Probiodrug
Written by
Probiodrug |
Chronic toxicology data de-risk PQ912 |
Company update |
Pharma & biotech |
14 April 2016 |
Share price performance
Business description
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Analysts
Probiodrug is a research client of Edison Investment Research Limited |
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Probiodrug announced a positive outcome in the chronic toxicology studies confirming a favourable therapeutic margin and further de-risking the lead asset PQ912. Availability of study results is a regulatory prerequisite and, if approved by the health authorities, allows longer treatment trials with Alzheimer’s disease (AD) patients. Probiodrug is now exploring possibilities for longer-term studies, which may be carried out as an extension of the ongoing Phase IIa SAPHIR trial or as a separate study. Our increased valuation of Probiodrug is €303m or €40.7/share.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
0.0 |
(11.4) |
(2.35) |
0.0 |
N/A |
N/A |
12/15 |
0.0 |
(13.5) |
(1.96) |
0.0 |
N/A |
N/A |
12/16e |
0.0 |
(14.2) |
(1.91) |
0.0 |
N/A |
N/A |
12/17e |
0.0 |
(11.2) |
(1.50) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items.
Green light for long-term treatment with PQ912 trial
On 4 April Probiodrug announced results from chronic toxicology studies, during which PQ912 was tested in rats and dogs for six and nine months respectively. There were no new findings and no aggravation of the minimal to slight findings compared to the previous shorter one-month and three-month studies conducted in the same animal species. Chronic toxicology studies are a regulatory prerequisite for long-term treatment in patients.
Full SAPHIR results early 2017
As a reminder, according to the latest estimate from the company, the first results from the Phase IIa study should be released around end-2016, with the full data in early 2017. With no new safety issues in chronic animal models, Probiodrug believes that the safety profile of chronic treatment with PQ912 is confirmed with a comfortable safety margin and has started exploring opportunities for a longer-term clinical study (patients in the SAPHIR trial receive PQ912 for three months). This could be an extension to SAPHIR or a separate trial. Notably, no other details were provided regarding the possible trial design.
Valuation: Increased to €303m due to de-risking
The main change to our valuation model is an increase in success probability for PQ912 to reach the market from 20% to 25%. Rolling our valuation model forward in time also had a positive effect on our risk-adjusted NPV, which now stands at €303m or €40.7/share vs €242m or €32.6/share. Our other assumptions for PQ912 remain unchanged.
Valuation
Our Probiodrug valuation is increased to €303m (from €242m) or €40.7/share. We view the positive outcome of chronic animal treatment studies as a significant de-risking event and increase our probability of success from 20% to 25%. We leave our other assumptions unchanged, including our estimated partnering deal in 2017, according to which a partner will fund further development of PQ912 until the potential launch in 2022. While no value is assigned to the preclinical pipeline given its earlier stage of development, it represents a potential upside to our current valuation, which could be added as the projects progress into clinical stage. A summary of our other assumptions and a breakdown of our rNPV valuation, which uses a discount rate of 12.5%, are shown in Exhibit 1.
Exhibit 1: Probiodrug rNPV valuation
Product |
Indication |
Launch |
Peak sales (€m) |
Value (€m) |
Probability |
rNPV (€m) |
NPV/Share (€/share) |
PQ912 |
Alzheimer's disease |
2022 |
6,200 |
1,100.8 |
25% |
281.9 |
37.9 |
Net cash (at end 2015) |
21.4 |
100% |
21.4 |
2.9 |
|||
Valuation |
|
|
|
1,122.2 |
303.2 |
40.7 |
Source: Edison Investment Research, Probiodrug. Note: Peak sales are rounded to the nearest €100m.
Exhibit 2: Financial summary
€000s |
2012 |
2013 |
2014 |
2015 |
2016e |
2017e |
||
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
6 |
0 |
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
6 |
0 |
0 |
0 |
0 |
0 |
||
Research and development |
(9,255) |
(8,004) |
(8,008) |
(10,158) |
(11,105) |
(7,669) |
||
EBITDA |
|
|
(10,206) |
(9,387) |
(11,173) |
(13,337) |
(14,449) |
(11,190) |
Operating Profit (before amort. and except.) |
(10,521) |
(9,675) |
(11,241) |
(13,363) |
(14,475) |
(11,216) |
||
Intangible Amortisation |
(37) |
(26) |
(26) |
(30) |
(30) |
(26) |
||
Exceptionals |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(10,558) |
(9,701) |
(11,267) |
(13,393) |
(14,505) |
(11,242) |
||
Net Interest |
(314) |
(106) |
(170) |
(112) |
293 |
66 |
||
Profit Before Tax (norm) |
|
|
(10,835) |
(9,781) |
(11,411) |
(13,475) |
(14,182) |
(11,150) |
Profit Before Tax (FRS 3) |
|
|
(10,872) |
(9,807) |
(11,437) |
(13,505) |
(14,213) |
(11,176) |
Tax |
(656) |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(11,491) |
(9,781) |
(11,411) |
(13,475) |
(14,182) |
(11,150) |
||
Profit After Tax (FRS 3) |
(11,528) |
(9,807) |
(11,437) |
(13,505) |
(14,213) |
(11,176) |
||
Average Number of Shares Outstanding (m) |
4.1 |
4.3 |
4.9 |
6.9 |
7.4 |
7.4 |
||
EPS - normalised (€) |
|
|
(2.84) |
(2.30) |
(2.35) |
(1.96) |
(1.91) |
(1.50) |
EPS - normalised and fully diluted (€) |
|
(2.84) |
(2.30) |
(2.35) |
(1.96) |
(1.91) |
(1.50) |
|
EPS - (IFRS) (€) |
|
|
(2.85) |
(2.30) |
(2.35) |
(1.97) |
(1.91) |
(1.50) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
996 |
425 |
186 |
140 |
84 |
32 |
Intangible Assets |
67 |
101 |
82 |
56 |
26 |
0 |
||
Tangible Assets |
926 |
321 |
101 |
81 |
55 |
29 |
||
Investments |
3 |
3 |
3 |
3 |
3 |
3 |
||
Current Assets |
|
|
9,009 |
5,856 |
21,294 |
21,726 |
8,294 |
3,365 |
Stocks |
18 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
5 |
0 |
0 |
0 |
0 |
0 |
||
Cash |
7,726 |
4,421 |
20,920 |
21,361 |
7,929 |
3,000 |
||
Other |
1,260 |
1,435 |
374 |
365 |
365 |
365 |
||
Current Liabilities |
|
|
(3,570) |
(9,320) |
(4,580) |
(4,911) |
(4,672) |
(4,359) |
Creditors |
(3,570) |
(3,974) |
(4,580) |
(4,911) |
(4,672) |
(4,359) |
||
Short term borrowings |
0 |
(5,346) |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(1,070) |
(1,265) |
(929) |
(822) |
(822) |
(6,365) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
(5,543) |
||
Other long term liabilities |
(1,070) |
(1,265) |
(929) |
(822) |
(822) |
(822) |
||
Net Assets |
|
|
5,365 |
(4,304) |
15,971 |
16,133 |
2,884 |
(7,328) |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(12,090) |
(8,477) |
(10,540) |
(12,149) |
(13,725) |
(10,538) |
Net Interest |
22 |
9 |
(54) |
0 |
293 |
66 |
||
Tax |
28 |
9 |
5 |
2 |
0 |
0 |
||
Capex |
(64) |
(4) |
(2) |
(6) |
0 |
0 |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
9,516 |
(188) |
32,436 |
12,594 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(2,588) |
(8,651) |
21,845 |
441 |
(13,432) |
(10,473) |
||
Opening net debt/(cash) |
|
|
(10,314) |
(7,726) |
925 |
(20,920) |
(21,361) |
(7,929) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
(0) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(7,726) |
925 |
(20,920) |
(21,361) |
(7,929) |
2,543 |
Source: Edison Investment Research, Probiodrug accounts
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