Xbrane Biopharma — Biosimilar focus with Phase III trial about to start

Xbrane Biopharma — Biosimilar focus with Phase III trial about to start

Xbrane now focuses on developing high-margin biosimilar products with Xlucane, its Lucentis biosimilar, as the lead product. After the July 2018 SEK78m upfront deal with STADA, Xbrane is starting the global XPLORE Phase III trial. The primary endpoint reports in mid-2020 and XPLORE completes in February 2021. Xbrane is raising SEK59.3m at SEK30/ share to help fund its 50% share of the XPLORE study. Xbrane sold SEK20m of Spherotide (a triptorelin generic) to Iran in 2018. A partner is needed to progress development in Europe. Our valuation remains at SEK581m.

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Xbrane Biopharma

Biosimilar focus with Phase III trial about to start

FY18 results and rights issue

Pharma & biotech

4 March 2019

Price

SEK35.6

Market cap

SEK294m

SEK9.14/US$

Cash (SEKm) at 31 December 2018

101

Shares in issue (post rights)

8.27m

Free float

69%

Code

XBRANE

Primary exchange

NASDAQ First North

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(20.2)

(25.1)

(47.2)

Rel (local)

(23.1)

(28.4)

(49.2)

52-week high/low

SEK69.5

SEK35.6

Business description

Xbrane Biopharma is a Swedish developer of biosimilars using a patented, more efficient manufacturing system. The lead product is Xlucane, a Lucentis biosimilar, partnered with STADA for 2022 European launch. Xbrane sells a triptorelin generic, Spherotide, in Iran and aims to develop a Chinese product with CR Pharma.

Next events

Xlucane Phase III

March 2019

Q119 results

14 May 2019

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Xbrane Biopharma is a research client of Edison Investment Research Limited

Xbrane now focuses on developing high-margin biosimilar products with Xlucane, its Lucentis biosimilar, as the lead product. After the July 2018 SEK78m upfront deal with STADA, Xbrane is starting the global XPLORE Phase III trial. The primary endpoint reports in mid-2020 and XPLORE completes in February 2021. Xbrane is raising SEK59.3m at SEK30/ share to help fund its 50% share of the XPLORE study. Xbrane sold SEK20m of Spherotide (a triptorelin generic) to Iran in 2018. A partner is needed to progress development in Europe. Our valuation remains at SEK581m.

Year
end

Revenue* (SEKm)

PBT**
(SEKm)

EPS**
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/17

20.77

(44.16)

(8.14)

0.0

N/A

N/A

12/18

20.49

(12.59)

(2.04)

0.0

N/A

N/A

12/19e

20.00

(146.95)

(19.06)

0.0

N/A

N/A

12/20e

20.00

(240.41)

(28.96)

0.0

N/A

N/A

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

Xlucane now the core focus with STADA partnering

Xbrane is developing Xlucane, a monthly biosimilar of Lucentis (ranibizumab, Roche (US) Novartis (Eur); 2018 sales: $3.6bn) to treat wet age-related macular degeneration. In July 2018, it was globally partnered with STADA, a private, €2.3bn sales company. Costs and profits are split 50:50. In Europe, the partners aim to launch in 2022 on Lucentis patent expiry; US patent expiry is in 2020. The global Phase III (NCT03805100, XPLORE) aims to recruit 580 patients starting in March 2019. The primary endpoint data are due in May 2020. The full 52-week trial ends in February 2021. Competitors include bioeq - Formycon with Phase III data and Samsung Bioepis with a Phase III reporting primary data soon. Roche has a bispecific antibody, Faricimab, entering Phase III after a good Phase II performance with one injection every 16 weeks. It is also trialling new Lucentis delivery systems.

Spherotide seeking a European partner

Spherotide is a generic triptorelin depot that treats prostate cancer, endometriosis and uterine fibroids. In 2018, Ipsen, the market leader, sold €372.6m of Decapeptyl (triptorelin), an 8% volume rise. Spherotide 2018 bulk sales to Iran were SEK20m at a 22% margin; payment is difficult due to sanctions. Xbrane reported a SEK13m upfront in H118 in a deal with Chinese CR Pharma. European development depends on signing a partner to fund trials; Xbrane does not plan to invest directly.

Valuation: Value at SEK581m, SEK59.3m rights issue

Our indicative valuation revised in November 2018 remains at SEK581m based on Xbrane expectations of up to a €100m Xlucane yearly profit share. This equates to SEK92/share before dilution. Xbrane is raising SEK59.3m at SEK30/share before expenses less a pro-rata of SEK6.4m set off against the SEK45m loan; further funds will be needed in 2020 to cover its 50% share of the company-estimated €30–40m XPLORE costs. Operating costs after sales in 2018 were SEK111m. Pre-payments for XPLORE are SEK34m, (SEK1m 2017). Xbrane gained SEK99.7m in deal fees and borrowed SEK45m in 2018. Year-end cash was SEK101m.

Exhibit 1: Financial summary

SEK 000s

2017

2018

2019e

2020e

Year end 31 December

GAAP

GAAP

GAAP

GAAP

PROFIT & LOSS

 

 

 

 

Revenue

 

 

20,771

20,485

20,000

20,000

Cost of Sales

(15,829)

(15,907)

(15,800)

(15,800)

Gross Profit

4,942

4,578

4,200

4,200

Other income

2,515

99,742

0

0

EBITDA

 

 

(40,871)

(7,468)

(140,527)

(233,986)

Operating Profit (before amort. and except.)

 

(43,939)

(10,890)

(143,949)

(237,408)

Intangible Amortisation

(779)

(525)

(525)

(525)

Other

0

0

0

0

Operating Profit

(44,718)

(11,415)

(144,474)

(237,933)

Net Interest

(217)

(1,700)

(3,000)

(3,000)

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

(44,156)

(12,590)

(146,949)

(240,408)

Profit Before Tax (FRS 3)

 

 

(44,935)

(13,115)

(147,474)

(240,933)

Tax

0

(121)

0

0

Profit After Tax (norm)

(44,156)

(12,711)

(146,949)

(240,408)

Profit After Tax (FRS 3)

(44,935)

(13,236)

(147,474)

(240,933)

Average Number of Shares Outstanding (m)

5.4

6.2

7.7

8.3

EPS - normalised (öre)

 

 

(814)

(204)

(1,906)

(2,896)

EPS - normalised fully diluted (öre)

 

 

(814)

(204)

(1,906)

(2,896)

EPS - FRS 3 (öre)

 

 

(828)

(213)

(1,913)

(2,903)

Dividend per share (öre)

0

0

0

0

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

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

82,861

89,798

83,532

81,610

Intangible Assets

63,657

64,182

59,838

59,838

Tangible Assets

18,569

16,745

14,823

12,901

Investments

635

8,871

8,871

8,871

Current Assets

 

 

28,101

161,658

65,070

46,585

Stocks

3,065

5,525

5,525

5,525

Debtors

8,072

10,494

10,494

10,494

Cash

7,903

100,972

4,384

10,139

Other current assets

9,061

44,667

44,667

20,427

Current Liabilities

 

 

(17,029)

(160,439)

(154,039)

(154,039)

Creditors

(17,029)

(114,878)

(114,878)

(114,878)

Short term borrowings

0

(45,561)

(39,161)

(39,161)

Long Term Liabilities

 

 

(4,664)

(7,704)

(17,629)

(258,036)

Long term borrowings

(1,119)

(4,159)

(4,159)

(224,159)

Other long term liabilities

(3,545)

(3,545)

(3,545)

(3,545)

Net Assets

 

 

89,269

83,313

(23,065)

(283,881)

CASH FLOW

Operating Cash Flow

 

 

(36,848)

46,707

(143,016)

(212,238)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(3,347)

(1,598)

(1,500)

(1,500)

Acquisitions/disposals

0

0

0

0

Financing

20,004

48,238

48,437

0

Dividends

0

0

0

0

Other

(2,637)

(278)

(508)

(508)

Net Cash Flow

(22,828)

93,069

(96,588)

(214,246)

Opening net debt/(cash)

 

 

(29,612)

(6,784)

(51,252)

38,936

HP finance leases initiated

0

0

0

0

Other

0

(48,601)

6,400

0

Closing net debt/(cash)

 

 

(6,784)

(51,252)

38,936

253,181

Source: Edison Investment Research, Xbrane Biopharma accounts

General disclaimer and copyright

This report has been commissioned by Xbrane Biopharma and prepared and issued by Edison, in consideration of a fee payable by Xbrane Biopharma. 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 Edison analyst 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.

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Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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General disclaimer and copyright

This report has been commissioned by Xbrane Biopharma and prepared and issued by Edison, in consideration of a fee payable by Xbrane Biopharma. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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

Fluence Corporation — “Landmark” €165m contract win

The award of a €165m (US$188m) contract to provide water treatment to Abidjan, the largest city in Ivory Coast, is transformative in our view. This turnkey project will supply 150,000m3/day of water to 4.7 million people and include a range of treatment solutions. The win establishes Fluence as a supplier of large, innovative solutions and leads us to double our FY20 adjusted EPS forecast to US$c3.8. Despite organic revenue growth in FY19 and FY20 of well over 50%, the share price implies an FY20 P/E of 7x.

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