Touchstone Innovations
Written by
Touchstone Innovations |
New year, new name |
Rebrand and update |
Pharma & biotech |
6 January 2017 |
Share price performance
Business description
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Touchstone Innovations is a research client of Edison Investment Research Limited |
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Touchstone Innovations (IVO), the new name for Imperial Innovations, aligns the brand behind its evolving and diversified portfolio. Strong newsflow in the final months of 2016 capped a year of momentum for Innovations. Notably in December PsiOxus Therapeutics secured a $936m deal with Bristol-Myers Squibb (BMS) for its next-generation ‘armed’ oncolytic virus (NG-348). This was the largest deal for an Innovations portfolio company, leap-frogging the $790m collaboration between Crescendo Biologics and Takeda signed in October. Numerous other portfolio companies including Abzena, Puridify and Yoyo Wallet expanded or formed new partnerships.
Year |
Net portfolio value* (£m) |
Cash** |
Net fair value |
Net asset |
NAV/share |
DPS |
07/15 |
327.2 |
128.1 |
21.3 |
420.1 |
306 |
0.0 |
07/16 |
335.1 |
148.3 |
(56.2) |
455.9 |
283 |
0.0 |
07/17e |
436.2 |
94.4 |
30.0 |
476.5 |
296 |
0.0 |
07/18e |
537.4 |
36.0 |
30.0 |
495.3 |
307 |
0.0 |
Note: *Net value, excludes provisions. **Cash, cash equivalents and short-term investments.
New name, same Innovations
The rebranding marks the continued evolution of the company as it looks to build on milestones achieved in 2016, including the £100m equity raise and the launch of Apollo Therapeutics. While Innovations highlights the continued vitality of its relationship with Imperial College London, we expect the new branding to reinforce the portfolio diversification seen in the past 24 months, both in relation to source and sector. We expect Innovations’ strategy to remain the same as it looks to continue to acquire IP, form companies and scale them up to generate value.
PsiOxus: $50m upfront highlights potential
Portfolio company PsiOxus’s agreement with BMS for exclusive worldwide rights to the ‘armed’ oncolytic virus NG-348 (‘armed’ with specific immune-therapeutic transgenes) includes a $50m upfront payment with up to $886m in development, regulatory and sales-based milestones, and in addition, royalties on net sales. NG-348 is currently in preclinical development, which will be completed by PsiOxus (with funding from BMS) before the handover of clinical development to BMS.
Partnerships define year end
Expansion of Cell Medica’s partnership with Baylor College of Medicine, extension of Puridify and GSK’s collaboration, along with Abzena’s licensing deal with Trieza Therapeutics and Yoyo Wallet’s Caffè Nero partnership all demonstrate the value other companies see in Innovations’ portfolio companies. Outside of partnerships TopiVert has received FDA IND approval for TOP1630 in dry eye syndrome.
Valuation: Modest NAV premium
Innovations’ shares trade at a c 14% premium to our unchanged FY17e NAV of 296p/share (at 4 January 2016). We believe this is a modest premium given a maturing investment portfolio with a number of companies approaching important catalysts with significant potential for future value uplifts.
Exhibit 1: Financial summary
£'000s |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 July |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|
|
|
|
|
|
Revenue |
|
|
3,636 |
5,099 |
4,257 |
4,359 |
4,463 |
Cost of sales |
|
|
(1,005) |
(1,769) |
(1,395) |
(1,396) |
(1,438) |
Gross profit |
|
|
2,631 |
3,330 |
2,862 |
2,963 |
3,025 |
EBITDA |
|
|
(8,385) |
(8,223) |
(9,758) |
(10,289) |
(10,890) |
Operating profit (before GW and except.) |
(8,418) |
(8,237) |
(9,772) |
(10,303) |
(10,904) |
||
Fair value gains/losses |
|
|
40,549 |
21,324 |
(56,249) |
30,000 |
30,000 |
Impairments |
|
|
0 |
0 |
0 |
0 |
0 |
Share-based payment |
|
|
(4,821) |
1,161 |
2,972 |
(3,000) |
(3,000) |
Operating profit |
|
|
27,310 |
14,248 |
(63,049) |
16,697 |
16,096 |
Net interest |
|
|
106 |
817 |
(64) |
(180) |
(1,205) |
Profit before tax (norm) |
|
|
(8,312) |
(7,420) |
(9,836) |
(10,483) |
(12,109) |
Profit before tax (FRS 3) |
|
|
27,416 |
15,065 |
(63,113) |
16,517 |
14,891 |
Tax |
|
|
0 |
0 |
0 |
0 |
0 |
Profit after tax (norm) |
|
|
(8,312) |
(7,420) |
(9,836) |
(10,483) |
(12,109) |
Profit after tax (FRS 3) |
|
|
27,416 |
15,065 |
(63,113) |
16,517 |
14,891 |
Average number of shares outstanding (m) |
|
102.4 |
136.2 |
146.1 |
161.2 |
161.2 |
|
EPS - normalised (p) |
|
|
(8.1) |
(5.4) |
(6.7) |
(6.5) |
(7.5) |
EPS - reported (p) |
|
|
26.8 |
11.1 |
(43.2) |
10.2 |
9.2 |
Dividend per share (p) |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
BALANCE SHEET |
|
|
|
|
|
|
|
Fixed assets |
|
|
258,327 |
333,936 |
345,615 |
446,956 |
548,155 |
Tangible assets |
|
|
26 |
29 |
18 |
29 |
40 |
Intangible assets |
|
|
0 |
0 |
0 |
0 |
0 |
Investment Portfolio |
|
|
257,105 |
333,268 |
345,146 |
446,263 |
547,451 |
UCSF (University Challenge Seed Fund) investments |
543 |
460 |
163 |
163 |
163 |
||
UCSF loans |
|
|
0 |
0 |
0 |
0 |
0 |
Other |
|
|
653 |
179 |
288 |
501 |
501 |
Financial asset |
|
|
0 |
0 |
0 |
0 |
0 |
Current assets |
|
|
177,800 |
130,506 |
152,792 |
98,987 |
40,731 |
Cash and cash equivalents |
|
|
176,462 |
128,097 |
148,306 |
94,394 |
36,028 |
Financial asset |
|
|
0 |
0 |
0 |
0 |
0 |
Accounts receivable, net |
|
|
1,338 |
2,409 |
4,486 |
4,593 |
4,703 |
Current liabilities |
|
|
(4,900) |
(5,732) |
(7,333) |
(7,333) |
(7,333) |
Trade accounts payable |
|
|
(4,900) |
(4,232) |
(4,166) |
(4,166) |
(4,166) |
Short-term borrowings |
|
|
0 |
(1,500) |
(3,167) |
(3,167) |
(3,167) |
Long-term liabilities |
|
|
(26,445) |
(38,639) |
(35,184) |
(62,103) |
(86,263) |
Long-term borrowings |
|
|
(14,830) |
(27,222) |
(24,089) |
(51,680) |
(76,512) |
UCSF |
|
|
(640) |
(666) |
(477) |
(477) |
(477) |
Provisions |
|
|
(10,975) |
(10,751) |
(10,618) |
(9,946) |
(9,274) |
Net assets |
|
|
404,782 |
420,071 |
455,890 |
476,507 |
495,290 |
NAV/share (p) |
|
|
295 |
306 |
283 |
296 |
307 |
CASH FLOW |
|
|
|
|
|
|
|
Operating cash flow |
|
|
(6,523) |
(9,331) |
(10,799) |
(10,182) |
(10,780) |
Net Interest |
|
|
44 |
875 |
(24) |
(180) |
(1,205) |
Tax |
|
|
0 |
0 |
0 |
0 |
0 |
Capex |
|
|
(23) |
(17) |
0 |
(25) |
(25) |
Purchase of trade investments |
|
|
(32,826) |
(59,957) |
(71,046) |
(71,117) |
(71,188) |
Proceeds from sale of trade investments |
|
|
3,370 |
7,179 |
4,979 |
0 |
0 |
Revenue share paid on asset realisations in trade investments |
|
|
0 |
(989) |
0 |
0 |
0 |
Equity financing |
|
|
146,823 |
0 |
98,599 |
0 |
0 |
Short term liquidity investments |
|
|
0 |
0 |
0 |
0 |
0 |
Net cash flow |
|
|
110,865 |
(62,240) |
21,709 |
(81,504) |
(83,198) |
Opening net debt/(cash) |
|
|
(50,783) |
(161,632) |
(99,375) |
(121,050) |
(39,546) |
Other |
|
|
(16) |
(17) |
(34) |
0 |
0 |
Closing net debt/(cash) |
|
|
(161,632) |
(99,375) |
(121,050) |
(39,546) |
43,651 |
Source: Edison Investment Research, Imperial Innovations accounts
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