Currency in SEK
Last close As at 07/06/2023
SEK8.42
▲ 0.08 (0.96%)
Market capitalisation
SEK436m
Research: Healthcare
IRLAB Therapeutics has reported Q123 results, providing a financial update and highlighting its near-term strategic priorities. The company intends to present further comprehensive data from the Phase IIb mesdopetam study in FY23, while discussions with Ipsen continue regarding the next clinical steps for the drug. Patient recruitment in the PD-Falls Phase IIb pirepemat study continues as planned, with patient enrolment expected by end FY23. We see this as a positive indicator that IRLAB is on track to deliver top-line results in H124. In light of the quarterly results, we have made adjustments to our forecasts and estimate that IRLAB’s net cash position of SEK210.1m at end March is sufficient to fund operations to the end of Q124. The company’s lower net cash position has been offset slightly by rolling our model forward. Our valuation is virtually unchanged at SEK4.90bn or SEK94.7/share (previously SEK4.84bn or SEK93.3/share)
IRLAB Therapeutics |
Positive signs for mesdopetam in Q1 update |
Q123 results |
Pharma and biotech |
15 May 2023 |
Share price performance
Business description
Next events
Analysts
IRLAB Therapeutics is a research client of Edison Investment Research Limited |
IRLAB Therapeutics has reported Q123 results, providing a financial update and highlighting its near-term strategic priorities. The company intends to present further comprehensive data from the Phase IIb mesdopetam study in FY23, while discussions with Ipsen continue regarding the next clinical steps for the drug. Patient recruitment in the PD-Falls Phase IIb pirepemat study continues as planned, with patient enrolment expected by end FY23. We see this as a positive indicator that IRLAB is on track to deliver top-line results in H124. In light of the quarterly results, we have made adjustments to our forecasts and estimate that IRLAB’s net cash position of SEK210.1m at end March is sufficient to fund operations to the end of Q124. The company’s lower net cash position has been offset slightly by rolling our model forward. Our valuation is virtually unchanged at SEK4.90bn or SEK94.7/share (previously SEK4.84bn or SEK93.3/share)
Year |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/21 |
207.9 |
91.1 |
1.76 |
0.0 |
N/A |
N/A |
12/22 |
61.3 |
(113.1) |
(2.18) |
0.0 |
N/A |
N/A |
12/23e |
0.2 |
(208.4) |
(4.02) |
0.0 |
N/A |
N/A |
12/24e |
0.2 |
(190.2) |
(3.67) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Collaboration with Ipsen continues
In its Q123 report, IRLAB highlighted that it remains in discussions with Ipsen (the licensee for mesdopetam) about the future, potentially registrational, clinical path for mesdopetam. However, Ipsen has still not been confirmed whether it intends to progress the drug into later studies. We note that Ipsen is currently conducting preparatory work including pharmacokinetic studies and upscale manufacturing, which, together with mesdopetam’s clinical results to date, IRLAB believes marks the drug as a Phase III-ready asset.
Cash runway to end Q124
In the light of IRLAB’s quarterly results, we have adjusted our forecasts. We now estimate FY23 R&D expenses of SEK169m (previously SEK132m) and operating losses of SEK208m (previously SEK160m). We attribute the increase in R&D expenses to ongoing patient recruitment in the Phase IIb pirepemat study, as well as development activities associated with preparing IRL757 and IRL942 for Phase I studies. We estimate that IRLAB’s net cash position of SEK210.1m at end Q123 provides an operating cash runway to end Q124.
Valuation: SEK4.90bn or SEK94.7share
We value IRLAB at SEK4.90bn or SEK94.7/share (previously SEK4.84bn or SEK93.3/share). Our valuation is largely unchanged, but is affected by the lower net cash position, which has been slightly offset by rolling our model forward by three months.
Financials and valuation
Following IRLAB’s Q123 report, we have updated our financial estimates and forecast FY23 operating losses of SEK208m (previously SEK160m), with net cash outflows from operating activities of SEK200m (previously SEK156m). The increase in operating expenses has been attributed to costs associated with the ongoing Phase IIb pirepemat study, as well as preparatory Phase I activities for IRL757 and IRL942. We expect operating losses to reduce slightly in FY24 to SEK190m due to winding down the Phase IIb mesdopetam trial by end FY23 and forecast operating cash outflows of SEK187m. As such, we estimate that IRLAB’s net cash position of SEK210.1m at end March 2023 is sufficient to fund operations to end Q124.
We estimate that IRLAB will need to raise SEK750m before becoming self-sustainable in FY28 with the projected launches of mesdopetam and pirepemat. We account for this funding as illustrative debt in our model and have distributed the raise (SEK250m per year) across three consecutive years (FY24–26). Alternatively, if funding is realised through an equity issue instead (assuming at the current trading price of SEK9.78/share), IRLAB would need to issue 76.7m shares, resulting in our per-share valuation decreasing to SEK38.1 from SEK94.7 currently (the number of shares outstanding would increase from 51.8m to 128.6m). As part of IRLAB’s licensing agreement with Ipsen for mesdopetam, it could potentially receive up to US$335m in development, regulatory and sales-based milestones, which would have an impact on its financing requirements. However, as a result of the Phase IIb mesdopetam study missing its primary endpoint, the timings of such payments are uncertain.
Our valuation of IRLAB remains largely unchanged at SEK4.90bn or SEK94.7/share (previously SEK4.84bn or SEK93.3/share). Our valuation is based on a risk-adjusted NPV calculation for the company’s lead clinical assets, mesdopetam and pirepemat (applying a 12.5% discount rate), and reflects a net cash position of SEK210.1m at end December 2022. A breakdown of our rNPV valuation is shown in Exhibit 1.
Exhibit 1: IRLAB rNPV valuation
Product |
Launch |
Peak |
Peak sales ($m) |
Value |
Probability |
rNPV (SEKm) |
rNPV/share (SEK) |
Mesdopetam – PD-LIDs |
2028 |
2034 |
1,268.5 |
5,276.8 |
40% |
2,125.3 |
41.0 |
Mesdopetam – PD-Psychosis |
2029 |
2035 |
493.7 |
2,316.0 |
30% |
715.8 |
13.8 |
Pirepemat – PD-Falls (postural hypotension) |
2028 |
2034 |
1,062.1 |
6,260.5 |
30% |
1,853.7 |
35.8 |
Net cash at end-March 2023 |
|
|
210.1 |
100% |
210.1 |
4.1 |
|
Valuation |
|
|
14,063.4 |
|
4,904.8 |
94.7 |
Source: Edison Investment Research
Exhibit 2: Financial summary
Accounts: IFRS, year-end: 31 December, SEK000s |
|
|
2020 |
2021 |
2022 |
2023e |
2024e |
PROFIT & LOSS |
|
|
|
|
|
|
|
Total revenues |
|
|
404 |
207,906 |
61,277 |
223 |
163 |
Cost of sales |
|
|
0 |
0 |
0 |
0 |
0 |
Gross profit |
|
|
404 |
207,906 |
61,277 |
223 |
163 |
Total operating expenses |
|
|
(91,862) |
(155,330) |
(174,386) |
(208,427) |
(190,325) |
Research and development expenses |
|
|
(75,989) |
(129,748) |
(146,178) |
(168,579) |
(156,053) |
EBITDA (reported) |
|
|
(89,202) |
56,050 |
(108,330) |
(205,063) |
(187,004) |
Operating income (reported) |
|
|
(91,458) |
52,576 |
(113,109) |
(208,204) |
(190,162) |
Operating margin % |
|
|
N/A |
N/A |
N/A |
N/A |
N/A |
Finance income/(expense) |
|
|
(195) |
(795) |
(297) |
(230) |
(6) |
Exceptionals and adjustments |
|
|
0 |
0 |
0 |
0 |
0 |
Profit before tax (reported) |
|
|
(91,653) |
51,781 |
(113,406) |
(208,434) |
(190,168) |
Profit before tax (normalised) |
|
|
(91,394) |
91,131 |
(113,147) |
(208,434) |
(190,168) |
Income tax expense (includes exceptionals) |
|
|
0 |
0 |
0 |
0 |
0 |
Net income (reported) |
|
|
(91,653) |
51,781 |
(113,406) |
(208,434) |
(190,168) |
Net income (normalised) |
|
|
(91,394) |
91,131 |
(113,147) |
(208,434) |
(190,168) |
Basic average number of shares, m |
|
|
47.7 |
51.7 |
51.8 |
51.8 |
51.8 |
Basic EPS (SEK) |
|
|
(1.92) |
1.00 |
(2.19) |
(4.02) |
(3.67) |
Adjusted EPS (SEK) |
|
|
(1.92) |
1.76 |
(2.18) |
(4.02) |
(3.67) |
Dividend per share (SEK) |
|
|
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
BALANCE SHEET |
|
|
|
|
|
|
|
Tangible assets |
|
|
4,317 |
8,348 |
8,009 |
5,161 |
2,296 |
Intangible assets |
|
|
82,010 |
42,661 |
46,862 |
46,862 |
46,862 |
Other non-current assets |
|
|
0 |
0 |
0 |
0 |
0 |
Total non-current assets |
|
|
86,327 |
51,009 |
54,871 |
52,023 |
49,158 |
Cash and equivalents |
|
|
277,009 |
401,897 |
252,776 |
51,550 |
114,248 |
Inventories |
|
|
0 |
0 |
0 |
0 |
0 |
Trade and other receivables |
|
|
6,732 |
19,543 |
15,908 |
13,522 |
13,522 |
Other current assets |
|
|
0 |
0 |
0 |
0 |
0 |
Total current assets |
|
|
283,741 |
421,440 |
268,684 |
65,072 |
127,769 |
Non-current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
250,000 |
Non-current lease liabilities |
|
|
1,270 |
3,566 |
381 |
315 |
315 |
Other non-current liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Total non-current liabilities |
|
|
1,270 |
3,566 |
381 |
315 |
250,315 |
Accounts payable |
|
|
3,683 |
4,634 |
0 |
0 |
0 |
Non-current loans and borrowings |
|
|
0 |
0 |
0 |
0 |
0 |
Current lease liabilities |
|
|
1,657 |
3,034 |
3,595 |
2,762 |
2,762 |
Deferred Income |
|
|
0 |
42,576 |
0 |
0 |
0 |
Other current liabilities |
|
|
15,578 |
19,158 |
28,748 |
31,623 |
31,623 |
Total current liabilities |
|
|
20,918 |
69,402 |
32,343 |
34,385 |
34,385 |
Equity attributable to company |
|
|
347,880 |
399,481 |
290,830 |
82,396 |
(107,772) |
CASH FLOW STATEMENT |
|
|
|
|
|
|
|
Operating income |
|
|
(91,458) |
52,576 |
(113,109) |
(208,204) |
(190,162) |
Depreciation and amortisation |
|
|
2,256 |
3,474 |
4,779 |
3,141 |
3,158 |
Share based payments |
|
|
0 |
0 |
0 |
0 |
0 |
Other adjustments |
|
|
(195) |
38,295 |
(297) |
(230) |
(6) |
Movements in working capital |
|
|
183 |
34,296 |
(33,985) |
5,195 |
0 |
Cash from operations (CFO) |
|
|
(89,214) |
128,641 |
(142,612) |
(200,099) |
(187,010) |
Capex |
|
|
(394) |
(708) |
(2,876) |
(293) |
(293) |
Acquisitions & disposals net |
|
|
0 |
0 |
(500) |
0 |
0 |
Other investing activities |
|
|
0 |
0 |
0 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(394) |
(708) |
(3,376) |
(293) |
(293) |
Net proceeds from issue of shares |
|
|
257,706 |
(180) |
0 |
0 |
0 |
Movements in debt |
|
|
(1,616) |
(2,865) |
(3,134) |
(833) |
250,000 |
Other financing activities |
|
|
0 |
0 |
0 |
0 |
0 |
Cash from financing activities (CFF) |
|
|
256,090 |
(3,045) |
(3,134) |
(833) |
250,000 |
Cash and equivalents at beginning of period |
|
|
110,527 |
277,009 |
401,897 |
252,775 |
51,550 |
Increase/(decrease) in cash and equivalents |
|
|
166,482 |
124,888 |
(149,122) |
(201,225) |
62,697 |
Effect of FX on cash and equivalents |
|
|
0 |
0 |
0 |
0 |
0 |
Cash and equivalents at end of period |
|
|
277,009 |
401,897 |
252,775 |
51,550 |
114,248 |
Net (debt)/cash |
|
|
277,009 |
401,897 |
252,776 |
51,550 |
(135,752) |
Source: Edison Investment Research, IRLAB company accounts
|
|
Research: Financials
JDC Group (JDC) reported Q123 results in line with management’s expectations. Despite the relatively low year-on-year revenue growth of 1.4% in Q1, JDC reiterated its FY23 guidance for revenue of €175–190m based on cooperation agreements that have been signed. This translates to 17% top-line growth at the midpoint of guidance. EBITDA is still expected to be in the range of €11.5–13.0m. We have made no changes to our estimates, which are more or less at the midpoint of guidance. JDC trades at an FY24e EV/EBITDA multiple of 12.0x on our estimates, which we believe is undemanding for what is essentially a fast-scaling platform business.
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