New CEO Dr Ray Barlow, who joined e-Therapeutics (ETX) in April, has undertaken a business and strategic review, assisted by an independent industry-wide expert panel. The portfolio has been rationalised from six to two preclinical immuno-oncology programmes; two programmes are available for out-licensing, while data will be published on two others to showcase and validate the proprietary network pharmacology discovery platform. This will secure ETX’s cash runway comfortably to the end of 2019, free capacity to add new programmes in H217 and enable further investment in the platform. The management team is now focused on external collaborations and partnerships to provide validation and generate revenue. ETX’s attendance at industry conferences, including one in Boston this week, will help to raise its profile.
e-Therapeutics |
Strategic review complete: focus on deal-making |
Strategy update |
Pharma & biotech |
27 July 2017 |
Share price performance
Business description
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Analysts
e-Therapeutics is a research client of Edison Investment Research Limited |
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New CEO Dr Ray Barlow, who joined e-Therapeutics (ETX) in April, has undertaken a business and strategic review, assisted by an independent industry-wide expert panel. The portfolio has been rationalised from six to two preclinical immuno-oncology programmes; two programmes are available for out-licensing, while data will be published on two others to showcase and validate the proprietary network pharmacology discovery platform. This will secure ETX’s cash runway comfortably to the end of 2019, free capacity to add new programmes in H217 and enable further investment in the platform. The management team is now focused on external collaborations and partnerships to provide validation and generate revenue. ETX's attendance at industry conferences, including one in Boston this week, will help to raise its profile.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
01/16 |
0.0 |
(11.1) |
(3.3) |
0.0 |
N/A |
N/A |
01/17 |
0.0 |
(13.4) |
(3.9) |
0.0 |
N/A |
N/A |
01/18e |
0.0 |
(8.9) |
(2.6) |
0.0 |
N/A |
N/A |
01/19e |
0.0 |
(9.0) |
(2.7) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Expert panel confirms utility of ETX’s approach
Dr Barlow’s significant business development experience is driving the ongoing transformation at ETX. His ‘root and branch’ review of the company included the views of an independent panel of industry experts with scientific/commercial backgrounds at AstraZeneca, Pfizer, Merck &Co and biotechs. It confirmed the productivity of the network-driven discovery (NDD) approach and its potential advantages in terms of time (nine months or less from concept to hits vs >24 months by standard methods), cost, and number/quality of output molecules.
Priorities: Platform and two immuno-oncology assets
The internal portfolio has been rationalised to two immuno-oncology programmes: checkpoint signalling modulation and tryptophan breakdown, both currently at the medicinal chemistry stage. ETX will fund these in-house into pre-clinical. Other programmes, including hedgehog signalling (large data package) and anti-influenza (innovative) will be actively marketed for out-licensing. Data from other projects will be published to validate the NDD approach. This will free up funding to invest in the AI/computational/data platform and develop new network models in complex diseases such as neurodegeneration, fibrosis and triple negative breast cancer. However, additional programmes will require external funding or partnerships.
Focus on partnering deals from 2018 onwards
No change to our numbers: cash of £14m (as of end-January 2017), tax credits (£2.8m received June 2017) and prudent cost control give ETX a secure cash runway to the end of 2019. However, deals remain key to unlocking value and the new team is focused on arranging meetings with potential collaborators. Attendance at industry conferences and data publication will raise the profile of the new management and the innovative discovery platform.
Financial summary
Exhibit 1: Financial summary
£000s |
2016 |
2017 |
2018e |
2019e |
||
Year ending 31 January |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
R&D |
(9,965) |
(10,911) |
(7,500) |
(7,500) |
||
G&A |
(1,375) |
(2,614) |
(1,475) |
(1,531) |
||
EBITDA |
|
|
(11,267) |
(13,469) |
(8,895) |
(8,951) |
Operating profit (before amort. and except.) |
|
(11,340) |
(13,525) |
(8,975) |
(9,031) |
|
Intangible amortisation |
0 |
(2,805) |
0 |
0 |
||
Exceptionals/special Items |
0 |
0 |
0 |
0 |
||
Share-based payment |
(215) |
(99) |
(250) |
(250) |
||
Operating profit |
(11,555) |
(16,429) |
(9,225) |
(9,281) |
||
Net interest |
271 |
132 |
110 |
40 |
||
Profit before tax (norm) |
|
|
(11,069) |
(13,393) |
(8,865) |
(8,991) |
Profit before tax (as reported) |
|
|
(11,284) |
(16,297) |
(9,115) |
(9,241) |
Tax |
2,464 |
3,073 |
1,800 |
1,800 |
||
Profit after tax (norm.) |
(8,605) |
(10,320) |
(7,065) |
(7,191) |
||
Profit after tax (as reported) |
(8,820) |
(13,224) |
(7,315) |
(7,441) |
||
Average number of shares outstanding (m) |
264.4 |
267.1 |
268.4 |
268.4 |
||
EPS - normalised (p) |
|
|
(3.3) |
(3.9) |
(2.6) |
(2.7) |
EPS - as reported (p) |
|
|
(3.3) |
(5.0) |
(2.7) |
(2.8) |
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 |
|
|
804 |
207 |
312 |
417 |
Intangible assets |
740 |
156 |
251 |
346 |
||
Tangible assets |
64 |
51 |
61 |
71 |
||
Current assets |
|
|
28,783 |
17,724 |
11,838 |
4,577 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
3,941 |
3,749 |
2,549 |
2,549 |
||
Cash |
24,842 |
13,975 |
9,289 |
2,028 |
||
Other |
0 |
0 |
0 |
0 |
||
Current liabilities |
|
|
(1,156) |
(1,951) |
(1,951) |
(1,951) |
Creditors |
(1,156) |
(1,951) |
(1,951) |
(1,951) |
||
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 |
|
|
28,431 |
15,980 |
10,199 |
3,043 |
CASH FLOW |
||||||
Operating cash flow |
|
|
(11,204) |
(11,711) |
(7,695) |
(8,951) |
Net interest |
329 |
194 |
121 |
75 |
||
Tax |
2,027 |
2,570 |
3,073 |
1,800 |
||
Capex |
(6) |
(22) |
(50) |
(50) |
||
Purchase of intangibles |
(138) |
(143) |
(135) |
(135) |
||
Acquisitions/disposals |
0 |
(1,768) |
0 |
0 |
||
Financing |
12 |
13 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Net cash flow |
(8,980) |
(10,867) |
(4,686) |
(7,261) |
||
Opening net debt/(cash) |
|
|
(33,822) |
(24,842) |
(13,975) |
(9,289) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(24,842) |
(13,975) |
(9,289) |
(2,028) |
Source: Edison Investment Research, e-Therapeutics accounts
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Victoria’s management continues to drive revenue and margin growth through a combination of acquisition, closer integration of operations and organic growth. Having completed four acquisitions during FY17, the group now intends to strengthen its presence in mainland Europe and is embarking on a major restructuring of the UK manufacturing and logistics operations. The shares trade on prospective multiples that reflect the anticipated rate of earnings growth.