Momentum screen refresh + 7 highlighted stocks
We report on the performance of our momentum style screen since the last refresh three months ago and present the 25 new constituents. The screen underperformed small-cap and microcap indices modestly, though our previous focus stocks did significantly better. While momentum (as we express it) has outperformed smallcap significantly since inception of the screen in July 2016, this has arisen in shorter periods and appears to only coincide with a steadily rising small-cap index. We therefore consider this style screen to have limited predictive capability. We highlight seven stocks, which we think are interesting.
VER BMY CKT KEYS LGT MACF WYG
28 Jun 18
Small Cap Breakfast
Cake Box Holdings—franchise retailer of cakes with a growing store base across the UK looking to join AIM, Offer tbc, expected late June Mind Gym. Behavioural science business that uses scalable proprietary products to deliver human capital and business improvement solutions to large corporations. Offer TBA. Due 28 June Anexo -specialist integrated credit hire and legal services group. Offer TBA. Due 19 June. i-nexus—develops and provides strategy execution software to assist global enterprises in effective execution of their strategic plans and initiatives looking to jon AIM. Offer TBC, expected 19 June Yellow Cake will use its expertise to generate value through the ownership of physical U3O8 (Uranium) together with a range of activities and opportunities connected with owning physical U3O8. Acquiring supply contract for up to $170m. Offer TBA. Tekmar— technology provider of protection systems for subsea cable, umbilical and flexible pipes and offshore engineering services—Offshore wind farms and Oil & Gas. Revenue of £21.9m and Adjusted EBITDA of £4.9m Offer TBA Knights Group— UK regional legal and professional services businesses. FYApr18 rev £34.9 million and adjusted operating profit was £6.8 million excluding Turner Parkinson (acquiring on IPO). Offer TBA TransGlobe Energy Corporation—an independent international upstream oil and gas company with headquarters in Calgary, Canada is looking to join AIM. No Capital to be raised, market cap of £131m. Expected 29 June Strongbow Exploration (TSX:SBW) intends to dual list on AIM. Holds rights to the South Crofty underground tin mine, a former producing tin mine located in the towns of Pool and Camborne, Cornwall . The project is estimated to require the Company to raise £25 million over the next 18 months to progress to a production decision. Offer TBS. Due June.
VER MTFB STX ITM NWF KZG IMM VERS ECSC BOOM
14 Jun 18
Tuzistra XR downgrade prompts strategic rethink
Vernalis has provided a trading and operational update to its guidance for Tuzistra XR prescriptions for financial year-end 2018. Despite dynamic management of commercial initiatives, Tuzistra XR prescription growth is not accelerating fast enough to meet Vernalis’s guidance of 105-115k prescriptions (given at the FY17 results). Following a disappointing uptake in the current cough cold season (~65% of the season is complete), Vernalis is downgrading guidance on prescription numbers and, in light of slow progress in the US cough and flu business, is seeking alternative strategies for the US business and the group. As such, we place our financial forecasts and valuation under review until we receive clarity on strategic next steps and the potential impact on cash burn, given a cash balance of £44m (unaudited at 31 January 2018).
28 Feb 18
Avingtrans (AVG LN) Good progress on integration; FY19 PBT raised 13% | Devro (DVO LN) Upgrading to Buy on valuation and recovery grounds | Genus (GNS LN) H1’s in line with expectations: solid ABS performance | Vernalis (VER LN) Tuzistra® XR scrips below guidance: evaluating strategic options
VER AVG DVO GNS
28 Feb 18
N+1 Singer - Vernalis - Trading update highlights Tuzistra® XR run-rate below expectations
The shortfall in prescription volume growth volume is disappointing, although we note our cautious stance vs. guidance for current-year prescriptions. We significantly lowered our rollout expectations for Tuzistra® XR and the four follow-on cough cold programmes on 24th November and will review our estimates following this morning’s update. The company enjoys a strong cash position of £48.9m (as per 11th Dec).
14 Dec 17
N+1 Singer - Morning Song 14-12-2017
Advanced Medical Solutions (AMS LN) In line FY trading update | Infrastructure India (IIP LN) NAV declines further - financing discussions continue | IQE (IQE LN) Apple investment in VCSELs highlights upgrade potential | ReNeuron Group (RENE LN) Interim results and IND approved to commence Phase IIb in stroke | Severfield (SFR LN) Significant Google contract confirmed | Synairgen (SNG LN) Revised terms with Pharmaxis | Tribal Group (TRB LN) Financial performance materially ahead | Vernalis (VER LN) Trading update highlights Tuzistra® XR run-rate below expectations
VER AMS IQE SNG IIP TRB SFR RENE
14 Dec 17
Small Cap Breakfast
Fusion Antibodies— Sch1 from the Belfast based contract research organisation providing services to biopharmaceutical and diagnostics companies that are involved in the development of antibodies for both therapeutic drug and diagnostic applications. Offer to raise £5.5m for the Company and £1.075m for selling shareholders at 82p with market cap of £18.1m. Due 18 Dec | Erris Resources PLC—a mineral exploration and development company currently focused on two geographic areas. Offer TBC, expected 21 December 2017 | CIP Merchant Capital—Closed ended investment Company. Sector focus oil & gas, healthcare, pharma, and real estate. Offer TBA. Due 21 Dec | Panthera Resources— The Company was established to act as a holding company for Indo Gold Limited, an unlisted Australian registered company. The Company aims to explore and develop gold assets in India and West Africa. Offer TBC, expected 20 Dec | Sumo Group—one of the UK's largest independent developers of AAA-rated video games providing both turnkey and codevelopment solutions, including initial concept and pre-production. Offer TBC. Due late Dec | Pelatro—provider of proprietary software solutions to enterprise-level customers for various aspects of precision marketing for use in B2C applications. Offer TBC, expected 19 December 2017 | Fusion Antibodies—contract research organisation providing services to biopharmaceutical and diagnostics companies that are involved in the development of antibodies for both therapeutic drug and diagnostic applications. Raising £5.5m at 82p plus £1.075mn vendor sale. £mkt cap £18.1m Due 18 Dec. | Sirius Petroleum—RTO. Becoming an operating company in the Ororo Field in Nigeria. Raising £7.2m/ Mkt Cap £35.6m. Due 19 Dec. | Bushveld Minerals—RTO of Bushveld Vametco and therefore 78.8% of Strategic Minerals Corporation, the intermediate holding company that owns a 75 per cent. interest in the Vametco Vanadium Mine. | Eqtec—Company with access to a proprietary advanced gasification technology used in industrial size power plants to convert waste into synthetic gas to generate electricity. Raising £1.6m. Mkt Cap £8.7m. Due 21 Dec | Volex VLX.L—The global provider of cable assemblies is proposing to move from the main market to AIM on 19 January. £71m market cap. FYMar18E rev £241.5m and £7.19m PBT | Miriad Advertising—Global video advertising company incorporated in 2015 and is engaged in the development of native invideo advertising. 2016 rev £0.7m and £7.3m operating loss. Offer TBA. Expected 19 Dec | OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m.
VER BIRD OTC MPH IQG PDZ MSYS REAT BCN
13 Dec 17
N+1 Singer - Morning Song 24-11-2017
Future (FUTR LN) Results underline change and opportunity | IndigoVision Group (IND LN) Trading behind expectations; Chief Exec leaves | James Fisher & Sons (FSJ LN) Outlook unchanged; Offshore Oil recovery delayed | Sanderson Group (SND LN) Scaling up the Enterprise division | Speedy Hire (SDY LN) Earnings enhancing acquisitions | Vernalis (VER LN) Reduction in cough cold forecasts | WYG (WYG LN) UK challenges prompt further downgrades
VER SDY FSJ IND WYG SND FUTR
24 Nov 17
Operational initiatives in place, execution is key
Tuzistra XR prescriptions (Rx) grew threefold to ~35k in FY16/17 (2nd year on the market) vs ~12k in FY15/16. Investment into addressing the barriers to higher Tuzistra XR prescribing is translating into higher Rx rates, although this has not been matched by revenue growth due to higher inventory stocking in the same period last year. In H217 FDA issued partner Tris with two complete response letters to Vernalis’s CCP-07 and CCP-08 NDAs and we now model launch during the 2018/19 cough cold season. Our updated forecasts reflect this and lower Tuzistra XR revenues due to a slower than anticipated sales trajectory in the near term.
22 Nov 17
N+1 Singer - Vernalis - Solid FY results driven by NCE collaborations; Tuzistra broadly in line
FY results are ahead of our forecasts, mainly as a result of higher than expected NCE collaborative revenue, with Tuzistra™ XR prescriptions broadly in line. Following Complete Response Letters from the FDA for follow-on cough cold programmes CCP-07 and (post period-end) CCP-08, the share trades near all-time lows. Vernalis is currently working closely with Tris Pharma to resubmit the NDAs as soon as possible. We reiterate Hold.
12 Sep 17
N+1 Singer - Morning Song 12-09-2017
Futura Medical (FUM LN) H1 results: Eroxon® trial plan amended; licensing discussions underway | Goals Soccer Centres (GOAL LN) Further downgrades overshadow various strategic positives | Murgitroyd Group (MUR LN) Trading in line after record H2 performance | Oxford Instruments (OXIG LN) FY18 guidance maintained, but dependent on stronger H2 | Summit Therapeutics (SUMM LN) BARDA contract a major boost to ridinilazole | Vernalis (VER LN) Solid FY results driven by NCE collaborations; Tuzistra broadly in line
VER SUMM OXIG GOAL MUR FUM
12 Sep 17
N+1 Singer - Vernalis - Complete Response Letter for CCP-08
Vernalis has this morning announced that it has received a Complete Response Letter (non-approval) from the FDA in relation to CCP-08, its follow-on prescription cough cold medicine for the US market. This follows the CRL for CCP-07 in April 2017 and represents a further significant setback for the group. Vernalis will provide updates on its progress with both products in the coming months. We also continue to look forward to two sets of proof-of-concept data (CCP-05 and CCP-06) later this year.
07 Aug 17
N+1 Singer - Morning Song 07-08-2017
Earthport (EPO LN) Platform expansion into Nigeria | Surgical Innovations Group (SUN LN) Transformational acquisition of Elemental | T. Clarke (CTO LN) Earnings enhancing acquisition of ETON Associates | Vernalis (VER LN) Complete Response Letter for CCP-08
VER CTO SUN EPO
07 Aug 17
Tuzistra XR steady growth in Rx run rate
Vernalis has provided a year-end trading and operational update ahead of its FY17 results due to be announced on 12 September. Total revenues are expected to be ahead of current market expectations, largely due to higher than anticipated R&D-related milestones. This and tighter cost control means that operating loss for the full year is expected to be lower than consensus estimates. In terms of prescription (Rx) growth, Tuzistra XR continued its steady growth in volumes y-o-y; reported net revenue will depend on the impact of rebates and vouchers on gross revenues for the year. Our valuation remains unchanged at £399m (76p per share).
19 Jul 17
FDA issues CCP-07 complete response letter
FDA has issued a complete response letter (CRL) to Vernalis’ CCP-07 NDA following its 20 April PDUFA date, outlining questions that need to be addressed in an NDA resubmission for potential FDA approval. Given limited disclosure regarding possible timelines for dealing with these questions and the probable class of resubmission, we conservatively push back our CCP-07 approval assumption by one year, delaying launch into the 2018/19 cough cold season. However, we acknowledge that there are scenarios under which CCP-07 could still be launched into the 2017/18 season, albeit later than previously anticipated. Separately, Vernalis has received a $2m milestone relating to an existing research collaboration.
24 Apr 17
N+1 Singer - Vernalis - FY’17e upgrade, but further cough cold cuts
Although H1 results in February demonstrated strong YoY growth in prescriptions, the Tuzistra™ XR rollout continued to lag expectations. We continue to anticipate FDA approvals of follow-on products CCP-07 and CCP-08 by their respective PDUFA dates this year. However we have taken a more prudent view on the cough cold rollout, resulting in a target price downgrade from 37p to 28p. We retain a Hold recommendation.
20 Mar 17
Positive Tuzistra trends
Investment into addressing barriers to higher Tuzistra XR prescribing is starting to translate into higher prescription (Rx) rates. Mid-way through the second season post launch, both Rx and sales are showing positive trends and gathering momentum, although we lower our near-term Tuzistra XR net sales forecasts. Ongoing focus on improved salesforce effectiveness, which will provide a solid foundation for CCP-07 and CCP-08 launches, means the post-season update should better inform the future potential of Vernalis’s extended release Rx-only cough cold franchise.
15 Mar 17
Small Cap Breakfast
AFC Energy (AFC.L) | Touchstone Innovations (IVO.L) | 4D Pharma (DDDD.L) | FairFX (FFX.L) | Versarien (VRS.L) | Abzena (ABZA.L) | MetalNRG (NEX:MNRG) | Valiant Investments ( N E X : V A L P ) | Vernalis (VER.L) | Satellite Solutions (SAT.L)
VER AFC IVO DDDD EQLS VRS ABZA SAT
06 Mar 17
Advancing towards a commercial portfolio
FDA acceptance of the CCP-08 NDA (setting a 4 August 2017 PDUFA date) advances Vernalis towards its goal of building a speciality US franchise of extended release (ER) prescription-only (Rx) cough cold products. Potential 2017 approval of CCP-08 and CCP-07 (PDUFA date 20 April 2017) would enable launch into the 2017/18 cough cold season. Last reported cash of £78.6m (unaudited at end October) supports ongoing investment in operational initiatives to enhance Tuzistra XR sales growth this season and beyond. Successful execution will lay important foundations for the launches of CCP-07 and CCP-08.
05 Jan 17
N+1 Singer - Morning Song 01-12-2016
Blackstone/GSO Loan Financing (BGLF LN) CLO refinancing outlook | Clipper Logistics (CLG LN) Interims highlight further significant growth | Grainger (GRI LN) Final results in line, further progress on PRS investment pipeline | Vernalis (VER LN) AGM statement in line with expectations | WYG (WYG LN) Order book strength underpins FY expectations
VER GRI WYG BGLF CLG
01 Dec 16
Investing in the commercial platform
Vernalis marked its transition into a commercial-stage speciality pharma company with the September 2015 US launch of Tuzistra XR, the first product from its extended release (ER) prescription only (Rx) cough cold pipeline. First year (FY16) Tuzistra XR net sales were £1.1m. The £38.9m (net) raised in May provides sufficient funds to invest in operational initiatives (pharmacy stocking, patient access) to support stronger sales growth into the 2016/17 cough cold season and beyond. Successful execution will lay important foundations for the launch of CCP-07 in the following season (PDUFA date: 20 April 2017), and potentially CCP-08 soon after (NDA filing by year-end 2016). This increased investment in FY17, offset by weaker sterling, decreases our valuation to £376m (72p/share).
21 Oct 16
Life Science Sector review
And then worst of all, you never get approval when you say you will. There is nothing that causes investor whiplash more than a sudden announcement of an unsuccessful clinical trial. Whether you are the onedrug wonder on AIM or the multi-drug portfolio NASDAQ darling, the market never takes too kindly to unsavoury news from the FDA on clinical results. But should investors lambast these two scenarios similarly based on poor trial results? The variables are endless but in this example the clear answer is no. Investors who invest in one-drug companies edging ever closer to FDA decision day do not have much cause for complaint as they are rolling the dice. But what of the company with many drug candidates in the clinic? Surely the usual knee-jerk reaction of a mass selloff is not rational when a company has a singular failure amongst a well-developed and advanced portfolio?
VER AZN BTG CYAD CIR ETX GSK GTCL GWP INDV SHP VRP
11 Jul 16
Cash cushion for cough cold growth
The issue of 80m new shares at 50p/share has raised £40m (gross), which enables Vernalis to focus on executing its operational plan and removes uncertainty over whether it is sufficiently funded through to sustainable profitability in FY19 (on our new forecasts). Near-term investment into the commercial cough cold platform will underpin future sales growth. Ongoing initiatives to improve physician awareness, stocking and formulary coverage should increase Tuzistra’s XR market share in the longer term.
25 May 16
MOXATAG® supply issue, forecast downgrade, moving to Hold
Yesterday’s announcement that the sole supplier of MOXATAG® had been placed into provisional liquidation (less than 8 months after Vernalis’ acquisition of the product) was disappointing. Although launch stock is available, we have removed the product from our FY’17 forecasts and pushed our forecasts for the anticipated US rollout out by one year (given the seasonal nature of prescriptions). In addition, we have ignificantly revised downwards our expectations for Vernalis’ cough cold franchise, following the disappointing first-season performance of Tuzistra® XR. We reduce our target price from 86p to 46p and downgrade from Buy to Hold.
20 May 16
Hybridan - Small Cap Wrap
ABDP Interim Results, ALSP Interim Dividend*, CGNR Financing Update*, COG FDA Clearance*, CNIC World's First, ELA Placing, ITM Grant, LID Launch, LRM Trading Update, , MSG Contract and Agreement*, PLI New Data*, TPG Final Results, TRAK Trading Update, VLG Agreements, VENN Final Results*, VER Fundraise, VIP Results
VER ABDP ALSP COG CNIC ELA ITM LID LRM PLI TPG TRAK ORPH VLG VIP CGNR CTEA
10 May 16
Securing cash to sustainability
Vernalis intends to raise £40m (gross) through the issue of 80m new shares at 50p per share. This equity raise will remove any uncertainty over whether Vernalis’s cash position is sufficient to take it through to sustainable profitability in FY18 (on our current forecasts). New funds will be used to boost existing working capital required for a conservative Tuzistra XR roll-out, upcoming Moxatag re-launch and future launches of the remaining four US cough cold programmes in development with Tris. The share placing is on a non pre-emptive basis and is conditional on being passed at the General Meeting scheduled on 12 May 2016.
28 Apr 16
Establishing a firm foundation
Vernalis reported a modest £0.6m in Tuzistra XR sales over the first four months post-launch due to the mild cough cold season. The US launch of this prescription-only (Rx), extended release (ER) cough cold medicine is the first step in Vernalis’s transition into a commercial-stage speciality pharma company, targeting a $3.5bn market opportunity. The emphasis for year one of Tuzistra XR commercialisation is operational: establishing the platform for future sales growth. However, financial performance, in particular, during its second year on the market, will be an important determinant of whether Vernalis will need to raise new funds near term.
06 Apr 16
Interim results impacted by a mild US flu season
Vernalis interims confirm that first sales of Tuzistra® XR (the company’s lead long-acting prescription cough cold medicine) have been impacted by an unusually mild US flu season, with net sales of £0.6m during the period. Operating loss has widened YoY from £(4.3)m to £(13.5)m principally as a result of the significant costs associated with the launch and promotion of Tuzistra® XR in the USA, whilst R&D costs have reduced as a result of a planned scaledown of drug development activity. We will review our current-year forecasts for Tuzistra® XR in due course.
17 Mar 16
Cello Group (CLL LN) Prelims | Centaur Media (CAU LN) Prelims | Imagination Technologies Group (IMG LN) Significant further cost reductions | Marshall Motor Holdings (MMH LN) Quality franchise mix, B/S and growth outlook for just 9x | Safestyle UK (SFE LN) Capital returns and factory expansion for growth | Vernalis (VER LN) Interim results impacted by a mild US flu season
VER CLL CAU IMG MMH SFE
17 Mar 16
CCP-07 FDA filing remains on track for 2016
Vernalis’ cough cold product, CCP-07, has successfully completed a single-dose comparative bioavailability study and will now progress into a multiple-dose study. A potential FDA filing remains on track for 2016. We retain a Buy recommendation.
21 Dec 15
A player in the US prescription cough cold market
Vernalis is poised to complete the transition towards becoming a self-sustaining speciality pharma company, based on its five extended release cough cold products targeted at high-value prescribers. First out of the blocks is Tuzistra XR, launched in September. We forecast £5.8m cough cold sales in FY16 rising to £27.3m in FY17. Our DCF valuation is £439m.
12 Nov 15
TuzistraTM rollout gaining pace: remains a Buy
We note this morning’s announcement that Vernalis’ US partner Tris Pharma has commenced 12-month stability testing on manufactured batches of CCP-08, in line with our expectations. In addition, we have updated our forecasts following FY2015 results (18 months) and the subsequent acquisition of US rights to Moxatag®. The net result is a reduction in target price from 93p to 86p, mainly as a result of a more conservative stance on the initial pricing of TuzistraTM XR, the company’s lead long-acting prescription cough cold medicine ($90 net per prescription vs. $100 previously expected for the FY2015/16 flu season, net of rebates, co-pay contributions by Vernalis and launch incentives). However, we are encouraged by the company’s carefully laid out plans for the ongoing launch, including its Stock Now campaign to US pharmacies. We retain a Buy recommendation.
12 Oct 15
Abzena (ABZA LN) Roche’s acquisition of Adheron adds validation | Avon Rubber (AVON LN) A positive week, but share price now up with events | Minds + Machines Group (MMX LN) Positive update on Portfolio and Renewals | Mobile Streams (MOS LN) Final results | Vernalis (VER LN) Tuzistra™ rollout gaining pace: remains a Buy
VER ABZA AVON MMX MOS
12 Oct 15
FY results ahead of expectations
Vernalis’ financial results for the 18 months to 30th June are ahead of expectations, mainly driven by lower than expected costs. The key highlight during the period was the FDA approval (in April) and US launch (in Sept) of TuzistraTM XR, the company’s long-acting prescription treatment for cough cold. Vernalis is on the N+1 Singer Best Ideas list for 2015. We reiterate our Buy recommendation.
29 Sep 15
Investment in NCE development pipeline completed
Vernalis has completed investment in its NCE development pipeline following the results from its Phase II proof-of-concept trial of V158866 (neuropathic pain). The trial failed to meet its pain reduction primary endpoint but does not change our valuation on Vernalis. We look forward to the full commercial launch of the group’s lead cough cold product (TuzistraTM XR) later this year following its approval by the FDA on 30th April. We re-iterate our Buy recommendation and 93p target price.
20 Aug 15
Vernalis’ lead cough cold product (TuzistraTM XR) was approved by the FDA on 30th April and the company is currently making preparations for a full commercial launch later this year, in time for the US ‘flu season’. Although the four subsequent cough cold programmes are experiencing formulation delays, we have upgraded our valuation based on the results of payer and market research, which suggests better pricing and a larger initial target group of prescribers than previously expected. We are upgrading our target price from 87p to 93p.
03 Jul 15
Tuzistra XR; US commercial potential unveiled
Vernalis is preparing for commercial launch of Tuzistra XR, its extended-release, codeine-based cough cold treatment following FDA approval in April. The product has greater commercial potential than previously anticipated with an addressable market of up to £1.8bn and is the only approved codeine-based, long-release liquid treatment. We forecast maiden cough cold sales in FY16 leading to profitability in FY18. We increase our valuation from £323m to £406m.
17 Jun 15