e-Therapeutics’ (ETX) H118 results were a routine financial update highlighting its continuing focus on partnering the Network-driven Drug Discovery (NDD) platform, out-licensing its NDD-derived preclinical immunoncology (I/O) assets and financial prudence. The H118 operating loss was £2.8m. Cash outflow was £2.0m, resulting in a cash balance of £7.6m at the end of H118. Both R&D and administrative expenses had been reduced from H117.
e-Therapeutics |
Keeping the faith |
Interim results |
Pharma & biotech |
8 October 2018 |
Share price performance
Business description
Next events
Analyst
e-Therapeutics is a research client of Edison Investment Research Limited |
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e-Therapeutics’ (ETX) H118 results were a routine financial update highlighting its continuing focus on partnering the Network-driven Drug Discovery (NDD) platform, out-licensing its NDD-derived preclinical immunoncology (I/O) assets and financial prudence. The H118 operating loss was £2.8m. Cash outflow was £2.0m, resulting in a cash balance of £7.6m at the end of H118. Both R&D and administrative expenses had been reduced from H117.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
01/17 |
0.0 |
(14.1) |
(4.1) |
0.0 |
N/A |
N/A |
01/18 |
0.0 |
(6.7) |
(2.0) |
0.0 |
N/A |
N/A |
01/19e |
0.0 |
(5.1) |
(1.4) |
0.0 |
N/A |
N/A |
01/20e |
0.0 |
(4.0) |
(1.1) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
H118 financials demonstrate continued prudence
ETX’s H118 operating loss was £2.8m (vs £3.7m H117). Both R&D and administrative expenses, of £2.1m and £0.7m respectively, had been reduced compared to those of H117 (£2.7m and £1.0m, respectively). We now estimate that FY19 R&D and administrative expenses will be c £0.9m lower than we had forecast. Cash outflow was £2.0m (H117: £1.6m), which was softened by the £1.4m R&D tax credit (H117: £3.0m). Cash and deposits at the end of H118 were £7.6m compared with £12.4m at the end of H117. We estimate that this cash runway will reach until at least 2020, before which time a licensing transaction inflow is expected.
The pace of I/O transactions has not slowed
The frenetic rate of licensing transactions for preclinical I/O assets like ETX’s two most advanced products (described in our previous note) has not slowed. More recently, this included Boehringer Ingelheim’s €210m acquisition of Germany’s preclinical-stage ViraTherapeutics, AbbVie’s c $625m licensing transaction of argenx’s ARGX-115 and Roche’s acquisition of the preclinical I/O company Tusk Therapeutics for €70m upfront plus up to €585m in milestones. ETX has recently demonstrated a transactional track record with the two AI collaborations with Intellegens and Biorelate, aimed at enhancing the NDD platform, and the more recent collaboration with C4X Discovery.
Valuation: Virtually unchanged
In our last note, we changed our preclinical valuation methodology from Lerner’s VC method to one where we added the value of a single, median, preclinical transaction to ETX’s market capitalisation. The latter represents a market valuation of ETX’s NDD platform, while the former represents the value of only one of two possible preclinical licensing transactions. We have maintained this valuation methodology, which has only increased slightly due to transaction values being in dollars or euros. Our valuation is £63.5m or 24p per share.
Exhibit 1: Financial summary
£'000s |
2017 |
2018 |
2019e |
2020e |
||
Year ending 31 January |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
R&D |
(10,911) |
(5,019) |
(3,851) |
(3,000) |
||
G&A |
(2,641) |
(1,749) |
(1,242) |
(1,000) |
||
EBITDA |
|
|
(14,200) |
(6,696) |
(5,035) |
(3,995) |
Operating Profit (before amort. and except.) |
|
(14,256) |
(6,768) |
(5,093) |
(4,001) |
|
Share-based payment |
(99) |
(105) |
(60) |
(50) |
||
Operating profit |
(16,456) |
(6,873) |
(5,153) |
(4,050) |
||
Net interest |
132 |
49 |
23 |
15 |
||
Profit Before Tax (norm) |
|
|
(14,124) |
(6,719) |
(5,070) |
(3,986) |
Profit Before Tax (reported) |
|
|
(16,324) |
(6,824) |
(5,130) |
(4,035) |
Tax |
3,073 |
1,360 |
1,355 |
1,000 |
||
Profit after tax (norm.) |
(11,051) |
(5,359) |
(3,715) |
(2,985) |
||
Profit after tax (as reported) |
(13,251) |
(5,464) |
(3,775) |
(3,035) |
||
Average Number of Shares Outstanding (m) |
267.1 |
268.5 |
268.5 |
268.5 |
||
EPS - normalised (p) |
|
|
(4.1) |
(2.0) |
(1.4) |
(1.1) |
EPS - as reported (p) |
|
|
(5.0) |
(2.0) |
(1.4) |
(1.1) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
||
EBITDA margin (%) |
N/A |
N/A |
N/A |
N/A |
||
Operating margin (before GW and except) (%) |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||
Fixed assets |
|
|
207 |
206 |
197 |
171 |
Intangible assets |
156 |
135 |
141 |
133 |
||
Tangible assets |
51 |
71 |
56 |
38 |
||
Current assets |
|
|
18,225 |
11,556 |
6,714 |
3,512 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
3,749 |
1,455 |
717 |
717 |
||
Cash |
13,975 |
9,597 |
5,502 |
2,795 |
||
Other |
501 |
504 |
495 |
0 |
||
Current liabilities |
|
|
(1,951) |
(1,024) |
(704) |
(452) |
Creditors |
(1,951) |
(1,024) |
(704) |
(452) |
||
Other creditors |
0 |
0 |
0 |
0 |
||
Short-term borrowings |
0 |
0 |
0 |
0 |
||
Long-term liabilities |
|
|
0 |
0 |
0 |
0 |
Long-term borrowings |
0 |
0 |
0 |
0 |
||
Deferred taxation |
0 |
0 |
0 |
0 |
||
Other long-term liabilities |
0 |
0 |
0 |
0 |
||
Net assets |
|
|
16,481 |
10,738 |
6,207 |
3,231 |
CASH FLOW |
||||||
Operating cash flow |
|
|
(12,509) |
(7,373) |
(5,453) |
(3,702) |
Net interest |
194 |
86 |
23 |
15 |
||
Tax |
3,073 |
2,968 |
1,355 |
1,000 |
||
Capex |
(22) |
(66) |
(5) |
(5) |
||
Purchase of intangibles |
(143) |
(5) |
(15) |
(15) |
||
Acquisitions/disposals |
(1,473) |
0 |
0 |
0 |
||
Financing |
13 |
12 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Net cash flow |
(10,867) |
(4,378) |
(4,095) |
(2,707) |
||
Opening net debt/(cash) |
|
|
(24,842) |
(13,975) |
(9,597) |
(5,502) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(13,975) |
(9,597) |
(5,502) |
(2,795) |
Source: e-therapeutics, Edison Investment Research
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Premier Technical Services Group (PTSG) has strong positions in its specialist services sectors, focused on safe building-operating environments. It has an outstanding organic- and acquisition-driven profit growth track record and a robust business model that drives efficiencies in operational performance. The share price has moved sideways for much of this year; the current rating anticipates healthy growth and we consider that a combination of existing organic momentum and M&A potential will be able to deliver this.