July to September 2017 results highlight the continued progression of Nuevolution into a clinical company. Ongoing partnerships with Almirall, Amgen and Janssen continue to advance as we expect and we anticipate that Almirall’s RORγt inhibitor programme will be the first Nuevolution asset to enter the clinic (in dermatology and psoriatic arthritis), which we forecast for H218/H119. Lead assets in the internal pipeline are nearing clinical readiness and Nuevolution anticipates a new partnership in the next three to 12 months. In the near term, up-listing to Nasdaq Stockholm’s Main Market and expansion of the investor base will position the company for future development. We value Nuevolution at SEK917m.
Written by
Nuevolution |
On the road to becoming a clinical company |
July to September 2017 results |
Pharma & biotech |
24 November 2017 |
Share price performance
Business description
Next events
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July to September 2017 results highlight the continued progression of Nuevolution into a clinical company. Ongoing partnerships with Almirall, Amgen and Janssen continue to advance as we expect and we anticipate that Almirall’s RORγt inhibitor programme will be the first Nuevolution asset to enter the clinic (in dermatology and psoriatic arthritis), which we forecast for H218/H119. Lead assets in the internal pipeline are nearing clinical readiness and Nuevolution anticipates a new partnership in the next three to 12 months. In the near term, up-listing to Nasdaq Stockholm’s Main Market and expansion of the investor base will position the company for future development. We value Nuevolution at SEK917m.
Year end |
Revenue (SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/16 |
21.3 |
(151.9) |
(4.0) |
0.0 |
N/A |
N/A |
06/17 |
120.3 |
(9.4) |
(0.6) |
0.0 |
N/A |
N/A |
06/18e** |
182.8 |
45.9 |
0.7 |
0.0 |
N/A |
N/A |
06/19e** |
133.9 |
(7.0) |
(0.1) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Nuevolution has announced a change in year end to December, which we will take into account once reported.
Collaborations continue to provide validation
Nuevolution’s core collaborations continue to progress as expected. In vivo proof of concept is expected in two cancer programmes in the Amgen collaboration within the next three to six months. In the Almirall collaboration we expect Nuevolution to give a detailed update on the programme in H118; we forecast that it will enter the clinic in H218/H119. Nuevolution’s unpartnered assets are progressing well to clinical readiness, the RORγt inhibitor (outside Almirall-licensed indications) is in ongoing API production and the company expects to select the optimal indication for clinical development by year end. The BET BD1 programme is following closely behind with API production expected to start in H118. Nuevolution expects to announce a new collaboration/licensing deal in the next 3-12 months.
Financials: Financed into 2019
For the three-month period covering July to September 2017 operating expenses increased to 31.9m from SEK29.5m in 2016. This resulted in an increased net loss of SEK28.6m (2016: SEK25.6m). Net cash as of 30 September of SEK142.3m gives a cash runway into CY19. We have adjusted our SG&A costs upwards in FY18 and beyond to reflect the one-off and ongoing costs of the Main Market Nasdaq up-listing. We have increased our revenue forecasts as a result of updating exchange rates for the Almirall and Amgen deals.
Valuation: rNPV of SEK917m (SEK21.4/share)
We value Nuevolution at SEK917m ($109m) vs SEK902m previously. It is exclusively based on a risk-adjusted model of the future milestone payments we expect from the Almirall, Amgen and Janssen deals plus net cash. We have rolled forward our valuation, updated it for net cash and adjusted it for current exchange rates. For a full breakdown of our valuation please see our previously published note Defining year as partnerships progress on track.
Exhibit 1: Financial summary
Accounts: IFRS, Year-end: June, SEK000s |
|
|
2016 |
2017 |
2018e |
2019e |
Income Statement |
||||||
Total revenues |
|
|
21,314 |
120,318 |
182,833 |
133,932 |
Reported gross profit |
|
|
21,314 |
120,318 |
182,833 |
133,932 |
SG&A (expenses) |
|
|
(57,493) |
(23,216) |
(25,538) |
(24,261) |
R&D costs |
|
|
(115,707) |
(107,587) |
(112,966) |
(118,615) |
Adjusted EBIT |
|
|
(151,886) |
(10,485) |
44,329 |
(8,944) |
Reported EBIT |
|
|
(151,886) |
(10,485) |
44,329 |
(8,944) |
Finance income/ (expense) |
|
|
(22) |
1,045 |
1,575 |
1,980 |
Adjusted PBT |
|
|
(151,908) |
(9,440) |
45,904 |
(6,964) |
Reported PBT |
|
|
(151,908) |
(9,440) |
45,904 |
(6,964) |
Income tax expense |
|
|
6,911 |
(16,046) |
(16,066) |
2,437 |
Adjusted net income |
|
|
(144,997) |
(25,486) |
29,838 |
(4,527) |
Reported net income |
|
|
(144,997) |
(25,486) |
29,838 |
(4,527) |
Earnings per share |
|
|
|
|
|
|
Basic EPS (SEK) |
|
(4.0) |
(0.6) |
0.7 |
(0.1) |
|
Diluted EPS (SEK) |
|
(4.0) |
(0.6) |
0.7 |
(0.1) |
|
Adjusted basic EPS (SEK) |
|
(4.0) |
(0.6) |
0.7 |
(0.1) |
|
Adjusted diluted EPS (SEK) |
|
(4.0) |
(0.6) |
0.7 |
(0.1) |
|
Average number of shares - basic |
|
36.5 |
42.9 |
42.9 |
42.9 |
|
Average number of shares - diluted |
|
36.5 |
43.6 |
43.6 |
43.6 |
|
|
|
|
|
|
|
|
Balance sheet |
|
|
|
|
|
|
Property, plant and equipment |
|
|
5,494 |
5,538 |
5,761 |
5,973 |
Other non-current assets |
|
|
8,585 |
6,397 |
1,665 |
4,102 |
Total non-current assets |
|
|
14,079 |
11,935 |
7,426 |
10,075 |
Cash and equivalents |
|
|
205,955 |
179,595 |
220,072 |
211,896 |
Trade and other receivables |
|
|
367 |
93 |
93 |
93 |
Other current assets |
14,564 |
10,032 |
2,902 |
2,902 |
||
Total current assets |
|
|
220,886 |
189,720 |
223,067 |
214,891 |
Non-current loans and borrowings |
|
|
3,482 |
2,939 |
2,939 |
2,939 |
Total non-current liabilities |
|
|
3,482 |
2,939 |
2,939 |
2,939 |
Trade and other payables |
|
|
12,162 |
10,986 |
10,986 |
10,986 |
Current loans and borrowings |
|
|
1,222 |
1,482 |
1,482 |
1,482 |
Other current liabilities |
|
|
20,044 |
16,286 |
15,286 |
14,286 |
Total current liabilities |
|
|
33,428 |
28,754 |
27,754 |
26,754 |
Equity attributable to company |
|
|
198,055 |
169,962 |
199,800 |
195,273 |
|
|
|
|
|
|
|
Cash flow statement |
|
|
|
|
|
|
Profit before tax |
|
|
(151,908) |
(9,440) |
45,904 |
(6,964) |
Depreciation of tangible assets |
|
|
1,328 |
1,703 |
277 |
288 |
Share based payments |
|
|
48,528 |
(153) |
0 |
0 |
Other adjustments |
|
|
22 |
(1,045) |
(1,575) |
(1,980) |
Movements in working capital |
|
|
19,594 |
(962) |
0 |
0 |
Net cash from operating activities (pre-tax) |
|
|
(82,436) |
(9,897) |
44,606 |
(8,656) |
Interest paid / received |
|
(224) |
(798) |
1,575 |
1,980 |
|
Income taxes paid |
|
|
1,210 |
(12,520) |
(4,204) |
0 |
Cash from operations (CFO) |
|
|
(81,450) |
(23,215) |
41,977 |
(6,676) |
Capex (includes acquisitions) |
|
|
(504) |
(715) |
(500) |
(500) |
Other investing activities |
|
|
(51) |
(9) |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(555) |
(724) |
(500) |
(500) |
Net proceeds from issue of shares |
|
|
242,061 |
0 |
0 |
0 |
Other financing activities |
|
|
(1,119) |
(1,253) |
(1,000) |
(1,000) |
Cash from financing activities (CFF) |
|
|
240,942 |
(1,253) |
(1,000) |
(1,000) |
Increase/(decrease) in cash and equivalents |
|
|
158,937 |
(25,192) |
40,477 |
(8,176) |
Cash and equivalents at beginning of period |
|
|
46,250 |
205,955 |
179,595 |
220,072 |
Cash and equivalents at end of period |
|
|
205,955 |
179,595 |
220,072 |
211,896 |
Source: Edison Investment Research, Nuevolution accounts
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Future has assembled a strong platform on which to develop its specialist media. With a growing portfolio of brands, it is successfully diversifying its revenue streams and building recurring and repeatable income, giving a more robust business model. Acquisitions have brought scale and added range and reach, building on organic growth from leveraging of the brands with their highly engaged audiences. Cash flow is strong, with tight working capital management, and the balance sheet is modestly geared. This progress has resulted in impressive share price performance, but we still consider that the rating does not yet fully reflect the opportunity.