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Mount Sinai and Renalytix has formed a JV, called Kantaro (75:25% equity interest, respectively), to develop and scale production of Mount Sinai’s high-performing Covid-19 antibody test kit, in a move that is potentially transformative for Renalytix and demonstrates the strength of the Renalytix-Mount Sinai relationship. An antibody test allows the study of immune response to Covid-19, the precise rate of infection, the identification of donors of therapeutic serum/plasma, and importantly may correlate with protection/immunity. Whilst it is still too early to identify what constitutes a protective response and the usefulness of an antibody test in the real-world setting, clearly the potential market opportunity is vast. The JV is in the process of validating the scaled assay and seek final EUA of the test kit before sales can commence. Kantaro has also collaborated with Bio-Techne to manufacture and distribute the antibody test kits at scale, with a goal of producing >10m patient tests per month by July. We anticipate sales could begin in July 2020 (Q1 FY’21, and to come at a modest extra financial costs to Renalytix other that time and internal resources. It is too early to pinpoint the financial implications and make changes to our forecasts. Nevertheless, for illustration at full capacity and a conservative estimated reimbursed price of $400/test kit, we anticipate this could translate to >$50m additional income on an annualised basis for Renalytix.
Companies: Renalytix AI
Accelerating the COVID-19 Opportunity
Companies: Open Orphan
Avacta is leveraging the antibody-like properties of Affimers for Therapeutic and Diagnostic applications across multi-billion dollar markets, including testing and treatment for COVID-19, building a differentiated pipeline and global partnerships. The near-term key is the roll out of its SARS COV-2 antigen tests, including potentially one of the first Point-of-Care tests to-market, offering game-changing commercial scope, sufficient to significantly accelerate the clinical development of its Therapeutic pipeline.
Companies: Avacta Group
IXICO has reported its results for the six-months to March 2020. Revenues grew 33% to £4.6m, and EBITDA for the period was £0.7m versus £0.1m for H1/19A. Cash at 31 March 2020 was £6.7m and the order book stood at £15.3m, boosted post period end by a £10.5m contract win. The COVID-19 pandemic has, to date, only had a limited impact on IXICO's business, though management expect trial delays to impact FY21 business more notably. While forecasting remains uncertain, we believe IXICO is in a strong position to weather the current environment (strong cash position, order book and remote working) and the mid- to longer- term opportunity remains significant for the company.
Open Orphan, a niche Contract Research Organisation (CRO) and world leader in testing the efficacy of vaccines and antivirals, raised £12.6m (gross) to fund development of the world’s first COVID-19 challenge model. Compared with traditional trials, challenge studies can fast-track testing of vaccines and antivirals, with reduced costs and fewer volunteers. The company is in active discussions with 12 global vaccine manufacturers with regards such a challenge model. Given the paucity of lab testing capability in the UK, Open Orphan is exploiting its in-house virology lab to offer third-party services and commercialise a lab-based COVID-19 antibody test, for which it has UK exclusivity from Quotient. We initiate coverage with a target price of 19p, based on a sum-of-the parts analysis.
ECO has received a positive opinion from the EMA for the use of the water-soluble formulation of Aivlosin to treat an d control mycoplasmosis in pigs. This is the usual precursor to full Marketing Authorisation in a couple of months, with European launch therefore expected in H2 ahead of the peak Autumn/Winter respiratory disease season. Mycoplasmosis is a key economic disease in pigs and this additional market expansion for Aivlosin represents a valuable additional growth driver for the group over the next few years. We prudently make no change to our forecasts at this stage, but at the very least this approval should be supportive of estimates.
Companies: Eco Animal Health Group
FY results showed an adjusted net loss of £3.8m, with year-end cash of £2.5m – in line with the trading update at the time of the recent £14m placing. Near-term focus remains on the outcome of study SG016, and although the enrolment rate into the COVID-19 trial has slowed in recent weeks, with 98 out of the targeted 100 patients having been enrolled, top-line data is expected to be presented in July. The company also confirmed that the trial of SNG001 in COVID-19 patients within the home setting and to be conducted virtually has commenced. Additionally, MHRA gave approval to run an interim analysis (109 out of targeted 120 patients) without compromising the integrity of the COPD Phase II trial, with data expected to be presented in the summer: a busy summer, with two potential value inflection points. We reiterate a target price of 120p, of which c.80p relates to the use of SNG001 in COVID-19 disease, with the prospect of this being increased on successful Phase II outcomes for both COPD and COVID-19.
The potential of cell therapies is starting to become clear, and MaxCyte’s technology lies at the heart of many of these next-generation treatments. The pivotal role its platform plays is shown by ten major partnership agreements formed with leading cell therapy players over the past 18 months. These can earn pre-commercialisation milestones in excess of $800m, transforming MaxCyte’s medium- and longer-term revenues as the underlying programmes advance through clinical development. CARMA, MaxCyte’s proprietary cell therapy platform, is nearing a key inflection point, with Phase I data from its lead asset due in 2020. Management is targeting CARMA to be self-financing by 2021. We raise our valuation to £260m (340p/share), from £195m and 341p, with the core business alone valued at £158m (206p/share).
Futura has a commercially differentiated and clinically proven product that can be used as a first line therapy for erectile dysfunction (ED). The company is pursuing a medical device approval pathway and we expect US/EU approval by mid-2021 at the latest given the quality and quantity of its data.
Companies: Futura Medical
Synairgen (SNG.L): Preliminary 2019 results | Yourgene Health (YGEN.L): COVID-19 testing service launch and business update
Companies: Synairgen Yourgene Health
We are initiating coverage on specialist pharmaceutical services provider Ergomed. We believe it should prove relatively resilient during the COVID-19 crisis and has the fundamentals in place to execute its growth strategy. Ergomed announced impressive audited numbers for FY19, with revenue up 26% to £68.3m and EBITDA up 5.5x to £12.5m. The FY19 announcement is effectively Ergomed’s fourth profit upgrade for FY19 and a small beat on recently reset FY19 expectations. Ergomed trades at a discounted EV/EBITDA of 10.1x vs the contract research outsourcing (CRO) sector average of 11.5x (FY20). We value Ergomed at £186m or 399p/share. Ergomed’s strong organic growth is benefiting from a clear strategic focus on high growth pharma sectors, margin control and order book growth (up 15% to £125m in FY19, giving 90% visibility to 2020).
Companies: AVO AGY ARBB ARIX BUR CMH CLIG DNL GDR HAYD PCA PIN PHP RE/ RECI RMDL STX SHED VTA
There has been much comment on the fact that equity markets in the US and Europe have been shrinking for some years now, certainly in terms of the number of quoted companies, if not in total market capitalisation (MCap). This paper has been written with the assistance of the Quoted Companies Alliance (QCA) and focuses on the evidence for such in the London market and, in particular, that for smaller and midcap companies. It assesses that evidence and considers explanations. Finally, we ask why it matters, and assuming that it does, what practical steps can be taken to reverse the trend. Successful public markets have been a key part of the United Kingdom’s economic success for generations, even centuries, and we should not allow them to wither on the vine.
Companies: AVO AGY ARBB ARIX ASAI DNL GDR HAYD NSF PCA PIN PXC PHP RE/ RECI RMDL STX SCE TRX TON SHED VTA
Shield reported FY 2019 results that showed sustained momentum from Norgine’s promotional activity of Feraccru in England and Germany, with in-market pack volumes c.70% higher than in 2018. Revenues of £0.7m compared with £11.9m in 2018, which included £11m of milestones. This resulted in an adjusted net loss of £6.3m (vs +£1.1m). Net cash at 30 June was £4.1m, providing a cash runway into Q1 2021, which excludes potential significant up-front payments and milestones for US rights to Accrufer, which are currently being negotiated. Despite minor changes to forecasts, reflecting the later-than-modelled introduction of Feraccru/Accrufer into the broader EU market and US, we reiterate our 350p target price, which reflects the long-term nature of market exclusivity, peak market share (20% assumption) and rolling forward the start year for our DCF calculation, rather than near-term sales. This excludes the potential value of the US milestone, which we have stated in the past could be $50m with $100m+ of commercial milestones.
Companies: Shield Therapeutics
Shield Therapeutics (STX) has reported FY19 results; total revenue of £0.7m reflects royalties on Feraccru sales from European partner Norgine. 2019 achievements include FDA approval of STX’s key asset for the treatment of iron deficiency in patients with any underlying cause – the broadest possible label – in the critical US market. Momentum has continued into 2020 with an out-licensing deal with China-based Beijing Aosaikang Pharmaceutical (ASK Pharm) that covers China, Hong Kong, Macau and Taiwan. The next key inflection point is a US partnering deal, and discussions are ongoing with the aim of closing a transaction at the earliest opportunity in 2020. We expect Accrufer launch later this year once a partner has been found. STX reported a cash balance of £10.4m at 30 April 2020 implying a cash runway to Q121. We value Shield at £381.7m.