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Research: Healthcare
The first set of 12-month data from the ongoing retinitis pigmentosa (RP) eye study has been released showing a stable longer-term response, which is excellent. However, the 12-month data are only for three patients so far with mean numbers reported. ReNeuron aims to present more RP eye data over 2020. Stroke data from the CTX PISCES III trial are expected around mid-2021. We retain the indicative value of ReNeuron at £197m.
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ReNeuron Group |
Stable 12-month vision |
Trial update |
Pharma & biotech |
26 February 2020 |
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The first set of 12-month data from the ongoing retinitis pigmentosa (RP) eye study has been released showing a stable longer-term response, which is excellent. However, the 12-month data are only for three patients so far with mean numbers reported. ReNeuron aims to present more RP eye data over 2020. Stroke data from the CTX PISCES III trial are expected around mid-2021. We retain the indicative value of ReNeuron at £197m.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/18 |
0.9 |
(21.0) |
(55.66) |
0.0 |
N/A |
N/A |
03/19 |
2.7 |
(17.2) |
(45.34) |
0.0 |
N/A |
N/A |
03/20e |
6.1 |
(22.8) |
(60.33) |
0.0 |
N/A |
N/A |
03/21e |
3.1 |
(30.8) |
(83.69) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
More data and some 12-month outcomes
The US trial (NCT02464436) has now reported data on eight patients to three months, six patients to six months and three at 12 months (Exhibit 1). All these patients had successful surgery, but two others experienced surgical complications and lost sight. The time course data are very supportive (Exhibit 2), with rapid gains in the treated eye followed by a stable mean visual acuity gain of 15 letters using EDTRS (we calculated between six and 12 months). It is interesting the acuity gain seen averages six letters in the untreated eye; this takes longer to develop, from two to three months after treatment. So far, these longer-term data are an average of a few patients (Exhibit 1) with no range or SD reported, but will become more robust as more patient data is gained. The 12-month data on six patients are due in Q320, with all eight currently reported by late 2020.
hRPC cell-based therapy might treat any RP patient
RP is an inherited, degenerative eye disease caused by one of over 100 different gene mutations. ReNeuron’s human retinal progenitor cell (hRPC) therapy could potentially treat any RP patient giving a big potential commercial advantage. Gene therapies can only treat specific mutations. As a next stage, the current Phase i/IIa US trial will be extended at a higher dose and a new site in the UK is planned. ReNeuron and its clinical advisers believe that the amended protocol will enable the efficacy signal observed so far to be both better delineated and magnified. A pivotal hRPC study is being planned with an application possible in H1 2021. The data so far supports running such a study. Running a larger US trial may require a US partner.
Valuation: £197m with cash into 2021
We retain our indicative value of £197m or 624p per share. This uses a 25% probability of success for hRP therapy. It is possible that hRPC could become the major valuation contributor over 2020. The CTX stroke indication is a major unmet need, but the PISCES III trial cannot produce data before mid-2021 with our expected launch window being from 2024 onwards.
Detailed data to 12 months, US and UK expansion
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Exhibit 1: Patient numbers reporting data by time point |
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Source: ReNeuron (Edison graphic). NB there are eight patients overall |
All eight of these patients will have 12-month data by late 2020. By then, we will also have some 18-month vision data. the trial has a two-year final endpoint. The reported patients were dosed with 1 million cells. In an amended protocol submitted to the FDA, nine extra patients will be added to the 21 planned and the dose will be raised to 2 million cells. In addition, a wider range of pre-treatment baseline visual acuity in patients will be eligible and the trial endpoint swill be expanded to include microperimetry testing to measure and detect changes in retinal sensitivity
The current study is currently expected to run till November 2022, so needs to complete recruitment by Q4 2020. ReNeuron has also applied to the UK MHRA to open a UK site at the Oxford Eye Hospital. Professor Robert MacLaren, a world-renowned leader in the treatment of retinal diseases, will be Principal Investigator. The trial currently runs at two US centres.
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Exhibit 2: Visual mean acuity gain in treated and untreated eyes with hRPC |
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Source: ReNeuron (Edison graphic) |
The exact 12-month mean data are less important as the numbers will change when more patient data are acquired. The gains in the untreated eye seen in this study are interesting and appear stable. ReNeuron’s hRPC therapy uses cells so inter-eye connectivity is very unlikely, making the outcome scientifically puzzling. If significant gains in the untreated eye are confirmed and consistent, this may require design changes to the planned pivotal study, due from 2021.
A clinically similar observation was reported by Gensight in May 2019, with two-year viral gene therapy data (against a different eye condition) showing improvements in the sham-treated eye, an unexplained and unexpected observation. Technically, the two products are very dissimilar (cells vs retrovirus virus), so this might be coincidental.
Exhibit 3: Financial summary
£'000s |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
897 |
2,720 |
6,094 |
3,094 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
897 |
2,720 |
6,094 |
3,094 |
||
R&D expenses |
(16,657) |
(16,240) |
(24,685) |
(28,634) |
||
SG&A expenses |
(4,616) |
(4,779) |
(5,078) |
(5,586) |
||
EBITDA |
|
|
(20,222) |
(17,915) |
(23,448) |
(30,965) |
Operating Profit (before amort. and except.) |
|
(20,376) |
(18,299) |
(23,575) |
(31,032) |
|
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Operating Profit |
(20,376) |
(18,299) |
(23,575) |
(31,032) |
||
Other |
0 |
0 |
0 |
0 |
||
Net Interest |
(591) |
1,064 |
792 |
240 |
||
Profit Before Tax (norm) |
|
|
(20,967) |
(17,235) |
(22,783) |
(30,792) |
Profit Before Tax (FRS 3) |
|
|
(20,967) |
(17,235) |
(22,783) |
(30,792) |
Tax |
3,352 |
2,887 |
3,579 |
4,152 |
||
Profit After Tax (norm) |
(17,615) |
(14,348) |
(19,204) |
(26,640) |
||
Profit After Tax (FRS 3) |
(17,615) |
(14,348) |
(19,204) |
(26,640) |
||
Average Number of Shares Outstanding (m) |
31.6 |
31.6 |
31.8 |
31.8 |
||
EPS - normalised (p) |
|
|
(55.66) |
(45.34) |
(60.33) |
(83.69) |
EPS - FRS 3 (p) |
|
|
(55.66) |
(45.34) |
(60.33) |
(83.69) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
912 |
1,522 |
1,682 |
1,959 |
Intangible Assets |
186 |
186 |
186 |
186 |
||
Tangible Assets |
726 |
632 |
792 |
1,069 |
||
Other |
0 |
704 |
704 |
704 |
||
Current Assets |
|
|
41,706 |
29,988 |
11,684 |
15,849 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
1,285 |
834 |
834 |
834 |
||
Cash and deposits |
37,411 |
26,386 |
8,082 |
12,247 |
||
Other |
3,010 |
2,768 |
2,768 |
2,768 |
||
Current Liabilities |
|
|
(5,949) |
(7,402) |
(7,402) |
(7,402) |
Creditors |
(5,949) |
(7,261) |
(7,261) |
(7,261) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Short term leases |
0 |
(141) |
(141) |
(141) |
||
Other |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
(864) |
(864) |
(30,864) |
Long term borrowings |
0 |
0 |
0 |
(30,000) |
||
Long term leases |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
36,669 |
24,108 |
5,965 |
(19,593) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(14,887) |
(11,947) |
(18,808) |
(25,733) |
Net Interest |
383 |
342 |
792 |
242 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(235) |
(239) |
(287) |
(344) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
0 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(14,739) |
(11,844) |
(18,304) |
(25,835) |
||
Opening net debt/(cash) |
|
|
(53,061) |
(37,411) |
(26,380) |
(8,076) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(911) |
813 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(37,411) |
(26,380) |
(8,076) |
17,759 |
Source: ReNeuron accounts, Edison Investment Research
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|
Research: Industrials
FY19 proved to be a more challenging year than management expected originally. Encouragingly, order intake reached record levels and FY20 has started strongly. The project delays and resourcing issues now appear to have been addressed. Management expects strong revenue growth and a reduced EBITDA loss in FY20, with a positive result and free cash inflow in FY21. The new executive team are clearly focused on a robust delivery of the innovative solutions driving an increasingly high quality backlog.