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Last close As at 08/06/2023
SEK8.42
▲ 0.08 (0.96%)
Market capitalisation
SEK436m
Research: Healthcare
IRLAB Therapeutics has made substantial progress year to date with the mesdopetam (IRL790) global licensing deal with Ipsen. By partnering its lead asset mesdopetam, a D3 antagonist currently in a Phase IIb/III study in Parkinson’s disease (PD) patients with levodopa-induced dyskinesias (PD-LIDs), IRLAB has de-risked its strategy. Importantly, IRLAB has the financial flexibility in the near term to focus on Phase II asset, pirepemat, (IRL752) and broadening its clinical portfolio through the development of its preclinical assets (including IRL942 and IRL1009) and its ISP platform technology. We value IRLAB at SEK5.1bn or SEK99.4/share.
Written by
Susie Jana
IRLAB Therapeutics |
Ipsen deal de-risks the strategy |
Update to mesdopetam |
Pharma & biotech |
12 August 2021 |
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IRLAB Therapeutics is a research client of Edison Investment Research Limited |
IRLAB Therapeutics has made substantial progress year to date with the mesdopetam (IRL790) global licensing deal with Ipsen. By partnering its lead asset mesdopetam, a D3 antagonist currently in a Phase IIb/III study in Parkinson’s disease (PD) patients with levodopa-induced dyskinesias (PD-LIDs), IRLAB has de-risked its strategy. Importantly, IRLAB has the financial flexibility in the near term to focus on Phase II asset, pirepemat, (IRL752) and broadening its clinical portfolio through the development of its preclinical assets (including IRL942 and IRL1009) and its ISP platform technology. We value IRLAB at SEK5.1bn or SEK99.4/share.
Year end |
Revenue (SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
0.4 |
(95.1) |
(2.34) |
0.0 |
N/A |
N/A |
12/20 |
0.4 |
(91.4) |
(1.92) |
0.0 |
N/A |
N/A |
12/21e |
237.7 |
129.7 |
2.51 |
0.0 |
N/A |
24.1 |
12/22e |
0.4 |
(137.8) |
(2.66) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Ipsen a valuable partner with focus on neuroscience
Deal terms include a $28m upfront payment and up to $335m in development and sales milestones, plus double-digit royalties, which are commensurate with assets at this stage of development. Ipsen is a global, mid-sized pharmaceutical company, with a focus on neuroscience as one of its core competencies. It has historically been active in the research quest for PD treatments and will take over all future clinical development and global commercialisation of mesdopetam. Top-line data from the US/EU Phase IIb/III trial in PD-LIDs are expected in H122, and will define the pivotal trials required for approval. The Phase III trial could start in 2023.
Focus now on broadening proprietary pipeline
This deal provides external validation of IRLAB’s Integrative Screening Process (ISP) research platform, which discovered mesdopetam and Phase II asset pirepemat. Pirepemat (IRL752) is a first-in-class oral small molecule currently in development for the treatment of postural dysfunction (impaired balance) and falls in PD (PD-Falls), both of which are untapped markets and represent a significant burden on healthcare systems. We expect IRLAB to continue to focus on its core competency of research and development utilising its ISP platform, potentially expanding its discovery efforts beyond PD to include discovery/preclinical compounds for a range of neurological and psychiatric conditions.
Valuation: SEK5.1bn or SEK99.4/share
Our revised valuation is SEK5.1bn or SEK99.4/share from SEK4.8bn or SEK93.3/share previously. We update for mesdopetam deal terms including the $28m upfront payment and assume a 20% royalty rate plus development and sales milestones (PD-LIDs and PD-Psychosis) versus our prior 30% blended royalty rate assumption. Our peak sales are unchanged. We do not include the early-stage portfolio (preclinical assets IRL942 and IRL1009), nor the proprietary ISP platform technology in our valuation. We include reported net cash of SEK253.9m at 31 March 2021 plus the $28m upfront payment from Ipsen.
ISP platform receives external validation
The mesdopetam deal with Ipsen validates the ISP technology, IRLAB’s unique, proprietary research platform at the heart of its drug discovery engine, which enables the discovery of novel drugs for central nervous system (CNS) related diseases. Other compounds discovered by the ISP platform include pirepemat and preclinical assets IRL942 and IRL1009, which could be developed for psychiatric, cognitive and motor symptoms associated with neurodegenerative diseases and ageing. The platform contains a growing database of almost 1,400 CNS drug-like compounds developed over 25 years. With the development of mesdopetam in Ipsen’s hands from the start of designing the Phase III programme, IRLAB can focus on the development of Phase II asset pirepemat, progressing preclinical compounds into clinical studies and the discovery of new molecular entities utilising ISP (Exhibit 1). We note that numerous other biotech and pharmaceutical companies have developed screening platforms, but the ISP platform is unique in combining measurements of both neurochemistry and behaviour through the use of AI-based analytics.
Exhibit 1: IRLAB milestones and catalysts 2020–26e |
Source: IRLAB corporate presentation |
Valuation
Our revised valuation of SEK5.1bn or SEK99.4/share versus SEK4.8bn or SEK93.3/share reflects the revisions made to our model with regards to mesdopetam. Our updated valuation includes net cash of SEK253.9m (at 31 March 2021) plus the $28m upfront payment from Ipsen, which provides funding in the medium term. It is based on a risk-adjusted NPV model for mesdopetam in PD-LIDs (SEK46.5/share), in PD-Psychosis (SEK14.2/share) and pirepemat in PD-Falls (SEK29.3/share). The breakdown of our NPV valuation, which uses a 12.5% discount rate, is shown in Exhibit 2. We do not include the early-stage portfolio (preclinical assets IRL942 and IRL1009), nor the proprietary ISP platform technology. We see uplift as assets move into clinical development.
Exhibit 2: IRLAB sum-of-the-parts valuation
Product |
Indication |
Launch |
Peak sales |
Value (SEKm) |
Probability |
rNPV |
rNPV/share (SEK) |
Mesdopetam |
PD-LIDs |
2026 |
1,207 |
4,657.7 |
50% |
2,404.6 |
46.5 |
Mesdopetam |
PD-Psychosis |
2027 |
688 |
2,350.2 |
30% |
734.0 |
14.2 |
Pirepemat |
PD-Falls |
2027 |
1,036 |
5,190.8 |
30% |
1,515.5 |
29.3 |
Net cash at 31 March 2021* |
|
|
491.2 |
100% |
491.2 |
9.5 |
|
Valuation |
|
|
12,690.0 |
5,145.2 |
99.4 |
Source: Edison Investment Research. Note: *Plus $28m upfront payment from Ipsen.
For mesdopetam in PD-LIDs and PD-Psychosis in the US and EU5 only, we replace our blended tiered royalty rate of 30% with a flat 20% royalty on net sales, and include development and sales milestones totalling $290m relating to PD-LIDs and PD-Psychosis. We maintain our forecast R&D costs for completion of the Phase IIb/III study in PD-LIDs in 2021/22 and have removed all R&D costs associated with the potential start of a Phase II study in PD-Psychosis in 2022. We subsequently increase our unallocated R&D cost assumptions to reflect IRLAB’s increased focus on its portfolio of preclinical assets and ISP platform. We forecast launch in 2026 and unchanged peak sales of $1.2bn in the US/EU5 in 2032 for PD-LIDs. We forecast launch in 2027 and unchanged peak sales of $688m in the US/EU5 in 2033 for PD-Psychosis.
Our pirepemat assumptions are unchanged. We model treatment of PD-Falls in the US and EU5 only and forecast peak sales of $1.0bn in 2033 assuming launch in 2027. We also assume an out-licensing deal post Phase IIb data and use a blended tiered royalty rate of 30%, which considers any potential milestone value.
Exhibit 3: Financial summary
Accounts: IFRS, year-end: 31 December, SEK’000s |
|
|
2018 |
2019 |
2020 |
2021e |
2022e |
PROFIT & LOSS |
|
|
|
|
|
|
|
Total revenues |
|
|
196 |
448 |
404 |
237,701 |
413 |
Cost of sales |
|
|
0 |
0 |
0 |
0 |
0 |
Gross profit |
|
|
196 |
448 |
404 |
237,701 |
413 |
Total operating expenses |
|
|
(74,093) |
(96,296) |
(91,862) |
(107,854) |
(138,066) |
Research and development expenses |
|
|
(58,927) |
(79,381) |
(75,989) |
(89,746) |
(114,746) |
EBITDA (reported) |
|
|
(72,565) |
(92,916) |
(89,202) |
133,195 |
(133,913) |
Operating income (reported) |
|
|
(73,897) |
(95,848) |
(91,458) |
129,847 |
(137,653) |
Operating margin % |
|
|
N/A |
N/A |
N/A |
N/A |
N/A |
Finance income/(expense) |
|
|
(202) |
(272) |
(195) |
(446) |
(446) |
Exceptionals and adjustments |
|
|
0 |
0 |
0 |
0 |
0 |
Profit before tax (reported) |
|
|
(74,099) |
(96,120) |
(91,653) |
129,401 |
(138,099) |
Profit before tax (normalised) |
|
|
(73,359) |
(95,121) |
(91,394) |
129,660 |
(137,840) |
Income tax expense (includes exceptionals) |
|
|
0 |
0 |
0 |
0 |
0 |
Net income (reported) |
|
|
(74,099) |
(96,120) |
(91,653) |
129,401 |
(138,099) |
Net income (normalised) |
|
|
(73,359) |
(95,121) |
(91,394) |
129,660 |
(137,840) |
Basic average number of shares, m |
|
|
38.2 |
40.6 |
47.7 |
51.7 |
51.7 |
Basic EPS (SEK) |
|
|
(1.94) |
(2.37) |
(1.92) |
2.50 |
(2.67) |
Adjusted EPS (SEK) |
|
|
(1.92) |
(2.34) |
(1.92) |
2.51 |
(2.66) |
Dividend per share (SEK) |
|
|
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
BALANCE SHEET |
|
|
|
|
|
|
|
Tangible assets |
|
|
1,197 |
5,919 |
4,317 |
10,282 |
10,295 |
Intangible assets |
|
|
83,269 |
82,270 |
82,011 |
81,751 |
81,492 |
Other non-current assets |
|
|
0 |
0 |
0 |
0 |
0 |
Total non-current assets |
|
|
84,466 |
88,189 |
86,328 |
92,033 |
91,787 |
Cash and equivalents |
|
|
134,442 |
110,527 |
277,009 |
407,316 |
270,689 |
Inventories |
|
|
0 |
0 |
0 |
0 |
0 |
Trade and other receivables |
|
|
6,028 |
9,351 |
6,732 |
6,732 |
6,732 |
Other current assets |
|
|
0 |
0 |
0 |
0 |
0 |
Total current assets |
|
|
140,470 |
119,878 |
283,741 |
414,048 |
277,421 |
Non-current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
0 |
Non-current lease liabilities |
|
|
0 |
2,900 |
1,270 |
7,270 |
7,270 |
Other non-current liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Total non-current liabilities |
|
|
0 |
2,900 |
1,270 |
7,270 |
7,270 |
Accounts payable |
|
|
5,997 |
8,438 |
3,683 |
4,295 |
5,520 |
Non-current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
0 |
Current lease liabilities |
|
|
0 |
1,643 |
1,657 |
1,657 |
1,657 |
Other current liabilities |
|
|
6,463 |
13,259 |
15,578 |
15,578 |
15,578 |
Total current liabilities |
|
|
12,460 |
23,340 |
20,918 |
21,530 |
22,755 |
Equity attributable to company |
|
|
212,476 |
181,826 |
347,879 |
477,280 |
339,181 |
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
Operating income |
|
|
(73,897) |
(95,848) |
(91,458) |
129,847 |
(137,653) |
Depreciation and amortisation |
|
|
1,332 |
2,932 |
2,256 |
3,349 |
3,740 |
Share based payments |
|
|
0 |
0 |
0 |
0 |
0 |
Other adjustments |
|
|
(202) |
(244) |
(195) |
(446) |
(446) |
Movements in working capital |
|
|
1,977 |
1,959 |
183 |
612 |
1,225 |
Cash from operations (CFO) |
|
|
(70,790) |
(91,201) |
(89,214) |
133,362 |
(133,134) |
Capex |
|
|
(1,052) |
(137) |
(394) |
(266) |
(330) |
Acquisitions & disposals net |
|
|
0 |
0 |
0 |
0 |
0 |
Other investing activities |
|
|
0 |
0 |
0 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(1,052) |
(137) |
(394) |
(266) |
(330) |
Net proceeds from issue of shares |
|
|
131,575 |
68,970 |
257,706 |
0 |
0 |
Movements in debt |
|
|
0 |
(1,547) |
(1,616) |
0 |
0 |
Other financing activities |
|
|
0 |
0 |
0 |
(2,789) |
(3,164) |
Cash from financing activities (CFF) |
|
|
131,575 |
67,423 |
256,090 |
(2,789) |
(3,164) |
Cash and equivalents at beginning of period |
|
|
74,709 |
134,442 |
110,527 |
277,009 |
407,316 |
Increase/(decrease) in cash and equivalents |
|
|
59,733 |
(23,915) |
166,482 |
130,307 |
(136,627) |
Effect of FX on cash and equivalents |
|
|
0 |
0 |
0 |
0 |
0 |
Cash and equivalents at end of period |
|
|
134,442 |
110,527 |
277,009 |
407,316 |
270,689 |
Net (debt)/cash |
|
|
134,442 |
110,527 |
277,009 |
407,316 |
270,689 |
Source: Company accounts, Edison Investment Research
|
|
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