Q3 results reflected the combined impact on gross margin of the core trading operation due to a return to a backwardation situation in product markets, as well as supply disruptions. More positively, SPIA and the other associates made a stronger contribution. With adverse trading conditions expected to persist for a period of time, management’s strategy to reduce volatility is being tested. The key growth drivers of increasing air traffic and an expanding geographic footprint continue to increase trading volumes and augur well for the future. Maintenance of profitability at a lower margin level while backwardation conditions persist should be offset by stronger growth from SPIA next year, but we now assume a more subdued expansion of the core business. The balance sheet remains supportive of further strategic M&A to facilitate growth. Our fair value falls to S$1.88 from S$2.11.
Written by
Mologen |
Licensing and funding milestones in Q3 |
Q3 results |
Pharma & biotech |
10 November 2017 |
Share price performance
Business description
Next events
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Mologen has announced two new sources of funding that will likely extend its cash reach into mid-2018. The signing of a share subscription facility with Global Corporate Finance (GCF) commits GCF to purchase up to 3.4m Mologen shares (c 10% of share capital). At the current share price, this approximates to €10m in funds which, in addition to the expected completion of the iPharma deal (worth up to €100m) by year end (€3m initial payment), will boost Mologen’s cash position. Furthermore, Mologen has a commitment to receive a $2.6m grant for further development of a leishmaniasis vaccine candidate, part of the MIDGE technology platform it is looking to divest. We value Mologen at €256m (€7.43/share).
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
0.0 |
(20.5) |
(0.99) |
0.0 |
N/A |
N/A |
12/16 |
0.0 |
(20.8) |
(0.84) |
0.0 |
N/A |
N/A |
12/17e |
3.0 |
(18.4) |
(0.54) |
0.0 |
N/A |
N/A |
12/18e |
0.0 |
(15.9) |
(0.46) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Funding and licensing deals expand cash horizon
The signing of a share subscription facility with GCF and the soon-to-be-signed deal with iPharma will provide Mologen with ongoing capital. The GCF agreement commits GCF to purchase up to 3.4m Mologen shares (c 10% of share capital), Mologen has full control over the drawdown of the funds and they can occur in €1m tranches over a 30-month period. Signed deal terms with iPharma look to aid the development and commercialisation of lefitolimod, particularly in China. Mologen would be eligible to receive a €3m initial payment, milestone payments of up to €100m, as well as low double-digit royalties and a €2m equity investment.
Mature data packages expected in H118
Full data packages from the Phase II SCLC IMPULSE trial and the Phase Ib/IIa HIV TEACH trial are expected to be presented at relevant conferences in mid-2018. Top-line data from TEACH and IMPULSE were presented earlier in 2017 and a detailed breakdown can be found in our previously published outlook report. We expect data from the ongoing pivotal Phase III IMPALA trial in mCRC in 2019.
Q3 results: Cash into mid-2018
R&D for the first nine months of 2017 remained similar to 2016 at €10.6m (9M16: €10.5m). As a result the EBIT loss increased slightly to €14.5m (9M16: €14.3m). We now include the initial €3m payment from iPharma in our FY17 forecasts which are largely unchanged. New funding should enable a cash reach until mid-2018, however, a funding gap to the IMPALA readout remains.
Valuation: €256m (€7.43/share)
We value Mologen at €256m (€7.43/share) vs €253m previously. We have rolled forward our model which is based on a risk-adjusted rNPV of lefitolimod across a range of indications and regions. For a full break down of our valuation, see our previously published outlook note (Lefitolimod trial readouts hint at future potential).
Exhibit 1: Financial summary
€'000s |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
12 |
39 |
74 |
3,036 |
40 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
12 |
39 |
74 |
3,036 |
40 |
||
Research and development (cost of materials) |
(8,687) |
(11,681) |
(11,780) |
(12,369) |
(7,421) |
||
Selling, general & administrative (personnel expenses) |
(5,113) |
(5,074) |
(5,453) |
(5,180) |
(4,662) |
||
Other operating income / expense |
(3,199) |
(3,702) |
(3,418) |
(3,444) |
(3,444) |
||
EBITDA |
|
|
(16,987) |
(20,418) |
(20,577) |
(17,957) |
(15,488) |
Operating Profit (before GW and except.) |
|
(17,059) |
(20,499) |
(20,813) |
(17,960) |
(15,494) |
|
Intangible Amortisation |
(38) |
(40) |
(172) |
(19) |
(17) |
||
Exceptionals/Other |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(17,097) |
(20,539) |
(20,985) |
(17,978) |
(15,511) |
||
Net Interest |
19 |
3 |
(18) |
(424) |
(422) |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(17,040) |
(20,496) |
(20,831) |
(18,384) |
(15,916) |
Profit Before Tax (FRS 3) |
|
|
(17,078) |
(20,536) |
(21,003) |
(18,403) |
(15,933) |
Tax |
0 |
0 |
0 |
0 |
0 |
||
Deferred tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(17,040) |
(20,496) |
(20,831) |
(18,384) |
(15,916) |
||
Profit After Tax (FRS 3) |
(17,078) |
(20,536) |
(21,003) |
(18,403) |
(15,933) |
||
Average Number of Shares Outstanding (m) |
16.8 |
20.7 |
24.7 |
34.3 |
34.3 |
||
EPS - normalised (c) |
|
|
(1.01) |
(0.99) |
(0.84) |
(0.54) |
(0.46) |
EPS - FRS 3 (c) |
|
|
(1.02) |
(0.99) |
(0.85) |
(0.54) |
(0.47) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
440 |
414 |
62 |
97 |
121 |
Intangible Assets |
206 |
175 |
37 |
33 |
20 |
||
Tangible Assets |
234 |
239 |
25 |
64 |
101 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
14,613 |
25,981 |
21,300 |
8,015 |
22,265 |
Stocks |
30 |
28 |
13 |
13 |
13 |
||
Debtors |
0 |
0 |
33 |
33 |
33 |
||
Cash |
13,563 |
24,592 |
20,520 |
7,235 |
21,485 |
||
Other |
1,020 |
1,361 |
734 |
734 |
734 |
||
Current Liabilities |
|
|
(1,747) |
(6,886) |
(7,404) |
(7,404) |
(7,404) |
Creditors |
(1,315) |
(6,390) |
(6,530) |
(6,530) |
(6,530) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other |
(432) |
(496) |
(874) |
(874) |
(874) |
||
Long Term Liabilities |
|
|
(8) |
(6) |
(2,121) |
(7,072) |
(37,072) |
Long term borrowings |
0 |
0 |
(2,119) |
(7,070) |
(37,070) |
||
Other long term liabilities |
(8) |
(6) |
(2) |
(2) |
(2) |
||
Net Assets |
|
|
13,298 |
19,503 |
11,837 |
(6,364) |
(22,091) |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(15,602) |
(15,095) |
(19,270) |
(17,755) |
(15,280) |
Net Interest |
3 |
0 |
0 |
(424) |
(424) |
||
Tax |
(6) |
12 |
0 |
0 |
0 |
||
Capex |
(93) |
(95) |
(57) |
(56) |
(47) |
||
Acquisitions/disposals |
0 |
0 |
13 |
0 |
0 |
||
Financing |
14,495 |
26,207 |
12,706 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(1,203) |
11,029 |
(6,608) |
(18,236) |
(15,751) |
||
Opening net debt/(cash) |
|
|
(14,765) |
(13,563) |
(24,592) |
(18,401) |
(165) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
1 |
0 |
1 |
0 |
0 |
||
Other |
0 |
0 |
416 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(13,563) |
(24,592) |
(18,401) |
(165) |
15,585 |
Source: Mologen accounts, Edison Investment Research
|
|
Smith & Nephew’s Q317 results featured 9% revenue growth in emerging markets that continued the trend of previous quarters. A further efficiency review looks likely to focus on reducing complexity in manufacturing and warehousing, improving the G&A ratio and continued salesforce efficiency. A narrowing of the FY revenue and profit growth expectations towards the lower end of the previously guided range may have disappointed some, but this close to the year-end there should be confidence that the revised FY ranges will remain intact. Management does not comment on M&A speculation, but with the recently announced retirement of its CEO, S&N’s continued strength in the attractive emerging markets and rumoured activist interest look likely to stoke further media speculation.