After a second half punctuated by outstanding interim clinical results and partnering, which together contributed to a c 430% year-to-date share price increase, the FY19 financial results now return to focus. The FY19 net loss decreased to £14.3m (£17.6m in FY18), driven by R&D spend of £16.3m and an R&D tax credit of £2.9m. We expect the year-end FY19 cash balance of £26.4m to last into FY21.
ReNeuron’s R&D expense decreased slightly to £16.3m (from £16.7m in FY18) due to the delayed start of the PISCES III Phase IIb study of its CTX neural stem cell therapy product in chronic stroke patients. R&D accounted for 77% of operating expense. The reduced operating loss of £18.3m (vs £20.4m in FY18) also included the costs of running the ongoing Phase I/IIa study of the human retinal progenitor cell (hRPC) cellular therapy product in retinitis pigmentosa (RP). The FY19 net loss was £14.3m (vs £17.6m in FY18), thanks to a £2.9m R&D tax credit (£3.4m in FY18) and foreign currency gains. Year-end FY19 cash was £26.4m, which we expect to provide a runway into 2021.
With the CTX product in an ongoing placebo-controlled Phase IIb study in the US and the most recent positive interim data on ReNeuron’s hRPC product for RP in the Phase I/IIa study, the focus for investors has been on the company’s product pipeline rather than its financials. Clinical trial results from the pipeline have clearly helped the out-licensing of both the CTX and hRPC products to Fosun for China with associated milestone cash inflows. ReNeuron now has the luxury to await later-stage transactions, outside those for smaller territories like Japan and on the exosome delivery platform, until Phase IIb data. We have included a £16m cash inflow as illustrative debt as a placeholder for either a licensing transaction or stock offering in 2021.
We have updated our model for the FY19 preliminary results and made a number of other changes. We have increased our R&D spend in FY20 and FY21 to reflect the deferred spend from the delayed start to the PISCES III study. The £16m illustrative debt represents either a licensing transaction or a fund-raising in FY21. These two changes reduced our valuation by c 3% but are more than offset by updating our model to reflect the Fosun milestones, R&D tax credits and US dollar strength. Our valuation moves to £198m or 625p per share, from £193m or 610p per share previously. Our probabilities of success remain unchanged for now.
