Probiodrug — Update 9 November 2015

Probiodrug — Update 9 November 2015

Probiodrug

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Probiodrug

Private placement to extend cash runway

Private placement

Pharma & biotech

10 November 2015

Price

€20.00

Market cap

€148m

Net cash (€m) at 30 June 2015

14.8

Shares in issue

7.4m

Free float

56%

Code

PBD

Primary exchange

Euronext Amsterdam

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.2

(9.1)

(8.0)

Rel (local)

(3.8)

(2.9)

(18.6)

52-week high/low

US$24

US$17.5

Business description

Probiodrug is a German biopharmaceutical company developing its clinical pipeline for the treatment of Alzheimer’s disease. Lead product candidate, PQ912, has entered Phase IIa. PQ912 is a small molecule inhibitor of glutaminyl cyclase (QC), which is essential for the formation of pGlu-Abeta. Two further products are in preclinical stages.

Next events

Q315 IMS

November 2015

Phase I data from Lilly’s LY3002813 (read-across to PBD-C06)

Q415

PQ912 first Phase IIa data

Mid-2016

Analysts

Dr Lucy Codrington

+44 (0)20 3681 2527

Dr Philippa Gardner

+44 (0)20 3681 2521

Probiodrug is a research client of Edison Investment Research Limited

Probiodrug has announced a capital raise of €13.5m from a private placement of 0.68m new shares; we estimate net proceeds of €12.9m. These funds should ensure Probiodrug can move swiftly ahead with future development plans for lead product PQ912 once data from the ongoing Phase IIa SAPHIR trial become available around mid-2016. Furthermore, the improved financial position should ensure Probiodrug can negotiate any deal terms, if a partner is sought, from a position of strength. Our rNPV is increased to €234m with inclusion of these new funds.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/13

0.0

(9.8)

(2.30)

0.0

N/A

N/A

12/14

0.0

(11.4)

(2.35)

0.0

N/A

N/A

12/15e

0.0

(14.1)

(1.98)

0.0

N/A

N/A

12/16e

0.0

(13.3)

(1.78)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items.

Capital raise completed

The private placement of 676,589 new shares at a price of €20/share (0% discount to the closing price on 5 November) raised gross proceeds of €13.5m. The company reports that there was strong demand from international institutional investors. The issued shares represent c 10% of the currently issued share capital.

Proceeds should provide cash runway into 2017

We estimate the net proceeds to be €12.9m; our model suggests that this should be sufficient to fund operations into 2017 (vs mid-2016 previously). Importantly, this incorporates the key milestone of the SAPHIR initial readout in mid-2016 which, if positive, could trigger a partnership. The funds raised will afford Probiodrug a stronger negotiating position with any potential future partner.

Funds to develop pipeline beyond PQ912

In addition to supporting the further clinical development of lead candidate PQ912, Probiodrug intends to use the proceeds to advance development of the preclinical pipeline, PBC-C06 and PQ1565. Like PQ912, these products are directed at pGlu-Abeta, a toxic variant of amyloid-beta, implicated as an initiating and sustaining factor in the AD pathological cascade. Part of this will include preclinical studies to assess combination approaches using its products, building on recent research suggesting a synergistic effect on Abeta clearance using combinations of therapies.

Valuation: Risk-adjusted NPV of €234m

Our rNPV has increased to €234m (vs €218m previously) with the addition of estimated net proceeds of €12.9m to end-H115 cash. On a per share basis, our valuation is slightly diluted to €31.5/share (vs €32) due to the increased share count. We assume increased R&D spend in FY15/16 (€10.7m and €9.8m vs €8.3m and €8.4m) taking advantage of available funds. We now forecast end-FY15 net cash of €21.1m (vs €10.4m), with a consequent increase to interest income from 2016. Our main underlying valuation assumptions are otherwise unchanged.

Financial summary

Exhibit 1: Financial summary

EUR'000s

2011

2012

2013

2014

2015e

2016e

December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

21

6

0

0

0

0

Cost of Sales

0

0

0

0

0

0

Gross Profit

21

6

0

0

0

0

Research and development

(13,229)

(9,255)

(8,004)

(8,087)

(10,652)

(9,835)

EBITDA

 

 

(13,856)

(10,206)

(9,387)

(11,173)

(13,969)

(13,540)

Operating Profit (before amort. and except.)

(14,225)

(10,521)

(9,675)

(11,241)

(14,003)

(13,573)

Intangible Amortisation

(44)

(37)

(26)

(26)

(25)

(25)

Exceptionals

0

0

0

0

0

0

Other

0

0

0

0

0

0

Operating Profit

(14,269)

(10,558)

(9,701)

(11,267)

(14,028)

(13,599)

Net Interest

8

(314)

(106)

(170)

(50)

299

Profit Before Tax (norm)

 

 

(14,217)

(10,835)

(9,781)

(11,411)

(14,053)

(13,275)

Profit Before Tax (FRS 3)

 

 

(14,261)

(10,872)

(9,807)

(11,437)

(14,078)

(13,300)

Tax

6

(656)

0

0

0

0

Profit After Tax (norm)

(14,211)

(11,491)

(9,781)

(11,411)

(14,053)

(13,275)

Profit After Tax (FRS 3)

(14,255)

(11,528)

(9,807)

(11,437)

(14,078)

(13,300)

Average Number of Shares Outstanding (m)

3.5

4.1

4.3

4.9

7.1

7.4

EPS - normalised (EUR)

 

 

(4.09)

(2.84)

(2.30)

(2.35)

(1.98)

(1.78)

EPS - normalised and fully diluted (EUR)

 

(4.09)

(2.84)

(2.30)

(2.35)

(1.98)

(1.78)

EPS - (IFRS) (EUR)

 

 

(4.10)

(2.85)

(2.30)

(2.35)

(1.98)

(1.79)

Dividend per share (EUR)

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

n/a

n/a

n/a

n/a

EBITDA Margin (%)

-65981.0

-170100.0

n/a

n/a

n/a

n/a

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

-67738.1

-175350.0

n/a

n/a

n/a

n/a

BALANCE SHEET

Fixed Assets

 

 

8,061

996

425

186

131

72

Intangible Assets

6,794

67

101

82

57

31

Tangible Assets

1,264

926

321

101

71

38

Investments

3

3

3

3

3

3

Current Assets

 

 

11,032

9,009

5,856

21,294

21,459

9,165

Stocks

18

18

0

0

0

0

Debtors

1

5

0

0

0

0

Cash

10,314

7,726

4,421

20,920

21,085

8,791

Other

699

1,260

1,435

374

374

374

Current Liabilities

 

 

(3,136)

(3,570)

(9,320)

(4,580)

(4,905)

(4,844)

Creditors

(3,136)

(3,570)

(3,974)

(4,580)

(4,905)

(4,844)

Short term borrowings

0

0

(5,346)

0

0

0

Long Term Liabilities

 

 

(1,012)

(1,070)

(1,265)

(929)

(929)

(929)

Long term borrowings

0

0

0

0

0

0

Other long term liabilities

(1,012)

(1,070)

(1,265)

(929)

(929)

(929)

Net Assets

 

 

14,945

5,365

(4,304)

15,971

15,756

3,464

CASH FLOW

Operating Cash Flow

 

 

(14,404)

(12,090)

(8,477)

(10,540)

(12,636)

(12,593)

Net Interest

39

22

9

(54)

(50)

299

Tax

44

28

9

5

0

0

Capex

(84)

(64)

(4)

(2)

(4)

0

Acquisitions/disposals

0

0

0

0

0

0

Financing

18,658

9,516

(188)

32,436

12,855

0

Dividends

0

0

0

0

0

0

Net Cash Flow

4,253

(2,588)

(8,651)

21,845

165

(12,294)

Opening net debt/(cash)

 

 

(6,061)

(10,314)

(7,726)

925

(20,920)

(21,085)

HP finance leases initiated

0

0

0

0

0

0

Other

0

0

0

0

0

0

Closing net debt/(cash)

 

 

(10,314)

(7,726)

925

(20,920)

(21,085)

(8,791)

Source: Edison Investment Research, Probiodrug accounts. Note: The negative net interest in 2015e relates to interest on potential late payment obligations of back taxes (relating to 2004); the company has filed a lawsuit contesting the back taxes.

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US

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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Finmeccanica — Update 9 November 2015

Finmeccanica

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