Sensyne Health (SENS.L): Research agreement with Hampshire Hospitals NHS Foundation Trust | RenalytixAI (RENX.L): First Quarter results for 2021
Companies: Sensyne Health Plc (SENS:LON)Renalytix AI Plc (RENX:LON)
FY’20 results are slightly ahead of our expectations, and cap an excellent period with strong news flow. KidneyIntelX has now launched at Mount Sinai and is cleared to report results in all 50 US states. We continue to believe KidneyIntelX could represent the future standard-ofcare for early detection of chronic kidney disease progression and kidney failure in patients with Type II Diabetes, affecting an estimated 11m. Focus is now on building out the platform with expanded indicated uses, win national reimbursement and drive testing adoption. One significant catalyst ahead is Medicare coverage, which come as early as H1 2021 under new proposed rules. Whether or not this rule is finalised, the company is moving forward towards broader insurance payor coverage. In this note, we have refreshed our forecasts and valuation reflecting the deployment of IPO proceeds.
Companies: Renalytix AI Plc
Renalytix has officially commercially launched the KidneyIntelX testing platform with its launch partner Mount Sinai. The test is now fully integrated into the Mount Sinai health system, and goes beyond mere patient testing into a holistic approach to CKD patient support with Mount Sinai’s care delivery, physician education and support and billing pathways. This is a pivotal milestone for Renalytix triggering first commercial testing revenues, and was achieved in less than two years since Renalytix first IPOd in November 2018. It is estimated there are approx. 66,000 Diabetic kidney disease patients at the Mount Sinai health system, representing a significant initial addressable market opportunity. We continue to expect the launch and similar integrations of the KidneyIntelX platform into two further health care systems in FY’21. Simultaneously, Renalytix also announced agreements with LabCorp and an unnamed national medical logistics provider to use additional service centres to support the launch with the collection of blood samples at centres close to home or by primary physicians within the Mount Sinai system. Given the ongoing Covid-19 pandemic and the impact on physician visits, we believe this is beneficial and aids the use of KidneyIntelX to remotely monitor patients. This also provides a logistics framework to scale this process across multiple territories in the US.
Renalytix has filed the regulatory submission package with the FDA seeking clearance of KidneyIntelX, and we expect full FDA approval for the KidneyIntelX by year-end 2020. In our view, the risk of protracted FDA review is low given the continuous fine-tuning of the regulatory package in communication with the FDA through the Breakthrough Device designation pathway granted by the FDA in May 2019. The intended use of KidneyIntelX is for patients with Type 2 diabetes and chronic kidney disease. This is the same label as approved by the New York State Department of Health in June, and represents 20-30% of the estimated 37m CKD patients in the US. Importantly, the submission of this regulatory package doesn’t lock in test specification, and Renalytix can continue to improve the AI algorithm performance as well as incorporate new biomarkers and datasets that might enable a broader label through a defined pathway with the FDA. If successful, FDA clearance would be a major advantage within a complex process for adoption, being leveraged in ongoing discussions with payers and health systems, and will help advance future adoption into kidney disease clinical guidelines. Nevertheless, FDA clearance is not essential for the commercial launch of KidneyIntelX and to begin reporting patient results. This is expected with the full EHR integrated launch of KidneyIntelX with Mount Sinai, which is expected to begin in September 2020 and trigger first commercial revenues.
Today’s collaboration agreement with AstraZeneca is a breakthrough moment. It is the second pharmaceutical collaboration Renalytix has agreed to date, but is the first to explore the utility of the KidneyIntelX platform in other chronic diseases beyond chronic kidney disease (CKD) within the cardiovascular, renal and metabolic (CVRM) therapy area. The multi-stage precision medicine collaboration aims to evaluate whether the KidneyIntelX platform can be used to identify and stratify often hidden CKD patient groups with complications, like hyperkalaemia and anaemia, in order to optimise their care and therapeutic utilisation. Initial focus is on optimising therapeutic utilisation of AstraZeneca’s potassium-binding and anti-anaemia therapies, Lokelma and Roxadustat, respectively. Results from the first evaluation stage are expected in H1 2020 and if successful are expected to prompt a multi-centre study that could enable future label expansions beyond its current intended use. We understand that Renalytix will earn a small margin from the collaboration overcompensating for R&D expenses incurred. This income inaugurates Renalytix’ pharmaceutical income channel, and lays foundations for long-term growth in this channel with further validation, including the potential for KidneyIntelX to act as a companion diagnostic (CDx) to novel drugs. We view the announcement to be highly encouraging, opening up use of KidneyIntelX in a broader and potentially vast patient group, and paves the route for KidneyIntelX to be used as the “go-to” companion diagnostic in the future for kidney disease and complications.
RenalytixAI (RENX.L): KidneyIntelX to be used in study investigating kidney risk in COVID-19 Patients
Renalytix has announced the pricing of its global offering raising $74.3m gross proceeds and shares will begin trading today on Nasdaq under the ticker “RNLX”. In aggregate, Renalytix will issue 11m new ordinary shares, representing 15.6% of enlarged share capital. The global offering was oversubscribed and highlights the strong institutional support for Renalytix and its leading KidneyIntelX platform as a prognostic tool for rapid progressing kidney function decline. The proceeds evolves the company’s prospects beyond our current forecasts providing substantial capital to significantly invest in the continued development and commercialisation of the KidneyIntelX platform to maximise reimbursement and its commercial potential. Our forecasts reflect the initial launch of KidneyIntelX with launch partner Mount Sinai in Q3 2020, but we will update our forecasts in due course to reflect the evolving commercial strategy.
Vor Biopharma raises $110m Series B round (from yesterday) | RenalytixAI (RENX.L): Agreement with US preferred provider network
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.
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.
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).
The results from the expanded multi-centre validation study are positive, progressive and highly encouraging. The main data point to note is that the test continues to optimise with blood plasma biobank samples and linked electronic health record data, and improve its predictive power compared to the standard of care. In the high risk group, the positive predictive value (PPV) was 62% vs 41% for the KDIGO risk strata. This data builds on positive interims results previously announced in July 2019 (previous PPV of 53%), and supports the ongoing commercialisation of KidneyIntelX and is expected to be submitted to the FDA under Breakthrough Device Designation within the next two months. We continue to expect an FDA approval decision in 2020. There are over 12m Type 2 diabetes patients in the US with CKD. Result are highly encouraging and confirm our belief in KidneyIntelX as the new standard of care for early detection of fast-progressing chronic kidney disease. Specifically, data today supports use in those 12m US patients that have both Type 2 diabetes and CKD. We make no forecast changes, but have unwound our valuation risk-adjustment from 55% to 60% (in line with our risk unwinding stages set out in a previous note). Our analysis implies an increase in intrinsic value from 422p/share to 459p/share.
IXICO plc (IXI.L): Half-year report | RenalytixAI (RENX.L): Joint Venture with Mount Sinai to develop a Covid-19 antibody test
Companies: IXICO Plc (IXI:LON)Renalytix AI Plc (RENX:LON)
Mount Sinai and Renalytix has formed a JV, called Kantaro (75:25% equity interest, respectively), to develop and scale production of Mount Sinai’s high-performing Covid-19 antibody test kit, in a move that is potentially transformative for Renalytix and demonstrates the strength of the Renalytix-Mount Sinai relationship. An antibody test allows the study of immune response to Covid-19, the precise rate of infection, the identification of donors of therapeutic serum/plasma, and importantly may correlate with protection/immunity. Whilst it is still too early to identify what constitutes a protective response and the usefulness of an antibody test in the real-world setting, clearly the potential market opportunity is vast. The JV is in the process of validating the scaled assay and seek final EUA of the test kit before sales can commence. Kantaro has also collaborated with Bio-Techne to manufacture and distribute the antibody test kits at scale, with a goal of producing >10m patient tests per month by July. We anticipate sales could begin in July 2020 (Q1 FY’21, and to come at a modest extra financial costs to Renalytix other that time and internal resources. It is too early to pinpoint the financial implications and make changes to our forecasts. Nevertheless, for illustration at full capacity and a conservative estimated reimbursed price of $400/test kit, we anticipate this could translate to >$50m additional income on an annualised basis for Renalytix.
RenalytixAI (RENX.L): Proposed dual-listing on Nasdaq | e-therapeutics (ETX.L): Covid-19 project update | RedX (REDX.L): Appointment of Non-Executive Director
Companies: RENX ETX REDX
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The H1 results are as announced in the October update; COVID delayed several new contracts until earlier this month, leaving H1 revenue at £5.1m. However, management remained comfortable with a FY sales forecast of £21.7m on the basis of a strong pipeline and the substantial tranche of annually renewed revenue billed each H2. Reassuringly, the new contracts have now been signed for both the Celebrus Customer Data Management (CDM) solution and the Celebrus Customer Data Platform (CDP), and they cover a range of verticals from financial services to automotive manufacture and ecommerce provision. With significant net cash, D4t4 is in a strong position for long-term sustainable growth on the back of rapidly growing global demand for CDP/CDM. It remains confident on prospects in new geographies (N America and APAC) and new use markets (fraud, risk analysis and healthcare) plus a high level of recurring revenue. Our forecasts and target price remain unchanged save for a tweak to cashflow and raised dividend expectation. We reiterate our 310p target price.
Companies: D4t4 Solutions plc
IQE has announced that the strong performance in H120, which resulted in record first-half revenue, has continued into the second half. It has updated FY20 revenue guidance from at least £165m to over £170m, with adjusted EBIT guidance remaining at the mid-single-digit million level. We have updated our FY20 and FY21 forecasts accordingly, giving adjusted PBT upgrades of 34% and 10% for FY20 and FY21 respectively.
Companies: IQE plc
LoopUp has announced a very strong H1 period, in line with the previous trading update and reflecting a number of months of exceptional performance. This is allowing the business to invest in the major identified new opportunity, to provide telephony within Microsoft Teams, where the early signs are extremely positive. We look forward to further detail on the Teams pipeline and sales levels over time.
Companies: LoopUp Group PLC
H1 Results: Ready to reinvest
Companies: First Property Group plc (FPO:LON)First Property Group plc (GXZ:BER)
Earnings in H1A were better than flat and H2E has got off to a good start. Margins are up and so too is recurring revenue as proportion of total business. First half order deferrals are now materialising and renewals are positive. Free cash generation was strong and the outlook is positive. We see no fundamental reason for the recent share price underperformance and we reiterate our Buy recommendation.
Companies: Shearwater Group plc
After a challenging 2H21 for the events and traffic data business, Tracsis has delivered FY results to July in line with the reassuring August trading update. With £48m (FY19: £49.2m) revenue, the group has quantified an estimated £10m set back to COVID-affected activities within the Traffic & Data Services (T&DS) Division, implying underlying outperformance compared with expectations for the higher-margin Rail Technology & Services (RT&S) Division. Forecasts describe prospects: continuing growth in FY21 and FY22 for RT&S, with two major contracts identified in latter stage of negotiation; and a still hampered FY21 for events and traffic surveys within T&DS – but forecasts for FY22 show a return to an ex-COVID environment, regaining the original growth path. With £17.9m of cash (no debt) and delivering multiple fundamental elements of the UK rail ecosystem, Tracsis has weathered the storm better than expected, with organic and acquired growth prospects as strong as ever. Target 900p reiterated.
Companies: Tracsis plc
The Panoply has reported very robust interim results and we upgrade our FY21 PBT/EPS estimates by +5%/+10%. Revenues leapt +58% to £21.2m with LFL growth of +18% (Q1 +10%, Q2 +26%). EBITDA more than doubled to £2.9m, with LFL growth of +37%. Cash conversion was strong and the group has declared a maiden interim dividend of 0.2p. The group had a strong sales backlog of £17.5m at 1st October and we are pleased to note that it is increasingly winning large, multi-disciplinary contracts notably Bloomberg Philanthropies, Land Registry and Planning Inspectorate. These contracts would have beyond the capabilities of the individual businesses before they joined The Panoply and therefore in our view securing these £4m+ contracts vindicates the group strategy. We raise our PBT forecast by +5% to £4.9m (£4.7m). On a maximum deferred consideration basis, EPS is 5.1p (4.8p) while assuming shares are issued at 150p rather than our previous assumption of 120p gives EPS of 6.4p (5.8p). We have re-run our sensitivity analysis using the current share price of 200p and this indicates PF EPS of 10p could be delivered in 2023. We raise our target price to 220p (was 180p) and retain our Buy recommendation.
Companies: Panoply Holdings Plc
Nanoco has secured just under £1m grant funding for a life sciences project to develop a heavy metal-free quantum dot testing kit to detect COVID-19. The project will last 18 months and represents a potential third segment for generating future revenues in addition to established activities in sensing and display applications. We make minor adjustments to our estimates, although there is no impact on EBITDA or cash flow.
Companies: Nanoco Group PLC
Mirriad Advertising’s H120 numbers show strong top-line progress, up 109% on H119 and 26% ahead of H219. H120 revenues were up over 185% year-on-year in China and Singapore, with market confidence rebuilding. There are very promising new agreements in place with US media owners, with early moves in large adjacent markets, such as music video. There are advanced negotiations ongoing with Tier 1 entertainment platforms. These prospects significantly increase the attraction of Mirriad’s proposition to advertisers. Cash burn is now under £1m per month, with end-August cash of £13.3m (no debt). Market forecasts for FY20–22 are unchanged.
Companies: Mirriad Advertising plc
Following Fonix successfully raising £45m through an oversubscribed IPO on 12 October, we initiate our coverage with a target price of 150p. The investment case is focused upon Fonix leveraging its proprietary, cloud-based platform to expand with existing clients and win new clients within a robust UK phone-paid services market. The structural strength of Fonix’s platform is demonstrated by Fonix experiencing no churn from major customers in the past six years, which reflects that Fonix benefits from strategic integration and strong relationships with its clients. Fonix’s FY20 gross profit and EBITDA grew by +22% and +36% respectively, and we conservatively forecast +11-12% EBITDA and EPS growth in FY21 and FY22. On 12m forward EV/EBITDA of 10x and an EFCF yield of 7%, Fonix looks considerably undervalued compared to AIM payment and finnCap Tech 40 peers that are trading on 12m fwd EV/EBITDA of 17-20x with 7-17% EBITDA growth, and EFCF yields of 1-3%. We base our 150p target price on 15x FY22 EV/EBITDA or a 5% FY22 EFCF yield, and look forward to Fonix’s trading update in early 2021.
Companies: Fonix Mobile PLC
ACT announces today that it has received a PO for the first large scale deployment of its HXM offering for a leading global energy supplier, and this on a c. 3 months sales cycle. We believe this has the potential to grow into a multi-million contract over time and validates ACT’s decision to change its go-to-market model back in Jan 2020. Perhaps even more significantly ACT reports that channel partners have established a pipeline of >4m addressable employee seats just since August. Our best estimate is that this pipeline could be worth high single digit tens of millions of recurring dollars p.a . For a company capitalised at £37m that is very material. This is a company/story worth getting to know.
Companies: Actual Experience plc
Digital transformation services provider The Panoply has reported a strong H1 21A financial performance in our view. Revenue grew 58% YoY during the period (+18% YoY organically) and adjusted EBITDA by 142%, reflecting the impressive commercial progress made and the impact of acquisitions. Client billings showed a solid improvement on H1 20. Commentary on the outlook is positive and underpinned by a £17.5m sales backlog to March 2021. Overall, we believe this is a very positive release from The Panoply and that the group remains well placed to achieve its targets.
CAP-XX Ltd* (CPX.L, 6.8p/£30.1m) | Tern plc* (TERN.L, 6.85p/£20.6m) | Location Sciences Group plc* (LSAI.L, 0.45p/£1.0m)
Companies: CPX TERN LSAI
Location Sciences (LON:LSAI), a world leader in location verification for mobile advertising, recently released a trading update for the current year (year-end Dec). The update covers the three product lines — Verify, GeoProtect, and Insights. We provide an overview of these on p2.The update outlin
Companies: LSAI PXAMF 59LA
WANdisco has announced a $3m initial contract with a major US telecoms company to migrate a 13PB on-premise Hadoop cluster to the Microsoft Azure cloud using its LiveData Migrator. Most of this will be recognised in 2020 but it also has an opportunity to migrate a further 30PB of data stored by the company in the coming years. We make no change to forecasts, as we believe WANdisco still needs to sign further deals to reach our FY20 estimate, but see the current acceleration in commercial activity as very encouraging.
Companies: WANdisco Plc