e-Therapeutics (ETX) has announced an update on its collaboration with C4X Discovery (C4XD) on novel interventions in Parkinson’s disease (PD). The PD collaboration started in May 2018 and combines the network-driven drug discovery (NDD) platform at ETX with the genetic information from C4XD’s platform. This has already resulted in a number of avenues for novel drug target generation in PD.
e-Therapeutics |
Releasing hidden value |
Partnership update |
Pharma & biotech |
6 December 2018 |
Share price performance
Business description
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e-Therapeutics is a research client of Edison Investment Research Limited |
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e-Therapeutics (ETX) has announced an update on its collaboration with C4X Discovery (C4XD) on novel interventions in Parkinson’s disease (PD). The PD collaboration started in May 2018 and combines the network-driven drug discovery (NDD) platform at ETX with the genetic information from C4XD’s platform. This has already resulted in a number of avenues for novel drug target generation in PD.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
01/17 |
0.0 |
(14.1) |
(4.1) |
0.0 |
N/A |
N/A |
01/18 |
0.0 |
(6.7) |
(2.0) |
0.0 |
N/A |
N/A |
01/19e |
0.0 |
(5.1) |
(1.4) |
0.0 |
N/A |
N/A |
01/20e |
0.0 |
(4.0) |
(1.1) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Early collaborative success
The May 2018 collaboration with C4XD has now generated results that could lead to novel drug targets for the treatment of PD. ETX applied its NDD technology to analyse a set of 200 genes which had been identified through C4XD’s Taxonomy3 genomics platform as potentially being implicated in the aetiology of PD. The ETX NDD platform identified gene products that are linked to the phenotypic pathophysiology of PD. This is a significant advance as efforts over the last two decades to use single nucleotide polymorphisms (which can distinguish between patients and healthy individuals) alone to identify new targets in PD and other diseases, have been largely unsuccessful. The ETX approach reflects the fact that many diseases are the result of interactions of multiple small differences which individually may be unimportant and may have been overlooked, but only a network-aware process can reveal. Complex diseases like PD, Alzheimer’s and multiple sclerosis involving more than one pathway should be more amenable to ETX’s more refined NDD approach.
Good business development ammunition
Significant progress in the PD collaboration may not yet be the announcement of a licensing transaction that investors have been patiently waiting for. It is, however, a further demonstration that ETX’s NDD platform might yield novel drug targets in PD and adds to its existing capabilities in the tryptophan catabolism and immune checkpoint modulator programmes. We expect ETX’s management to be in constant business development mode in selling the benefits of its platform and its two assets available for licensing, so this announcement on advances in a neurological indication can only aid that process.
Valuation: Unchanged for now
Our valuation included the median upfront value of a preclinical immunoncology transaction plus ETX’s market capitalisation. The latter represents a market valuation of ETX’s NDD platform, and the former represents the value of only one of two potential preclinical licensing transactions. Our valuation remains at £63.5m or 24p per share.
Exhibit 1: Financial summary
£'000s |
2017 |
2018 |
2019e |
2020e |
||
Year ending 31 January |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
R&D |
(10,911) |
(5,019) |
(3,851) |
(3,000) |
||
G&A |
(2,641) |
(1,749) |
(1,242) |
(1,000) |
||
EBITDA |
|
|
(14,200) |
(6,696) |
(5,035) |
(3,955) |
Operating Profit (before amort. and except.) |
|
(14,256) |
(6,768) |
(5,093) |
(4,001) |
|
Share-based payment |
(99) |
(105) |
(60) |
(50) |
||
Operating profit |
(16,456) |
(6,873) |
(5,153) |
(4,050) |
||
Net interest |
132 |
49 |
23 |
15 |
||
Profit Before Tax (norm) |
|
|
(14,124) |
(6,719) |
(5,070) |
(3,986) |
Profit Before Tax (reported) |
|
|
(16,324) |
(6,824) |
(5,130) |
(4,035) |
Tax |
3,073 |
1,360 |
1,355 |
1,000 |
||
Profit after tax (norm.) |
(11,051) |
(5,359) |
(3,715) |
(2,985) |
||
Profit after tax (as reported) |
(13,251) |
(5,464) |
(3,775) |
(3,035) |
||
Average Number of Shares Outstanding (m) |
267.1 |
268.5 |
268.5 |
268.5 |
||
EPS - normalised (p) |
|
|
(4.1) |
(2.0) |
(1.4) |
(1.1) |
EPS - as reported (p) |
|
|
(5.0) |
(2.0) |
(1.4) |
(1.1) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
||
EBITDA margin (%) |
N/A |
N/A |
N/A |
N/A |
||
Operating margin (before GW and except) (%) |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||
Fixed assets |
|
|
207 |
206 |
197 |
171 |
Intangible assets |
156 |
135 |
141 |
133 |
||
Tangible assets |
51 |
71 |
56 |
38 |
||
Current assets |
|
|
18,225 |
11,556 |
6,714 |
3,512 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
3,749 |
1,455 |
717 |
717 |
||
Cash |
13,975 |
9,597 |
5,502 |
2,795 |
||
Other |
501 |
504 |
495 |
0 |
||
Current liabilities |
|
|
(1,951) |
(1,024) |
(704) |
(452) |
Creditors |
(1,951) |
(1,024) |
(704) |
(452) |
||
Other creditors |
0 |
0 |
0 |
0 |
||
Short-term borrowings |
0 |
0 |
0 |
0 |
||
Long-term liabilities |
|
|
0 |
0 |
0 |
0 |
Long-term borrowings |
0 |
0 |
0 |
0 |
||
Deferred taxation |
0 |
0 |
0 |
0 |
||
Other long-term liabilities |
0 |
0 |
0 |
0 |
||
Net assets |
|
|
16,481 |
10,738 |
6,207 |
3,231 |
CASH FLOW |
||||||
Operating cash flow |
|
|
(12,509) |
(7,373) |
(5,453) |
(3,702) |
Net interest |
194 |
86 |
23 |
15 |
||
Tax |
3,073 |
2,968 |
1,355 |
1,000 |
||
Capex |
(22) |
(66) |
(5) |
(5) |
||
Purchase of intangibles |
(143) |
(5) |
(15) |
(15) |
||
Acquisitions/disposals |
(1,473) |
0 |
0 |
0 |
||
Financing |
13 |
12 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Net cash flow |
(10,867) |
(4,378) |
(4,095) |
(2,707) |
||
Opening net debt/(cash) |
|
|
(24,842) |
(13,975) |
(9,597) |
(5,502) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(13,975) |
(9,597) |
(5,502) |
(2,795) |
Source: e-therapeutics, Edison Investment Research
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Interim results indicate the resilience of BCA’s model in the face of still challenging UK market fundamentals. The company delivered top-line growth of 22% and adjusted EBITDA growth of 12.7% and is able to maintain its expectation that market forecasts for FY19 will be achieved. While the uncertainties in new car markets persist, largely due to supply-side constraints and the looming Brexit, we maintain our EBITDA estimates for this year and next despite some divisional mix changes. The FY20 P/E multiple of just 15.7x is undemanding in our view given BCA’s investment proposition delivering healthy cash flows.