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Research: Healthcare
ReNeuron introduced its exosome nanomedicine programme at its recent capital markets day. While being a preclinical programme, it has three significant advantages. First, it gives ReNeuron the potential to expand into new therapeutic indications. Second, it opens up the potential for collaborations in diagnostics and drug delivery. Third, it builds on its wealth of experience and IP and on its CTX cell line on which ReNeuron’s existing products and the exosome platform are built.
Written by
ReNeuron Group |
The rise of the exosome |
Capital markets day |
Pharma & biotech |
22 May 2018 |
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ReNeuron introduced its exosome nanomedicine programme at its recent capital markets day. While being a preclinical programme, it has three significant advantages. First, it gives ReNeuron the potential to expand into new therapeutic indications. Second, it opens up the potential for collaborations in diagnostics and drug delivery. Third, it builds on its wealth of experience and IP and on its CTX cell line on which ReNeuron’s existing products and the exosome platform are built.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/16 |
0.0 |
(12.8) |
(0.44) |
0.0 |
N/A |
N/A |
03/17 |
0.0 |
(18.2) |
(0.49) |
0.0 |
N/A |
N/A |
03/18e |
0.0 |
(21.4) |
(63.45)** |
0.0 |
N/A |
N/A |
03/19e |
0.0 |
(24.7) |
(73.38)** |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, **post share consolidation, exceptional items and share-based payments.
A new (existing) platform emerges
ReNeuron’s capital markets day showcased its exosome nanomedicine platform. ReNeuron’s scientists, clinicians and its collaborators described the origin and functions of these naturally occurring sub-cellular vesicles. ReNeuron has been working on exosomes for many years since discovering them as a by-product of its genetically modified human neural stem cell line (CTX). The expert panel also described the potential use and applications of exosomes.
From oncology therapeutics to drug delivery
Through the development of ReNeuron’s CTX cell line products for chronic stroke and retinitis pigmentosa (which continue to advance in clinical studies), applications for the exosome nanomedicine platform have become apparent. Native exosomes migrate to the liver if injected intravenously in healthy animals and to the lymph nodes if injected intraperitoneally. Exosomes also migrate to tumours, opening up the possibility of a targeted cancer therapy because exosomes can be loaded with chemotherapeutic agents, and also oncology diagnostics. New drugs such as mRNAs need a delivery mechanism to protect them from degradation. The loading of exosomes with drugs can both stabilise a labile drug and target its delivery. Thus, the exosome platform could at the very least provide ReNeuron with a source of licensing revenue and at most, a new therapeutic oncology product.
Valuation: Minor changes ahead of FY results
In recent publications of Edison Healthcare Insight, we increased our estimated FY19 R&D expenses to account for the conduct of two Phase II studies. Since then, we have made one change to our model incorporating our estimate of the FY18 cash. Our risk-adjusted NPV valuation of ReNeuron is £276m, or 8.74p per share (previously £290m). Reneuron’s market capitalisation is c £22m – below cash and ascribing no technology value for a company in two Phase II studies or the recently disclosed exosome platform. This may make our assumption of an injection of funding prior to the end FY19 of increasing significance.
Exhibit 1: Financial summary
£'000s |
2016 |
2017 |
2018e |
2019e |
2020e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
29 |
46 |
46 |
46 |
46 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
29 |
46 |
46 |
46 |
46 |
||
R&D expenses |
(10,272) |
(16,648) |
(18,313) |
(20,986) |
(23,084) |
||
SG&A expenses |
(4,015) |
(4,139) |
(4,346) |
(4,781) |
(5,259) |
||
EBITDA |
|
|
(13,632) |
(19,814) |
(21,614) |
(24,218) |
(26,286) |
Operating Profit (before amort. and except.) |
|
(13,724) |
(19,887) |
(21,759) |
(24,866) |
(27,443) |
|
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(13,724) |
(19,887) |
(21,759) |
(24,866) |
(27,443) |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Net Interest |
878 |
1,722 |
398 |
161 |
87 |
||
Profit Before Tax (norm) |
|
|
(12,846) |
(18,165) |
(21,361) |
(24,705) |
(27,356) |
Profit Before Tax (FRS 3) |
|
|
(12,846) |
(18,165) |
(21,361) |
(24,705) |
(27,356) |
Tax |
1,492 |
2,592 |
1,282 |
1,482 |
3,283 |
||
Profit After Tax (norm) |
(11,354) |
(15,573) |
(20,079) |
(23,223) |
(24,073) |
||
Profit After Tax (FRS 3) |
(11,354) |
(15,573) |
(20,079) |
(23,223) |
(24,073) |
||
Average Number of Shares Outstanding (m) |
2,609.3 |
3,164.6 |
31.6 |
31.6 |
31.6 |
||
EPS - normalised (p) |
|
|
(0.44) |
(0.49) |
(63.45) |
(73.38) |
(76.07) |
EPS - FRS 3 (p) |
|
|
(0.44) |
(0.49) |
(63.45) |
(73.38) |
(76.07) |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
6,963 |
724 |
3,239 |
5,783 |
8,457 |
Intangible Assets |
1,591 |
0 |
0 |
0 |
0 |
||
Tangible Assets |
361 |
724 |
3,239 |
5,783 |
8,457 |
||
Other |
5,011 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
64,894 |
58,136 |
34,635 |
19,944 |
(5,626) |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
1,421 |
1,060 |
1,060 |
1,060 |
1,060 |
||
Cash |
60,709 |
53,061 |
32,293 |
17,402 |
(9,969) |
||
Other |
2,764 |
4,015 |
1,282 |
1,482 |
3,283 |
||
Current Liabilities |
|
|
(4,199) |
(5,702) |
(3,702) |
(13,702) |
(13,702) |
Creditors |
(3,700) |
(5,701) |
(3,701) |
(3,701) |
(3,701) |
||
Short term borrowings |
0 |
0 |
0 |
(10,000) |
(10,000) |
||
Short term leases |
(1) |
(1) |
(1) |
(1) |
(1) |
||
Other |
(498) |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
(1) |
(1) |
(1) |
(1) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long term leases |
0 |
(1) |
(1) |
(1) |
(1) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
67,658 |
53,157 |
34,171 |
12,025 |
(10,872) |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(11,920) |
(13,976) |
(22,521) |
(23,103) |
(25,149) |
Net Interest |
0 |
0 |
0 |
0 |
0 |
||
Tax |
0 |
1,340 |
4,015 |
1,282 |
1,482 |
||
Capex |
(293) |
(532) |
(2,660) |
(3,192) |
(3,830) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Financing |
65,195 |
0 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
345 |
520 |
398 |
122 |
87 |
||
Net Cash Flow |
53,327 |
(12,648) |
(20,768) |
(24,891) |
(27,410) |
||
Opening net debt/(cash) |
|
|
(12,380) |
(65,708) |
(53,059) |
(32,291) |
(7,400) |
HP finance leases initiated |
1 |
(1) |
0 |
0 |
0 |
||
Other |
(0) |
(0) |
(0) |
(0) |
0 |
||
Closing net debt/(cash) |
|
|
(65,708) |
(53,059) |
(32,291) |
(7,400) |
20,009 |
Source: ReNeuron accounts, Edison Investment Research
|
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Be Heard is building a group of digital marketing specialists, with five partner companies increasingly working together in a process that should become smoother once they are co-located. Last year’s trading issues have been resolved and new business momentum is good, with some pitches now carried out under the group banner. The management team has been reconfigured and responsibilities clarified, with unified procedures and financial reporting being put in place. Consensus sees strong revenue growth in FY18e, with operating margins starting to build, which should then be reflected in an improving rating.