TxCell — Aiming for first CAR Treg

TxCell — Aiming for first CAR Treg

TxCell’s novel CAR-modified regulatory T-cell (CAR Treg) platform continues to develop well. TxCell has four indications in preclinical development with the first ever CAR Treg trial, in transplant rejection, anticipated by TxCell to start by late 2018. This could provide powerful clinical proof-of-concept data by 2020. In 2017, an €11.1m gross rights issue provided funding for 2017 with an operational cash use of €13m guided by management. In 2018, warrants could bring a further €10.8m in cash covering costs until the IND is filed for the first ever CAR Treg clinical trial. The indicative market cap remains at €74m.

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Written by

TxCell

Aiming for first CAR Treg

FY16 results

Pharma & biotech

14 March 2017

Price

€1.95

Market cap

€38m

Cash (€m) at 31 December 2016

3.5

Shares in issue
(as of 24 February post share issue)

19.4m

Free float

40%

Code

TXCL

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.0)

(23.9)

(63.8)

Rel (local)

(5.1)

(27.3)

(67.6)

52-week high/low

€5.5

€1.7

Business description

TxCell is developing regulatory T-cell therapies against autoimmune and inflammatory disorders. It is now focused on a novel CAR Treg technology platform. A clinical trial in transplantation may start in 2018. Ovasave for Crohn’s disease is at clinical stage but is on hold.

Next events

Annual report

April 2017

Preclinical update

Q317

IND on CAR Treg

2018

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

TxCell is a research client of Edison Investment Research Limited

TxCell’s novel CAR-modified regulatory T-cell (CAR Treg) platform continues to develop well. TxCell has four indications in preclinical development with the first ever CAR Treg trial, in transplant rejection, anticipated by TxCell to start by late 2018. This could provide powerful clinical proof-of-concept data by 2020. In 2017, an €11.1m gross rights issue provided funding for 2017 with an operational cash use of €13m guided by management. In 2018, warrants could bring a further €10.8m in cash covering costs until the IND is filed for the first ever CAR Treg clinical trial. The indicative market cap remains at €74m.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

0.92

(10.78)

(88)

0.0

N/A

N/A

12/16

0.00

(12.73)

(98)

0.0

N/A

N/A

12/17e

0.00

(11.27)

(56)

0.0

N/A

N/A

12/18e

0.00

(10.95)

(31)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Share issues in 2016, 2017 and 2018 reduce EPS. Revenues shown exclude tax credits.

Focus on CAR Treg with transplant in the lead

TxCell is now focused on the CAR Treg ENTrIA platform technology (see our last published note of 28 February 2017). ENTrIA uses chimeric antigen receptor (CAR) technology similar to that in the CAR T-cell cancer area; TxCell holds a core granted US patent. We expect ENTrIA to be an excellent basis for partnering and technology licensing – although deals are not shown in financial forecasts. The first clinical CAR Treg trial may start in 2018 for transplant, based on a key academic collaboration with published preclinical CAR Treg data. Other potential indications are lupus nephritis, bullous pemphigoid (skin) and multiple sclerosis. Ovasave, using ASTrIA technology with non-modified Tr1 Tregs is on hold.

Financing and funding: Cash into 2018

TxCell had €3.5m cash at the end of 2016 and issued a further 5.5m of shares in the February 2017 €11.1m rights issue. This gave 19.4m shares as of 24 February. TxCell is therefore funded for its estimated 2017 €13m cash burn. By February 2018, TxCell anticipates that conversion of the 4.6m rights issue warrants (four warrants for three shares) will yield up to €10.8m. This could cover 2018 costs until the CAR Treg IND filing, but Edison forecasts that up to €2m additional cash may be needed, perhaps covered by a Treg deal. Edison has updated the financial statements (Exhibit 1) to reflect the figures published on 10 March.

Valuation: Unchanged with good prospects

TxCell is in a transitional phase since the potentially high-value CAR Treg projects are moving through preclinical. The CAR Treg projects have a total nominal value of €30m. Potential CAR Treg deals are valued at €29m using as a benchmark Celgene’s $300m acquisition of Delinia, a preclinical Treg company. After costs and tax, this gives an unchanged NPV of €74m equal to €3.75/share. Assuming full conversion of loans and warrants, the diluted value remains at €2.83/share.

Exhibit 1: Financial summary

€ 000

2015

2016e

2017e

2018e

Year End December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

920

0

0

0

Tax refund

3,718

2,948

3,000

3,000

Cost of Sales

0

0

0

0

Gross Profit

4,638

2,948

3,000

3,000

EBITDA

 

 

(10,797)

(11,946)

(11,113)

(10,956)

Operating Profit (before amort. and except.)

 

(9,662)

(12,046)

(11,213)

(11,056)

Intangible Amortisation

0

0

0

0

Exceptionals

(1,167)

(87)

0

0

Share based payments

(483)

(649)

(650)

(650)

Operating Profit

(11,312)

(12,783)

(11,863)

(11,706)

Net Interest

42

(18)

10

2

Profit Before Tax (norm)

 

 

(10,782)

(12,733)

(11,268)

(10,954)

Profit Before Tax (FRS 3)

 

 

(11,297)

(13,570)

(12,018)

(11,704)

Tax

0

0

0

1

Profit After Tax (norm)

(10,782)

(12,733)

(11,268)

(7,954)

Profit After Tax (FRS 3)

(11,297)

(13,570)

(12,018)

(8,704)

Average Number of Shares Outstanding (m)

12.3

13.0

20.3

25.3

EPS - normalised (c)

 

 

(87.7)

(97.6)

(55.5)

(31.4)

EPS - (IFRS) (c)

 

 

(91.9)

(104.0)

(59.2)

(34.4)

Dividend per share (c)

0.0

0.0

0.0

1.0

Gross Margin (%)

NA

NA

NA

NA

EBITDA Margin (%)

NA

NA

NA

NA

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

NA

NA

NA

NA

BALANCE SHEET

Fixed Assets

 

 

6,938

6,967

7,267

7,567

Intangible Assets

5,907

5,957

6,057

6,157

Tangible Assets

876

826

1,026

1,226

Other

155

184

184

184

Current Assets

 

 

13,782

7,952

5,148

4,614

Stocks

0

0

0

0

Debtors

1,551

1,504

1,504

1,505

Cash

9,208

3,500

644

109

Other

3,023

2,948

3,000

3,000

Current Liabilities

 

 

(7,467)

(9,000)

(7,000)

(5,000)

Creditors

(5,859)

(6,889)

(4,889)

(2,889)

Short term borrowings

(1,608)

(2,111)

(2,111)

(2,111)

Long Term Liabilities

 

 

(1,664)

(4,967)

(1,667)

(3,668)

Long term borrowings

(1,641)

(4,948)

(1,648)

(3,648)

Other long term liabilities

(23)

(19)

(19)

(20)

Net Assets

 

 

11,589

952

3,748

3,513

CASH FLOW

Operating Cash Flow

 

 

(10,108)

(10,379)

(13,010)

(12,958)

Net Interest

42

(18)

10

2

Tax

0

0

0

0

Capex

(214)

(100)

(400)

(400)

Acquisitions/disposals

(5,879)

0

0

0

Equity financing

7,631

1,700

13,845

10,821

Other

3,813

3,089

(3,300)

2,000

Net Cash Flow

(4,715)

(5,708)

(2,855)

(535)

Opening net debt/(cash)

 

 

(10,895)

(5,959)

3,559

3,115

HP finance leases initiated

0

0

0

1

Other

(221)

(3,810)

3,300

(2,000)

Closing net debt/(cash)

 

 

(5,959)

3,559

3,115

5,649

Source: TxCell accounts, Edison Investment Research. Note: *Equity in 2017 is €3.3m loan conversion and the €11 rights issue. Equity in 2018 assumes full rights warrant conversion, although this could happen progressively over the period to February 2018. A €2m nominal long-term loan is indicated in 2018 covered possible additional funding needs. FY16 accounts have not been fully published. FY15 has been adjusted in line with the headline 2016 figures.

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 TxCell 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 St

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 St

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 TxCell 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 St

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 St

Sydney NSW 2000

Australia

Research: Real Estate

Palace Capital — Another NAV-accretive disposal

Palace continues to demonstrate its ability to grow NAV per share through its strategic recycling of assets. The disposal of a property in Maldon has realised value created through recent asset management initiatives. As with two other recent sales, this is in line with the company’s strategy to increase shareholder value through active management of the investment portfolio. We have adjusted our forecasts for the £1.56m gain in value and, although we have not assumed any additional acquisitions, would expect Palace to reinvest the proceeds in other regional property assets at attractive yields and with further scope for capital gains.

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