TxCell — Lonza to make CAR Tregs

TxCell — Lonza to make CAR Tregs

TxCell has announced that Lonza, the biopharmaceutical and cell manufacturing global specialist, will produce its CAR Tregs. TxCell uses a robust manufacturing design to give low inter-patient variability with potentially consistent therapeutic results. The time needed to transfer and validate the process in Lonza will push the IND filing to H119, formerly by Q418 but with security of supply. TxCell has drawn €5.4m of convertible loans ytd and is seeking longer-term funding or a partnering deal. The indicative valuation remains at €87.9m.

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TxCell

Lonza to make CAR Tregs

Annual report, Lonza deal

Pharma & biotech

12 June 2018

Price

€0.86

Market cap

€19m

Cash (€m) at 31 March 2018

3.6

Shares in issue
(as of 5 June 2018)

22.34m

Free float

59.45%

Code

TXCL

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(24.7)

(33.3)

(60.3)

Rel (local)

(23.8)

(35.5)

(61.6)

52-week high/low

€2.2

€0.9

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 file for regulatory authorisation in H1 2019. Lonza is the manufacturing partner.

Next events

Q2 results

19 July 2018

Filing of IND

H119

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

TxCell is a research client of Edison Investment Research Limited

TxCell has announced that Lonza, the biopharmaceutical and cell manufacturing global specialist, will produce its CAR Tregs. TxCell uses a robust manufacturing design to give low inter-patient variability with potentially consistent therapeutic results. The time needed to transfer and validate the process in Lonza will push the IND filing to H119, formerly by Q418 but with security of supply. TxCell has drawn €5.4m of convertible loans ytd and is seeking longer-term funding or a partnering deal. The indicative valuation remains at €87.9m.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/16

0.00

(12.73)

(98)

0.0

N/A

N/A

12/17

0.00

(9.71)

(46)

0.0

N/A

N/A

12/18e

0.00

(11.87)

(53)

0.0

N/A

N/A

12/19e

0.00

(12.02)

(54)

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 2018 will reduce EPS.

CAR Treg with multiple preclinical projects

TxCell aims to be the leading Treg company to treat immune disorders using chimeric antigen receptor (CAR) technology. In an ASCO discussion, Professor Carl June, MD, a pioneer of CAR-T therapy for cancer, noted that “Engineering T cells is a way to put the immune system on steroids and boost it to fight not just cancer but other chronic diseases…Companies are...investigating CAR T-cell therapy in organ transplantation to eliminate the need for lifelong immune-suppressants. The same principles that apply in the treatment of cancer apply to other diseases impacted by inflammation”. TxCell plans CAR Treg trials as a proof of concept in solid organ transplant.

Lonza to manufacture

TxCell can make autologous CAR Tregs in about three to four weeks. Lonza will now take this process and transfer it to its facility in Holland to supply global clinical trials. TxCell has gained a globally recognised manufacturing partner, which will reduce risk for potential partners. However, Lonza’s scheduling constraints mean that the validation of the process will postpone the IND filing into H119. The deal avoids the need for TxCell to incur long-term manufacturing overheads.

Valuation: €87.9m value unchanged

As at 31 March 2018, TxCell had €3.6 m of cash after gaining €1.9m in advanced tax credits and the delayed payment of €2m to Trizell. Of the €5.4m loan notes issued ytd, €0.4m in nominal value had converted to 0.4m shares by 5 June at an average of €0.99/share. The 2016 loans have all converted. The new loan terms are much improved with no fees and fewer warrants (450,000 ytd). TxCell is now better placed to partner its CAR Treg programme - although any deal remains uncertain. If no deal is concluded during 2018, TxCell could draw up to €13.8m of loans by the year end; it can stop drawdowns at any time if other funding is available. The indicative value remains at €87.9m.The use of convertible loans will lead to further dilution over 2018.

Exhibit 1: Financial summary

€000s

2016

2017

2018e

2019e

Year End December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

0

0

0

Tax refund

2,948

2,234

2,500

2,500

Cost of Sales

0

0

0

0

Gross Profit

2,948

2,234

2,500

2,500

EBITDA

 

 

(11,946)

(9,301)

(11,772)

(11,924)

Operating Profit (before amort. and except.)

 

(12,046)

(9,401)

(11,872)

(12,024)

Intangible Amortisation

0

0

0

0

Exceptionals

(87)

0

0

0

Share based payments

(649)

(1,099)

(1,000)

(1,000)

Operating Profit

(12,783)

(10,500)

(12,872)

(13,024)

Net Interest

(18)

(96)

(100)

(100)

Profit Before Tax (norm)

 

 

(12,733)

(9,712)

(11,872)

(12,024)

Profit Before Tax (FRS 3)

 

 

(13,569)

(10,911)

(12,972)

(13,123)

Tax

0

0

0

0

Profit After Tax (norm)

(12,733)

(9,712)

(11,872)

(12,024)

Profit After Tax (FRS 3)

(13,569)

(10,911)

(12,972)

(13,123)

Average Number of Shares Outstanding (m)

13.1

21.0

22.4

22.4

EPS - normalised (c)

 

 

(97.5)

(46.3)

(53.0)

(53.7)

EPS - (IFRS) (c)

 

 

(103.9)

(52.0)

(57.9)

(58.6)

Dividend per share (c)

0.0

0.0

0.0

0.0

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

 

 

7,031

7,254

7,204

7,154

Intangible Assets

5,911

5,935

5,885

5,835

Tangible Assets

799

1,041

1,041

1,041

Other

322

278

278

278

Current Assets

 

 

5,763

7,530

5,315

3,243

Stocks

0

0

0

0

Debtors

1,381

2,620

2,620

2,620

Cash

3,482

4,910

2,695

623

Other

900

0

0

0

Current Liabilities

 

 

(7,893)

(6,683)

(2,590)

(2,590)

Creditors

(7,724)

(6,345)

(2,252)

(2,252)

Short term borrowings

(169)

(338)

(338)

(338)

Long Term Liabilities

 

 

(3,710)

(1,481)

(14,881)

(24,881)

Long term borrowings

(3,650)

(1,161)

(14,561)

(24,561)

Other long term liabilities

(60)

(321)

(321)

(321)

Net Assets

 

 

1,191

6,620

(4,952)

(17,074)

CASH FLOW

Operating Cash Flow

 

 

(10,417)

(9,657)

(15,693)

(11,751)

Net Interest

(18)

(96)

(100)

(100)

Tax

0

0

0

0

Capex

(337)

(196)

(222)

(222)

Acquisitions/disposals

0

0

0

0

Equity financing

270

10,084

400

0

Other

4,776

1,293

13,400

10,000

Net Cash Flow

(5,726)

1,429

(2,215)

(2,072)

Opening net debt/(cash)

 

 

(7,567)

337

(3,411)

12,204

HP finance leases initiated

0

0

0

0

Other

(2,178)

2,320

(13,400)

(10,000)

Closing net debt/(cash)

 

 

337

(3,411)

12,204

24,276

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 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

DISCLAIMER
Copyright 2018 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 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.
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Frankfurt +49 (0)69 78 8076 960

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London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, 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

295 Madison Avenue, 18th Floor

10017, 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 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

DISCLAIMER
Copyright 2018 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 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. 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

295 Madison Avenue, 18th Floor

10017, 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

295 Madison Avenue, 18th Floor

10017, 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 — A year of significant development and growth

The year ended 31 March 2018 was one of significant development and growth for Palace, including the £68m acquisition of RT Warren, its largest acquisition to date, a £70m capital raise, and a move to trading on the Main Market of the LSE. The shares will join the FTSE Small Cap Index and FTSE All Share Index on 18 June. The portfolio, enlarged by the RT Warren acquisition, offers significant asset management opportunities, while management seeks further accretive acquisitions, neither of which is reflected in our estimates. The shares offer an attractive yield and trade at a significant discount to NAV.

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