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Research: Healthcare
FY22 has been a year of transition for Arovella as it pivots its strategic focus towards immunotherapy, in particular invariant natural killer T (iNKT) cell-based therapies. Another major development during the period was the first commercial launch of ZolpiMist, the flagship product from its legacy OroMist portfolio. With first sales expected in Q3 CY22 for ZolpiMist and steady progress of the lead iNKT asset ALA-101 towards the clinic, we expect FY23 to be eventful for Arovella. The FY22 results were broadly in line with expectations with the significantly higher R&D figure (A$2.6m, five times the FY21 number) signalling the oncology-focus. The year-end cash balance of A$6.1m should provide a 12-month runway based on the current run rate, but we estimate the need to raise another A$5m in FY24. Our valuation remains largely unchanged at A$31m or A$0.05/share.
Arovella Therapeutics |
Progressing on all fronts |
Financial update |
Pharma and biotech |
5 September 2022 |
Share price performance
Business description
Next events
Analyst
Arovella Therapeutics is a research client of Edison Investment Research Limited |
FY22 has been a year of transition for Arovella as it pivots its strategic focus towards immunotherapy, in particular invariant natural killer T (iNKT) cell-based therapies. Another major development during the period was the first commercial launch of ZolpiMist, the flagship product from its legacy OroMist portfolio. With first sales expected in Q3 CY22 for ZolpiMist and steady progress of the lead iNKT asset ALA-101 towards the clinic, we expect FY23 to be eventful for Arovella. The FY22 results were broadly in line with expectations with the significantly higher R&D figure (A$2.6m, five times the FY21 number) signalling the oncology-focus. The year-end cash balance of A$6.1m should provide a 12-month runway based on the current run rate, but we estimate the need to raise another A$5m in FY24. Our valuation remains largely unchanged at A$31m or A$0.05/share.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/21 |
0.3 |
(3.4) |
(1.15) |
0.0 |
N/A |
N/A |
06/22 |
0.3 |
(7.4) |
(1.42) |
0.0 |
N/A |
N/A |
06/23e |
2.4 |
(5.6) |
(0.87) |
0.0 |
N/A |
N/A |
06/24e |
6.2 |
(2.1) |
(0.35) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Pipeline making progress
Arovella’s lead iNKT programme ALA-101 (targeting CD-19 expressing cancer cells) has been making steady progress, with two critical manufacturing steps achieved during the year: the selection of a plasmid and vector manufacturer (manufacturing commenced in January 2022) and a manufacturer for the iNKT cells to be used in clinical trials (deal signed with Q-Gen in April 2022). Management aims to commence Phase I clinical trials for ALA-101 in the next 12–18 months following the required regulatory clearances. The year also marked the launch of ZolpiMist (through its Australian market partner STADA) and Q123 (Q3 CY22) is expected to deliver the first commercial sales, a key milestone for the company.
Clear cash runway to end FY23
Arovella ended FY22 with net cash of A$6.1m, supported by two equity raises in FY22 contributing gross proceeds of A$6.6m. The first round of financing raised A$4.6m through institutional investors and the second round raised A$2.0m through a share purchase plan. We expect the available capital pool to extend the cash runway to end FY23 but estimate the need to raise another A$5m in FY24.
Valuation: A$31m or A$0.05 per basic share
We roll forward our model and increase the probability of success for ZolpiMist to 80% from 70% previously, following launch in the Australian market in Q2 CY22. However, the upside generated has been offset by a lower net cash balance of A$6.1m. Overall, our valuation remains largely unchanged at A$31m or A$0.05 per basic share (from A$30.5m or A$0.05 per basic share).
Exhibit 1: Financial summary
A$'000s |
2020 |
2021 |
2022 |
2023e |
2024e |
||
Year end 30 June |
AIFRS |
AIFRS |
AIFRS |
AIFRS |
AIFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
533 |
257 |
296 |
2,447 |
6,242 |
Cost of Sales |
(201) |
(223) |
(207) |
(248) |
(298) |
||
Gross Profit |
332 |
35 |
89 |
2,198 |
5,944 |
||
Sales, General and Administrative Expenses |
(4,259) |
(3,529) |
(4,538) |
(4,719) |
(4,908) |
||
Research and Development Expense |
(285) |
(542) |
(2,596) |
(2,700) |
(2,808) |
||
EBITDA |
|
|
(3,413) |
(3,129) |
(7,045) |
(5,221) |
(1,772) |
Operating Profit (before amort. and excepts.) |
|
(3,636) |
(3,332) |
(7,241) |
(5,357) |
(1,909) |
|
Intangible Amortisation |
(349) |
(449) |
(356) |
(275) |
(275) |
||
Other |
799 |
907 |
0 |
0 |
0 |
||
Exceptionals |
(5,973) |
(1,239) |
(833) |
0 |
0 |
||
Operating Profit |
(9,958) |
(5,021) |
(8,430) |
(5,633) |
(2,184) |
||
Net Interest |
22 |
(27) |
(191) |
(199) |
(206) |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(3,613) |
(3,359) |
(7,432) |
(5,556) |
(2,115) |
Profit Before Tax (FRS 3) |
|
|
(9,936) |
(5,047) |
(8,621) |
(5,831) |
(2,390) |
Tax |
0 |
0 |
0 |
0 |
0 |
||
Deferred tax |
(0) |
(0) |
(0) |
(0) |
(0) |
||
Profit After Tax (norm) |
(3,613) |
(3,359) |
(7,432) |
(5,556) |
(2,115) |
||
Profit After Tax (FRS 3) |
(9,936) |
(5,047) |
(8,621) |
(5,831) |
(2,390) |
||
Average Number of Shares Outstanding (m) |
142.3 |
330.9 |
549.6 |
669.9 |
676.6 |
||
EPS - normalised (c) |
|
|
(2.78) |
(1.15) |
(1.42) |
(0.87) |
(0.35) |
EPS - Reported ($) |
|
|
(0.07) |
(0.02) |
(0.02) |
(0.01) |
(0.00) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
4,673 |
3,344 |
2,625 |
2,780 |
2,937 |
Intangible Assets |
4,251 |
2,911 |
2,253 |
2,509 |
2,765 |
||
Tangible Assets |
365 |
381 |
266 |
166 |
67 |
||
Other |
57 |
52 |
105 |
105 |
105 |
||
Current Assets |
|
|
2,035 |
7,343 |
6,588 |
804 |
3,299 |
Stocks |
22 |
0 |
0 |
0 |
0 |
||
Debtors |
869 |
534 |
36 |
44 |
44 |
||
Cash |
977 |
6,717 |
6,071 |
281 |
2,775 |
||
Other |
166 |
92 |
480 |
480 |
480 |
||
Current Liabilities |
|
|
(2,022) |
(1,695) |
(1,509) |
(1,672) |
(1,672) |
Creditors |
(2,010) |
(1,689) |
(1,441) |
(1,604) |
(1,604) |
||
Short term borrowings |
(12) |
(6) |
(67) |
(67) |
(67) |
||
Long Term Liabilities |
|
|
(550) |
(11) |
(87) |
(87) |
(5,087) |
Long term borrowings |
(4) |
(3) |
(77) |
(77) |
(5,077) |
||
Other long-term liabilities |
(545) |
(8) |
(9) |
(9) |
(9) |
||
Net Assets |
|
|
4,135 |
8,982 |
7,617 |
1,826 |
(522) |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(2,884) |
(3,545) |
(6,268) |
(5,223) |
(1,936) |
Net Interest |
0 |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(388) |
(515) |
(566) |
(567) |
(569) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Financing |
0 |
9,856 |
6,256 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(3,272) |
5,797 |
(578) |
(5,790) |
(2,505) |
||
Opening net debt/(cash) |
|
|
(4,260) |
(961) |
(6,709) |
(5,926) |
(136) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
0 |
||
Other |
(27) |
(50) |
(205) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(961) |
(6,709) |
(5,926) |
(136) |
2,369 |
Source: Company reports, Edison Investment Research
|
|
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