After the successful offer from J&J on 16 June, Actelion made public that it has been released from its obligation, as a listed company, to release its half year 2017 results as well as a number of other obligations (management transactions, ad-hoc releases, etc.). With J&J’s intention to de-list the company, we terminate coverage of the stock.
Companies: ACTELION LTD-REG
FY16 results. Revenues reached CHF2,412m (+18% and +15% at CER), operating income CHF789m (+20% and +14% at CER) and net income CHF696m (+26% and +19% at CER). Net cash at the end of FY16 was CHF495m. No cash dividend will be proposed as a consequence of the J&J transaction. Shareholders will receive US$280 in cash and one share of the new R&D company for each Actelion share. The latter will comprise the early stage R&D pipeline (basically compounds in phase I or II) and will be listed. No outlook is given, again due to the ongoing transaction.
Actelion and Johnson&Johnson have entered into a definitive agreement whereby Actelion shareholders will receive USD280 (CHF280.08) per share in cash and a share in the new spun-off R&D company (drug discovery operations and early-stage clinical development assets), to be listed on the Swiss market and in which J&J will initially hold 16%. The tender offer is expected to start by mid-February.
Actelion indicated that the Maestro study did not meet it primary endpoint, with results showing improvement for patients in exercise capacity, but with an even stronger improvement for placebo patients (!).
Actelion released 9m results. Revenues reached CHF1,791m (+17% and +14% at CER), operating income CHF660m (+24% and +17% at CER) and net income CHF581m (+29% and +21% at CER). Once again, the group upgraded its guidance for FY16 (from a low-teen to a mid-teen percentage growth in core operating income). Over 9m, core operating income grew 20% (+14% at CER) to CHF781m.
The group released H1 16 results showing a 17% increase in sales to CHF1,180m (+13% at CER), +20% in operating income to CHF412m (+12% at CER), +25% in net to CHF361m (+17% at CER). The net cash position is apparenty stable (CHF418m vs CHF430m a year ago and CHF405 at year-end 2015) but includes the payment of the dividend (CHF158m) and CHF248m spent on share repurchases. Once again, the group raises its guidance to a « low teen core operating income growth at CER » vs « high single-digit » previously. This is already the second time this year that the group has raised its earnings forecasts for FY16…after three times last year and twice in FY14 (!).
Sales reached CHF590m (+14% and +11% at CER), operating income CHF208m (+10% and +3% at CER), net income CHF178m (+12% and +5%). The group upgraded its FY16 guidance from « low » to « high single-digit percentage core operating income growth, at constant exchange rates and barring unforeseen events ». The net cash position at the end of Q1 16 reached CHF472m.
Actelion released FY15 results. Revenues reached CHF2,045m (+4% and +7% at CER), operating income was CHF656m (+15% and +21% at CET), net income totalled CHF552m (-7% and -3% at CER). Note last’s year net income included a CHF11m tax benefit. The board will propose a dividend of CHF1.50 (+15%).
As communicated on 21 December 2015, Actelion has obtained the FDA approval for Selexipag (Uptravi, an oral selective prostacyclin IP receptor agonist). The group held a conference call on 5 January to discuss the approval and market opportunities.
Sales reached CHF1,525m (+2%, +5% at CER), operating income CHF533m (+3% and +7% at CER), net income CHF452m (-20%, -27% at CER). As a reminder last year’s net earnings included a tax benefit of CHF121m related to the Asahi litigation. Core net earnings in 9m 15 are up +1% and +5% at CER. The group upgraded its guidance for FY15, now targeting an increase of at least 20% in core earnings growth at CER (before US rebate reversals) vs growth "in the mid to high teen percentage range" previously.
According to Bloomberg, Actelion has been holding discussions since last month with US-based ZS Pharma, the share of which was up 28% yesterday night. Actelion confirmed late last night it was talking to the US company, without commenting on the exact nature of these talks. ZS Pharma indicated that it was in preliminary discussions with Actelion regarding "a potential strategic transaction", and we, like the market, understand that Actelion would be considering acquiring the company.
Actelion released H1 15 resuts that show sales up +2% to CHF1,011m (+4% at CER), operating income down 1% to CHF344m (+4% at CER) and net income down 32% to CHF287m (-28% at CER). Note last year’s H1 net earnings benefited from a significant tax benefit from the Asahi litigation which explains the apparent fall in net results in H1 15. However, the group indicated it is upgrading its guidance for the full year, now expecting core earnings to grow in the mid to high teen percentage range (vs low double-digit previously) at CER and excluding prior year US reversals.
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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
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.
Companies: Renalytix AI
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.
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
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
With CHF13bn ($14bn) annual sales, Roche is a dominant force in the global diagnostics market. Interestingly, in recent years, most diagnostics majors have witnessed material re-ratings – also a function of increased M&A euphoria. Now, in the backdrop of COVID-19, Roche has also emerged as a prominent player on the testing front. With big pharmas moving away from (low-growth) non-pharma offerings, is it time for Roche to consider unlocking value from Diagnostics?
Companies: Roche Holding
ReNeuron has released further follow-up data from the ongoing human retinal progenitor cell (hRPC) trial, which shows a robust sustained averaged response. This data set completes the six-month data on eight patients and extends, for one individual, to 18 months, who showed a good net gain. The next dose level, two million cells in nine patients, remains delayed due to COVID-19. A filing to start a pivotal study is expected in the second half of CY21. Our indicative value remains at £107m.
Companies: Reneuron Group
Hutchison China MediTech (HCM) is on the brink of global launches of two assets from its internally developed oncology portfolio. In 2022 we expect US launches of surufatinib (broad NET indication) two years earlier than forecast as well as savolitinib (NSCLC). Recently the FDA granted fast-track designation to fruquintinib in mCRC and we forecast global launch in 2023. In China, HCM has laid the foundations to capitalise on the slew of additional novel oncology drugs (expected by end 2021). HCM is well funded (following the recent $100m equity investment from General Atlantic, plus warrants granted for an additional $100m in 18 months) as it accelerates the global development of its unpartnered assets and expands its global commercial outreach. Beyond 2024 we expect sustainable profitability and margin expansion. Our increased valuation is $6.3bn.
Companies: Hutchison China Meditech
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
Cambridge Cognition ("COG") has provided a trading update for the 6 months to 30 June and presented its growth strategy at an excellent Capital Markets Day. The Group continues to build on an impressive H1 2020, announcing additional contract wins that take the order intake to £4.9m (+88% vs H1 2019). COG is currently 'seeing unprecedented demand' for its solutions which enable pharmaceutical companies to continue clinical trials even while participants are unable to physically visit clinical trial sites.
Companies: Cambridge Cognition
Diaceutics is launching a cloud based diagnostics commercialisation platform for the precision medicine market that will bring significant functional gains to customers and create meaningful internal efficiencies. The company has raised £20.5m gross in an equity Placing of new ordinary shares to fund the ongoing development of both the business and the new platform.
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
Alongside FY2019 results, Advanced Oncotherapy ("AVO") announced two new debt facilities which provide access to an additional c.£42m in strategic financing. The financing provides greater financial stability and flexibility for AVO moving forward, allowing the company to progress the development of the LIGHT system towards regulatory approval. LIGHT is now largely de-risked from a technology perspective, in our opinion, with development activities focused on the verification and validation of the system. In addition to an equity subscription completed in May (c.£15m), AVO has secured access to financing totalling nearly £60m in the 6 months to the end of June; an impressive achievement in our view which is credit to AVO's disruptive potential in the radiotherapy market, especially given COVID related headwinds currently faced by many companies today.