 |
||
Current Assets |
|
|
29,988 |
19,147 |
18,637 |
6,914 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
834 |
696 |
696 |
696 |
||
Cash and deposits |
26,386 |
12,625 |
15,887 |
4,164 |
||
Other |
2,768 |
5,826 |
2,054 |
2,054 |
||
Current Liabilities |
|
|
(7,402) |
(6,446) |
(4,446) |
(4,446) |
Creditors |
(7,261) |
(6,280) |
(4,280) |
(4,280) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Short term leases |
(141) |
(166) |
(166) |
(166) |
||
Other |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(864) |
(707) |
(541) |
(375) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Long term leases |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(864) |
(707) |
(541) |
(375) |
||
Net Assets |
|
|
23,244 |
13,223 |
14,754 |
3,072 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(15,037) |
(13,651) |
(15,752) |
(13,143) |
Net Interest |
303 |
258 |
14 |
64 |
||
Tax |
3,129 |
(611) |
5,369 |
1,600 |
||
Capex |
(239) |
(119) |
(100) |
(100) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
0 |
188 |
15,000 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
4,365 |
6,128 |
(1,269) |
(144) |
||
Net Cash Flow |
(7,479) |
(7,807) |
3,262 |
(11,723) |
||
Opening net debt/(cash) |
|
|
(27,911) |
(26,245) |
(12,459) |
(15,721) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
5,813 |
(5,979) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(26,245) |
(12,459) |
(15,721) |
(3,998) |
Source: Source: ReNeuron accounts, Edison Investment Research. Note only placing cash of £15m included to date in FY21.
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