ReNeuron Group — Pushing on with CustomEx in H123

ReNeuron Group (AIM: RENE)

Last close As at 22/05/2024

3.38

0.00 (0.00%)

Market capitalisation

2m

More on this equity

Research: Healthcare

ReNeuron Group — Pushing on with CustomEx in H123

With its H123 interim results, ReNeuron highlighted progress across its proprietary exosome platform, CustomEx. The company reported H123 revenues of £438k (H122: £58k), primarily related to income associated with a £320k payment from Fosun Pharma as part of a technology transfer and supply agreement. ReNeuron pared back its operating losses (£4.3m in H123, down from £6.1m in H122), largely with reduced clinical trial-related costs following the company’s strategic refocus on exosomes. ReNeuron closed the half year with a gross cash position, including bank deposits, of £10.5m, which, given the company’s current cash burn rate and our projections, is anticipated to fund operations into Q4 CY23. We value ReNeuron at £44.2m or 77p per share.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

ReNeuron Group

Pushing on with CustomEx in H123

H123 results

Pharma and biotech

6 December 2022

Price

15p

Market cap

£8m

US$1.23/£

Gross cash (£m) 30 September 2022

10.5

Shares in issue

57.1m

Free float

99.7%

Code

RENE

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(45.3)

(48.8)

(84.5)

Rel (local)

(47.5)

(50.1)

(84.8)

52-week high/low

93p

15p

Business description

ReNeuron Group is a UK biotech focused on the development of its stem cell-derived exosome drug delivery platform (CustomEx). The company operates as a contract research and development organisation and has established partners that are progressing the preclinical development of exosome-based therapeutics, utilising ReNeuron’s CustomEx technology.

Next events

Expansion of exosome partnerships

FY24

Fosun CTX manufacturing initiated

FY24

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Adam McCarter

+44 (0)20 3077 5700

ReNeuron Group is a research client of Edison Investment Research Limited

With its H123 interim results, ReNeuron highlighted progress across its proprietary exosome platform, CustomEx. The company reported H123 revenues of £438k (H122: £58k), primarily related to income associated with a £320k payment from Fosun Pharma as part of a technology transfer and supply agreement. ReNeuron pared back its operating losses (£4.3m in H123, down from £6.1m in H122), largely with reduced clinical trial-related costs following the company’s strategic refocus on exosomes. ReNeuron closed the half year with a gross cash position, including bank deposits, of £10.5m, which, given the company’s current cash burn rate and our projections, is anticipated to fund operations into Q4 CY23. We value ReNeuron at £44.2m or 77p per share.

Year end

Revenue
(£m)

PBT*
(£m)

EPS*
(£)

DPS
(£)

P/E
(x)

Yield
(%)

03/21

0.3

(13.4)

(0.29)

0.0

N/A

N/A

03/22

0.4

(11.1)

(0.17)

0.0

N/A

N/A

03/23e

0.8

(8.9)

(0.13)

0.0

N/A

N/A

03/24e

0.9

(9.6)

(0.14)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Encouraging pre-clinical data for CustomEx

In October 2022, ReNeuron presented encouraging pre-clinical data highlighting the enhanced drug delivery capability of its CustomEx platform over conventional human embryonic kidney-derived (HEK) exosomes. Notable results included a minimum 10-fold increase in cellular uptake across three cell types compared to HEK-derived exosomes and a 600% improvement in delivery of siRNA. In our view, this provides encouraging signs for the clinical progression of ReNeuron’s exosomes, and potential market differentiation against HEK competitors.

Funding into Q4 CY23

Based on the unfavourable macroeconomic conditions, the board has concluded that it will not be possible to complete an equity raise at the current time. Instead, the company intends to focus on cost deferral initiatives that include deferred programme expenses to extend the cash runway into Q4 CY23 (previously Q2 CY23). Management does not expect these initiatives to affect the company’s commercial activities and it estimates that the signing of new partner contracts may further extend the current runway into CY24. ReNeuron’s stock dropped c 35% in the two trading days following the half-year results, which likely reflects market uncertainty with regards to the company’s capability to raise capital.

Valuation: £44.2m or 77p per share

We value ReNeuron at £44.2m or 77p (previously £47.3m or 83p per share). Our valuation has been affected by rolling our model forward and updating our exchange rate assumption to US$1.23/£ (from £/US$1.11/£), which itself had an impact of c 8% on our risk-adjusted net present value. We have revised our FY23 estimates, but our underlying long-term assumptions remain unchanged.

Financials

As a result of ReNeuron’s strategic refocus, the company reported research and development (R&D) expenses for H123 of £3.0m (R&D expenses H122: £4.3m). We have updated our full year estimates and now expect total FY23 operating expenses of £9.7m (previously £11.9m), including R&D expenses of £6.0m (previously £8.1m). We estimate FY23 and FY24 free cash outflows of c £9.1m (previously £11.7m) and £9.4m (previously £10.5m), respectively, with the increased cash burn in FY23 associated with adverse working capital movement (H123 saw a £0.5m increase in working capital, while H122 had a £0.9m reduction). At end-September 2022, ReNeuron reported a gross cash position of £10.5m. Based on our estimated annual cash burn of c £9.1m in FY23 and £9.4m in FY24, we estimate the company is funded into Q4 CY23. However, we believe ReNeuron will need to raise c £15m in FY24 to fund operations into mid FY25, at which point we have assumed in our model that the company will secure a global licensing deal.

Exhibit 1: Financial summary

Accounts: IFRS; year end 31 March; £000s

 

 

2021

2022

2023e

2024e

PROFIT & LOSS

 

 

 

 

 

 

Total revenues

 

 

335

403

799

906

Cost of sales

 

 

0

0

0

0

Gross profit

 

 

335

403

799

906

Total operating expenses

 

 

(13,249)

(11,631)

(9,713)

(10,512)

Research and development expenses

 

 

(9,503)

(8,068)

(6,272)

(6,899)

SG&A

 

 

(3,746)

(3,563)

(3,441)

(3,613)

Operating income (reported)

 

 

(12,914)

(11,228)

(8,914)

(9,606)

Finance income/(expense)

 

 

(496)

170

50

10

Exceptionals and adjustments

 

 

0

0

0

0

Profit before tax (reported)

 

 

(13,410)

(11,058)

(8,864)

(9,596)

Profit before tax (normalised)

 

 

(13,410)

(11,058)

(8,864)

(9,596)

Income tax expense (includes exceptionals)

 

 

2,063

1,369

1,285

1,391

Net income (reported)

 

 

(11,347)

(9,689)

(7,578)

(8,205)

Net income (normalised)

 

 

(11,347)

(9,689)

(7,578)

(8,205)

Basic average number of shares, m

 

 

39.1

57.0

57.1

57.1

Basic EPS (£)

 

 

(0.29)

(0.17)

(0.13)

(0.14)

Adjusted EPS (£)

 

 

(0.29)

(0.17)

(0.13)

(0.14)

Dividend per share (£)

 

 

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

Tangible assets

 

 

213

288

250

167

Intangible assets

 

 

186

186

186

186

Right-of-use assets

 

 

473

373

298

239

Other non-current assets

 

 

0

0

0

0

Total non-current assets

 

 

872

847

735

592

Cash and equivalents

 

 

22,203

14,548

5,328

10,780

Current tax receivables

 

 

1,832

1,392

1,285

1,391

Trade and other receivables

 

 

444

536

563

591

Other current assets

 

 

0

0

0

0

Total current assets

 

 

24,479

16,476

7,176

12,762

Non-current loans and borrowings

 

 

0

0

0

0

Non-current lease liabilities

 

 

562

416

254

106

Long term debt

 

 

0

0

0

15,000

Total non-current liabilities

 

 

562

416

254

15,106

Accounts payable

 

 

5,727

6,873

4,811

3,608

Illustrative debt

 

 

0

0

0

0

Current lease obligations

 

 

157

146

165

165

Other current liabilities

 

 

0

0

0

0

Total current liabilities

 

 

5,884

7,019

4,976

3,773

Equity attributable to company

 

 

18,905

9,888

2,680

(5,525)

 

 

 

0

0

0

0

CASH FLOW STATEMENT

 

 

 

 

 

 

Operating income

 

 

(12,914)

(11,228)

(8,914)

(9,606)

Depreciation and amortisation

 

 

380

324

412

442

Share based payments

 

 

764

649

370

0

Other adjustments

 

 

6,025

1,788

1,392

1,285

Movements in working capital

 

 

(307)

1,056

(2,089)

(1,231)

Cash from operations (CFO)

 

 

(6,052)

(7,411)

(8,828)

(9,109)

Capex

 

 

(25)

(302)

(300)

(300)

Acquisitions & disposals net

 

 

0

0

0

0

Other investing activities

 

 

27

26

73

27

Cash used in investing activities (CFIA)

 

 

2

(276)

(227)

(273)

Capital changes

 

 

16,265

23

0

0

Debt Changes

 

 

(154)

(157)

(165)

(165)

Other financing activities

 

 

(7,500)

2,500

5,000

0

Illustrative Debt

 

 

0

0

0

15,000

Cash from financing activities (CFF)

 

 

8,611

2,366

4,835

14,835

Cash and equivalents at beginning of period

 

 

12,625

14,703

9,548

5,328

Increase/(decrease) in cash and equivalents

 

 

2,561

(5,321)

(4,220)

5,452

Effect of FX on cash and equivalents

 

 

(483)

166

0

0

Cash and equivalents at end of period

 

 

14,703

9,548

5,328

10,780

Net cash (debt)

 

 

14,703

9,548

5,328

(4,220)

Source: Edison Investment Research, ReNeuron accounts



General disclaimer and copyright

This report has been commissioned by ReNeuron Group and prepared and issued by Edison, in consideration of a fee payable by ReNeuron Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia


General disclaimer and copyright

This report has been commissioned by ReNeuron Group and prepared and issued by Edison, in consideration of a fee payable by ReNeuron Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on ReNeuron Group

View All

Latest from the Healthcare sector

View All Healthcare content

Research: Industrials

Norcros — Well placed to gain market share

Norcros’s interims highlighted a solid H1 performance, and although we have reduced our estimates to reflect a weaker outlook into FY24, we believe that Norcros’s proven strategy remains on track, which should allow it to unlock significant market share opportunities. We also believe that its key strengths are undervalued and that most, if not all, of the legacy issues, particularly the pension deficit, have been resolved. We have reduced our valuation from 314p/sh to 252p implying c 40% upside.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free