Collplant Holdings — A productive year to date

Collplant Holdings — A productive year to date

The year to date has been highly productive for CollPlant. It has completed a new production facility in Rehovot to support its increased commercial efforts. These include both its BioInk product for 3D bioprinting of organs and tissue, as well as VergenixFG and VergenixSTR for wound care and tendinopathy respectively, which are expanding operations in Europe. In addition, the company has announced its intention to de-list from TASE to trade exclusively on NASDAQ.

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CollPlant Holdings

A productive year to date

Earnings update

Pharma & biotech

30 May 2018

Price*

NIS0.39

Market cap

NIS66m

*Priced at 29 May 2018

NIS3.57/US$

Net cash ($m) at March 2018, plus Alpha tranche

4.9

Shares in issue/ADS in issue

171m/3.42m

Free float

49%

Code

CLGN

Primary exchange

NASDAQ

Secondary exchange

TASE

Share price performance

%

1m

3m

12m

Abs

2.4

(22.9)

(10.1)

Rel (local)

0.0

(23.4)

(14.9)

52-week high/low

NIS0.6

NIS0.3

Business description

CollPlant is an Israel-based regenerative medicine company. It is focused on developing and commercialising tissue repair products with its plant-based technology, rhCollagen. It has two products on the market, VergenixSTR and VergenixFG, and has received several orders for its 3D bioprinting product, BioInk.

Next events

Continued sales ramp-up

2018

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

The year to date has been highly productive for CollPlant. It has completed a new production facility in Rehovot to support its increased commercial efforts. These include both its BioInk product for 3D bioprinting of organs and tissue, as well as VergenixFG and VergenixSTR for wound care and tendinopathy respectively, which are expanding operations in Europe. In addition, the company has announced its intention to de-list from TASE to trade exclusively on NASDAQ.

Year end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/16

0.3

(27.9)

(0.28)

0.0

N/A

N/A

12/17

1.7

(20.9)

(0.16)

0.0

N/A

N/A

12/18e

3.3

(21.3)

(0.12)

0.0

N/A

N/A

12/19e

7.3

(19.6)

(0.10)

0.0

N/A

N/A

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

New rhCollagen production facility built

To meet future commercial and research needs, CollPlant opened a new 6,000 sq ft production facility for rhCollagen in Rehovot, Israel, in April 2018. The new facility is certified for good manufacturing practices (cGMP), and is focused on the purification and formulation of rhCollagen. The first production runs in the facility have been completed, and at the last report are in quality testing.

Additional BioInk delivered

The company previously announced that it had received multiple orders of its BioInk product from a biotechnology and medical device company. The orders were intended for research into the development of bioprinted organs and orthopaedic implants respectively. One of the clients placed a repeat order, which was delivered in Q118. The company recorded sales of $222,000 from this order and sales of its Vergenix brand product in Q118.

Financing complete, runway into 2019

The company initiated a series of financings starting in September 2017 with a number of investors (Alpha Capital, Meitav Dash and Ami Sagi), totalling approximately $8m, with up to $15m available through the exercise of warrants. With the NASDAQ uplisting, the company has completed its obligations under these agreements and received its final tranche, bringing estimated net cash to $4.9m ($3.9m at quarter end plus $1m from the final Alpha tranche in April, not accounting for subsequent cash burn), which we expect to provide a runway into 2019. CollPlant also announced that it is in proceedings to voluntarily de-list from the TASE.

Valuation: Increased to $79m or $22.96 per ADS (NIS 1.65 per share)

We have slightly increased our valuation to $79m or $22.96 per ADS from $77m or $22.62 per ADS. This was driven by rolling forward our NPVs, offset by lower net cash. We expect CollPlant to require $7m (up from $5.7m) in additional capital to reach profitability in 2021.

Valuation

We have slightly increased our valuation to $79m or $22.96 per ADS from $77m or $22.62 per ADS. This increase is driven by rolling forward our NPVs, offset by lower net cash. We currently do not include recurring revenue from the BioInk product in our model, although we may add this at a later date if the company continues to receive orders or if the technology is licensed and integrated into a product.

Exhibit 1: Valuation of CollPlant

Product

Status

NPV ($m)

rNPV ($m)

VergenixFG: Woundcare

Europe market

28.3

28.3

VergenixSTR: Tendonopathy

Europe market

56.7

56.7

Portfolio total

85.0

85.0

R&D

(7.1)

SG&A

(4.2)

Cash (Q118 + Alpha financing)

4.9

Overall valuation

78.6

ADSs

3.42

Value per basic ADS

22.96

Warrants, Options, and Debentures

3.5

Total diluted ADSs

7.0

Diluted value

103.2

Value per diluted ADS

14.83

Source: CollPlant reports, Edison Investment Research

Financials

Collplant reported revenue of $222,000 in Q118 from sales of its BioInk as well as Vergenix brands in Europe. Operating expenses were $2.3m, compared to $1.5m in Q117. The majority of the increase in costs is attributable to non-cash expenses associated with the Alpha financing agreement and an increase in share-based compensation. We have slightly increased our expected operating loss for 2018 to NIS21.4m ($6.0m) from NIS18.9m ($5.4m) to adjust for these and other expenses. The company ended the quarter with $3.9m in cash and received $1.0m associated with the closing of the Alpha financing in April, which we expect to provide sufficient capital for 2018. We currently forecast that the company will need $7m (increased from $5.7m) in additional capital to reach profitability in 2021, which we record as illustrative debt in 2019.

Exhibit 2: Financial summary

NIS'000s

2015

2016

2017

2018e

2019e

Year end 31 Dec

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

292

1,668.00

3,272.56

7,311.60

Cost of Sales

0

0

(52)

(1,333)

(3,656)

Gross Profit

0

292

1,616

1,940

3,656

R&D expenses,net

(11,864)

(16,789)

(14,066)

(14,064)

(14,767)

SG&A expenses

(6,950)

(11,048)

(8,303)

(9,280)

(8,558)

EBITDA

 

 

(18,026)

(27,023)

(19,670)

(20,330)

(18,076)

Operating Profit (before amort. and except)

 

(18,814)

(27,545)

(20,753)

(21,404)

(19,670)

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Operating Profit

(18,814)

(27,545)

(20,753)

(21,404)

(19,670)

Other

0

0

0

0

0

Net Interest

164

(348)

(127)

90

35

Profit Before Tax (norm)

 

 

(18,650)

(27,893)

(20,880)

(21,315)

(19,634)

Profit Before Tax (FRS 3)

 

 

(18,650)

(27,893)

(20,880)

(21,315)

(19,634)

Tax

0

0

0

0

0

Profit After Tax (norm)

(18,650)

(27,893)

(20,880)

(21,315)

(19,634)

Profit After Tax (FRS 3)

(18,650)

(27,893)

(20,880)

(21,315)

(19,634)

Average Number of Shares Outstanding (m)

84.7

100.6

133.2

179.7

188.7

EPS - normalised (NIS)

 

 

(0.22)

(0.28)

(0.16)

(0.12)

(0.10)

EPS - FRS 3 (NIS)

 

 

(0.22)

(0.28)

(0.16)

(0.12)

(0.10)

Dividend per share (NIS)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

4,971

6,364

5,631

7,385

6,665

Intangible Assets

1,721

1,631

1,454

1,408

1,408

Tangible Assets

2,612

4,008

3,582

5,310

4,590

Other

638

725

595

667

667

Current Assets

 

 

8,558

8,069

22,414

10,438

21,692

Stocks

0

487

700

1,038

2,983

Debtors

3,241

3,785

3,897

2,483

3,147

Cash

5,317

3,797

17,817

6,918

15,562

Other

0

0

0

0

0

Current Liabilities

 

 

(3,750)

(6,806)

(4,918)

(5,542)

(5,539)

Creditors

(2,496)

(5,189)

(2,922)

(3,837)

(3,834)

Short term borrowings

0

0

0

0

0

Short term leases

0

0

0

0

0

Other

(1,254)

(1,617)

(1,996)

(1,705)

(1,705)

Long Term Liabilities

 

 

0

(2,467)

(14,044)

(1,413)

(26,413)

Long term borrowings

0

(286)

(12,700)

0

(25,000)

Long term leases

0

0

0

0

0

Other long term liabilities

0

(2,181)

(1,344)

(1,413)

(1,413)

Net Assets

 

 

9,779

5,160

9,083

10,869

(3,595)

CASH FLOW

Operating Cash Flow

 

 

(14,496)

(19,384)

(17,903)

(13,665)

(15,447)

Net Interest

(2)

8

19

(254)

(35)

Tax

1

0

0

0

0

Capex

(1,389)

(492)

(447)

(2,260)

(873)

Acquisitions/disposals

0

0

0

0

0

Financing

10,010

18,219

20,234

17,960

0

Dividends

0

0

0

0

0

Other

27

0

0

0

0

Net Cash Flow

(5,849)

(1,649)

1,903

1,782

(16,355)

Opening net debt/(cash)

 

 

(11,062)

(5,317)

(3,511)

(5,117)

(6,918)

HP finance leases initiated

0

0

(253)

0

0

Other

104

(157)

(44)

19

0

Closing net debt/(cash)

 

 

(5,317)

(3,511)

(5,117)

(6,918)

9,438

Source: CollPlant reports, Edison Investment Research

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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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. 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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). 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Germany

London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

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10017, New York

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Level 4, Office 1205

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Israel

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. 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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. 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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

Research: Industrials

Epwin Group — Existing guidance maintained

A short AGM update statement echoed previous management comments regarding market conditions and (unchanged) FY18 expectations. This suggests that the underlying trading environment is broadly stable and actions being taken to improve operational efficiency are proceeding to plan. The share price performance will be driven by delivery against these expectations and/or any indication of more robust market conditions, in our view. Ahead of such a catalyst, the prospective 6.6% dividend yield is a clear incentive to invest.

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