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Research: Healthcare
As a follow-up to the c €20.7m Neovacs strategic investment in Pharnext, the French biotech has set up a management trust with Equitis Gestion, as trustee, to manage obligations, rights and activities with respect to the convertible debt. In this capacity, Equitis Gestion will be responsible for managing all securities issued by Pharnext (including warrants to purchase the bonds plus associated warrants to subscribe to common equity) as well as related obligation and exercise rights. As a reminder, the financing has been split across several tranches, of which Pharnext has drawn down the first tranche worth €10.7m. In exchange, the company has issued c two billion warrants to Neovacs to purchase shares in Pharnext. The agreement caps any sale of the Pharnext shares by the trust to 15% of the daily traded volumes (30% in case of specific events).
Written by
Pharnext |
Neovacs trust to manage Pharnext deal |
Financing agreement update |
Pharma and biotech |
1 November 2022 |
Share price performance
Business description
Analysts
Pharnext is a research client of Edison Investment Research Limited |
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As a follow-up to the c €20.7m Neovacs strategic investment in Pharnext, the French biotech has set up a management trust with Equitis Gestion, as trustee, to manage obligations, rights and activities with respect to the convertible debt. In this capacity, Equitis Gestion will be responsible for managing all securities issued by Pharnext (including warrants to purchase the bonds plus associated warrants to subscribe to common equity) as well as related obligation and exercise rights. As a reminder, the financing has been split across several tranches, of which Pharnext has drawn down the first tranche worth €10.7m. In exchange, the company has issued c two billion warrants to Neovacs to purchase shares in Pharnext. The agreement caps any sale of the Pharnext shares by the trust to 15% of the daily traded volumes (30% in case of specific events).
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
2.8 |
(21.4) |
(117.00) |
0.0 |
N/A |
N/A |
12/21 |
3.6 |
(30.6) |
(101.00) |
0.0 |
N/A |
N/A |
12/22e |
2.4 |
(31.7) |
(0.32) |
0.00 |
N/A |
N/A |
12/23e |
2.5 |
(30.9) |
(0.16) |
0.00 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
The €20.7m net proceeds will be raised by issuing up to 224,647 bonds with nominal value of €100 each over 11 monthly tranches along with associated warrants. The first €10.7m tranche will be followed by two tranches of €2.5m each, two tranches of €1m each and six tranches of €500k per month. Each tranche also comes with associated warrants and full debt drawdown would translate to Pharnext issuing warrants equivalent to 50% of its total share capital, resulting in Neovacs taking control of a 33% shareholding in the company following conversion (the share warrants will be available for exercise from January 2024). As part of the first €10.7m tranche drawdown, c two billion warrants (termed BSAP) were issued to Neovacs on 30 September 2022.
The agreement also allows for equalisation of certain payables by Pharnext to Neovacs, such as interest and fees on the initial (and now paid off) €2.5m fixed-rate loan raised August 2022, 1% monthly interest on the bonds outstanding as well as the commitment fee (5% of the total financing or €1.11m) due to Neovacs as part of the deal. We understand that these warrants (termed BSAE), if issued, can be exercised under certain pre-defined conditions outlined in the press release.
We also remind that Pharnext would be undertaking a share consolidation (5,000:1), applicable from 23 November 2022, as part of which it suspended all conversions of securities to equity, effective 22 October. We observe that prior to the deadline, Alpha Blue Ocean, holders of the OCEANE-BSA convertible debt, fully converted tranches nine and 10 of the debt, resulting in the number of shares in circulation increasing to 19.7 billion (3.94m following the stock consolidation).
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Research: Healthcare
Kazia Therapeutics’ Q123 cash flow report provided an update on the company’s financial position and business progress. While the quarter was dominated by lead asset paxalisib hitting a roadblock (failing to graduate to stage two of the GBM AGILE study), the period was also marked by clinical progress across other serious indications such as pediatric brain cancers and brain metastases (BMs). With multiple studies expected to read-out in CY23, the next few quarters will be crucial for the company. Period-end cash balance of AU$5.3m (c US$3.4m) was supported by an AU$3.7m equity injection and should be sufficient to extend the runway to end CY22 at current burn rates (A$6.1m in Q123). Further support is expected from drawing down on the outstanding at-the-market funding facility. We anticipate the capital requirements to come down materially as the GBM study approaches completion in H2 CY23. Our estimates and valuation remain unchanged at US$146.6m or US$9.79 per basic ADR.