Q2 results on 11th October were in line with expectations, with cash at period-end of £20.9m and the Phase III trial of ridinilazole on track to report top-line data in H2 2021. As a reminder, the Phase III programme of ridinilazole comprises two global trials run broadly concurrently, each expected to recruit approx. 680 patients with CDI (confirmed by clinical symptoms and a positive CDI toxin test). The primary endpoint is the efficacy of ridinilazole (200mg twice a day) vs. vancomycin (125mg four times a day) as measured by sustained clinical response (the primary endpoint met in Phase II), in addition to which a number of health-economic parameters will be assessed to support market uptake post approval. We continue to expect filing of ridinilazole in 2022, and forecast a peak sales potential of >$300m in the US alone, with substantial upside from other major markets.
Companies: Summit Therapeutics
We have updated forecasts to reflect Summit’s plan to establish a direct sales team in the US for ridinilazole, currently in Phase III for the treatment of C. difficile infection (CDI). As a result, our intrinsic value estimate is upgraded to 66p/share (from 48p), with Summit’s growing portfolio of preclinical, new-mechanism antibiotics providing potentially substantial further upside. We reiterate our positive stance.
Today’s new data on DDS-04 (a series of antibiotics against Enterobacteriaceae, a group of pathogens classified as High-Priority by the WHO) confirms that the series represents a high-potential addition to Summit’s emerging pipeline of new-mechanism antibiotics. We look forward with interest to further developments, including the selection of a preclinical candidate, and reiterate our positive stance.
FY results highlight Summit’s advancing pipeline as a pure-play developer of new-mechanism antibiotics, Ridinilazole (targeting C. difficile infection, an area of unmet need due to high recurrence rates) recently entered Phase III trials, and we continue to expect SMT-571 (targeting N. gonorrhoeae infection, already on its last treatment option as a result of high and rising antibiotics resistance) to enter Phase I trials by year-end. In addition, encouraging development progress is being made on a number of earlier-stage programmes targeting hard-to-treat, priority pathogens (including gram negatives, which pose a particular healthcare threat). We reiterate our positive stance.
The subscription provides a welcome boost to Summit’s near-term plans to initiate Phase III trials for ridinilazole, the company’s novel treatment of C. difficile infection, in Q1 2019; and supports the completion of IND enabling studies for SMT-571 for the treatment of gonorrhoea, expected to enter Phase I trials in H2 2019. We reiterate our positive stance on Summit.
Bagir Group (BAGR LN) Interim results | M&C Saatchi (SAA LN) H1 outperformance provides a huge buffer against uncertainty | Summit Therapeutics (SUMM LN) H1’s highlight antibiotics programmes on track
Companies: BAGR SAA SUMM
ECO Animal Health Group (EAH LN) Margin beat drives EBITDA upgrade | Summit Therapeutics (SUMM LN) Microbiome preservation data on ridinilazole published in PLOS ONE | Verona Pharma (VRP LN) Conviction Opportunity in Pulmonary Disease
Companies: EAH SUMM VRP
Burford Capital (BUR LN) Petersen v Argentina positive developments | Low & Bonar (LWB LN) Tough H1 | ReNeuron Group (RENE LN) Exclusivity deal in ophthalmology, licensing deal expected in 2018 | Safestyle UK (SFE LN) Turnaround well underway but additional hit to profits and cash | Summit Therapeutics (SUMM LN) Grant award from CARB-X to support gonorrhoea programme | Swallowfield (SWL LN) Strong growth in Brands mitigates Manufacturing
Companies: BUR LWB RENE SFE SUMM BAR
Adept4 (AD4 LN) Satisfactory progress against key objectives for 2018 | Ergomed (ERGO LN) TU disappoints but medium-term outlook bright | Redde (REDD LN) In line FY update, no change to forecasts | Small-cap quantitative research Momentum screen refresh + 7 highlighted stocks | Summit Therapeutics (SUMM LN) PhaseOut DMD misses endpoint: ezutromid development terminated
Companies: CLCO ERGO REDD SUMM
BCA Marketplace (BCA LN) Apax offer underplays the growth potential and forecast upside risk | Summit Therapeutics (SUMM LN)
Second N. gonorrhoeae target identified |
Companies: BCA Marketplace Summit Therapeutics
Amino Technologies (AMO LN) Full year expectations unchanged | Findel (FDL LN) Year of progress and delivery to instill confidence | Instem (INS LN) Contract win for Samarind RMS | Microsaic Systems (MSYS LN) Clear path to commercial success | Summit Therapeutics (SUMM LN) Q1 results: Phase II DMD trial on track for Q3 data release
Companies: AMO STU INS MSYS SUMM
Bioquell (BQE LN) In line trading despite FX headwinds | Carador Income Fund (CIFU LN) Significant reset activity post expiration of US risk retention appeal | Driver Group (DRV LN) Sale and leaseback in line with strategy | Harwood Wealth (HW LN) Acquires retirement solutions specialist Plan65 | Midatech Pharma (MTPH LN) FY results in line with expectations, US ops achieve EBITDA breakeven | River and Mercantile Group (RIV LN) AuM +1.1%, -5% EPS forecasts; resilience remains | Safestyle UK (SFE LN) New competitor impacts forecasts as we feared might be the case | Summit Therapeutics (SUMM LN) Further supportive data from PhaseOut DMD unveiled
Companies: BQE DRV HW/ MTPH RMMC SFE SUMM CIFU
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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
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.
Companies: Renalytix AI
Operational Progress – More to come
Companies: Open Orphan
Having taken time to assess the potential impact of COVID-19, IXICO has today provided a trading update for FY20E and an expectation for FY21E revenue growth. Revenues and EBITDA for FY20E are expected to be at least £9.1m and £0.9m respectively. Revenue growth for FY21E is expected to remain at double-digit levels. We view the trading update as a display of confidence in the ability of the company's remote access business model, proprietary technologies, and centralised AI data analytics capabilities to continue to serve its client base. We have re-instated forecasts for IXICO and reinstate our Buy recommendation.
ReNeuron has changed its focus to concentrate on cell therapy for retinal disorders. The Phase I/II has FDA clearance to use a higher dose and a new UK trial site in Oxford has been added. A pivotal study may start in H221. The CTX cell line for stroke will now be out-licensed. Internally, it will be used to produce exosomes, an emerging new area. Preclinical exosome technology might be used for therapeutic delivery to the brain and in vaccination or treatment of SARS-CoV-2 infections. Our indicative value is adjusted to £107m, formerly £197m, pending full FY20 results due in July.
Companies: Reneuron Group
Open Orphan reported statutory full-year results to 31 December 2019, which include Open Orphan DAC and Venn Life Sciences, as well as 12-month proforma results that include the January 2020 hVIVO acquisition. The results show proforma revenues of €27.1m (including €1.4m grant income) and LBITDA before exceptional items of -€10.1m. The FY 2019 results may be less relevant as a guide to future performance of the business, given the various developments that have occurred since, and the potentially transformative opportunities posed by COVID-19, which include an antibody testing service and the development of a COVID-19 challenge model. Post-period cost savings of €7.5m by year-end 2020, and a strong pipeline of work to build H2 2020 revenue should enable the business to reach operational profitability by Q3 2020. We leave forecasts unchanged, but with room for upside depending on uptake of the COVID-19 test, and reiterate our target price of 19p.
Open Orphan (ORPH) is a specialist Contract Research Organisation (CRO) offering pharmaceutical services relating to orphan and emerging therapies, and is pioneer in the testing of vaccines and anti-viral treatments through the use of human viral challenge (HVC) studies. FY19 financial results refl
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.
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
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
ReNeuron has announced its 3rd exosome collaboration agreement and has made another step to justifying the strategic shift to exosomes as announced earlier this month. As a reminder ReNeuron’s exosomes are derived from human neural stem cells, and are clinical-grade, scalable and have a natural ability to cross the blood-brain barrier. Exosomes can be used to deliver therapeutics for diseases of the brain. The agreement today is with an undisclosed major US pharmaceutical company, but like the previous exosome agreements (announced in April 2020 and Jan 2019), it is a research evaluation agreement and carries little immediate financial bearing. Nevertheless, proof-ofconcept in specific disease areas expected on the back of agreements could enable lucrative out-licensing agreements. We note there has been a spate of recent and highly rewarding licensing agreements with exosome developer peers - Codiak (with Sarepta and Jazz) and Evox (with Takeda and Eli Lilly). In particular, we note that the Codiak-Sarepta deal was valued at $72.5m in upfront and near-term license payments. We make no changes to our forecasts or valuation analysis at this juncture, but will continue to follow the exosome platform closely. We reiterate our positive stance on ReNeuron.
New York state approval is a pivotal moment for Renalytix. Approval facilitates the launch of KidneyIntelX with launch partner Mount Sinai and progressively derisks the investment hypothesis. Understandably with Mount Sinai in the heart of the NYC Covid-19 health pandemic, testing and first commercial revenues is now set to begin in calendar Q3 2020 (vs Q2 2020) once the integration of KidneyIntelX into the Mount Sinai electronic health record is completed. Renalytix is now licensed to provide KidneyIntelX testing services in 47 states in the US, with the remaining licenses pending in calendar 2020. We have adjusted our forecasts to reflect a full launch in the Mount Sinai system in FY’21 (June yearend) and have upgraded our valuation analysis through unwinding our risk adjustment from 60% to 65%. Our valuation analysis now implies an intrinsic value of 477p/share (previously 459p/share).
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.
Omega has conditionally raised £8m alongside an Open Offer up to £3m, to scale manufacturing, expand its lateral flow portfolio of global health tests and exploit the opportunities for COVID-19 testing that arise from its partnerships within the UK. We argue that the Food Intolerance business largely underpins the current valuation, given imminent Chinese approval, with upside derived from VISITECT and COVID-19 opportunities. Modelling the potential impact of a COVID-19 test with any degree of confidence at the moment is not possible; however, we provide a COVID-19 capacity model and a SOTP analysis that points to a valuation that is substantially in excess of the current market capitalisation.
Companies: Omega Diagnostics Group