In late November 2018, NetScientific announced that its portfolio company PDS Biotechnology and Edge Therapeutics (NASDAQ: EDGE) will merge. The new entity will trade on the NASDAQ and PDS’s shareholders will maintain majority ownership with a 70% stake, whereas Edge’s shareholders will hold the remaining 30%. The transaction is expected to close in Q119 and NetScientific’s ownership is expected to decrease to 9.2% (from 13.1%). The newly formed entity says it intends to use the combined cash balance of ~$25m to initiate several Phase II clinical trials of its PDS0101 cancer vaccine and to fund operations into 2020.
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NetScientific |
PDS agrees to merge with Edge Therapeutics |
Merger agreement |
Pharma & biotech |
30 November 2018 |
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In late November 2018, NetScientific announced that its portfolio company PDS Biotechnology and Edge Therapeutics (NASDAQ: EDGE) will merge. The new entity will trade on the NASDAQ and PDS’s shareholders will maintain majority ownership with a 70% stake, whereas Edge’s shareholders will hold the remaining 30%. The transaction is expected to close in Q119 and NetScientific’s ownership is expected to decrease to 9.2% (from 13.1%). The newly formed entity says it intends to use the combined cash balance of ~$25m to initiate several Phase II clinical trials of its PDS0101 cancer vaccine and to fund operations into 2020.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
0.5 |
(12.3) |
(20.6) |
0.0 |
N/A |
N/A |
12/17 |
0.4 |
(9.5) |
(13.6) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
PDS going public through a reverse merger
NetScientific recently announced that PDS and Edge Therapeutics have entered into a merger agreement. In accordance with the merger, Edge plans to implement a reverse stock split of 5 to 10 outstanding shares (exact ratio to be agreed between Edge and PDS) for one share. The new entity will operate under PDS and will trade on the NASDAQ under a new ticker symbol, which has not yet been disclosed. The transaction is expected to close in Q119.
Funding to initiate Phase II clinical trials
According to the companies, the merger is expected to result in a combined cash balance of ~$25m and says this should provide funding to enable the company to initiate a number of Phase II clinical trials of PDS’s cancer vaccine PDS0101 and fund operations into 2020. This includes its combination study with Merck’s checkpoint inhibitor Keytruda (pembrolizumab) in late-stage human papillomavirus (HPV)-positive head and neck cancer.
NetScientific explores strategic alternatives
On 26 November 2018, NetScientific announced that it is interested in exploring strategic alternatives to maximise value for its shareholders. Such approaches include selling the company in its entirety or selling specific holdings in its portfolio of investments. NetScientific is not in discussions with third parties at this time.
PDS reverse merges with Edge on to the NASDAQ
On 26 November 2018, NetScientific announced that PDS, a private biopharmaceutical company focused on the development of novel cancer immunotherapies and vaccines for infectious diseases, plans to undergo a reverse merger with Edge Therapeutics on to the NASDAQ. In March this year, Edge reported its lead asset EG-1962, a bio-absorbable nimodipine microparticle being developed for the prevention of delayed cerebral ischemia in patients with aneurysmal subarachnoid haemorrhage, failed its Phase III trial. In April, Edge announced it had started to investigate strategic alternatives.
Under the terms of the agreement, PDS shareholders will maintain majority ownership of the combined entity with 70% stake, while Edge shareholders will hold the remaining 30%. Moreover, Edge plans to implement a reverse stock split of between 5 and 10 outstanding shares for one share. PDS’s CEO Frank K Bedu-Addo and CSO Gregory L Conn will maintain their leadership roles in the combined entity. The boards of directors of both companies have approved the merger and the transaction is expected to close in Q119 with an anticipated cash balance of ~$25m at closing.
The focus of the newly combined entity will be on the clinical development of PDS’s Versamune-based pipeline. Versamune is a nanoparticle antigen technology based on the use of synthetic positively charged (cationic) lipids. The Versamune platform overcomes a major hurdle in immunotherapy by enabling the unique cancer proteins (antigens) to enter the cytoplasm of the immune dendritic cells directly. This leads to effective priming of tumour-specific killer (CD8+) T-cells to recognise and attack the tumours, leading to tumour cell death. The unique lipid used in the Versamune platform acts as a potent immune activator, which induces proliferation and activation of the primed T-cells. The company plans to initiate multiple Phase II clinical trials for PDS’s lead asset PDS0101 in: late-stage HPV-positive head and neck cancer in combination with Merck’s checkpoint inhibitor Keytruda (pembrolizumab); grade 2 and 3 cervical and anal neoplasia patients (AIN/CIN); and stage III cervical cancer patients.
Financials
NetScientific recently reported revenue of £0.13m in H118, down from £0.16m in H117. R&D came in at £1.9m, down 36.1% compared to H117, but down only 8.8% compared to H217. SG&A expenses fell 22.3% to £2.3m compared to the same period a year ago, but were up 1.2% sequentially. Loss from operations was £4.6m, down 24.8% compared to H117. Net cash at 30 June 2018 was £7.1m.
Exhibit 1: Financial summary
£'000s |
2016 |
2017 |
|
Year end 31 December |
IFRS |
IFRS |
|
PROFIT & LOSS |
|||
Revenue |
|
518 |
386 |
Cost of Sales |
(255) |
(245) |
|
Gross Profit |
263 |
141 |
|
Research and development |
(7,443) |
(5,177) |
|
Selling, general & administrative |
(5,001) |
(5,281) |
|
EBITDA |
|
(12,570) |
(10,814) |
Operating Profit (before amort. and except.) |
(12,429) |
(10,593) |
|
Intangible Amortisation |
0 |
0 |
|
Exceptionals/Other |
(666) |
0 |
|
Operating Profit |
(13,095) |
(10,593) |
|
Net Interest |
86 |
1,058 |
|
Other (change in fair value of warrants) |
(49) |
(45) |
|
Profit Before Tax (norm) |
|
(12,343) |
(9,535) |
Profit Before Tax (IFRS) |
|
(13,058) |
(9,580) |
Tax |
(18) |
202 |
|
Deferred tax |
0 |
0 |
|
Profit After Tax (norm) |
(12,361) |
(9,333) |
|
Profit After Tax (IFRS) |
(13,076) |
(9,378) |
|
Minority interest |
1,881 |
1,060 |
|
Profit After Tax after minority interest (FRS 3) |
(11,195) |
(8,318) |
|
Average Number of Shares Outstanding (m) |
51.1 |
61.0 |
|
EPS - normalised (p) |
|
(20.6) |
(13.6) |
EPS - IFRS (p) |
|
(21.9) |
(13.6) |
Dividend per share (p) |
0 |
0 |
|
BALANCE SHEET |
|||
Fixed Assets |
|
4,054 |
3,805 |
Intangible Assets |
0 |
0 |
|
Tangible Assets |
779 |
891 |
|
Other |
3,275 |
2,914 |
|
Current Assets |
|
11,034 |
7,968 |
Stocks |
0 |
86 |
|
Debtors |
1,578 |
1,014 |
|
Cash |
9,456 |
6,868 |
|
Other |
0 |
0 |
|
Current Liabilities |
|
(2,172) |
(905) |
Creditors |
(2,044) |
(777) |
|
Short term borrowings |
(128) |
(128) |
|
Long Term Liabilities |
|
(80) |
(70) |
Long term borrowings |
(80) |
(70) |
|
Other long term liabilities |
0 |
0 |
|
Net Assets |
|
12,836 |
10,798 |
Minority Interest |
(3,875) |
(4,573) |
|
Shareholder Equity |
|
8,961 |
6,225 |
CASH FLOW |
|||
Operating Cash Flow |
|
(12,939) |
(10,479) |
Net Interest |
43 |
(11) |
|
Tax |
112 |
(131) |
|
Capex |
(457) |
(399) |
|
Acquisitions/disposals |
(1,261) |
1,310 |
|
Financing |
0 |
8,083 |
|
Dividends |
0 |
0 |
|
Other |
66 |
(574) |
|
Net Cash Flow |
(14,436) |
(2,201) |
|
Opening net debt/(cash) |
|
(23,189) |
(9,248) |
HP finance leases initiated |
0 |
0 |
|
Exchange rate movements |
(603) |
387 |
|
Other |
1,098 |
(764) |
|
Closing net debt/(cash) |
|
(9,248) |
(6,670) |
Source: Company reports
|
|
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