After last year’s trading update, the tone of Abzena’s FY18 results announcement was much more upbeat. A stronger H2 resulted in FY18 revenues growing by about 18% to £22.0m (FY17, £18.7) and beat our £21.6m estimate. The investment programme increased the FY adjusted EBITDA loss to £12.0m (FY17 £7.5m, and our FY18 estimate of £10.8m). Encouragingly for the future, the value of the contracts secured in the second-half of FY18 was £15.4m; a 42% jump over the more sedate £10.8m in H118. The year-end cash position of £6.8m reflected the continued investment programme, which drove the FY loss to £14.2m. 

Last week’s announcement of a proposed royalty monetisation transaction will help relieve the funding gap before break-even and should assist investors in valuing the Abzena Inside portfolio. We anticipate new cash inflows of £7.0m over two years (£5.0 before YE19 and £2.0m before YE20) are required to tide over the services business to break even in FY21. 

We have made significant changes to our model, which now forecasts FY19 revenues at £26.1m from £34.1m, and aligning with the slightly higher than 18% revenue growth discussed in the FY18 results. This is more than offset by the annual £2m operating cost savings over the next five years after which, operational costs are rebased. We have also taken into account the changes to the earlierstage Abzena Inside portfolio and prudently reduced to zero the value of any preclinical products. The cost-saving programme and reduced capex adds c £50m to our valuation, while the Abzena Inside portfolio value declines by £25.8m. After the FY18 results, our valuation remains virtually unchanged at £89.9m or 42.1p per share from £90.0m or 42.1p per share but will need to be updated after any new cash inflow.