Quantum Genomics — Steady sailing as FRESH readout approaches

Quantum Genomics (PAR: ALQGC)

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Research: Healthcare

Quantum Genomics — Steady sailing as FRESH readout approaches

Quantum Genomics’ H122 results showed the company is on steady footing as it approaches a key inflection point. Top-line data from the Phase III FRESH study, investigating the use of firibastat in treatment-resistant hypertension (TRH), is expected to be presented at the American Heart Association (AHA) annual meeting on 7 November and, if positive, we expect data could form the basis of a global licensing deal. In H122, the company reported total revenues of €4.1m (including a €1.2m R&D tax credit), in line with our expectations. Lower total operating costs of €12.5m have led us to trim our FY22 loss before tax to €17.1m from €20.2m. With a net cash position at end-June 2022 of €16.5m, we see the company as funded to Q223, past key results from the FRESH trial and with time to negotiate a licensing deal. We value Quantum Genomics at €728.8m or €21.1 per share (previously €701.3m or €20.3 per share).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Quantum Genomics

Steady sailing as FRESH readout approaches

H122 update

Pharma and biotech

5 October 2022

Price

€2.95

Market cap

€102m

€1.00/US$

Net cash (€m) at 30 June 2022

16.5

Shares in issue

34.6m

Free float

90%

Code

ALQGC

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

54.

%

1m

3m

12m

Abs

11.6

52.7

(39.5)

Rel (local)

14.5

51.3

(33.9)

52-week high/low

€4.89

€1.56

Business description

Quantum Genomics is focused on the research and development of novel cardiovascular medicines. Lead asset firibastat is in two Phase III trials for the treatment of TRH and is also being investigated to treat post-MI HF. Readouts from the TRH programme, expected in Q422 and mid-2023, represent the most significant near-term catalysts.

Next events

Top-line FRESH
Phase III data

Top-line REFRESH Phase III data

7 November 2022

Mid-2023

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Harry Shrives

+44 (0)20 3077 5700

Quantum Genomics is a research client of Edison Investment Research Limited

Quantum Genomics’ H122 results showed the company is on steady footing as it approaches a key inflection point. Top-line data from the Phase III FRESH study, investigating the use of firibastat in treatment-resistant hypertension (TRH), is expected to be presented at the American Heart Association (AHA) annual meeting on 7 November and, if positive, we expect data could form the basis of a global licensing deal. In H122, the company reported total revenues of €4.1m (including a €1.2m R&D tax credit), in line with our expectations. Lower total operating costs of €12.5m have led us to trim our FY22 loss before tax to €17.1m from €20.2m. With a net cash position at end-June 2022 of €16.5m, we see the company as funded to Q223, past key results from the FRESH trial and with time to negotiate a licensing deal. We value Quantum Genomics at €728.8m or €21.1 per share (previously €701.3m or €20.3 per share).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/20

3.98

(14.66)

(0.72)

0.0

N/A

N/A

12/21

6.16

(15.37)

(0.58)

0.0

N/A

N/A

12/22e

8.25

(17.13)

(0.53)

0.0

N/A

N/A

12/23e

54.91

33.84

0.97

0.0

3.0

N/A

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

Major catalyst: FRESH top-line data

As a reminder, firibastat is in two Phase III trials for TRH (FRESH and REFRESH). Final data from the FRESH trial, expected to be presented at the AHA annual meeting on 7 November, will demonstrate whether firibastat can reduce blood pressure in TRH patients after 12 weeks of treatment. We expect a greater than 5mmHg reduction in blood pressure and a clean safety profile as a meaningful result in FRESH. Long-term data from the REFRESH trial (expected mid-2023) will be important in solidifying firibastat’s potential clinical utility.

Funded past FRESH readout

Given the clear unmet medical need in TRH, the data from FRESH, in our view, could provide the basis of a global licensing deal for firibastat. With net cash of €16.5m at end-H122, we see the company as funded well past the FRESH data readout, giving management considerable time in which to negotiate a licensing deal for firibastat. Considering H122 results, we have reduced our forecast loss before tax to €17.1m from €20.2m, largely due to a reduction in personnel expenses.

Valuation: €728.8m or €21.1 per share

We value Quantum Genomics at €728.8m or €21.1 per share (previously €701.3m or €20.3 per share). We have rolled our model forward and updated it for FX changes. We note the potential for considerable value uplift should FRESH data prove positive and will revisit our assumptions when these are reported. Our valuation reflects a net cash position of €16.5m at end-June 2022.

Exhibit 1: Financial summary

Accounts: IFRS, Yr end: December 31, €:000s

 

 

2019

2020

2021

2022e

2023e

PROFIT & LOSS

 

 

 

 

 

 

 

Total revenues

 

 

1,547

3,977

6,157

8,250

54,912

Cost of sales

 

 

0

0

0

0

0

Gross profit

 

 

1,547

3,977

6,157

8,250

54,912

Total operating expenses

 

 

(11,420)

(18,661)

(23,251)

(26,933)

(22,613)

Research and development expenses

 

 

(4,861)

(10,003)

(13,548)

(21,000)

(17,000)

SG&A

 

 

0

0

0

0

0

EBITDA (normalized)

 

 

(8,861)

(13,067)

(14,883)

(16,820)

34,125

Operating income (reported)

 

 

(9,873)

(14,684)

(17,094)

(18,683)

32,300

Finance income/(expense)

 

 

(13)

(1,457)

(95)

(19)

(33)

Exceptionals and adjustments

 

 

859

1,480

1,821

1,568

1,568

Profit before tax (reported)

 

 

(9,886)

(16,141)

(17,189)

(18,702)

32,267

Profit before tax (normalised)

 

 

(9,027)

(14,661)

(15,368)

(17,134)

33,835

Income tax expense (includes exceptionals)

 

 

0

(83)

(170)

(170)

(170)

Net income (reported)

 

 

(9,886)

(16,224)

(17,359)

(18,872)

32,097

Net income (normalised)

 

 

(9,027)

(14,744)

(15,538)

(17,304)

33,665

Basic average number of shares, m

 

 

16.8

20.4

27.0

32.7

34.6

Basic EPS (€)

 

 

(0.59)

(0.79)

(0.64)

(0.58)

0.93

Adjusted EPS (€)

 

 

(0.54)

(0.72)

(0.58)

(0.53)

0.97

Dividend per share (€)

 

 

0.00

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

Tangible assets

 

 

27.0

27.0

30.0

32.0

35.4

Intangible assets

 

 

360.0

760.0

537.0

411.0

411.0

Right-of-use assets

 

 

275.0

154.0

412.0

324.9

250.2

Other non-current assets

 

 

38.0

32.0

32.0

32.3

32.3

Total non-current assets

 

 

700

973

1,011

800

729

Cash and equivalents

 

 

11,164

27,153

13,552

8,501

42,309

Contract assets

 

 

0

0

684

1,135

1,135

Trade and other receivables

 

 

0

740

12

3,344

3,344

Current non-financial assets

 

 

2,711

3,650

5,727

5,044

5,044

Other current assets

 

 

204

285

257

0

0

Total current assets

 

 

14,079

31,828

20,232

18,024

51,832

Non-current loans and borrowings

 

 

490

470

2,882

2,582

2,282

Long-term rental debt

 

 

159

29

290

290

290

Provisions for pensions and similar

 

 

367

376

441

441

441

Other non-current liabilities

 

 

33.00

0.00

96.00

0.00

0.00

Total non-current liabilities

 

 

1,049

875

3,709

3,313

3,013

Accounts payable

 

 

3,353

5,921

6,746

5,894

5,894

Current loans and borrowing

 

 

204

252

163

0

0

Short-term rental debt

 

 

133

133

125

0

0

Contract liabilities

 

 

0

200

125

0

0

Other current liabilities

 

 

634

766

708

516

516

Total current liabilities

 

 

4,324

7,272

7,867

6,410

6,410

Equity attributable to company

 

 

9,406

24,654

9,667

9,101

43,138

 

 

 

 

 

 

 

 

CASH FLOW STATEMENT

 

 

 

 

 

 

 

Operating income

 

 

(9,873)

(14,684)

(17,094)

(18,683)

32,300

Depreciation and amortisation

 

 

153

137

390

295

257

Share based payments

 

 

859

1,480

1,568

1,568

1,568

Other adjustments

 

 

44

(19)

(314)

0

0

Movements in working capital

 

 

(1,611)

1,093

(1,567)

(4,635)

0

Cash from operations (CFO)

 

 

(10,428)

(11,993)

(17,017)

(21,455)

34,125

Capex

 

 

(45)

(411)

(15)

(16)

(17)

Acquisitions & disposals net

 

 

0

0

(30)

0

0

Other investing activities

 

 

0

6

0

0

0

Cash used in investing activities (CFIA)

 

 

(45)

(405)

(45)

(16)

(17)

Capital changes

 

 

7,381

28,501

846

16,720

0

Debt Changes

 

 

(462)

(108)

2,620

(300)

(300)

Interest paid

 

 

(7)

(6)

(5)

0

0

Other financing activities

 

 

0

0

0

0

0

Cash from financing activities (CFF)

 

 

6,912

28,387

3,461

16,420

(300)

Cash and equivalents at beginning of period

 

 

14,725

11,164

27,153

13,552

8,501

Increase/(decrease) in cash and equivalents

 

 

(3,561)

15,989

(13,601)

(5,051)

33,808

Effect of FX on cash and equivalents

 

 

0

0

0

0

0

Cash and equivalents at end of period

 

 

11,164

27,153

13,552

8,501

42,309

Net (debt)/cash

 

 

10,178

26,269

10,092

5,629

39,737

Source: Quantum Genomic company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Quantum Genomics and prepared and issued by Edison, in consideration of a fee payable by Quantum Genomics. 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.

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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 Quantum Genomics and prepared and issued by Edison, in consideration of a fee payable by Quantum Genomics. 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

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