Shield Therapeutics — Strategic year-end pivot sets tone for robust FY23

Shield Therapeutics (AIM: STX)

Last close As at 04/10/2024

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Research: Healthcare

Shield Therapeutics — Strategic year-end pivot sets tone for robust FY23

Shield Therapeutics’ FY22 trading update reported FY22 revenues of £8.5m, a material improvement on the £1.5m recorded in FY21 and broadly in line with our estimate of £8.8m. Sharp growth in prescription volumes (25,200 in FY22) continued to drive Accrufer sales in the US (£2.8m), although we note that the number of prescriptions in Q422 (9,324) was slightly lower than previous guidance of 9,700. However, this was offset by better-than-expected European royalty revenues of £1.3m (£0.9m in FY21), translating to a solid £0.5m in Q422 (from £0.14m in Q322). A key highlight of the year was the strategic co-commercialisation of Accrufer in the US with Viatris (previously Mylan), a leading global generic pharmaceutical manufacturer, in December 2022, allowing for broader market coverage and faster ramp-up. We expect benefits from the enlarged salesforce (c 100 from 22 at end FY22) to start showing from Q223. Based on our projections, Shield remains funded to profitability following receipt of a $5m upfront payment from Viatris, and subsequent $10m in incremental funding from AOP Health, and $21.7m from an equity raise.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Laboratory

Healthcare

Shield Therapeutics

Strategic year-end pivot sets tone for robust FY23

FY22 trading update

Pharma and biotech

10 February 2023

Price

6.97p

Market cap

£41m

£0.83/US$; £0.93/€

Pro forma net cash (£m) at 10 February 2023

17.3

Shares in issue

585.7m

Free float

55%

Code

STX

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

Shield Therapeutics is a commercial-stage pharmaceutical company. Its proprietary product, Feraccru/Accrufer, is approved by the EMA and FDA for iron deficiency. Outside the United States, Feraccru is marketed internationally through Shield and its commercial partners.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Shield Therapeutics is a research client of Edison Investment Research Limited

Shield Therapeutics’ FY22 trading update reported FY22 revenues of £8.5m, a material improvement on the £1.5m recorded in FY21 and broadly in line with our estimate of £8.8m. Sharp growth in prescription volumes (25,200 in FY22) continued to drive Accrufer sales in the US (£2.8m), although we note that the number of prescriptions in Q422 (9,324) was slightly lower than previous guidance of 9,700. However, this was offset by better-than-expected European royalty revenues of £1.3m (£0.9m in FY21), translating to a solid £0.5m in Q422 (from £0.14m in Q322). A key highlight of the year was the strategic co-commercialisation of Accrufer in the US with Viatris (previously Mylan), a leading global generic pharmaceutical manufacturer, in December 2022, allowing for broader market coverage and faster ramp-up. We expect benefits from the enlarged salesforce (c 100 from 22 at end FY22) to start showing from Q223. Based on our projections, Shield remains funded to profitability following receipt of a $5m upfront payment from Viatris, and subsequent $10m in incremental funding from AOP Health, and $21.7m from an equity raise.

Year end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20

10.4

0.8

0.1

0.0

N/A

N/A

12/21

1.5

(17.5)

(8.4)

0.0

N/A

N/A

12/22e

8.5**

(15.7)

(6.5)

0.0

N/A

N/A

12/23e

24.4

(21.3)

(4.2)

0.0

N/A

N/A

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

FY22 was marked by strong period-on-period growth in prescription volumes for Accrufer in the US (9,324 in Q422, accounting for 37% of FY22 prescription volumes and 26% q-o-q growth) and capped by the co-commercialisation deal with Viatris announced in December 2022. US revenues included £2.8m from product sales, bolstered by the £4.2m ($5m) upfront payment from Viatris. With salesforce recruitment going to plan (16 of the target 50 already hired and trained, with a further 17 expected to hit the field by late March), we expect these increased outreach efforts to be reflected in prescription volumes and revenue inflows from Q223. We also expect Shield to benefit from Viatris’s established relationships with insurers to expand payor coverage (beyond the current 40% of the eligible patient population) and negotiate better net-to-gross discounts, translating to a potentially faster sales ramp-up.

Excluding the US, the FY22 sales figures stood at £1.5m, including the £0.2m upfront payment from KYE Pharmaceuticals for commercialisation in Canada (potential regulatory approval in H223) and £1.3m in royalty payments from European distribution partner Norgine (Germany 72% and UK 18%). However, China, a key potential market, continued to be affected by COVID-19-related restrictions and we currently expect commercialisation timelines will likely be pushed back to 2025.

With total external funding of $31.7m (c £26m excluding the £4.2m payment from Viatris) in place, we estimate that Shield is well capitalised to profitability, which we project in Q125 (vs management’s estimate of Q424), provided that planned prescription and sales targets are achieved within the expected timelines.

General disclaimer and copyright

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

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

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London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

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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 Shield Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Shield Therapeutics. 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 2023 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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