Abzena — Fund-raising could drive transformational growth

Abzena — Fund-raising could drive transformational growth

Abzena recently announced a placing of £25m gross (issuing 75.8m new shares at 33p) to expand its service offering, capacity and capabilities. Importantly, we expect this fund-raising to take Abzena to profitability, which will be a significant milestone for the company. We have increased our valuation to £132m (vs £105m), primarily due to the increase in forecast service revenues, improved gross margin and cash position.

Analyst avatar placeholder

Written by

Abzena

Fund-raising could drive transformational growth

Fund-raising

Pharma & biotech

3 May 2017

Price

33.50p

Market cap

£72m

$1.28£

Net cash (£m) at 30 September 2016
(pro forma adjusted for equity raise)

33.3

Shares in issue

213.6m

Free float

39%

Code

ABZA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.7)

(14.1)

(32.3)

Rel (local)

(11.1)

(16.5)

(42.0)

52-week high/low

56.0p

32.2p

Business description

Abzena is a UK group that offers a range of services and technologies for biopharmaceutical development including immunogenicity tests, protein engineering, bioconjugation, polymer/synthetic chemistry, biomanufacturing and ADC chemistry.

Next events

Further Abzena inside products into the clinic

2017

Roche update SDP051

2017

Phase III GS-5745 futility analysis in gastric cancer

H217

Analyst

Dr Linda Pomeroy

+44 (0)20 3077 5738

Abzena is a research client of Edison Investment Research Limited

Abzena recently announced a placing of £25m gross (issuing 75.8m new shares at 33p) to expand its service offering, capacity and capabilities. Importantly, we expect this fund-raising to take Abzena to profitability, which will be a significant milestone for the company. We have increased our valuation to £132m (vs £105m), primarily due to the increase in forecast service revenues, improved gross margin and cash position.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/15

5.7

(4.7)

(5.89)

0.0

N/A

N/A

03/16

9.9

(7.5)

(6.00)

0.0

N/A

N/A

03/17e

19.1

(9.1)

(6.17)

0.0

N/A

N/A

03/18e

29.7

(10.1)

(4.52)

0.0

N/A

N/A

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

Building on strong progress since IPO in 2014…

Abzena has made strong progress since its IPO in 2014. It has built its service offering and geographic footprint both through investment and two acquisitions in the US. Alongside this, it has grown its Abzena inside portfolio to 12 (in clinical development) and has recently announced another significant licensing deal for its novel site-specific ThioBridge technology.

…with significant fund-raising to reach profitability

Abzena has announced a £25m (£23.9m net) fund-raising through a placing of 75.8m shares at a price of 33p each. The funds will be used to expand its services, capabilities and capacity. Specifically, it has indicated that it will use the funds to upgrade and grow its US-based biomanufacturing facilities and capabilities, invest in its existing biology, chemistry and biomanufacturing services in the UK and US, and invest in its sales and business development functions. In essence, this fund-raising, according to the company, should enable Abzena to fund its targeted services business revenue growth plans of 40% (CAGR) over the next three years and improve gross margins to 50%, which should move it towards profitability in a shorter time frame.

Valuation: Increased to £132m, or 62p per share

We have raised our rNPV to £132m (vs £105m) primarily due to the increase in forecast service revenues, improved gross margin and increase in cash. This has been slightly tempered as we have also increased the percentage of group admin costs relating to the service business to 90% (vs 70%). We have also rolled the model forward by three months and incorporated the estimated FY17 cash position of £4.1m and included the £23.9m net fund-raising cash. We maintain our assumptions around the Abzena inside clinical pipeline at this stage. We believe Abzena is well positioned following its fund-raising to grow its integrated service offering and, as its Abzena inside products move through the clinic and onto the market, we expect upside to our current estimates.

Investment summary

Company description: A growing, integrated business model

Abzena provides biological research services aimed at creating more effective and safer biological products. The group initially evolved through the combination of three key businesses: PolyTherics, Antitope and Warwick Effect Polymers. More recently, it has also acquired PacificGMP (contract, development and manufacturing) and TCRS (specialist contract chemistry and bioconjugation). This enables Abzena to offer a more comprehensive and integrated offering. Abzena listed on AIM in July 2014 (raising £20m) and in 2015, from a secondary placement, raised £20m net of expenses from the sale of 35m new shares at 60p. The group is primarily based on the Babraham Research Campus in Cambridge (UK) and, following two acquisitions in 2015, has operations in San Diego (PacificGMP) and Philadelphia (TCRS). The company employs c 200 staff.

Valuation: Raised to £132m

We have reviewed our rNPV model and updated it to reflect the change in our financial forecasts for the services business following the recent net fund-raising of £23.9m. We have raised our rNPV to £132m (vs £105m) primarily due to the increase in forecast service revenues and improved gross margin. This has been slightly tempered as we have also increased the percentage of group admin costs relating to the service business to 90% (vs 70%). Finally, we have rolled the model forward by three months and incorporated the estimated FY17 cash position of £4.1m, and included the £23.9m net fund-raising cash.

Financials: Forecast profitability in FY20

Following the net fund-raising of £23.9m (75.8m shares at a price of 33p each) to expand its services, capabilities and capacity, we now forecast a cash runway to profitability in FY20. As the fund-raising was after the FY17 March year end, we do not expect any impact on our FY17 forecasts. We now forecast revenue of £29.7m, £41.2m and £55.2m in FY18, FY19 and FY20 respectively (services business CAGR from FY17 to FY20 of 40%) and for the services business gross margin to improve to 50% in FY20, from 39% expected in FY17. Alongside this increase in revenue, we expect an increase in costs and now forecast £4.0m in FY18, £4.2m in FY19 and £4.4m in FY20 of R&D costs and £19.5m in FY18, £19.8m in FY19 and £23.0m in FY20 of SG&A costs. Finally, we expect capex to increase in FY18 and FY19 as a result of investment into increasing its capacity.

Sensitivities: Low-risk business model

With stable and growing revenues from its services business and a licensed portfolio of drugs that does not require investment to develop, Abzena operates a relatively low-risk business model. However, the biological services industry is highly competitive and will require Abzena to continually invest in enhancing its technologies and offering to the sector, which may require development and/or purchasing further assets. Having acquired two manufacturing businesses at the end of 2015 to expand its offering, it is integrating and embedding the broader offering, which is not without risk. While potential future royalty revenues on sales of products developed using Abzena’s technologies appear to offer pure upside, the development of these candidates is not within Abzena’s control. Advancing these candidates into late-stage clinical studies will require significant investment and/or a larger partner, so success of part of the pipeline will depend on the ability of Abzena’s licensees to secure the finance and/or partner. This does not include Gilead, Roche, two undisclosed major pharmas and private companies Opsona and Vascular Pharmaceuticals (large pharma investment). Finally, it should also be noted that Abzena’s revenues and costs are predominantly in US$ and therefore could be affected by exchange rate movements.

Promise of a transformational growth plan

Abzena recently announced a £25m (£23.9m net) fund-raising through a placing of 75.8m shares at a price of 33p each. It indicated that the funds will be used to expand its services, capabilities and capacity. Specifically, it has indicated that it will use the funds to upgrade and grow its US-based biomanufacturing facilities and capabilities, invest in its existing biology, chemistry and biomanufacturing services in the UK and US, and invest in its sales and business development functions. In essence, this fund-raising, according to the company, should enable it to deliver a transformational growth plan including:

revenue growth of 40% (CAGR) over the next three years;

improved gross margins of 50%; and

a move to profitability.

Abzena’s services business (pre fund-raising) accounted for 97% of group revenues (£8.7m H117). Approximately 84% of the services revenue to H117 was derived from repeat customers, yet the customer base remains relatively broad with the top 10 customers accounting for ~47% of total revenues. Geographically, these revenues in FY16 were broadly split between North America (67%) and Europe (21% not including UK, 6% in the UK).

The growth Abzena has experienced has, according to the company, led it to the point where it is capacity constrained and therefore requires further investment to enable it to grow further. For example, its capacity was already assigned through to 2018, its number of repeat customers had doubled and there was an increase in the number of manufacturing programmes that were enacted alongside Abzena inside contracts. Alongside this, the company had limited GMP chemistry (ADC) manufacturing capability which, if put in place, could provide the ability to attract high-value, follow-on projects.

We expect Abzena to invest the proceeds primarily across the three areas of the service business, and forecast capex of £11m in manufacturing, £3m in chemistry and £3m in biology. We expect the majority of this investment to be in FY18. We expect the new facilities to be completed by Q1 FY19.

We believe Abzena is well-positioned to achieve its growth plans. It has already indicated that demand exceeds its current capacity and it has previously demonstrated its ability to capture an opportunity and deliver following two acquisitions in 2015 (PacificGMP and TCRS). Exhibit 1 outlines how it has grown since the acquisitions.

Exhibit 1: Growth to date

Source: Abzena presentation

At the time of the acquisitions the strategic plan was to capture greater value from providing an integrated, broader service offering, both in terms of capability and stage in the development process. This has started to prove fruitful and with the fund-raising we expect Abzena to build on this by increasing its cross-group utilisation and attracting a diverse and international customer base including major pharmaceutical companies and public and private biotech companies.

Exhibit 2 illustrates Abzena’s operations, the two aspects of its business model and where it is able to capture value across the development process.

Exhibit 2: Capturing value across the development process

Source: Abzena presentation

While the fund-raising is important for the expansion and growth of its service business and ultimately transitioning the company to profitability, there remains a second aspect to its investment case: its expanding clinical pipeline of antibodies, being developed and fully funded by global partners, which were derived using Abzena’s protein engineering technology, termed Abzena inside products. The Abzena inside portfolio has grown to 12 (in clinical development) and it has recently announced another significant licensing deal for its novel site-specific ThioBridge technology.

Service areas that could deliver profitability

Abzena combines three distinct but complementary areas in biology, chemistry and manufacturing to enable better biopharmaceuticals. It is the integration of these areas that underpins Abzena’s business model.

Exhibit 3: Integrated business model

Source: Abzena presentation

Biology services

The Biology division provides immunology, protein engineering, protein production bioassay and bioanalysis services (divisional forecasts outlined below in Exhibit 4, with hyperlinks to detailed overviews of the specific technologies and services).

Exhibit 4: Biology division service and technology offerings and forecasts

Revenues

Technology offering

Products

Details

H117

FY17e

FY18e

FY19e

FY20e

Immunogenicity assessment

EpiScreen/iTope & TCED

Accurate, sensitive and rapid ex vivo and in silico (computer) testing for the risk of anti-drug antibodies (ADAs) to therapeutic antibodies/proteins; and identification of immunogenic sequences that cause unwanted immune response (which can then be 'fixed' by Abzena's Composite Human Antibody or Composite Protein technologies).

2.4

4.6

5.6

6.2

7.1

Protein engineering*

Composite Human Antibody/
Composite Proteins
**

Creation of fully humanised antibodies and deimmunised proteins to reduce the risk of immune responses (immunogenic sequences removed/critical sequences retained). Fully integrated offering with cell line development and bioconjugation as appropriate.

0.8

1.8

2.6

2.8

4

Source: Abzena and Edison Investment Research. Note: *Can lead to cell line development and then GMP manufacturing services. **Longer-term licensing potential.

Chemistry services

The Chemistry division provides custom synthesis of antibody drug conjugate (ADC) linkers, payloads and conjugation services (divisional forecasts outlined below in Exhibit 5, with hyperlinks to detailed overviews of the specific technologies and services).

Exhibit 5: Chemistry division service and technology offerings and forecasts

Revenues

Technology offering

Products

Details

H117

FY17e

FY18e

FY19e

FY20e

Bioconjugation – ADCs*

ThioBridge

Site-specific conjugation of chemotherapy drugs to antibodies and antibody fragments, creating more stable and homogeneous ADCs using the ThioBridge linker. Range of cytotoxic payloads available.

3.5

6.4

8.9

10.7

11.9

Specialist contract chemistry and bioconjugation

Produce, analyse and manufacture antibody drug conjugates

Specialist contract chemistry and bioconjugation company based near Philadelphia, US with expertise in producing and analysing ADCs.

Source: Edison Investment Research. Note: *Longer-term licensing potential.

Manufacturing services

The Manufacturing division provides cell line development, process and manufacturing capability to GMP standard for Phase I and II clinical trials (divisional forecasts outlined below in Exhibit 6, with hyperlinks to detailed overviews of the specific technologies and services).

Exhibit 6: Manufacturing division service and technology offerings and forecasts

Revenues

Technology offering

Products

Details

H117

FY17e

FY18e

FY19e

FY20e

Contract manufacturing biopharmaceutical products

Contract, development and manufacturing

San Diego-based CDMO (contract, development and manufacturing organisation) focused on developing/GMP manufacturing biopharmaceutical products (eg monoclonal antibodies) for use in Phase I and II clinical trials.

1.4

4.7

10.6

18.0

26.0

Cell line development*

Composite CHO

Development of stable and highly expressing mammalian cell lines, suitable for commercial production (for clinical trials) of proteins and antibodies by the licensee (or CMO). Suitable for Abzena-engineered products or biosimilars.

0.6

1.0

1.2

1.5

2.0

Source: Edison Investment Research. Note: *Can lead on to GMP manufacturing services.

Abzena inside – the risk-free potential upside

Abzena has potential additional upside to its service business growth from its Abzena inside products. This licensed portfolio of antibodies was developed using its Composite Human Antibody (CHA) or ThioBridge (antibody drug conjugates) technology (outlined above). This portfolio offers the prospect of small royalties (~1%) on sales (CHA) and potentially higher royalties (up to 5%) on its ADC products (ThioBridge). This provides risk-free upside as Abzena benefits if the product successfully reaches the market; however, it assumes none of the R&D or partnering risks and is not restricted by indication as its ‘inside’ is applied across a broad range of indications.

To date, 12 antibody candidates (up from five at the time of Abzena’s IPO in July 2014), developed using Abzena’s humanising technology (CHA), have been disclosed as in active clinical development with customers currently conducting Phase I, II and III studies. Alongside this have been two significant licensing ThioBridge deals for two separate biotech companies to develop up to three and 10 products (to include ThioBridge as the linker in the resulting products) respectively. For a more detailed overview of these deals, please see our previous update note. An overview of the disclosed Abzena inside pipeline is outlined below.

Example of value provided from its integrated business model

Abzena’s most recent ThioBridge deal announcement indicated that it had signed a significant licensing agreement with a San Diego-based biopharmaceutical company for its novel, site-specific ThioBridge technology and a master services agreement to use its chemistry services. The licensing deal includes the use of ThioBridge in up to 10 ADCs across a wide range of indications. According to the company, the value of the agreement has the potential to reach more than $300m in development/commercial milestones if the partner successfully develops the ADC products. Alongside this, Abzena would also receive royalties on sales of any approved products that incorporate the ThioBridge technology.

Exhibit 7: Valuation assumptions by product

Product - Partner

Status

Peak sales ($m)

Probability of success

Launch date

Estimated royalty rate

1

GS5745 - Gilead Sciences

Phase III

2,500

50%

2019

1%

2

OPN-305 - Opsona Therapeutics

Phase II

750

35%

2020

1%

3

VPI-2690B - Vascular Pharmaceuticals

Phase II

1,000

35%

2021

1%

4

NKT120 - NKT Therapeutics

Phase Ib

250

25%

2021

1%

5

SDP051 - Adheron Therapeutics

Phase II

1,000

25%

2023

1%

6

TBI 304H - Therapure Innovations

Phase I

1,000

15%

2021

1%

7

US major pharma partner

Phase II

1,000

35%

2022

1%

8

US Pharma

Phase I

750

15%

2022

1%

9

US Biotech

Phase I

750

15%

2022

1%

10

US Biotech

Phase I

750

15%

2023

1%

11

Private US Biotech

Phase I

750

15%

2023

1%

12

US biotech company

Phase I

750

5%

2025

1%

13

Halozyme ADC Product 1

Pre-clinical

500

5%

2026

3%

14

Halozyme ADC Product 2

Pre-clinical

500

5%

2027

3%

15

Halozyme ADC Product 3

Pre-clinical

500

5%

2028

3%

16

US Biotech ADC Product 1 and 2

Pre-clinical

1,000

5%

2025

3%

17

US Biotech ADC Product 3 and 4

Pre-clinical

1,000

5%

2026

3%

18

US Biotech ADC Product 5 and 6

Pre-clinical

1,000

5%

2027

3%

19

US Biotech ADC Product 7 and 8

Pre-clinical

1,000

5%

2028

3%

20

US Biotech ADC Product 9 and 10

Pre-clinical

1,000

5%

2029

3%

Source: Edison Investment Research

Sensitivities

With stable and growing revenues from its services business and a licensed portfolio of drugs that does not require R&D spend, Abzena operates a relatively low-risk business model. However, the biological services industry is highly competitive and will require Abzena to continually invest in enhancing its technologies and offering to the sector. This may include the need to acquire new assets/companies, which adds an element of execution risk, but with shrewd selection of targets this should only help strengthen Abzena’s position and therefore the investment case. Although the potential future revenue streams from royalties on sales of products developed using Abzena’s technologies appear to offer pure upside, the development of these candidates is not within Abzena’s control. With the exception of Gilead, Roche, two undisclosed major pharmas and private companies Opsona and Vascular Pharmaceuticals (a large pharma investment), a number of candidates are being developed by relatively small private companies that may struggle to secure the finance required to develop their products in a timely and effective manner. Advancing these candidates into late-stage clinical studies will require significant investment and/or a larger partner, so success will depend on the ability of Abzena’s smaller licensees to secure the finance/partner. Finally, it should also be noted that Abzena’s revenues and costs are predominantly in US$ and therefore could be affected by exchange rate movements.

Valuation

We have reviewed our rNPV model and updated it to reflect the change in our financial forecasts for the services business following the recent net fund-raising of £23.9m. We have raised our rNPV to £132m (vs £105m) primarily due to the increase in forecast service revenues and improved gross margin. This has been slightly tempered as we have also increased the percentage of group admin costs relating to the service business to 90% (vs 70%). Finally, we have rolled the model forward by three months and incorporated the estimated FY17 cash position of £4.1m and included the £23.9m net fund-raising cash. We maintain our assumptions around the Abzena inside clinical pipeline at this stage.

We believe Abzena is well positioned following its fund-raising to grow its integrated service offering and, as its Abzena inside products move through the clinic and onto the market, we expect upside to our current estimates. Our valuation model and key assumptions are summarised in Exhibit 8.

Exhibit 8: Abzena valuation model and key assumptions

rNPV (£m)

rNPV per share (p)

Key assumptions

Services business

43.8

20.5

3-phase DCF: 2017-2020 (40% CAGR growth), 2021-2025 (2-5% growth), 2% TV on 2025 FCF (steady-state); 10% WACC; 12-15% effective tax rate; 60% COGS FY18 decreasing to 50% in FY20; 90% of Group admin expense.

Licensed biological product royalties

60.2

28.2

Risked-adjusted royalties (1-5%) on partner's product sales; 12.5% WACC; 12% effective tax rate; 50% of Group R&D expense (risk-adjusted); no milestones included.

Portfolio sub-total

104

49

Cash (FY17e + fund-raising)

28.0

13.1

FY17e + net fund-raising.

Overall valuation

132.1

62

213.6m shares outstanding (basic).

Source: Edison investment Research

While we maintain our valuation approach for Abzena, which indicates significant upside to its current market cap of £72m, it is worth considering it against a set of its peers now that there is clarity around its route to profitability. Defining Abzena’s peer group is difficult because, while there are a number of companies that touch on various aspects of Abzena’s offering, there is not a true like-for-like operation. For example, if we consider the competition in terms of breadth of offering, then Lonza and Catalent are potentially significant competitors. Horizon Discovery could be a good peer comparator as it offers services while having a longer-term potential income stream. Equally, a company such as Abcam, a service provider, could be considered. There are also smaller players that compete with one aspect of Abzena’s business, for example Selexis in cell line development services and ImmunoGen for ADC technology. An overview of the possible competitor universe is shown in Exhibit 9. Lonza, Catalent and Abcam are profitable, whereas Horizon Discovery ImmunoGen and Seattle Genetics are currently loss making.

Exhibit 9: Competitor overview

Company

Description

Lonza

Broad commercial manufacturing capability (small-scale quantities to full commercial production), clinical development services (consumables, tests) and bioscience solutions.

Catalent

Suite of proprietary technology platforms and integrated business model. Divisions include biological development & manufacturing, biosimilar development & manufacturing and bioconjugates.

Abcam

Range of products sold including primary and secondary antibodies, biochemicals, proteins, peptides, lysates, immunoassays and other kits.

Horizon Discovery

Gene editing platform services and technology incorporated in customers’ final products.

ImmunoGen

Developing ADC technologies. Establishes deals for its technologies with pharmaceutical companies.

Seattle Genetics

Focused on developing and commercialising antibody-based therapies for the treatment of cancer. One marketed product alongside a product pipeline.

Selexis

Facilitates rapid, stable and cost effective bioproduction of virtually any recombinant protein. Leader in mammalian cell line generation. Technology incorporated in customers final products.

Company

Lonza

Catalent

Abcam

Horizon Discovery

ImmunoGen

Seattle Genetics

Selexis

Description

Broad commercial manufacturing capability (small-scale quantities to full commercial production), clinical development services (consumables, tests) and bioscience solutions.

Suite of proprietary technology platforms and integrated business model. Divisions include biological development & manufacturing, biosimilar development & manufacturing and bioconjugates.

Range of products sold including primary and secondary antibodies, biochemicals, proteins, peptides, lysates, immunoassays and other kits.

Gene editing platform services and technology incorporated in customers’ final products.

Developing ADC technologies. Establishes deals for its technologies with pharmaceutical companies.

Focused on developing and commercialising antibody-based therapies for the treatment of cancer. One marketed product alongside a product pipeline.

Facilitates rapid, stable and cost effective bioproduction of virtually any recombinant protein. Leader in mammalian cell line generation. Technology incorporated in customers final products.

Source: Edison Investment Research

We have looked at the publicly traded companies and EV/Sales multiples (Exhibit 10). If we apply the average EV/Sales ratio to Abzena (having removed the three much higher outliers, Abcam, Horizon Discovery and Seattle Genetics), it would imply an EV of £53m.

Exhibit 10: Publically traded comparators

Company

Market cap (m)

EV (m)

EV/Sales (x)

Lonza*

CHF11,063

CHF12,649

2.68

Catalent*

US$3,496

US$5,265

2.68

Abcam*

£1,688

£1,611

7.39**

Horizon Discovery

£200

£187

7.61**

ImmunoGen

US$349

US$189

2.92

Seattle Genetics

US$9,503

US$8,914

20.5**

Average

7.3

Average (outliers removed**)

2.76

Source: Edison Investment Research. Note: *Profitable companies. **Outliers.

A sector with growing interest and potential

Abzena is offering a service in an area that is large and growing rapidly. According to a 2014 McKinsey report, biopharmaceuticals were generating global revenues of $163bn, which was 20% of the pharma market in 2014. P&S Market Research has indicated that the biopharma market is expected to grow at c 10% pa to 2019 and the R&D outsourcing market at >23%, projected to reach $11.4bn by 2020. The potential in these markets is underpinned by the increase in the number of large pharmaceutical companies shifting their presence to biopharma and when we consider recent M&A activity in the biologics field (see Exhibits 11 and 12).

Exhibit 11: Increasing shift to biopharma

Source: EvaluatePharma and Edison Investment Research

Exhibit 12: Recent M&A activity in biologics sector

Date of acquisition

Company

Acquired company

Deal value ($m)

27/01/2017

IBA Molecular

Mallinckrodt's Nuclear Imaging Business

690

20/12/2016

Astellas Pharma

Ganymed Pharmaceuticals

1,402

29/11/2016

Celldex Therapeutics

Kolltan Pharmaceuticals

235

24/11/2016

Novartis

Selexys Pharmaceuticals

665

30/09/2016

Acorda Therapeutics

Biotie Therapies

363

30/09/2016

Celgene

EngMab

3,100

28/09/2016

Pfizer

Medivation

14,000

05/08/2016

Mylan

Meda

7,200

05/07/2016

Bristol-Myers Squibb

Cormorant Pharmaceuticals

520

03/06/2016

Shire

Baxalta

6,546

01/06/2016

AbbVie

Stemcentrx

9,800

31/05/2016

OSE Immunotherapeutics

Effimune

34

09/05/2016

VBI Vaccines

VBI Vaccines (pre SciVac Therapeutics)

92

26/01/2016

3SBio

Shanghai CP Guojian Pharmaceutical

214

22/01/2016

Shire

Dyax

6,546

Source: EvaluatePharma and Edison Investment Research

While it is clear that there is significant interest in the biopharma area, it is difficult to quantify how this translates into appropriate potential for Abzena. However, we note the company’s strong progress since its IPO in 2014. It has built its service offering and geographic footprint through investment and through two acquisitions in the US. Alongside this, it has grown its Abzena inside portfolio to 12 (in clinical development) and has recently announced another significant licensing deal for its novel site-specific ThioBridge technology.

Financials

Following the recent announcement of Abzena’s £23.9m net fund-raising (75.8m shares at a price of 33p each) to expand its services, capabilities and capacity, we have reviewed our forecasts. As the fund-raising was after the FY17 March year end, we do not expect any impact on our FY17 forecasts, but have reviewed our FY18 estimates onwards to incorporate the full impact of the fund-raising and expansion plans.

We expect Abzena to use the funds to upgrade and grow its US-based biomanufacturing facilities and capabilities, invest in its existing biology, chemistry and biomanufacturing services in the UK and US and invest in its sales and business development functions. The company has indicated that the funds will be invested in the following areas:

£11m: manufacturing.

£3m: chemistry.

£3m: biology.

£2m: working capital.

£6m: gross corporate expenses.

As a result of this investment, we now forecast a cash runway to profitability in FY20 and an increase in sales from the services business and improved margin. Exhibit 13 outlines our previous and current forecasts. We now forecast revenue of £29.7m, £41.2m and £55.2m in FY18, FY19 and FY20 respectively (services business CAGR from FY17 to FY20 of 40%) and for the services business gross margin to improve to 50% in FY20, from 39% expected in FY17. We expect growth in each area of the services business (biology, chemistry and manufacturing), but that the most significant and steepest growth will be in the manufacturing division in FY18 following the investment. Alongside this increase in revenue, we expect an increase in costs and now forecast £4.0m in FY18, £4.2m in FY19 and £4.4m in FY20 of R&D costs and £19.5m in FY18, £19.8m in FY19 and £23.0m in FY20 of SG&A costs. Finally, we expect capex to increase in FY18 and FY19 as a result of investment into increasing its capacity and forecast £11m of capex in FY18, £3m in FY19 and £2m in FY20. We have maintained our revenue forecasts from licences at this time, but note that as the services business grows there could be upside with further Abzena inside product agreements coming to fruition.

Importantly, our forecasts indicate that Abzena will be EBITDA positive (£0.1m) in FY19 and become profitable in FY20 (£3.1m PBT).

Exhibit 13: Change in service business revenue forecasts

2017e

2018e

2019e

2020e

Current

Previous

Current

Previous

Current

Previous

Current

Immunology

4.6

5.6

5.6

5.9

6.2

6.1

7.1

Protein Engineering

1.8

2.6

2.6

2.7

2.8

2.7

4.0

Chemistry

6.4

7.0

8.9

8.3

10.7

9.1

11.9

Cell Line Development

0.9

1.8

1.2

1.9

1.5

2.0

2.0

Biomanufacturing

4.7

7.2

10.6

8.3

18.0

9.0

26.0

Total Service Revenue

18.5

24.3

28.9

27.1

39.3

28.9

51.1

Source: Edison Investment Research

Exhibit 14: Financial summary

£'000s

2014

2015

2016

2017e

2018e

2019e

2020e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

Revenue

 

 

5,261

5,667

9,854

19,076

29,667

41,125

55,044

of which: Biology

3,128

4,158

5,299

6,423

8,237

9,061

11,132

Manufacturing

419

594

2,096

5,658

11,789

19,570

27,991

Chemistry

165

657

2,174

6,395

8,892

10,670

11,943

Total Service revenues

3,712

5,409

9,569

18,476

28,917

39,301

51,066

Licenses/milestones/royalties

1,549

258

285

600

750

1,824

3,978

Cost of Sales

(1,697)

(2,532)

(5,319)

(11,233)

(17,350)

(20,829)

(25,533)

Gross Profit

3,564

3,135

4,535

7,842

12,317

20,296

29,511

R&D expenses

(2,601)

(2,989)

(4,216)

(3,794)

(3,984)

(4,183)

(4,392)

SG&A expenses

(4,787)

(5,634)

(9,047)

(14,023)

(19,492)

(19,784)

(22,950)

EBITDA

 

 

(3,116)

(4,510)

(6,972)

(7,893)

(7,208)

113

5,945

Operating Profit (before GW and except)

 

(3,394)

(4,795)

(7,773)

(9,144)

(10,093)

(2,664)

3,123

Intangible Amortisation

(304)

(504)

(588)

(731)

(666)

(607)

(554)

Depreciation

(278)

(285)

(801)

(1,251)

(2,885)

(2,777)

(2,822)

Exceptionals

(426)

0

(2,542)

0

0

0

0

Operating Profit

(4,124)

(5,299)

(10,903)

(9,875)

(10,759)

(3,272)

2,569

Other

0

0

0

0

0

0

0

Net Interest

27

79

244

50

2

34

22

Profit Before Tax (norm)

 

 

(3,367)

(4,716)

(7,529)

(9,095)

(10,091)

(2,631)

3,145

Profit Before Tax (reported)

 

 

(4,097)

(5,220)

(10,659)

(9,825)

(10,757)

(3,238)

2,591

Tax

548

498

961

590

430

389

486

Profit After Tax (norm)

(2,819)

(4,218)

(6,568)

(8,505)

(9,661)

(2,242)

3,631

Profit After Tax (reported)

(3,549)

(4,722)

(9,698)

(9,236)

(10,327)

(2,849)

3,077

Average Number of Shares Outstanding (m)

1.4

71.6

109.4

137.8

213.6

213.6

213.6

EPS - normalised (p)

 

 

N/A

(5.89)

(6.00)

(6.17)

(4.52)

(1.05)

1.70

EPS - reported (p)

 

 

N/A

(6.59)

(8.86)

(6.70)

(4.83)

(1.33)

1.44

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

10,139

10,432

27,347

28,230

35,694

35,324

33,964

Intangible Assets

9,446

8,942

23,177

22,461

21,809

21,217

20,678

Tangible Assets

693

1,490

4,170

5,769

13,885

14,108

13,286

Other

0

0

0

0

0

0

0

Current Assets

 

 

5,856

20,924

22,108

11,540

17,810

15,495

20,100

Stocks

295

817

1,379

1,379

1,379

1,379

1,379

Debtors

2,263

3,161

5,436

5,436

5,436

5,436

5,436

Cash

2,757

15,799

13,724

4,135

10,565

8,291

12,799

Other

541

1,147

1,569

590

430

389

486

Current Liabilities

 

 

(1,278)

(2,354)

(5,850)

(5,850)

(5,850)

(5,850)

(5,850)

Creditors

(1,160)

(2,354)

(5,488)

(5,488)

(5,488)

(5,488)

(5,488)

Short term borrowings

0

0

0

0

0

0

0

Short term leases

0

0

0

0

0

0

0

Other

(118)

0

(362)

(362)

(362)

(362)

(362)

Long Term Liabilities

 

 

(1,183)

(1,153)

(2,549)

(2,549)

(2,549)

(2,549)

(2,549)

Long term borrowings

0

0

0

0

0

0

0

Long term leases

0

0

0

0

0

0

0

Other long term liabilities

(1,183)

(1,153)

(2,549)

(2,549)

(2,549)

(2,549)

(2,549)

Net Assets

 

 

13,534

27,849

41,056

31,370

45,105

42,420

45,665

CASH FLOW

Operating Cash Flow

 

 

(4,328)

(4,859)

(10,870)

(7,774)

(7,086)

238

6,073

Net Interest

0

0

0

0

0

0

0

Tax

251

(133)

371

961

590

430

389

Capex

(264)

(1,082)

(2,047)

(2,864)

(11,015)

(3,015)

(2,015)

Acquisitions/disposals

(6,133)

0

(9,357)

0

0

0

0

Financing

10,670

19,037

20,013

0

23,900

0

0

Dividends

0

0

0

0

0

0

0

Other

(6)

79

(185)

89

41

73

61

Net Cash Flow

190

13,042

(2,075)

(9,589)

6,430

(2,274)

4,508

Opening net debt/(cash)

 

 

(2,754)

(2,757)

(15,799)

(13,724)

(4,135)

(10,565)

(8,291)

HP finance leases initiated

0

0

0

0

0

0

0

Other

(187)

0

0

0

0

0

0

Closing net debt/(cash)

 

 

(2,757)

(15,799)

(13,724)

(4,135)

(10,565)

(8,291)

(12,799)

Source: Abzena accounts, Edison investment Research

Contact details

Revenue by geography (FY16)

Babraham Research Campus
Babraham
Cambridge CB22 3AT
UK
+44 (0)1223 903 498
www.abzena.com

Contact details

Babraham Research Campus
Babraham
Cambridge CB22 3AT
UK
+44 (0)1223 903 498
www.abzena.com

Revenue by geography (FY16)

Management team

CEO: John Burt

CFO: Julian Smith

Joined PolyTherics in November 2010, initially as chief business officer then becoming CEO in May 2011. Following the acquisition of Antitope and creation of Abzena, John is CEO of the group. Co-founder and CEO of Thiakis (2004-08, when Thiakis was acquired by Wyeth). Previous roles include finance, technology licensing and business and corporate development responsibilities at Vanguard Medica, GlaxoSmithKline and Imperial Innovations.

Joined PolyTherics as CFO in September 2013, now CFO for the group. Julian was chief financial and operations officer at Imperial Innovations (2006-13). Prior to Imperial Innovations, he was CFO of RadioScape and group financial controller of Mobile Systems International.

President, US: John Manzello

Chief Business Officer: Sven Lee

Joined Abzena in October 2016 after serving as president of San Diego’s Promosome, where he joined the company as president and CEO in April 2007. John expanded the business development, IP portfolio and strategic alliances for the company’s suite of synthetic biology technologies. Before joining Promosome, he held business and commercial development roles at Althea Technologies, Cohesive Technologies, Genzyme Transgenics (GTC) and GTC’s CRO/CMO subsidiary Primedica.

Before joining Abzena, Sven was director of global sales and business development for the cell therapy technologies business unit of Terumo BCT. Before Terumo, he was VP of global business development at Catalent Biologics, responsible for the team's preclinical through Phase I/II GMP manufacturing business. He also launched the SMART Tag antibody drug conjugation platform. Before Catalent, Sven spent five years as director of business development with Crucell (Johnson & Johnson) and 10 years with Biogen.

Senior VP Scientific Operations: Campbell Bunce, PhD

Senior VP of Technical Operations: Jim Mills, PhD

Campbell has over 19 years ‘experience working in the biotech and diagnostics sectors, occupying senior management positions with Piramed Pharma (director, development programmes), Immune Targeting Systems (R&D director) and Oxford Immunotec (GM, immunology products). He has extensive experience in developing novel biologics and vaccines for cancer, inflammatory and infectious diseases, leading them through development and regulatory processes.

Jim joined Abzena’s executive team in March 2015 as VP of technical operations. He was previously CEO of Cantab Biopharmaceuticals, having originally joined the company in 1997 as part of the process development group. Jim has a background in protein production and GMP manufacturing, having obtained his PhD in microbial physiology and biochemistry from the University of Leicester.

Management team

CEO: John Burt

Joined PolyTherics in November 2010, initially as chief business officer then becoming CEO in May 2011. Following the acquisition of Antitope and creation of Abzena, John is CEO of the group. Co-founder and CEO of Thiakis (2004-08, when Thiakis was acquired by Wyeth). Previous roles include finance, technology licensing and business and corporate development responsibilities at Vanguard Medica, GlaxoSmithKline and Imperial Innovations.

CFO: Julian Smith

Joined PolyTherics as CFO in September 2013, now CFO for the group. Julian was chief financial and operations officer at Imperial Innovations (2006-13). Prior to Imperial Innovations, he was CFO of RadioScape and group financial controller of Mobile Systems International.

President, US: John Manzello

Joined Abzena in October 2016 after serving as president of San Diego’s Promosome, where he joined the company as president and CEO in April 2007. John expanded the business development, IP portfolio and strategic alliances for the company’s suite of synthetic biology technologies. Before joining Promosome, he held business and commercial development roles at Althea Technologies, Cohesive Technologies, Genzyme Transgenics (GTC) and GTC’s CRO/CMO subsidiary Primedica.

Chief Business Officer: Sven Lee

Before joining Abzena, Sven was director of global sales and business development for the cell therapy technologies business unit of Terumo BCT. Before Terumo, he was VP of global business development at Catalent Biologics, responsible for the team's preclinical through Phase I/II GMP manufacturing business. He also launched the SMART Tag antibody drug conjugation platform. Before Catalent, Sven spent five years as director of business development with Crucell (Johnson & Johnson) and 10 years with Biogen.

Senior VP Scientific Operations: Campbell Bunce, PhD

Campbell has over 19 years ‘experience working in the biotech and diagnostics sectors, occupying senior management positions with Piramed Pharma (director, development programmes), Immune Targeting Systems (R&D director) and Oxford Immunotec (GM, immunology products). He has extensive experience in developing novel biologics and vaccines for cancer, inflammatory and infectious diseases, leading them through development and regulatory processes.

Senior VP of Technical Operations: Jim Mills, PhD

Jim joined Abzena’s executive team in March 2015 as VP of technical operations. He was previously CEO of Cantab Biopharmaceuticals, having originally joined the company in 1997 as part of the process development group. Jim has a background in protein production and GMP manufacturing, having obtained his PhD in microbial physiology and biochemistry from the University of Leicester.

Principal shareholders

(%)

Invesco Asset Management

25.8

Woodford Investment Management LLP

23.0

Touchstone Innovations

16.9

City Financial

4.2

Hargreave Hale

4.2

Companies named in this report

Seattle Genetics (SGEN), ImmunoGen (IMGN), Roche (ROG), Gilead Sciences (GILD), Opsona Therapeutics, Vascular Pharmaceuticals, NKT Therapeutics, Adheron Therapeutics, Therapure Innovations, Lonza, Catalent, Abcam, Horizon Pharma, Halozyme

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Abzena and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Abzena and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

PharmaMar — We see value in self-commercialisation

At its recent R&D day in New York, PharmaMar flagged endometrial cancer as a likely fourth indication for lurbinectedin (data to be presented at ASCO). It confirmed that it is on track to achieve the key milestones of an approval decision for Aplidin for multiple myeloma in Europe, and Phase III results for lurbinectedin in ovarian cancer this year, with the most likely timing in Q4. The company emphasised its goal of commercialising lurbinectedin itself in the US market, prompting us to adopt self-commercialisation as our base case valuation scenario, which lifts our valuation by 16% to €1.50bn (vs €1.29bn), or €6.75/share (vs €5.79/share).

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free