ReNeuron Group — Funding to complete Phase IIa and other projects

ReNeuron Group (AIM: RENE)

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Research: Healthcare

ReNeuron Group — Funding to complete Phase IIa and other projects

ReNeuron is focused on human retinal progenitor cell therapy (hRPC) for retinitis pigmentosa (RP). Ongoing Phase IIa data show a stable average gain in visual acuity. A nine-patient continuation Phase IIa study is underway at a higher dose. A placing of £15m and an open offer of up to £2.5m at 70p/share, totalling up to £17.5m before costs, are planned to give at least 18 months cash to complete the Phase IIa, potentially initiate a pivotal study in H2 CY22 and progress preclinical exosome and other cell therapy projects. The valuation is adjusted to £190m, formerly £170m.

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Healthcare

ReNeuron Group

Funding to complete Phase IIa and other projects

Placing and rights issue

Pharma & biotech

8 December 2020

Price

81.0p

Market cap

£26m

$1.32/£

Gross cash (£m) at 30 September 2020

9.8

Shares in issue at 30 September
(Note, with placing and offer will be up to 56.85m shares)

31.85m

Free float

99.7%

Code

RENE

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(8.1)

(4.9)

(41.0)

Rel (local)

(17.3)

(14.4)

(35.8)

52-week high/low

168.5p

74.5p

Business description

ReNeuron Group is a UK biotech company developing allogeneic cell therapies. Human retinal progenitor cells are the lead Phase I/IIa project for retinitis pigmentosa. There is a strong preclinical technology base in exosomes.

Next events

Further hRPC Phase I/IIa data

CY21

FY21 results

July 2021

hRPC pivotal study start

H2 CY22

Analyst

Dr John Savin

+44 (0)20 3077 2500

ReNeuron Group is a research client of Edison Investment Research Limited

ReNeuron is focused on human retinal progenitor cell therapy (hRPC) for retinitis pigmentosa (RP). Ongoing Phase IIa data show a stable average gain in visual acuity. A nine-patient continuation Phase IIa study is underway at a higher dose. A placing of £15m and an open offer of up to £2.5m at 70p/share, totalling up to £17.5m before costs, are planned to give at least 18 months cash to complete the Phase IIa, potentially initiate a pivotal study in H2 CY22 and progress preclinical exosome and other cell therapy projects. The valuation is adjusted to £190m, formerly £170m.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/19

2.7

(17.2)

(45.34)

0.0

N/A

N/A

03/20

6.2

(13.9)

(35.85)

0.0

N/A

N/A

03/21e

0.2

(14.4)

(32.85)

0.0

N/A

N/A

03/22e

0.2

(13.3)

(20.55)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Shares in issue forecast at 56.85m at YE2020

Placing gives funding to at least Q2 CY22

The oversubscribed placing is raising £13.9m with a further £1.1m from directors and associated funds. This is at 70p, a discount of 27% to the November 23 close of 96.45p. There is also a one-for-nine open offer for up to £2.5m; we do not factor this into our current cash forecast as the take-up is unknown. These transactions need EGM approval on 11 December. Total shares in issue could rise by up to 25m to 56.85m from 31.85m. The new shares, if all are issued, will be 43.9% of the new share capital, giving a dilution of about 79%. Management expects the placing, net of costs, to provide cash to at least Q2 CY22.

H121 results and FY21 outlook

In H1 FY21 to 30 September, the loss (after a £0.9m tax credit) was £7.1m. The operating cash outflow, helped by working capital gains, was £5.5m, offset by receipt of the £2.9m FY19 tax credit. This gave a cash outflow of £2.6m. For FY21, we expect operating cash use to be c £13.8m. We assume the raised H1 creditor level (£8m), possibly related to the closed stroke trial, to reduce to £6m. Given £9.8m H1 FY21 cash, we estimate FY21 year-end cash of about £16m based on the placing proceeds, a reduction in working capital and receipt of tax credits from FY19 and FY20. FY22 costs are expected to be lower after the June CY20 restructuring.

Valuation: Revised to £190m

The value has been adjusted to take account of the prospective funding, adjusted after H221 results for income, lower costs and revised cash flow. A hPRC approval (unchanged probability of 30%) is now expected around H2 CY25, formerly by Q4 CY24. The immunotherapy and diabetes cell therapy projects have good deal potential but are preclinical. Exosome evaluation projects to deliver RNA drugs are promising and require early licensing. This takes the indicative value to £190m; the valuation point is now 1 January 2021. If the maximum 25m shares are issued, this would be 3.3p per share (formerly 5.3p). We note current high deal values in the gene and cell retinal therapy area, with one totalling $250m plus royalties in June 2020. Deals on RP from CY22 and on exosomes from CY21 might occur.

Exhibit 1: Financial summary

£'000s

2019

2020

2021e

2022e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,720

6,165

238

182

Cost of Sales

0

0

0

0

Gross Profit

2,720

6,165

238

182

R&D expenses

(16,246)

(16,335)

(10,618)

(10,500)

SG&A expenses

(4,773)

(4,239)

(3,836)

(3,028)

EBITDA

 

 

(18,129)

(13,997)

(13,811)

(12,941)

Operating Profit (before amort. and except.)

 

(18,299)

(14,409)

(14,216)

(13,346)

Intangible Amortisation

0

0

0

0

Exceptionals

0

0

0

0

Operating Profit

(18,299)

(14,409)

(14,216)

(13,346)

Other

0

0

0

0

Net Interest

1,064

551

(211)

64

Profit Before Tax (norm)

 

 

(17,235)

(13,858)

(14,427)

(13,282)

Profit Before Tax (FRS 3)

 

 

(17,235)

(13,858)

(14,427)

(13,282)

Tax

2,887

2,446

1,600

1,600

Profit After Tax (norm)

(14,348)

(11,412)

(12,827)

(11,682)

Profit After Tax (FRS 3)

(14,348)

(11,412)

(12,827)

(11,682)

Average Number of Shares Outstanding (m)

31.6

31.8

39.0

56.8

EPS - normalised (p)

 

 

(45.34)

(35.85)

(32.85)

(20.55)

EPS - FRS 3 (p)

 

 

(45.34)

(35.85)

(32.85)

(20.55)

Dividend per share (p)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

1,522

1,229

1,104

979

Intangible Assets

186

186

186

186

Tangible Assets

632

452

452

452

Other

704

591

466

341

Current Assets

 

 

29,988

19,147

18,637

6,914

Stocks

0

0

0

0

Debtors

834

696

696

696

Cash and deposits

26,386

12,625

15,887

4,164

Other

2,768

5,826

2,054

2,054

Current Liabilities

 

 

(7,402)

(6,446)

(4,446)

(4,446)

Creditors

(7,261)

(6,280)

(4,280)

(4,280)

Short term borrowings

0

0

0

0

Short term leases

(141)

(166)

(166)

(166)

Other

0

0

0

0

Long Term Liabilities

 

 

(864)

(707)

(541)

(375)

Long term borrowings

0

0

0

0

Long term leases

0

0

0

0

Other long term liabilities

(864)

(707)

(541)

(375)

Net Assets

 

 

23,244

13,223

14,754

3,072

CASH FLOW

Operating Cash Flow

 

 

(15,037)

(13,651)

(15,752)

(13,143)

Net Interest

303

258

14

64

Tax

3,129

(611)

5,369

1,600

Capex

(239)

(119)

(100)

(100)

Acquisitions/disposals

0

0

0

0

Financing

0

188

15,000

0

Dividends

0

0

0

0

Other

4,365

6,128

(1,269)

(144)

Net Cash Flow

(7,479)

(7,807)

3,262

(11,723)

Opening net debt/(cash)

 

 

(27,911)

(26,245)

(12,459)

(15,721)

HP finance leases initiated

0

0

0

0

Other

5,813

(5,979)

0

0

Closing net debt/(cash)

 

 

(26,245)

(12,459)

(15,721)

(3,998)

Source: Source: ReNeuron accounts, Edison Investment Research. Note only placing cash of £15m included to date in FY21.

General disclaimer and copyright

This report has been commissioned by ReNeuron Group and prepared and issued by Edison, in consideration of a fee payable by ReNeuron Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by ReNeuron Group and prepared and issued by Edison, in consideration of a fee payable by ReNeuron Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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