Deinove — Progress implementing the new strategy

Deinove (EG: ALDEI)

Last close As at 17/04/2024

0.64

0.00 (0.00%)

Market capitalisation

14m

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Research: Healthcare

Deinove — Progress implementing the new strategy

Progress has been made in implementing the new corporate strategy and Deinove expects commercial revenues from FY18. Cash resources are sufficient to finance the business for the rest of FY17 and into FY18. Upside for the shares will be dependent on Deinove’s ability to demonstrate commercial deployment of its technology and generate revenue in its target markets.

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Healthcare

Deinove

Progress implementing the new strategy

FY16 results

Pharma & biotech

6 April 2017

Price

€2.02

Market cap

€21m

Net cash* (€m) at 31 December 2016

9.3

*Company definition

Shares in issue

10.3m

Free float

71%

Code

ALDEI

Primary exchange

Alternext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.8

(10.2)

(45.3)

Rel (local)

3.4

(14.2)

(53.4)

52-week high/low

€4.0

€1.8

Business description

Deinove is a biotechnology company that discovers, develops and produces high value-added compounds from rare bacteria, including Deinococcus bacteria.

Next events

AGM

May 2017

Analysts

Graeme Moyse

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

Deinove is a research client of Edison Investment Research Limited

Progress has been made in implementing the new corporate strategy and Deinove expects commercial revenues from FY18. Cash resources are sufficient to finance the business for the rest of FY17 and into FY18. Upside for the shares will be dependent on Deinove’s ability to demonstrate commercial deployment of its technology and generate revenue in its target markets.

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

0.5

(7.3)

(66.8)

0.0

N/A

N/A

12/16

0.8

(6.9)

(64.6)

0.0

N/A

N/A

12/17e

0.5

(7.9)

(56.6)

0.0

N/A

N/A

12/18e

1.2

(7.2)

(44.2)

0.0

N/A

N/A

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

Reshaping the business

Deinove has made progress in implementing its new strategy (ex-biofuels), which is now focused on two areas: healthcare (antifungal and antibiotics) and industrial biotech (cosmetics and nutrition). Reflecting its strategic objectives Deinove has reconfigured its board, appointing four directors with considerable experience in the pharmaceutical industry, including Charles Woler as Chairman. In healthcare, where a significant market opportunity exists to develop new antimicrobial drugs, Deinove completed (January 2017) its acquisition of Deinobiotics (now 100% owned) and has appointed Bernard Scorneaux (March 2017) as preclinical project manager for the division. Deinove also recently concluded in vitro tests on a number of wild strains of bacteria and successfully identified a number that possess properties which make them suitable candidates for use in its target markets. Following the screening programme, Deinove announced the formation of a partnership with Greentech to develop and market active ingredients for skin care (complementing those with Avril and Flint Hill Resources in nutrition). Deinove expects to bring its first product (carotenoids) to market by the end of 2018. We forecast the first commercial revenue from the Deinochem project in 2018.

FY16 slightly ahead of forecasts

FY16 results were slightly ahead of our forecasts, with revenue of €0.8m (Edison FY16e €0.5m) and a net loss of €6.3m (Edison FY16e €6.7m), in part due to higher revenue, but also as a result of better cost control than we had anticipated. Deinove believes that net cash of €9.3m is sufficient to last until Q118 without further recourse to tranches 3 & 4 of the Kepler facility (€8m). At the same time, Deinove will pursue non-dilutive sources of funding for its healthcare business.

Valuation: Upside potential

Deinove’s target markets are large (cosmetic > $100bn, nutrition >$100bn, health >$50bn). By comparison, its market capitalisation is modest (c €20m), but upside will be dependent on the successful commercial deployment of its technology and its ability to penetrate its target markets and generate revenue.

Exhibit 1: Financial summary

€'000s

2015

2016

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

492

793

469

1,247

Cost of sales

0

0

0

0

Gross profit

492

793

469

1,247

EBITDA

 

 

(7,309)

(6,983)

(7,300)

(6,414)

Operating profit (before amort. and except.)

(7,331)

(6,956)

(7,943)

(7,155)

Intangible Amortisation

(634)

(736)

(244)

(426)

Exceptionals

(10)

283

0

0

Other

0

0

0

0

Operating profit

(7,975)

(7,409)

(8,187)

(7,581)

Net Interest

(14)

15

0

0

Profit before tax (norm)

 

 

(7,345)

(6,941)

(7,943)

(7,155)

Profit before tax (FRS 3)

 

 

(7,989)

(7,394)

(8,187)

(7,581)

Tax

1,633

1,115

2,078

2,580

Profit after tax (norm.)

(5,712)

(5,826)

(5,865)

(4,575)

Profit after tax (FRS 3)

(6,356)

(6,279)

(6,109)

(5,001)

Average number of shares outstanding (m)

8.6

9.0

10.4

10.4

EPS - normalised (c)

 

 

(66.8)

(64.6)

(56.6)

(44.2)

EPS - (IFRS) (c)

 

 

(74.3)

(69.6)

(59.0)

(48.3)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross margin (%)

N/A

N/A

N/A

N/A

EBITDA margin (%)

N/A

N/A

N/A

N/A

Operating margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed assets

 

 

1,968

2,366

5,623

5,056

Intangible assets

117

201

3,600

3,174

Tangible assets

1,055

853

712

570

Investments

796

1,312

1,312

1,312

Current assets

 

 

15,359

11,537

9,135

5,106

Stocks

0

0

0

0

Debtors

2,393

1,792

2,097

2,003

Cash

11,932

9,316

6,609

2,675

Other

1,034

429

429

429

Current liabilities

 

 

(2,719)

(2,142)

(3,640)

(4,046)

Creditors

(2,719)

(2,142)

(3,640)

(4,046)

Short-term borrowings

0

0

0

0

Long-term liabilities

 

 

(6,512)

(9,193)

(10,425)

(10,425)

Long-term borrowings

(6,497)

(9,178)

(10,410)

(10,410)

Other long-term liabilities

(15)

(15)

(15)

(15)

Net Assets

 

 

8,096

2,568

693

(4,309)

CASH FLOW

Operating cash flow

 

 

(7,324)

(6,079)

(6,885)

(6,319)

Net Interest

(14)

15

0

0

Tax

1,633

1,115

2,857

2,985

Capex

(289)

(620)

(501)

(600)

Acquisitions/disposals

756

(479)

(3,642)

0

Financing

14,257

752

4,233

0

Dividends

0

0

0

0

Net cash flow

9,019

(5,297)

(3,939)

(3,934)

Opening net debt/(cash)

 

 

3,584

(5,435)

(138)

3,801

HP finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

(5,435)

(138)

3,801

7,735

Closing net debt/(cash) (company definition)

(12,432)

(9,316)

(6,609)

(2,675)

Source: Company accounts, Edison Investment Research

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 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deinove 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 2017. “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 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deinove 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 2017. “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

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