4SC has announced an updated development programme, to be funded by an equity fund-raising, which we expect in 2017. The proceeds from this will be used to accelerate development of 4SC’s leading drug candidates. This will include continuing to progress resminostat in CTCL (initiated at end 2016), a subsequent filing of a marketing authorisation application in Europe (2019) and progression of resminostat into a further pivotal study in HCC (2018). 4SC also expects a pivotal study in 4SC-202 in Merkel cell carcinoma (2018) and the progression of 4SC-208 into clinical evaluation (early 2019). Our forecasts and valuation are under review. We believe that if 4SC executes the proposed plans it could be a significant and positive step.
Written by
4SC |
Intention to raise equity to progress development |
Updated development plan |
Pharma & biotech |
17 May 2017 |
Share price performance
Business description
Next events
Analyst
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4SC has announced an updated development programme, to be funded by an equity fund-raising, which we expect in 2017. The proceeds from this will be used to accelerate development of 4SC’s leading drug candidates. This will include continuing to progress resminostat in CTCL (initiated at end 2016), a subsequent filing of a marketing authorisation application in Europe (2019) and progression of resminostat into a further pivotal study in HCC (2018). 4SC also expects a pivotal study in 4SC-202 in Merkel cell carcinoma (2018) and the progression of 4SC-208 into clinical evaluation (early 2019). Our forecasts and valuation are under review. We believe that if 4SC executes the proposed plans it could be a significant and positive step.
Year |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
3.3 |
(8.4) |
(0.59) |
0.0 |
N/A |
N/A |
12/16 |
2.1 |
(10.9) |
(0.54) |
0.0 |
N/A |
N/A |
12/17e |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
12/18e |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Strategic update to accelerate leading candidates
At the end of 2016, 4SC initiated a pivotal Phase II trial of resminostat in CTCL in Europe. The company has indicated that it is progressing as planned, with 18 patients currently recruited, in line with its expectations. Initial headline data are expected in H119 and, if these are positive, the company has indicated that it will file a Marketing Authorisation Application (MAA) in Europe shortly after. Resminostat has also been tested in a Phase II study (in combination with sorafenib) for patients with advanced-stage liver cancer in Japan and Korea. Positive data were reported from subgroup analysis and its continued development is being discussed with its partner Yakult. The company has indicated that, depending on discussions, it is possible to advance resminostat into a pivotal study in advanced-stage HCC in Q118, which would have an expected readout in 2021. We note that all rights to resminostat (ex-Japan) now lie with 4SC following the termination of its agreement with Menarini in Asia-Pac (ex-Japan).
Earlier-stage pipeline accelerated plan
4SC-202 and 4SC-208 also form key parts of 4SC’s focus moving forward. 4SC-202 (HDAC/LSD1 inhibitor) has demonstrated promising preclinical data. Based on the data 4SC intends to initiate a Phase II study in patients with advanced melanoma and to support a study in microsatellite-stable gastrointestinal cancers. These are expected to initiate in H217, if funding is available. If successful, this could lead to a pivotal study in Q418 in Merkel cell carcinoma. Finally, 4SC-208 (small molecule) will be moved forward to complete preclinical testing in 2018.
Valuation: Proposed plans a positive step
We place our financial forecasts and valuation under review until there is further clarity, but we believe that if 4SC executes the proposed plans it could be a significant and positive step.
Exhibit 1: Financial summary
€'000s |
2013 |
2014 |
2015 |
2016 |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
4,904 |
7,055 |
3,266 |
2,060 |
Cost of sales |
(1,474) |
(4,080) |
(1,763) |
(76) |
||
Gross profit |
3,430 |
2,975 |
1,503 |
1,984 |
||
R&D expenditure |
(10,243) |
(8,504) |
(7,255) |
(10,601) |
||
Administrative, distribution and other |
(3,779) |
(3,908) |
(3,163) |
(3,175) |
||
Operating profit |
(10,592) |
(9,437) |
(8,915) |
(11,792) |
||
Intangible amortisation |
(1,593) |
(819) |
(827) |
(892) |
||
Exceptionals (impairment / restructuring costs) |
(862) |
0 |
0 |
0 |
||
Share-based payments |
(53) |
(3) |
2 |
0 |
||
EBITDA |
|
|
(7,804) |
(8,339) |
(7,914) |
(10,900) |
Operating profit (before GW and except.) |
|
(8,084) |
(8,615) |
(8,090) |
(10,900) |
|
Net interest |
48 |
(228) |
(331) |
(14) |
||
Other (profit/loss from associates) |
19 |
39 |
58 |
711 |
||
Profit before tax (norm) |
|
|
(8,036) |
(8,843) |
(8,421) |
(10,914) |
Profit before tax (FRS 3) |
|
|
(10,525) |
(9,626) |
(9,188) |
(11,095) |
Tax |
0 |
(70) |
(40) |
(71) |
||
Profit after tax (norm) |
(8,017) |
(8,874) |
(8,403) |
(10,274) |
||
Profit after tax (FRS 3) |
(10,525) |
(9,696) |
(9,228) |
(11,166) |
||
Average number of shares outstanding (m) |
10.1 |
10.1 |
14.3 |
19.0 |
||
EPS - normalised (€) |
|
|
(0.80) |
(0.88) |
(0.59) |
(0.54) |
EPS - FRS 3 (€) |
|
|
(1.04) |
(0.96) |
(0.64) |
(0.59) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed assets |
|
|
11,591 |
10,639 |
11,077 |
7,096 |
Intangible assets |
10,651 |
9,836 |
9,123 |
6,499 |
||
Tangible assets |
602 |
425 |
357 |
222 |
||
Investments and other |
338 |
378 |
1,597 |
375 |
||
Current assets |
|
|
6,114 |
4,295 |
22,415 |
11,959 |
Stocks |
23 |
25 |
20 |
0 |
||
Debtors |
346 |
652 |
94 |
95 |
||
Cash |
4,899 |
3,202 |
21,476 |
10,048 |
||
Other current assets |
846 |
393 |
817 |
1,816 |
||
Current liabilities |
|
|
(3,587) |
(4,842) |
(5,593) |
(3,257) |
Creditors |
(675) |
(993) |
(688) |
(834) |
||
Short-term borrowings |
0 |
(317) |
(1,962) |
0 |
||
Deferred revenue (short term) |
(1,589) |
(2,638) |
(1,779) |
(1,431) |
||
Other current liabilities |
(1,323) |
(894) |
(1,164) |
(992) |
||
Long-term liabilities |
|
|
(2,836) |
(8,042) |
(1,471) |
(525) |
Long-term borrowings |
0 |
(6,131) |
0 |
0 |
||
Deferred revenue (long term) |
(2,682) |
(1,788) |
(1,433) |
(493) |
||
Other long-term liabilities |
(154) |
(123) |
(38) |
(32) |
||
Net assets |
|
|
11,282 |
2,050 |
26,428 |
15,273 |
CASH FLOW |
||||||
Operating cash flow |
|
|
(7,052) |
(8,302) |
(8,916) |
(12,320) |
Net interest |
66 |
0 |
(2) |
(531) |
||
Tax |
0 |
(70) |
(40) |
(71) |
||
Capex |
(99) |
(100) |
(109) |
(404) |
||
Expenditure on intangibles |
(21) |
(3) |
(114) |
(60) |
||
Acquisitions/disposals |
10 |
0 |
0 |
2,808 |
||
Financing |
0 |
477 |
27,608 |
0 |
||
Other |
0 |
0 |
4,333 |
650 |
||
Net cash flow |
(7,096) |
(7,998) |
22,760 |
(9,928) |
||
Opening net debt/(cash) |
|
|
(12,064) |
(4,899) |
3,246 |
(19,514) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(69) |
(147) |
0 |
462 |
||
Closing net debt/(cash) |
|
|
(4,899) |
3,246 |
(19,514) |
(10,048) |
Source: 4SC accounts, Edison Investment Research
|
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Research: Healthcare
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