Patient recruitment in the Phase II Lymfactin trial (AdeLE) continues to progress well, aided by the addition (in March) of new treatment centres in Sweden. Initial efficacy and safety data are on track for the end of 2020. Near term, top-line data from Phase I/II asset CDNF in Parkinson’s disease (PD) are expected by the year end; positive data from this trial could serve as validation of the research efforts and could also enable future partnering opportunities. H119 net loss was slightly above expectations as a result of higher than expected R&D, SG&A and financial costs. In March, Herantis raised gross €5.8m enabling a cash runway into late 2020. We value Herantis at €58.7m (€9.7/share) vs €47.9m (€9.7/share) previously.
Written by
Herantis Pharma |
Trials on track as CDNF readout nears |
Trading update |
Pharma & biotech |
2 September 2019 |
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Herantis Pharma is a research client of Edison Investment Research Limited |
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Patient recruitment in the Phase II Lymfactin trial (AdeLE) continues to progress well, aided by the addition (in March) of new treatment centres in Sweden. Initial efficacy and safety data are on track for the end of 2020. Near term, top-line data from Phase I/II asset CDNF in Parkinson’s disease (PD) are expected by the year end; positive data from this trial could serve as validation of the research efforts and could also enable future partnering opportunities. H119 net loss was slightly above expectations as a result of higher than expected R&D, SG&A and financial costs. In March, Herantis raised gross €5.8m enabling a cash runway into late 2020. We value Herantis at €58.7m (€9.7/share) vs €47.9m (€9.7/share) previously.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.0 |
(2.2) |
(0.5) |
0.0 |
N/A |
N/A |
12/18 |
0.0 |
(4.2) |
(0.8) |
0.0 |
N/A |
N/A |
12/19e |
0.0 |
(5.8) |
(1.0) |
0.0 |
N/A |
N/A |
12/20e |
0.0 |
(4.2) |
(0.7) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
CDNF and Lymfactin inflection points approaching
Top-line efficacy and safety data from the ongoing Phase I/II trial testing CDNF in PD patients are expected by the year end. CDNF is a neuroprotective factor that Herantis hope could have a disease-modifying effect on patients with PD. Additionally, Herantis continues to progress its next generation, non-invasive CDNF and expects to select a lead molecule for development by the year end. Herantis’s second clinical asset, Lymfactin, continues to enrol patients on schedule with new trial sites opened in Stockholm and Uppsala in March. Lymfactin is a gene therapy to stimulate lymph vessel growth as a therapy for breast cancer-related associated secondary lymphedema (BCAL). Phase I 12-month follow-up results announced in April 2019 demonstrated the treatment was safe with no serious adverse events reported. 12-month data from the Phase II AdeLE (adenovirus gene therapy for the treatment of lymphedema) trial in BCAL patients are expected by end 2020.
Financials: Cash runway into late 2020
R&D expenses increased to €1.4m (H118: €1.1m) in H119, reflecting the ongoing Lymfactin Phase II trial in BCAL and the Phase I/II CDNF trial in PD. The net loss grew substantially in H119 to €3.3m (H118: €1.8m) mainly as a result of minimal financial income (compared with €0.78m in H118) and increased financial expenses (H119: €0.41m vs H118: €0.03m) related to the capital raise. Herantis’s cash and cash equivalents of €5.6m suggests it has a cash runway into late 2020.
Valuation: €58.7m or €9.7/share
Our valuation of €58.7m (€9.7/share) vs €47.9m (€9.7/share) previously, includes net debt of €0.9m and is based on an rNPV of CDNF in PD (€3.9/share) and Lymfactin in BCAL (€6.0/share). We have rolled forward our model and updated for both FX and increased number of outstanding shares following the recent capital raise. For a detailed overview of our valuation please see our initiation note.
Successful execution of clinical trials as readouts near
Herantis currently has two ongoing clinical trials; a Phase I/II trial testing its recombinant CDNF (cerebral dopamine neuroprotective factor) in patients with Parkinson’s disease and a Phase II trial testing its Lymfactin gene therapy in patients with BCAL secondary lymphedema.
Neuro-trophic/protective factors (such as CDNF, MANF and GDNF) are endogenous secretory proteins that have been shown to have neuroprotective and neurorestorative effects, presenting the opportunity for their use in the treatment of PD. CDNF-based therapy is being evaluated in a Phase I/II trial by Herantis for its potential neuroprotective and neurorestorative properties in PD. The trial is funded through an EU grant (Horizon 2020). CDNF is dosed intracranially once a month (a two- to three-hour infusion in the outpatient setting) using an implanted drug delivery device with portal access located behind the patient’s ear. Top-line efficacy and safety data are expected by the year end. Herantis’s CDNF is unable to cross the blood brain barrier (BBB) in its current formulation. Since Herantis in-licensed the global rights to a second generation of CDNF (from the University of Helsinki in July 2018), it has been actively developing a non-invasive way of delivering CDNF and expects to select a lead molecule for development by the year end.
Herantis is developing its Phase II asset Lymfactin gene therapy as a potential therapy for BCAL administered as a single-dose injection in combination with lymph node transfer surgery. The Phase I 12-month follow-up results announced in April demonstrated that the treatment was safe with no serious adverse events reported. The study enrolled 15 patients from three universities in Finland (Helsinki, Tampere and Turku). 12-month data from the Phase II AdeLE (adenovirus gene therapy for the treatment of lymphedema) trial in BCAL patients is expected by the end of 2020. If the Phase II AdeLE trial completes successfully, then a Phase III programme in BCAL could be initiated in 2021 either by Herantis or a potential development and commercialisation partner. New trial sites were opened in Stockholm and Uppsala in March 2019.
Financials: Funded through inflection points
In H119, Herantis issued 1.1m new shares (subscription price of €5.20) raising gross €5.8m, which we should enable a cash runway into late 2020. Herantis reported a net loss of €3.3m in H119 (€1.8m in H118). R&D expenses increased to €1.4m (H118: €1.1m), reflecting the advancement of the R&D pipeline. Financial expenses increased substantially to €411,733 (vs €28,817 in H118) due to the one-off costs associated with the capital raise in May. We note the majority of funding for the Phase I/II CDNF trial is through an EU grant. Cash burn amounted to €2.7m in H119 (H118: €1.8m). In the near term, Herantis will continue to be cash consumptive and operate as a non revenue-generating biotech. Cash and cash equivalents at 30 June 2019 were reported at €5.6m and debt was €6.5m (Business Finland loans). Due to higher than expected H119 costs we now forecast an FY19 net loss of €5.8m (vs €4.5m previously). We note that management is considering a secondary listing on the First North Stockholm marketplace. Herantis has previously been granted R&D loans from Business Finland, of which €0.6m remains to be drawn down; in H119 the company drew down €0.25m and we anticipate the remaining €0.6m will be drawn down by the year end. Additionally, the Phase I-II study (TreatER) of CDNF in PD is essentially funded by a grant (Horizon 2020) of €6.0m. We expect Herantis to raise additional capital (through either equity or debt) before late 2020 to fund ongoing operations.
Exhibit 1: Financial summary
Accounts: IFRS, Yr end: December, EUR: |
|
|
2016 |
2017 |
2018 |
2019e |
2020e |
Income statement |
|
|
|
|
|
|
|
Total revenues |
|
|
25 |
0 |
0 |
0 |
0 |
Cost of sales |
|
|
0 |
0 |
0 |
0 |
0 |
Reported gross profit |
|
|
25 |
0 |
0 |
0 |
0 |
SG&A (expenses) |
|
|
(942) |
(1,024) |
(1,244) |
(1,493) |
(1,508) |
R&D costs |
|
|
(27) |
0 |
0 |
(2,840) |
(1,988) |
Other (includes exceptionals) |
|
|
(2,273) |
(1,703) |
(2,424) |
232 |
235 |
Depreciation |
|
|
(1,203) |
(1,218) |
(1,202) |
(1,213) |
(910) |
Adjusted EBIT |
|
|
(4,420) |
(3,945) |
(4,871) |
(5,313) |
(4,171) |
Reported EBIT |
|
|
(4,420) |
(3,945) |
(4,871) |
(5,313) |
(4,171) |
Finance income/ (expense) |
|
|
(4) |
1,780 |
691 |
(485) |
(68) |
Other income (expense) (includes exceptionals) |
|
|
0 |
0 |
0 |
0 |
0 |
Adjusted PBT |
|
|
(4,425) |
(2,165) |
(4,180) |
(5,799) |
(4,239) |
Reported PBT |
|
|
(4,425) |
(2,165) |
(4,180) |
(5,799) |
(4,239) |
Income tax expense |
|
|
0 |
0 |
0 |
0 |
0 |
Adjusted net income |
|
|
(4,425) |
(2,165) |
(4,180) |
(5,799) |
(4,239) |
Reported net income |
|
|
(4,425) |
(2,165) |
(4,180) |
(5,799) |
(4,239) |
Earnings per share |
|
|
|
|
|
|
|
Basic EPS (€) |
|
|
(1.1) |
(0.5) |
(0.8) |
(1.0) |
(0.7) |
Diluted EPS (€) |
|
|
(1.1) |
(0.5) |
(0.8) |
(1.0) |
(0.7) |
Adjusted basic EPS (€) |
|
|
(1.1) |
(0.5) |
(0.8) |
(1.0) |
(0.7) |
Adjusted diluted EPS (€) |
|
|
(1.1) |
(0.5) |
(0.8) |
(1.0) |
(0.7) |
Average number of shares - basic (m) |
|
|
4.1 |
4.2 |
4.9 |
5.5 |
6.1 |
Average number of shares - diluted (m) |
|
|
4.1 |
4.9 |
5.5 |
6.1 |
6.1 |
Balance sheet |
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
9 |
7 |
5 |
4 |
3 |
Goodwill |
|
|
0 |
0 |
0 |
0 |
0 |
Intangible assets |
|
|
6,590 |
5,663 |
4,735 |
3,524 |
2,616 |
Other non-current assets |
|
|
712 |
392 |
118 |
117 |
116 |
Total non-current assets |
|
|
7,311 |
6,061 |
4,857 |
3,644 |
2,734 |
Cash and equivalents |
|
|
2,829 |
5,402 |
2,186 |
4,233 |
904 |
Inventories |
|
|
0 |
0 |
0 |
0 |
0 |
Trade and other receivables |
|
|
65 |
109 |
105 |
105 |
105 |
Other current assets |
0 |
0 |
0 |
0 |
0 |
||
Assets classified for sale |
|
|
0 |
0 |
0 |
0 |
0 |
Total current assets |
|
|
2,895 |
5,511 |
2,290 |
4,338 |
1,009 |
Non-current loans and borrowings |
|
|
8,018 |
6,022 |
5,878 |
6,729 |
6,729 |
Trade and other payables |
|
|
0 |
0 |
0 |
0 |
0 |
Other non-current liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Total non-current liabilities |
|
|
8,018 |
6,022 |
5,878 |
6,729 |
6,729 |
Trade and other payables |
|
|
186 |
278 |
200 |
200 |
200 |
Current loans and borrowings |
|
|
103 |
547 |
507 |
507 |
507 |
Other current liabilities |
|
|
324 |
634 |
651 |
651 |
651 |
Liabilities of assets held for sale |
|
|
0 |
0 |
0 |
0 |
0 |
Total current liabilities |
|
|
613 |
1,460 |
1,358 |
1,358 |
1,358 |
Equity attributable to company |
|
|
1,575 |
4,090 |
(89) |
(106) |
(4,345) |
Non-controlling interest |
|
|
0 |
0 |
0 |
0 |
0 |
Cashflow statement |
|
|
|
|
|
|
|
Profit before tax |
|
|
(4,425) |
(2,165) |
(4,180) |
(5,799) |
(4,239) |
Depreciation of tangible assets |
|
|
1,203 |
1,218 |
1,202 |
1,213 |
910 |
Amortisation of intangible assets |
|
|
0 |
0 |
0 |
0 |
0 |
Share based payments |
|
|
(0) |
(2,021) |
(3) |
0 |
0 |
Other adjustments |
|
|
5 |
240 |
(688) |
485 |
68 |
Movements in working capital |
|
|
166 |
372 |
(79) |
0 |
0 |
Net cash from operating activities (pre-tax) |
|
|
(3,052) |
(2,355) |
(3,747) |
(4,100) |
(3,261) |
Interest paid / received |
|
|
16 |
(244) |
15 |
(485) |
(68) |
Income taxes paid |
|
|
0 |
0 |
0 |
0 |
0 |
Cash from operations (CFO) |
|
|
(3,036) |
(2,599) |
(3,732) |
(4,586) |
(3,329) |
Capex (includes acquisitions) |
|
|
(10) |
0 |
0 |
0 |
0 |
Other investing activities |
|
|
(61) |
(0) |
7 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(71) |
(0) |
7 |
0 |
0 |
Proceeds from issue of shares |
|
|
0 |
4,680 |
0 |
5,782 |
0 |
Movements in debt |
|
|
0 |
0 |
509 |
851 |
0 |
Other financing activities |
|
|
396 |
492 |
0 |
0 |
0 |
Cash from financing activities (CFF) |
|
|
396 |
5,172 |
509 |
6,633 |
0 |
Currency translation differences and other |
|
|
0 |
0 |
0 |
0 |
0 |
Increase/(decrease) in cash and equivalents |
|
|
(2,711) |
2,573 |
(3,216) |
2,047 |
(3,329) |
Cash and equivalents at beginning of period |
|
|
5,541 |
2,829 |
5,402 |
2,186 |
4,233 |
Cash and equivalents at end of period |
|
|
2,829 |
5,402 |
2,186 |
4,233 |
904 |
Source: Edison Investment Research, Herantis accounts
|
|
Research: Industrials
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