Reported gp-ASIT+ Phase III allergy data unfortunately confirmed the outcome of the first Phase III: a statistically proven, inadequate clinical response, in this case a 0.15 reduction in the peak allergy score; 0.3 was the endpoint. Given the current cash position of €3.8m and the €9.23m debt from July now unlikely to convert, it is hard to see how ASIT can fund and progress its remaining preclinical allergy projects or run any revised gp-ASIT+ programme. Our forecasts and valuation are withdrawn till the strategy for the business and the overall financial position become clearer.
Written by
ASIT biotech |
Statistically significant clinical insignificance |
Phase III failure |
Pharma & biotech |
26 November 2019 |
Share price performance
Business description
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Analyst
ASIT biotech is a research client of Edison Investment Research Limited |
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Reported gp-ASIT+ Phase III allergy data unfortunately confirmed the outcome of the first Phase III: a statistically proven, inadequate clinical response, in this case a 0.15 reduction in the peak allergy score; 0.3 was the endpoint. Given the current cash position of €3.8m and the €9.23m debt from July now unlikely to convert, it is hard to see how ASIT can fund and progress its remaining preclinical allergy projects or run any revised gp-ASIT+ programme. Our forecasts and valuation are withdrawn till the strategy for the business and the overall financial position become clearer.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.0 |
(12.0) |
(0.94) |
0.0 |
N/A |
N/A |
12/18 |
0.0 |
(14.3) |
(0.86) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are both as reported.
Not the crescendo we expected
The second gp-ASIT+ Phase III study showed a clinical allergy score reduction of 0.15 against a 0.3 reduction set, by the German regulator, as the primary endpoint for clinical significance; the drop was statistically valid, P=0.05. The study also confirms the first Phase III result – deemed to have failed due to a poor pollen season. Why the product has shown such a disappointing efficacy remains unclear although analysis of the full data set may offer some insight. The product was safe but, a strong, durable immune tolerance response was clearly not generated. Perhaps a longer dose regimen might have succeeded – but how ASIT might fund the trials needed to test this is not clear. Longer treatment periods were not considered at Phase II which used fast readout surrogate endpoints and not the Phase III scoring system.
Limited cash and financial options
After a major Phase III failure, biotech company recovery depends on strong cash and a viable earlier-stage portfolio. In ASIT’s case, cash on 22 November was €3.8m and the other allergy products are preclinical. The H1 operating loss was €7.8m so ASIT will, on our estimates, have cash into Q120. We assume that the second convertible note tranche of €4.2m, previously expected in December 2019, will not be available. The first loan tranche of €5.03m is now unlikely to convert and is repayable by 31 December 2020 with a 3% interest rate. The Equity Line convertible notes of July 2018 can, on average, provide €600k a month to February 2020 but only if the share price is over €1.1368. At the time of writing, the shares were suspended. The last report of 30 June 2019 showed €5.8m remaining of the equity line but some of this has been drawn down over H219.
Valuation: suspended
A valuation of ASIT is not currently possible. Edison’s valuation and financial forecasts are withdrawn until there is a clear statement about the direction of ASIT from the board.
Exhibit 1: Financial summary
|
|
€'000s |
2017 |
2018 |
|
Year end 31 December |
|
|
IFRS |
IFRS |
|
INCOME STATEMENT |
|
|
|
|
|
Revenue |
|
|
|
0 |
0 |
Cost of Sales |
|
|
|
0 |
0 |
Gross Profit |
|
|
|
0 |
0 |
General and Administrative Expenses |
|
(1,676) |
(2,468) |
||
Research and Development Expenses |
|
(10,903) |
(10,856) |
||
Other Operating Income |
|
|
604 |
557 |
|
Reported operating profit |
|
|
(11,975) |
(12,767) |
|
Net Interest |
|
|
|
(9) |
(1,557) |
Profit before tax (as reported) |
|
|
(11,984) |
(14,324) |
|
Reported tax |
|
|
|
(2) |
3 |
Profit after tax (reported) |
|
|
(11,986) |
(14,321) |
|
Minority interests |
|
|
0 |
0 |
|
Net income (reported) |
|
|
(11,986) |
(14,321) |
|
Basic average number of shares outstanding (m) |
|
12.8 |
16.7 |
||
EPS - basic, as reported (€) |
|
(0.94) |
(0.86) |
||
BALANCE SHEET |
|
|
|
|
|
Non Current Assets |
|
|
1,837 |
2,398 |
|
Property Plant and equipment, net |
|
691 |
810 |
||
Other intangible assets |
|
|
0 |
0 |
|
Other Non Current Assets |
|
|
1,146 |
1,588 |
|
Current Assets |
|
|
2,448 |
9,156 |
|
Cash and cash equivalents |
|
|
2,126 |
8,458 |
|
Accounts receivable |
|
|
0 |
0 |
|
Inventories |
|
|
|
0 |
0 |
Other current assets |
|
|
322 |
698 |
|
Current Liabilities |
|
|
2,654 |
4,621 |
|
Accounts payable |
|
|
1,264 |
2,980 |
|
Short term debt and borrowings |
|
34 |
25 |
||
Other current liabilities |
|
|
1,356 |
1,616 |
|
Non Current Liabilities |
|
|
432 |
465 |
|
Loans and borrowings |
|
|
432 |
465 |
|
Other non-current liabilities |
|
|
0 |
0 |
|
Equity |
|
|
|
1,199 |
6,468 |
Common stock / Capital |
|
|
9,989 |
14,350 |
|
Additional paid-in capital / Share premium |
|
21,957 |
37,034 |
||
Other reserves and surplus |
|
|
(28,645) |
(42,889) |
|
Other Equity |
|
|
|
(2,102) |
(2,027) |
CASH FLOW |
|
|
|
|
|
Cash Flow from Operations |
|
|
|
|
|
Net income (loss) |
|
|
(11,986) |
(14,321) |
|
Depreciation and Amortization |
|
|
205 |
253 |
|
Interest income/expense |
|
|
9 |
1,557 |
|
Stock-based compensation |
|
|
54 |
73 |
|
Non Cash Adjustments |
|
|
(492) |
(564) |
|
(Increase) decrease in inventories |
|
0 |
0 |
||
(Increase) decrease in trade receivables |
|
74 |
(376) |
||
(Increase) decrease in other current assets |
|
(112) |
360 |
||
Increase (decrease) in trade payables |
|
(586) |
0 |
||
Net cash used in Operating activities |
|
(12,834) |
(13,018) |
||
Cash Flow from Investing |
|
|
|
|
|
Purchases of fixed assets |
|
|
(161) |
(371) |
|
Other Investing Activities |
|
|
0 |
0 |
|
Net cash used in Investing activities |
|
(161) |
(371) |
||
Cash Flow from Financing |
|
|
|
|
|
Change in Debt |
|
|
0 |
0 |
|
Change in Capital Stock |
|
|
0 |
19,591 |
|
Interest paid |
|
|
|
(10) |
(2) |
Other Financing Activities |
|
|
1,743 |
134 |
|
Net cash used in Financing activities |
|
1,733 |
19,723 |
||
Net Changes in Cash and Cash Equivalent |
|
(11,262) |
6,334 |
||
Net cash/(debt) at the beginning of the period |
|
12,956 |
1,660 |
||
Net cash/(debt) at the end of the period |
|
1,660 |
7,968 |
||
Source: ASIT biotech accounts
|
|
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