Abzena — Update 28 July 2016

Abzena — Update 28 July 2016

Abzena

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Abzena

Validating the rationale and positive newsflow

Newsflow update

Pharma & biotech

28 July 2016

Price

41.00p

Market cap

£56m

$1.31/£

Net cash (£m) at 31 March 2016

13.7

Shares in issue

137.0m

Free float

39%

Code

ABZA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.8

(18.0)

(49.7)

Rel (local)

(8.3)

(22.4)

(52.2)

4

52-week high/low

81.50p

39.50p

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 (PacificGMP) and ADC chemistry (TCRS).

Next events

Further Abzena inside products into the clinic

2016

Roche update SDP051

2016

Initiation of Phase II studies GS-5745 (COPD, RA and CF)

H216

Analyst

Dr Linda Pomeroy

+44 (0)20 3077 5738

Abzena is a research client of Edison Investment Research Limited

Abzena has announced the formation of a JV company, Denceptor Therapeutics, and an agreement with Faron to manufacture Clevegen (an Abzena inside product). Both deals validate the rationale behind expanding the company last year to provide a broader range of services. Meanwhile, Annexon Biosciences has recently raised funds and indicated it will be taking ANX-005 (another Abzena inside product) forward. We have increased our valuation to £143m (vs £133m) to reflect FX changes.

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

(6.8)

(4.32)

0.0

N/A

N/A

03/18e

25.0

(4.2)

(2.63)

0.0

N/A

N/A

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

Formation of a JV: Denceptor Therapeutics

Abzena has announced the formation of a JV with Baylor Scott & White Research Institute, focusing on dendritic cell (DC) receptor-targeting antibodies. There is potential to target autoimmune (tolerogenic DC) or oncology (cytotoxic t-cells) indications. The lead programme is preclinical, targeting head and neck cancer (HPV E6/E7), and is expected to be in the clinic (funding dependent) in H117. Abzena has indicated that it has planned for the JV over the past year by adding to its management team to enable Abzena’s CSO to head up the JV. The JV will independently raise capital. We consider this move positive as it enables Abzena to retain a licence interest, generates service revenues (because Denceptor will outsource development and manufacturing activities), and gain potential upside by retaining a small equity stake. Importantly, it achieves this while retaining its core business model (service and technology provider), thereby lowering the risk profile.

Agreement for the manufacture of Clevegen

Abzena has also announced an agreement to manufacture Clevegen, a novel therapeutic antibody developed by Faron to reduce immune suppression in cancer. Clevegen is currently preclinical and will become the first product to have been humanised by Abzena’s technology and will also be manufactured by Abzena for clinical development. This provides validation of the rationale for expanding the company, last year, to be able to offer and leverage a broader service offering.

Valuation: Increased to £143m, or 104p per share

We have not altered our valuation in light of these announcements as the programmes need to progress further before we would include them. However, we have increased our valuation to £143m (vs £133m) or 104p per share (vs 98p), due to a change in the $/£ rate used (1.3 vs 1.5) for the Abzena inside portfolio. Abzena is starting to demonstrate the potential in its integrated service offering and we expect potential uplifts to valuation as its Abzena inside products move through the clinic and to the market; for example, we note the recent fundraising and intention to advance the currently preclinical ANX-005 programme by Annexon Biosciences.

Exhibit 1: Financial summary

£000s

2014

2015

2016

2017e

2018e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

Revenue

 

 

5,261

5,667

9,854

19,076

25,008

of which: Immunology

2,196

2,940

3,978

5,569

6,015

Protein engineering

932

1,218

1,321

1,849

1,960

Bioconjugation

165

657

1,376

1,926

2,023

Cell line development

419

594

525

735

772

Biomanufacturing (PacificGMP)

1,571

3,928

5,891

TCRS

798

4,469

7,597

Total Service revenues

3,712

5,409

9,569

18,476

24,258

Licenses/milestones/royalties

1,549

258

285

600

750

Cost of Sales

(1,697)

(2,532)

(5,319)

(11,234)

(13,342)

Gross Profit

3,564

3,135

4,535

7,843

11,666

R&D expenses

(2,601)

(2,989)

(4,216)

(3,794)

(3,984)

SG&A expenses

(4,787)

(5,634)

(9,047)

(11,761)

(12,643)

EBITDA

 

 

(3,116)

(4,510)

(6,972)

(5,423)

(2,853)

Operating Profit (before GW and except)

 

(3,394)

(4,795)

(7,773)

(6,882)

(4,195)

Intangible Amortisation

(304)

(504)

(588)

(731)

(666)

Depreciation

(278)

(285)

(801)

(1,460)

(1,342)

Exceptionals

(426)

0

(2,542)

0

0

Operating Profit

(4,124)

(5,299)

(10,903)

(7,613)

(4,861)

Other

0

0

0

0

0

Net Interest

27

79

244

50

8

Profit Before Tax (norm)

 

 

(3,367)

(4,716)

(7,529)

(6,833)

(4,187)

Profit Before Tax (FRS 3)

 

 

(4,097)

(5,220)

(10,659)

(7,563)

(4,853)

Tax

548

498

961

908

582

Profit After Tax (norm)

(2,819)

(4,218)

(6,568)

(5,925)

(3,605)

Profit After Tax (FRS 3)

(3,549)

(4,722)

(9,698)

(6,656)

(4,271)

Average Number of Shares Outstanding (m)

1.4

71.6

109.4

137.0

137.0

EPS - normalised (p)

 

 

N/A

(5.89)

(6.00)

(4.32)

(2.63)

EPS - FRS 3 (p)

 

 

N/A

(6.59)

(8.86)

(4.86)

(3.12)

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

10,139

10,432

27,347

29,171

29,678

Intangible Assets

9,446

8,942

23,177

22,461

21,809

Tangible Assets

693

1,490

4,170

6,711

7,868

Other

0

0

0

0

0

Current Assets

 

 

5,856

20,924

22,108

13,178

8,562

Stocks

295

817

1,379

1,379

1,379

Debtors

2,263

3,161

5,436

5,436

5,436

Cash

2,757

15,799

13,724

5,456

1,165

Other

541

1,147

1,569

908

582

Current Liabilities

 

 

(1,278)

(2,354)

(5,850)

(5,850)

(5,850)

Creditors

(1,160)

(2,354)

(5,488)

(5,488)

(5,488)

Short term borrowings

0

0

0

0

0

Short term leases

0

0

0

0

0

Other

(118)

0

(362)

(362)

(362)

Long Term Liabilities

 

 

(1,183)

(1,153)

(2,549)

(2,549)

(2,549)

Long term borrowings

0

0

0

0

0

Long term leases

0

0

0

0

0

Other long term liabilities

(1,183)

(1,153)

(2,549)

(2,549)

(2,549)

Net Assets

 

 

13,534

27,849

41,056

33,951

29,841

CASH FLOW

Operating Cash Flow

 

 

(4,328)

(4,859)

(10,870)

(5,304)

(2,731)

Net Interest

0

0

0

0

0

Tax

251

(133)

371

961

908

Capex

(264)

(1,082)

(2,047)

(4,014)

(2,515)

Acquisitions/disposals

(6,133)

0

(9,357)

0

0

Financing

10,670

19,037

20,013

0

0

Dividends

0

0

0

0

0

Other

(6)

79

(185)

89

47

Net Cash Flow

190

13,042

(2,075)

(8,268)

(4,291)

Opening net debt/(cash)

 

 

(2,754)

(2,757)

(15,799)

(13,724)

(5,456)

HP finance leases initiated

0

0

0

0

0

Other

(187)

0

0

0

0

Closing net debt/(cash)

 

 

(2,757)

(15,799)

(13,724)

(5,456)

(1,165)

Source: Abzena accounts, Edison Investment Research

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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

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Nexstim — Update 27 July 2016

Nexstim

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