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Research: Healthcare
Shield Therapeutics (STX) has provided an updated trading statement ahead of FY19 results, expected at the end of May. In its January trading update, STX had guided to FY19 revenues of £2.9m. However, this has been revised down to £0.7m with repayment of the €2.5m Norgine milestone. In Europe, Feraccru has continued to grow during Q120 in its launched countries (the UK and Germany), and STX has reported minimal COVID-19 disruption to its commercial progress and manufacturing supply chain to date. The company reported an unaudited cash balance of £11.3m at 31 March. The next key inflection point is a US partnering deal, and STX has been able to advance discussions with potential commercial partners in recent weeks. We expect Accrufer launch later this year once a partner has been found.
Written by
Shield Therapeutics |
Next step a US partnering deal |
Business update |
Pharma & biotech |
4 May 2020 |
Share price performance
Business description
Next events
Analysts
Shield Therapeutics is a research client of Edison Investment Research Limited |
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Shield Therapeutics (STX) has provided an updated trading statement ahead of FY19 results, expected at the end of May. In its January trading update, STX had guided to FY19 revenues of £2.9m. However, this has been revised down to £0.7m with repayment of the €2.5m Norgine milestone. In Europe, Feraccru has continued to grow during Q120 in its launched countries (the UK and Germany), and STX has reported minimal COVID-19 disruption to its commercial progress and manufacturing supply chain to date. The company reported an unaudited cash balance of £11.3m at 31 March. The next key inflection point is a US partnering deal, and STX has been able to advance discussions with potential commercial partners in recent weeks. We expect Accrufer launch later this year once a partner has been found.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.64 |
(18.42) |
(15.2) |
0.0 |
N/A |
N/A |
12/18 |
11.88 |
(5.15) |
(1.5) |
0.0 |
N/A |
N/A |
12/19e |
0.68 |
(10.06) |
(7.1) |
0.0 |
N/A |
N/A |
12/20e |
12.35 |
0.84 |
1.7 |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Feraccru/Accrufer a highly tolerable ID treatment
FY19 revenues have been revised down to £0.7m as STX will repay the €2.5m milestone paid out by Norgine during the year, related to the clarification that the AEGIS-H2H study did not achieve its primary endpoint. AEGIS-H2H was not required for regulatory approval and it is still likely that the 52 week data will prove valuable for health economics purposes and in pricing and reimbursement discussions. Feraccru/Accrufer’s profile as a highly tolerable oral iron product will still enable it to garner market share given treatment discontinuation rates are high (30–60%), with first-line treatment utilising salt-based oral iron products (which have intolerable side effects). We anticipate use in iron deficiency (ID)/iron deficiency anaemia in patients whose iron level does not warrant intravenous iron infusions. We maintain our peak penetration assumptions.
Financials: Cash runway to Q121
Shield reported an unaudited cash balance of £11.3m at 31 March 2020, which implies a cash runway into Q121. We expect a US partnering deal by year end 2020 and associated upfront licensing payment to strengthen the balance sheet, further reducing the requirement for a capital increase.
Valuation: £369.2m or 315p/share
Our revised valuation is £369.2m or 315p/share vs £344.7m or 294p/share (derived from an rNPV model). Our base assumptions for Shield remain unchanged. Our valuation reflects an end-2020 net cash forecast of £6.6m, and we have updated for FX and rolling forward our model. Our NPV calculation is based on Feraccru achieving peak sales of €130m in Europe, $410m in the US and $126m in China.
Exhibit 1: Financial summary
December |
£000s |
|
2017 |
2018 |
2019e |
2020e |
2021e |
PROFIT & LOSS |
|||||||
Revenue |
|
|
637 |
11,881 |
684 |
12,346 |
8,760 |
Cost of sales |
|
|
(155) |
(311) |
(420) |
(1,750) |
(4,159) |
Gross profit |
|
|
482 |
11,570 |
264 |
10,596 |
4,601 |
Gross margin % |
|
|
76% |
97% |
39% |
86% |
53% |
SG&A (expenses) |
|
|
(16,722) |
(12,438) |
(7,324) |
(6,758) |
(6,107) |
R&D costs |
|
|
(4,711) |
(4,300) |
(3,000) |
(3,000) |
(3,000) |
Other income/(expense) |
|
|
0 |
0 |
0 |
0 |
0 |
EBITDA |
|
|
(18,514) |
(2,814) |
(7,736) |
3,096 |
(2,399) |
Depreciation and amortisation |
|
|
(2,437) |
(2,354) |
(2,324) |
(2,258) |
(2,107) |
Reported Operating Income |
|
|
(20,951) |
(5,168) |
(10,061) |
838 |
(4,506) |
Exceptionals and adjustments |
|
|
(2,571) |
0 |
0 |
0 |
0 |
Adjusted Operating Income |
|
|
(18,380) |
(5,168) |
(10,061) |
838 |
(4,506) |
Finance income/(expense) |
|
|
(43) |
15 |
0 |
0 |
0 |
Reported PBT |
|
|
(20,994) |
(5,153) |
(10,061) |
838 |
(4,506) |
Profit Before Tax (norm) |
|
|
(18,423) |
(5,153) |
(10,061) |
838 |
(4,506) |
Income tax expense |
|
|
1,406 |
3,359 |
1,800 |
1,200 |
600 |
Reported net income |
|
|
(19,588) |
(1,794) |
(8,261) |
2,038 |
(3,906) |
Average Number of Shares Outstanding (m) |
|
|
112.4 |
116.4 |
116.4 |
117.2 |
117.2 |
Year-end number of shares, m |
|
|
112.4 |
116.4 |
116.4 |
117.2 |
117.2 |
Basic EPS (p) |
|
|
(17.43) |
(2.00) |
(7.10) |
1.74 |
(3.33) |
EPS - normalised (p) |
|
|
(15.2) |
(1.5) |
(7.1) |
1.7 |
(3.3) |
Dividend per share (p) |
|
|
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
BALANCE SHEET |
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
13 |
8 |
6 |
4 |
3 |
Goodwill |
|
|
0 |
0 |
0 |
0 |
0 |
Intangible assets |
|
|
29,961 |
30,957 |
30,085 |
28,079 |
26,223 |
Other non-current assets |
|
|
0 |
0 |
0 |
0 |
0 |
Total non-current assets |
|
|
29,974 |
30,965 |
30,091 |
28,083 |
26,226 |
Cash and equivalents |
|
|
13,299 |
9,776 |
1,826 |
6,630 |
1,768 |
Inventories |
|
|
125 |
109 |
462 |
1,923 |
2,285 |
Trade and other receivables |
|
|
1,572 |
1,031 |
1,503 |
7,091 |
12,994 |
Other current assets |
|
|
0 |
1,500 |
1,500 |
1,500 |
1,500 |
Total current assets |
|
|
14,996 |
12,416 |
5,291 |
17,144 |
18,546 |
Non-current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
0 |
Other non-current liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Total non-current liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Trade and other payables |
|
|
3,501 |
2,548 |
2,309 |
9,617 |
12,568 |
Current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
0 |
Other current liabilities |
|
|
262 |
403 |
403 |
403 |
403 |
Total current liabilities |
|
|
3,763 |
2,951 |
2,712 |
10,020 |
12,971 |
Equity attributable to company |
|
|
41,207 |
40,430 |
32,669 |
35,207 |
31,801 |
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
Reported net income |
|
|
(19,588) |
(1,794) |
(8,261) |
2,038 |
(3,906) |
Depreciation and amortisation |
|
|
2,437 |
2,354 |
2,324 |
2,258 |
2,107 |
Share based payments |
|
|
560 |
1,013 |
500 |
500 |
500 |
Other adjustments |
|
|
39 |
4 |
0 |
0 |
0 |
Movements in working capital |
|
|
(186) |
(255) |
(1,064) |
259 |
(3,314) |
Interest paid/received |
|
|
0 |
0 |
0 |
0 |
0 |
Income taxes paid/received |
|
|
587 |
(1,500) |
0 |
0 |
0 |
Cash from operations (CFO) |
|
|
(16,151) |
(178) |
(6,500) |
5,055 |
(4,613) |
Capex |
|
|
(3,408) |
(3,345) |
(1,450) |
(250) |
(250) |
Acquisitions & disposals net |
|
|
0 |
0 |
0 |
0 |
0 |
Other investing activities |
|
|
0 |
0 |
0 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(3,408) |
(3,345) |
(1,450) |
(250) |
(250) |
Net proceeds from issue of shares |
|
|
11,880 |
0 |
0 |
0 |
0 |
Movements in debt |
|
|
0 |
0 |
0 |
0 |
0 |
Other financing activities |
|
|
0 |
0 |
0 |
0 |
0 |
Cash from financing activities (CFF) |
|
|
11,880 |
0 |
0 |
0 |
0 |
Cash and equivalents at beginning of period |
|
|
20,978 |
13,299 |
9,776 |
1,826 |
6,630 |
Increase/(decrease) in cash and equivalents |
|
|
(7,679) |
(3,523) |
(7,950) |
4,805 |
(4,863) |
Cash and equivalents at end of period |
|
|
13,299 |
9,776 |
1,826 |
6,630 |
1,768 |
Net (debt)/cash |
|
|
13,299 |
9,776 |
1,826 |
6,630 |
1,768 |
Source: Company accounts, Edison Investment Research
|
|
Research: TMT
Nanoco has announced that it has terminated the formal sale process of the company. It has taken actions to extend the cash runway from July this year to calendar Q2 2021. This is valuable as it creates time to progress active commercial opportunities delivering nano-materials for sensing and display applications, to pursue the IP infringement lawsuit against Samsung and secure medium-term funding. Given the uncertainty regarding future revenues we are not reinstating estimates even though the Takeover Panel restrictions are no longer in force.