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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Renalytix’s US IPO filing document went live overnight (having previously been filed confidentially). Whilst there are no details on size of offering, but the document is rich with details of the use of proceeds which we encourage UK investors to read. We are doing the same and will update our views in due course. Associated with the US filing document, another release this morning announces the publication of a circular, and outlines details for a new General Meeting on the 13 July 2020 to approve the issue of new shares, as well as board changes if the US IPO goes ahead. Namely, Julian Baines (Non-executive Chair) and Richard Evans (NED and Audit committee Chair) are stepping down from the board, Christopher Mills will assume the role of interim chair whilst a search for a successor is conducted.
Companies: Renalytix AI
The announcement announced today highlights the potential breadth of the KidneyIntelX platform, opening up new routes to expand data inputs and test utility, and create opportunities alongside pharmacological therapy as a companion diagnostic. The first agreement with the University of Michigan adds an additional 800 chronic kidney disease (CKD) patients (adding to Mount Sinai’s 1,500 patients and the University of Groningen’s 3,500 patients) to analysis the performance of KidneyIntelX in different settings. This will ultimately carry additional sway with healthcare centres, regulators, and payers. The option to exclusively license a new urinary biomarker, urinary Epithelial Growth Factor (uEGF), shows the potential to add additional biomarkers and body fluids into the platform to further enhance the prognostic performance of KidneyIntelX. We understand there is a relatively immaterial upfront payment to access this new biobank, and a similar immaterial cash payment to gain the biomarker license option with additional milestones and standard tiered royalties payable if exercised. The second data sharing agreement with a major undisclosed pharma partner highlights KidneyIntelX’s potential use as a companion diagnostic (e.g. for SGLT2 inhibitors) and the potential to use the test multiple times to monitor drug response. This builds on work being conducted in Groningen with data expected H2 CY’20. Ultimately, pharmaceutical collaborations could drive additional long-term value creation and may open opportunities for lucrative licensing and M&A deals. At this juncture we make no changes to our forecasts and eagerly await further updates. We reiterate our positive stance on Renalytix.
AVO’s goal is to deliver an affordable and novel proton therapy (PT) system, called LIGHT, based on state-of-the-art technology developed originally at the worldrenowned CERN. Over the past two years, the project has been significantly derisked through important technical milestones. AVO is working on the verification and validation phase, prior to LIGHT being used on the first patients to support CE certification. A recent equity issue, new loan facilities and some commercial announcements earlier in 2020 highlight the increasing confidence that is building in AVO’s ability to achieve its goal to deliver LIGHT in the near future.
Companies: Advanced Oncotherapy
Today Ergomed held its annual general meeting (AGM). As expected, no new financial details were provided, although the executive chairman released a statement with a general business update. Q120 trading was good with ‘solid overall growth in revenue’ and cash generation ‘remained strong’. In Q220, Ergomed continued to grow the order book across the business and maintained its ‘revenue growth trend’. Its staff successfully adapted to remote working conditions and no employees were made redundant or furloughed. The H120 trading update will be released in July 2020 as usual, but Ergomed stated within its AGM update (June 10) that it is confident the results will be ‘in line with current market expectations’.
Futura Medical confirms the timelines for the regulatory filings for MED3000, its novel erectile dysfunction (ED) treatment, are on track. Dialogues with both the US FDA and European Notified Body have been constructive. The EU Notified Body has begun its review of the supporting documentation and the FDA filing is still expected by end-Q320. There have been no COVID-19 related delays but, in our view, these remain a consideration. We assume the review processes will take a minimum of 12 months in both cases, so have approvals pencilled in for Q421. Commercialisation discussions are expected to start in earnest once the status of the regulatory approvals is known. Our DCF-based model, using conservative assumptions, values Futura Medical at £153.8m, equivalent to 60.9p a share.
Companies: Futura Medical
Inspiration Healthcare has announced its intention to acquire SLE Limited (SLE), a leading neonatal ventilator designer and manufacturer for consideration of £18.0m. Inspiration Healthcare has conditionally raised £16.5m (gross, ahead of an open offer) via an oversubscribed equity placing to support the acquisition. We believe the acquisition represents a transformation deal, virtually doubling the size of the business and providing significant new revenue growth opportunities. We expect the acquisition, on a 12-month proforma basis to be accretive to adjusted earnings in the near-term and increasingly so in the medium-term. We reiterate our Buy recommendation.
Companies: Inspiration Healthcare Group
ReNeuron has announced its 3rd exosome collaboration agreement and has made another step to justifying the strategic shift to exosomes as announced earlier this month. As a reminder ReNeuron’s exosomes are derived from human neural stem cells, and are clinical-grade, scalable and have a natural ability to cross the blood-brain barrier. Exosomes can be used to deliver therapeutics for diseases of the brain. The agreement today is with an undisclosed major US pharmaceutical company, but like the previous exosome agreements (announced in April 2020 and Jan 2019), it is a research evaluation agreement and carries little immediate financial bearing. Nevertheless, proof-ofconcept in specific disease areas expected on the back of agreements could enable lucrative out-licensing agreements. We note there has been a spate of recent and highly rewarding licensing agreements with exosome developer peers - Codiak (with Sarepta and Jazz) and Evox (with Takeda and Eli Lilly). In particular, we note that the Codiak-Sarepta deal was valued at $72.5m in upfront and near-term license payments. We make no changes to our forecasts or valuation analysis at this juncture, but will continue to follow the exosome platform closely. We reiterate our positive stance on ReNeuron.
Companies: Reneuron Group
We are encouraged by today’s Phase IIa data from the hRPC programme in Retinitis Pigmentosa (RP) and continued clinical meaningful improvement in the treated eye vs. the untreated eye of 8.9 and 8.8 letters at 6 and 12 months, respectively. All patients have now reached 6 months of treatment, although one patient now has reached 18 months and continues to show a highly encouraging 16.0 letter improvement vs. the untreated eye. We believe analysing the 8 patients who had a successful surgical operation, and excluding the two patients who had surgical complications, is the most appropriate dataset. The recovery in eyesight of one of the two patients who had surgical complications is good news, but we exclude from our analysis. Whilst it is possible, we think this recovery is unlikely to be the result of the hRPC therapy. As previously announced, nine additional patients are expected to be recruited into the Phase IIa trial and sufficient data is expected to be available from the trial to seek approval in H2 2021 to commence a single pivotal clinical study in RP. We view today’s results to be supportive of ReNeuron’s investment thesis and the new primary focus on RP. We make no changes to our forecasts or valuation analysis, and look forward to further updates from the hRPC programme.
Hemogenyx (HEMO.L): Agreement with GlobalCo (from Friday) | ReNeuron Group (RENE.L): Positive data from ongoing Phase 2 retinal cell therapy trial
Companies: Hemogenyx Pharmaceuticals Reneuron Group
Open Orphan (ORPH) is a specialist Contract Research Organisation (CRO) offering pharmaceutical services relating to orphan and emerging therapies, and is pioneer in the testing of vaccines and anti-viral treatments through the use of human viral challenge (HVC) studies. FY19 financial results refl
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
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).
New York state approval is a pivotal moment for Renalytix. Approval facilitates the launch of KidneyIntelX with launch partner Mount Sinai and progressively derisks the investment hypothesis. Understandably with Mount Sinai in the heart of the NYC Covid-19 health pandemic, testing and first commercial revenues is now set to begin in calendar Q3 2020 (vs Q2 2020) once the integration of KidneyIntelX into the Mount Sinai electronic health record is completed. Renalytix is now licensed to provide KidneyIntelX testing services in 47 states in the US, with the remaining licenses pending in calendar 2020. We have adjusted our forecasts to reflect a full launch in the Mount Sinai system in FY’21 (June yearend) and have upgraded our valuation analysis through unwinding our risk adjustment from 60% to 65%. Our valuation analysis now implies an intrinsic value of 477p/share (previously 459p/share).
Omega has conditionally raised £8m alongside an Open Offer up to £3m, to scale manufacturing, expand its lateral flow portfolio of global health tests and exploit the opportunities for COVID-19 testing that arise from its partnerships within the UK. We argue that the Food Intolerance business largely underpins the current valuation, given imminent Chinese approval, with upside derived from VISITECT and COVID-19 opportunities. Modelling the potential impact of a COVID-19 test with any degree of confidence at the moment is not possible; however, we provide a COVID-19 capacity model and a SOTP analysis that points to a valuation that is substantially in excess of the current market capitalisation.
Companies: Omega Diagnostics Group