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Research: Healthcare
Novogen is on track to commence a Phase II trial of GDC-0084 in glioblastoma in Q4 CY17, in line with previous guidance. It plans to meet with the FDA to discuss trial design as it finalizes preparations for the study. A Phase I trial of Cantrixil in ovarian cancer is well underway, with initial data expected in late 2017 or early 2018 – efficacy data from an expansion cohort at the MTD are likely in H2 CY18. We lift our valuation range slightly to between $69m and $120m ($14.24-24.81 per ADR), while noting that additional funds may be needed in FY18.
Written by
Dr Dennis Hulme
Novogen |
GDC-0084 Phase II on track to commence Q417 |
FY17 results update |
Pharma & biotech |
11 September 2017 |
ADR research
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Novogen is a research client of Edison Investment Research Limited |
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Novogen is on track to commence a Phase II trial of GDC-0084 in glioblastoma in Q4 CY17, in line with previous guidance. It plans to meet with the FDA to discuss trial design as it finalizes preparations for the study. A Phase I trial of Cantrixil in ovarian cancer is well underway, with initial data expected in late 2017 or early 2018 – efficacy data from an expansion cohort at the MTD are likely in H2 CY18. We lift our valuation range slightly to between $69m and $120m ($14.24-24.81 per ADR), while noting that additional funds may be needed in FY18.
Year end |
Revenue |
PTP |
EPADR |
DPADR |
P/E |
Gross yield |
06/16 |
2.9 |
(9.2) |
(2.25) |
0.0 |
N/A |
N/A |
06/17 |
6.8 |
(8.6) |
(1.80) |
0.0 |
N/A |
N/A |
06/18e |
5.9 |
(13.6) |
(2.82) |
0.0 |
N/A |
N/A |
06/19e |
13.9 |
(8.5) |
(1.76) |
0.0 |
N/A |
N/A |
Note: Converted at A$1/US$0.79 for the table above and throughout the note; Novogen changed the ADR ratio from 25:1 to 100:1 (100 ordinary shares per ADR) on 14 July 2017.
GDC-0084 Phase II to start in Q417
Novogen is on track to initiate a Phase II trial of GDC-0084 (a small molecule inhibitor of the PI3K/Akt/mTOR pathway) in glioblastoma (brain cancer) in Q417. It has appointed Chiltern Oncology to manage the trial, and the manufacture of finished dosage capsules of the drug is almost complete. Consultations with the FDA to discuss key features of the clinical trial design are expected before the study commences. The trial will test GDC-0084 in a subset of glioblastoma patients who are known to obtain little benefit from standard temozolomide chemotherapy; the study is supported by encouraging Phase I data. The clear unmet medical need in this patient group could open access to accelerated approval pathways.
Cantrixil ovarian cancer study progressing
The Phase I trial of Cantrixil in ovarian cancer is recruiting patients at three sites in Australia and two sites in the US. The maximum tolerated dose (MTD) of intra-peritoneal Cantrixil in advanced ovarian cancer is likely to be determined in late 2017 or early 2018. In addition to dosage, safety and tolerability, the study will also assess indicators of efficacy such as radiological responses and biomarkers. After six weeks of single-agent Cantrixil therapy, patients may continue to receive weekly Cantrixil in combination with a chemotherapy agent such as carboplatin. Efficacy data are likely in H2 CY18 from a 12-patient expansion cohort at the MTD.
Valuation: $69-120m in two GDC-0084 scenarios
We lift our indicative valuation range slightly to between $69m and $120m or $14.24-24.81 per ADR (vs $68m to $115m, $14.20-23.70 per ADR), under either post-Phase III approval or accelerated approval scenarios for GDC-0084. The valuation changes reflect rolling forward our DCF model to FY18 and reducing FY18 R&D expenses, offset by a deferral to FY28 of the forecast market launch of the preclinical Trilexium drug as the company focuses on its clinical programs. Novogen had $11.5m cash at 30 June 2017 and we estimate that it may require $6m in additional funding in FY18 and $9m in FY19.
Exhibit 1: Financial summary
|
US$000s |
2015 |
2016 |
2017 |
2018e |
2019e |
|
Year end 30 June |
AASB |
AASB |
AASB |
AASB |
AASB |
||
PROFIT & LOSS |
|||||||
Sales, royalties, milestones |
0 |
0 |
0 |
0 |
7,308 |
||
Other (includes R&D tax rebate) |
1,293 |
2,896 |
6,765 |
5,911 |
6,589 |
||
Revenue |
|
|
1,293 |
2,896 |
6,765 |
5,911 |
13,897 |
R&D expenses |
(4,689) |
(7,816) |
(8,798) |
(15,156) |
(17,733) |
||
SG&A expenses |
(2,582) |
(3,431) |
(6,001) |
(3,420) |
(3,482) |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
EBITDA |
|
|
(5,978) |
(8,352) |
(8,034) |
(12,664) |
(7,319) |
Operating Profit (before GW and except.) |
|
|
(5,982) |
(8,430) |
(8,127) |
(12,741) |
(7,594) |
Intangible Amortization |
(450) |
(1,043) |
(52) |
(1,006) |
(926) |
||
Exceptionals |
882 |
(449) |
0 |
0 |
0 |
||
Operating Profit |
(5,550) |
(9,923) |
(8,179) |
(13,747) |
(8,520) |
||
Net Interest |
(221) |
320 |
(407) |
114 |
10 |
||
Profit Before Tax (norm) |
|
|
(6,653) |
(9,153) |
(8,586) |
(13,633) |
(8,510) |
Profit Before Tax (reported) |
|
|
(5,772) |
(9,602) |
(8,586) |
(13,633) |
(8,510) |
Tax benefit |
0 |
0 |
157 |
0 |
0 |
||
Profit After Tax (norm) |
(6,653) |
(9,153) |
(8,430) |
(13,633) |
(8,510) |
||
Profit After Tax (reported) |
(5,772) |
(9,602) |
(8,430) |
(13,633) |
(8,510) |
||
Average Number of Shares Outstanding (m) |
238.4 |
427.4 |
467.8 |
483.3 |
483.3 |
||
Average Number of ADRs Outstanding (m) |
2.38 |
4.27 |
4.68 |
4.83 |
4.83 |
||
EPS - normalized (c) |
|
|
(2.37) |
(2.25) |
(1.80) |
(2.82) |
(1.76) |
EPS - diluted |
|
|
(2.37) |
(2.25) |
(1.80) |
(2.82) |
(1.76) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Earnings per ADR - normalized (c) |
(236.5) |
(224.6) |
(180.2) |
(282.1) |
(176.1) |
||
Earnings per ADR - diluted (c) |
(236.5) |
(224.6) |
(180.2) |
(282.1) |
(176.1) |
||
Dividend per ADR (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
1,178 |
1,127 |
12,980 |
12,963 |
12,749 |
Intangible Assets |
1,098 |
650 |
12,575 |
11,569 |
10,644 |
||
Tangible Assets |
67 |
467 |
387 |
1,376 |
2,088 |
||
Investments |
12 |
10 |
17 |
17 |
17 |
||
Current Assets |
|
|
35,272 |
26,931 |
15,389 |
7,621 |
8,021 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
119 |
157 |
3,367 |
6,021 |
6,696 |
||
Cash |
35,053 |
26,428 |
11,419 |
997 |
722 |
||
Other |
100 |
346 |
603 |
603 |
603 |
||
Current Liabilities |
|
|
(1,404) |
(1,131) |
(4,253) |
(4,253) |
(3,140) |
Creditors |
(1,279) |
(1,027) |
(1,479) |
(1,479) |
(365) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other |
(125) |
(104) |
(2,774) |
(2,774) |
(2,774) |
||
Long Term Liabilities |
|
|
0 |
(121) |
(4,099) |
(9,629) |
(19,109) |
Long term borrowings |
0 |
0 |
0 |
(5,530) |
(15,010) |
||
Other long term liabilities |
0 |
(121) |
(4,099) |
(4,099) |
(4,099) |
||
Net Assets |
|
|
35,046 |
26,805 |
20,017 |
6,701 |
(1,478) |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(4,550) |
(9,783) |
(9,229) |
(15,000) |
(8,777) |
Net Interest |
0 |
320 |
196 |
114 |
10 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(77) |
(415) |
(16) |
(1,067) |
(988) |
||
Acquisitions/disposals |
6 |
2 |
(5,607) |
0 |
0 |
||
Equity Financing |
37,458 |
618 |
(14) |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
32,837 |
(9,258) |
(14,670) |
(15,952) |
(9,754) |
||
Opening net debt/(cash) |
|
|
162 |
(35,053) |
(26,428) |
(11,419) |
4,533 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
2,379 |
632 |
(339) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(35,053) |
(26,428) |
(11,419) |
4,533 |
14,288 |
Source: Novogen accounts, Edison Investment Research. Note: Solely for the convenience of the reader the financial summary table has been converted at a rate of US$0.79 to A$1. Novogen reports statutory accounts in Australian dollars. These translations should not be considered representations that any such amounts have been or could be converted into US dollars at the assumed conversion rate. Novogen changed the ADR ratio from 25:1 to 100:1 (100 ordinary shares per ADR) effective 14 July 2017.
|
|
Research: Consumer
Rank Group’s FY17 results highlighted the growth potential of its Digital division. Online revenue grew 15.3%, with an impressive operating margin of 20.4% (vs our 14.2% estimate). By contrast, Venues were slightly light, with like-for-like revenues declining by 0.7%, due to fewer customer visits and tighter due diligence. However, Venues’ KPIs have improved in H2 over H1 and FY18 has started well. Our headline revenue forecasts are broadly unchanged, although we have lowered our FY18 operating profit by 2.2%, as result of higher employment costs in Mecca. We continue to anticipate a move into net cash in FY18, underpinning Rank’s progressive dividend policy. Trading multiples are attractive, with CY18e EV/EBITDA of 6.8x, P/E of 13.7x and free cash flow yield of 8.8%.
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