Ensifentrine is Phase III-ready asset targeting a vast market of underserved COPD patients, and we believe the company offers one of the best opportunities for investors in the UK Biotech space. We have high conviction on ensifentrine as an effective and safe potential therapy for COPD, and believe the current Phase III trial design gives a reasonable and achievable route to US regulatory approval. We update forecasts to reflect the upside upon success, and assume short-term funding of $130m is required to support this. Our risk-adjusted rNPV valuation analysis implies an intrinsic value of 165p/share, an upside of 263% to the current share price.
Companies: Verona Pharma
Verona Pharma’s investor and R&D webinar yesterday was an excellent example of the unmet need for a novel therapy in the 1.2m COPD patients that remain symptomatic despite maximum therapy. The event focused on the problems and opportunities arising from COPD, and brought together a group of leading pulmonologists representing the clinical community for a panel discussion (see below for key KOL takeaways). The event reinforced our confidence that ensifentrine has an important role as a solution to managing COPD, a disease forecast to become the 3rd leading cause of death by 2030 with 384m patients worldwide. We continue to anticipate the Phase III ENHANCE programme to begin in Q3 2020 (subject to funding) and peak sales potential of ensifentrine of $740m.
Based on the FDA’s positive feedback, we believe the Phase III ENHANCE trial design (as detailed below) gives a reasonable and achievable path for regulatory approval for use in symptomatic COPD patients as a maintenance therapy. The decision to evaluate ensifentrine as a monotherapy and as an add-on to a single standard-of-care bronchodilator treatment (LAMA or LABA) is logical, and allows for a broad label. We note that ensifentrine has demonstrated clinically meaningful and statistically significant improvements in lung function and symptom control both as a monotherapy, and as an add-on to either LAMA or LABA therapies. This gives us greater confidence in the success of the future ENHANCE clinical programme. As expected from the data totality, 3mg has sensibly been chosen as the lead ensifentrine dose. Wider implications of the FDA feedback on the cost and timing of the planned Phase III programme have yet to be determined, but we have left our forecasts unchanged. We presently assume a $100m plus capital requirement in 2020, the Phase III programme to begin in Q3 2020 (subject to funding) and forecast peak sales potential for ensifentrine in excess of $740m. We look to the Investor and Analyst R&D webinar on the 1st June 2020 for additional details.
Today’s Q1 update is broadly in line with our expectations, the company awaits End-of-Phase II feedback from the FDA this quarter to inform the design of a pivotal Phase III programme for nebulized ensifentrine in COPD. This FDA feedback will now be a written response, rather than through a meeting, due to the Covid-19 pandemic. We continue to expect the initiation of this Phase III programme in Q3 2020 (subject to funding and Covid-19 lockdown measures). Ensifentrine remains a highly compelling investigational therapy in COPD, having shown clinically meaningful lung improvements across three widely used inhaled modes: nebuliser, dry powder inhaler and metered dose inhaler (MDI). We currently forecast a peak sales potential for nebulized ensifentrine in excess of $740m. We look forward to further updates in due course and reiterate our positive stance.
Today’s Phase II single-dose (Part A) data on the metered dose inhaler (MDI) formulation of ensifentrine in COPD patients are strong, demonstrating a statistically significant and clinically meaningful, dose-response improvement in lung function vs. placebo. This improvement was statistically significant in all doses vs. placebo, except at the lowest strength. Furthermore, this lung function improvement showed statistically significant dose-response durability over 4 hours and 12 hours. Whilst it is too early to predict the leading MDI dose strength, the general dose-response and placebo-like safety profile of the MDI formulation, which will be seen favourably by potential commercial partners. However, the initiation of the multi-dose (Part B) stage trial has been postponed for the time being due to the ongoing Covid-19 pandemic. Nevertheless, today’s result means ensifentrine has shown clinically meaningful lung improvements across three widely used inhaled modes: nebuliser, dry powder inhaler and MDI. This underpins Verona’s partnering/licensing efforts for ensifentrine, which represents substantial blue-sky upside to our valuation.
Inspecs, a UK designer, manufacturer and distributor of eyewear frames to global retail chains announces its intention to IPO onto AIM raising £94m with a market cap of £138m. Admission expected 27th February. FY Dec 2018 numbers show revenue of $57m and underlying EBITDA of $11m
Companies: MSMN YGEN MTR AAU GROW KGH VRP HYR BRCK SDX
Verona Pharma has announced senior management changes with Dr. David Zaccardelli replacing Dr. Jan-Anders Karlsson as CEO, effective immediately, and Mark Hahn replacing Piers Morgan as CFO. In our view, the new US-based management, who join as a proven team, are solid appointments with strong CVs and a history of successfully working together. Most recently at Dova Pharmaceuticals until its $915m acquisition by Swedish Orphan Biovitrum (Sobi) in November 2019, and together have raised over $600m to support product development. We believe today’s announcement positions Verona Pharma well within the US market, and shows clears intent of raising funds to support the late-stage development of ensifentrine as a novel treatment for COPD. We see no change to the short term outlook, and reiterate our view that Verona remains a compelling investment proposition targeting a vast market opportunity.
Today’s Phase IIb trial results investigating nebulized ensifentrine as a twice-daily add-on to a long-acting antimuscarinic bronchodilator (LAMA) in symptomatic patients with moderate-to-severe chronic obstructive pulmonary disease (COPD) are excellent and highly supportive of the overall drug’s profile. In the study, ensifentrine met its primary endpoint (peak FEV1 at week 4) for all doses, showing a dose-responsive statistically significant and clinically meaningful improvement of lung function and continued duration throughout the trial period. Ensifentrine also demonstrated a placebo-like tolerability/safety profile, and statistically met other secondary endpoints including a compelling and progressive improvement in patient quality of life. The latter point is particularly encouraging, given that 76% of patients on tiotropium1 remain symptomatic, adding support for ensifentrine’s longer term antiinflammatory effect. We believe these results concludes a comprehensive Phase II programme, and the company is in good stead going to an FDA End-of-Phase II meeting expected in Q2 2020 to clarify the clinical trial protocol of a Phase III programme. We expect a Phase III programme is begin in H2 2020 and we reiterate our positive stance.
Polarean Imaging plc (POLX.L): Tyndall increases stake | Verona Pharma plc (AIM: VRP.L; Nasdaq: VRNA): Positive trial results
Companies: Polarean Imaging Verona Pharma
Calisen Group. Potential Intention to Float. Owner and manager of essential energy infrastructure assets . Consolidated FY Dec 18 revenue £162.1m and operating profit £25.4m. Raising up to £300m in primary plus partial vendor sale. The Global Sustainable Farmland Income Trust will invest in a diversified portfolio of operational farmland assets located in major agricultural markets including the United States, Europe, New Zealand, Australia and certain countries within Latin and South America. Raising up to $300m. Due 28 February. Investment firm Nippon Active Value fund is seeking to raise up to £200m at an issue price of 100p per share via an IPO. The company aims to invest in a portfolio of quoted Japanese stocks with market capitalisations of up to $1bn. First day of dealings expected early February.
Companies: VRP TERN HMI QTX IND DXRX ERGO FARN AUG AVG
Today’s Q3 results are in line with our expectations. Good progress is being made developing ensifentrine for use in COPD, with data from the final, fully enrolled, 4-week Phase IIb dose-ranging study expected around YE 2019. We look forward to results from this trial, which we see as key to capturing the full commercial potential of ensifentrine. The trial is expected to conclude the comprehensive Phase II programme, with an FDA End of Phase II Meeting anticipated in H1 2020. Verona is expected to go into this meeting with a substantial body of evidence supporting ensifentrine’s clinical utility in COPD, including data from 15 completed clinical trials (14 nebulized and 1 DPI trials). We continue to believe there are multiple additional value creation opportunities available, including collaborative agreements for the DPI or MDI formulation, other respiratory indications (e.g. asthma and Cystic Fibrosis) and/or new geographies. We reiterate our positive stance on ensifentrine as a first-in-class PDE3/PDE4 inhibitor inhaled drug therapy for COPD.
Verona Pharma has a pleasing habit of delivering important trial results on schedule, and this morning’s announcement, confirming the completion of recruitment in the Phase IIb trial of nebulised ensifentrine in moderateto-severe COPD, is no exception. We continue to look forward to data from the 416-patient, 46-centre trial around year-end, to be followed by an end-of-Phase II meeting with the FDA in H1 2020e and the start of Phase III trials in 2020, in line with previous guidance. Positive data would add to an already substantial body of clinical evidence supporting the utility of ensifentrine in COPD, including improved lung function, improved symptoms and synergistic effects with standard therapy.
Following on from yesterday’s stellar results from the Phase II trial of a handheld, dry powder inhaler (DPI) formulation of ensifentrine, today’s Q2 results are in line with expectations. Results from the final, dose-ranging, Phase IIb trial of nebulised ensifentrine are expected around year-end, to be followed by the start of Phase III trials in 2020. Ensifentrine has already accumulated a substantial body of evidence supporting utility in COPD, including improved lung function, improved symptoms (reduced breathlessness) and synergistic effects with standard therapy. We look forward to results from the final Phase IIb trial with anticipation, and reiterate our positive stance.
Verona Pharma (VRP.L): Interim results for six months-ended June 30 2019
Freyherr International Group PLC the Medicinal Cannabis holding company established in 2016, is planning to list on the NEX exchange on the 13 August.
Companies: CCS VRP UFO TILS TEK 88E ANX WGB JSE BBB
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Novacyt (NCYT.L): Trading update | Avacta (AVCT.L): COVID-19 wastewater detection sensor collaboration with Integumen
Companies: Novacyt Avacta Group
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
EKF has delivered another positive trading update, with outperformance in H1 and further orders for the Primestore MTM sample collection device prompting further material upgrades to our FY20 estimates. Despite a lot of noise around potential Covid-19 diagnostics and therapeutics. EKF remains one of very few UK-listed companies actually generating material revenues. Given the nature of its offering, which is agnostic over which molecular test is used, we expect demand to continue at elevated levels for the duration of the pandemic and continue to see further upside potential to our already materially upgraded estimates. EKF remains one of our best Ideas for 2020.
Companies: EKF Diagnostics Holding
Full-year results to 31 March were in line with the trading update at the time of the recent fundraise (£10.5m net), with revenues, adjusted pre-tax loss from the continuing businesses and year-end net debt of £9.8m (+12%), £0.4m and £0.8m, respectively. The company is fully funded to exploit the emerging COVID-19 diagnostic testing opportunities. Despite the disruption to its Food intolerance business in Q1 FY 2021, we still expect strong growth and a profitable FY 2021, with multiple value inflections points (WHO prequalification for VISITECT CD4, UK-RTC lateral flow COVID-19 antibody test CE marking and Chinese approval for Food Detective self-test) and subsequent orders determining the actual outcome, with potential upside to forecasts. We leave our forecasts unchanged for the time being and our target price under review.
Companies: Omega Diagnostics Group
Futura Medical’s update on MED3000, its novel treatment for erectile dysfunction (ED), confirms progress is in line with our expectations. The regulatory filings with both the US FDA and European Notified Body are progressing well. Importantly, the FDA has indicated there is a pathway for MED3000 to be launched as an OTC product in the US. This will require an additional, albeit modest, supplementary clinical trial to demonstrate longer term efficacy. More details should be known by the time of H120 results, likely in early-September. Our DCF-based model, using conservative assumptions, values Futura Medical at £153.8m, equivalent to 60.9p a share.
Companies: Futura Medical
MaxCyte’s new clinical and commercial licence agreement with Apeiron Biologics allows the use of MaxCyte’s proprietary Flow Electroporation technology for manufacturing Apeiron’s gene-silencing siRNA therapy, APN401, for clinical studies. The deal is the latest in a series of clinical and commercia
Diaceutics is expected to report 20% YoY revenue growth in H1E. This strong performance against a difficult global backdrop reinforces the recession proof growth qualities of the business model. With the launch of the DXRX platform this year, we expect further operational benefits to flow through the business.
Futura Medical (FUT.L): Regulatory update | EKF Diagnostics Holdings plc (EKF.L): Trading update
Companies: Futura Medical EKF Diagnostics Holding
SDI announced that it expects to meet market expectations for FY 2020, which are for adjusted pre-tax profit of £4.2m. Despite taking decisive action to reduce costs following the lockdown on 23 March, and confirmation that it has traded profitably in March and April, the lack of long-term visibility prompts a withdrawal of FY 2021 guidance. That said, we believe the company to have sufficient liquidity to weather the COVID-19 crisis with end markets still viable, and the improved 2020 margins are positive.
Companies: Scientific Digital Imaging
Many of the world’s best and most important products (eg Space exploration, nuclear medicine/power & the internet) were originally invented by the military. It’s happened again – but this time to combat airborne pathogens like Ebola, SARS/MERS and all manner of other biological nasties doing the rounds. You see on 10th December 2018, Kromek was awarded a $2.0m contract by DARPA (research arm of US Dept. of Defense) to develop a vehicle-mounted bio-threat detector. The idea being that this should be able to rapidly identify (within 1 hour) any dangerous germ that might have been released into the environment, say by terrorist groups, organised criminals &/or rogue states.
Companies: Kromek Group
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
Companies: AGY ARBB ARIX DNL GDR NSF PCA PIN PHNX PHP RE/ RECI STX SCE SIXH TRX SHED VTA
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’.
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
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
Following on from the Primestore MTM orders announced in April, EKF has received further orders worth $9.4m to be fulfilled between now and the end of July. This results in further upgrades to our already upgraded estimates, by 34% at the PBT/EPS level in FY20, with scope for further upgrades as and when additional orders are received. The Primestore device is proving its worth during the current Covid-19 pandemic. It deactivates viruses, bacteria, fungi and mycobacterium tuberculosis allowing safe sample handling and transport, greatly reducing risk of infection and enables samples to be transported at ambient temperatures, simplifying the significant logistical burden involved in transporting millions of samples. It is also worth reiterating that the sample collection device is agnostic as to which test is carried out on the patient sample, making this something of a picks and shovels play on the current environment. In addition to these US orders, EKF has now commissioned its facility in Wales and shipped its first product into the UK market this week. It has also begun the process to start manufacturing in Germany and will bring additional capacity on stream in the US in the near future. All of this is yet to be factored into estimates and represents additional potential sources of upgrades in due course. We continue to believe EKF is exceptionally well positioned in the current environment and is forming a crucial part of the supply chain required to significantly increase diagnostic testing capacity globally. EKF remains one of our Best Ideas for 2020, supported by a positive short and medium term outlook, strong fundamentals and a track record of meeting and beating expectations.