Collplant Holdings — Big potential for BioInk

Collplant Holdings — Big potential for BioInk

Over the course of H217, CollPlant announced that it had received orders for its BioInk product from two companies for development of 3D printed organs and orthopaedic devices respectively. In the FY17 results the company announced that the first two orders accounted for NIS0.69m in revenue, bringing revenue for the year to NIS1.67m. One of the clients placed a repeat order, which is expected to be recorded in Q118 results.

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CollPlant Holdings

Big potential for BioInk

Earnings update

Pharma & biotech

28 March 2018

Price*

NIS0.42

Market cap

NIS72m

*Priced at 26 March 2018

NIS3.49/US$

Net cash ($m) at year end 2017 and subsequent financings

6.7

Shares in issue

171m

Free float

83%

Code

CLGN

Primary exchange

TASE

Secondary exchange

NASDAQ

Share price performance

%

1m

3m

12m

Abs

(17.5)

(19.5)

14.6

Rel (local)

(13.8)

(16.5)

9.9

52-week high/low

NIS0.6

NIS0.3

Business description

CollPlant is an Israel-based regenerative medicine company. It is focused on developing and commercialising tissue repair products with its plant-based technology, rhCollagen. It has two products on the market, VergenixSTR and VergenixFG, and has received several orders for its 3D bioprinting product BioInk.

Next events

Continued sales ramp

2018

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Over the course of H217, CollPlant announced that it had received orders for its BioInk product from two companies for development of 3D printed organs and orthopaedic devices respectively. In the FY17 results the company announced that the first two orders accounted for NIS0.69m in revenue, bringing revenue for the year to NIS1.67m. One of the clients placed a repeat order, which is expected to be recorded in Q118 results.

Year end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/16

0.3

(27.9)

(27.72)

0.0

N/A

N/A

12/17

1.7

(20.9)

(15.68)

0.0

N/A

N/A

12/18e

3.2

(18.8)

(10.46)

0.0

N/A

N/A

12/19e

7.1

(18.3)

(9.69)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Several sales of BioInk for research

Full details of the BioInk orders have not been released, although we know that the first order was from a biotechnology company for the 3D printing of organ tissue (which subsequently placed a follow-up order), and the second order was from a medical device company developing orthopaedic devices. BioInk is attractive for these applications because it can produce an organized collagen matrix with tuneable properties.

Progress continues with Vergenix brand

The company’s two marketed medical products, VergenixFG and VergenixSTR for wound care and tendinopathy respectively had combined sales of NIS0.98m for FY17, the first full year of both products being marketed. We expect continued growth as the company expands the distribution base in Europe. We forecast sales of NIS2.7m in FY18 for the two products.

NASDAQ listing complete

The company delivered on its plan to uplist to NASDAQ in January 2018 under the new ticker CLGN. ADSs trade at a 1 to 50 ratio of ordinary shares. The uplisting also triggered several tranches of the company’s ongoing financings, collectively valued at $7.4m (NIS26m, and expected to fully close in April 2018). This was followed on 12 January 2018 with a private placement of 4.3m ordinary shares for $0.6m (NIS2.2m).

Valuation: $77.4m or $22.62 per ADS

We have increased our valuation slightly to $77m (NIS270m) from $76m (NIS267m), although it is lower on an ADS/share basis: $22.62 from $23.23 per basic ADS or NIS1.58 from NIS1.63 per basic share. The increase is driven by increased cash following the recent offerings and rolling forward our NPVs. G&A spending for the recent period was higher than expected (NIS8.30m vs. NIS5.43m), and this increase carried forward was partially offset. We estimate current net cash of $6.7m (NIS23.4m), which we expect to provide a runway into 2019.

Progress with BioInk continues

One of the key areas of development for CollPlant is using its BioInk technology in the 3D printing of organs and tissue. Instead of internally developing printed tissue products, the company supplies biotechnology and medical device companies for their development purposes. The first sales of the product were in Q417, and the company has delivered repeat orders in Q118. The details of these orders are not fully disclosed; we know that the company has supplied a biotechnology company developing 3D printed organs and a medical device company developing orthopaedic implants. The company recorded revenue from BioInk of NIS689,000 for 2017.

To further the goals of advancing the BioInk program, the company has also joined the RegenMed Development Organization’s (ReMDO’s) biomanufacturing initiative. ReMDO is a non-profit organisation set up as a consortium of 60 academic and industry partners focused on the advancement of regenerative medicine technologies. Its universal Bioink project is one of two ongoing development projects and has a total of 18 collaborators.

The interest in CollPlant’s BioInk is because the unique properties of the rhCollagen used in the product make it attractive as a matrix for bioprinting. Collagen is a major component of the extracellular matrix in natural tissue that provides structural support. CollPlant’s rhCollagen produces a highly organised collagen matrix with tuneable properties and a well-controlled number of cell binding sites, unlike collagen reclaimed from animal sources.

CollPlant listed on NASDAQ

The company successfully executed on its intention to uplist to NASDAQ, where its new ticker (CLGN) started trading on 31 January 2018. ADSs will trade on the exchange with a ratio of one ADS per 50 ordinary shares. The company has three ongoing financings, of which the uplisting triggered the final tranche in two (Ami Sagi, and Meitav Dash), with the third expected to close in April 2018. These deals provide approximately $7.4m (NIS26m) in direct financing and the company may raise up to $15m (NIS53m) in additional capital through associated warrants. In addition, the company announced on 12 January 2018 that it performed a private placement of 4.3m ordinary shares for $0.6m (NIS2.2m).

Valuation

We have increased our valuation slightly to $77m (NIS270m) from $76m (NIS 267), although it is lower on an ADS/share basis: $22.62 from $23.23 per basic ADS or NIS1.58 from NIS1.63 per basic share. The increase in valuation was driven by increased cash and rolling forward our NPVs, offset by increases in G&A expenses. Our net cash is adjusted for the recent offerings including the last tranche of the Alpha financing expected in April 2018 and the conversion of $3.65m in liabilities associated with debentures. The recent offerings has resulted in an increase in the number of potentially dilutive securities, convertible to approximately 3.5m ADSs, resulting in a value per diluted ADS of $14.74. We currently do not include recurring revenue from the BioInk product in our models, although we may add this at a later date, if the company continues to receive orders or if it is integrated into a product.

Exhibit 1: Valuation of CollPlant

Product

Status

NPV ($m)

rNPV ($m)

VergenixFG: Woundcare

Europe market

27.5

27.5

VergenixSTR: Tendonopathy

Europe market

55.0

55.0

Portfolio total

82.5

82.5

R&D

-7.6

SG&A

-4.2

Cash (YE17 + financings)

6.7

Overall valuation

77.4

ADSs

3.42

Value per basic ADS

22.62

Warrants, Options, and Debentures

3.5

Total diluted ADSs

7.0

Diluted value

102.6

Value per diluted ADS

14.74

Source: CollPlant reports, Edison Investment Research

Financials

CollPlant reported revenue of $275,000 (NIS952,000) for Q418 and $481,000 (NIS1.67m) for the year. The increase over FY16 ($84,000 for the year) was primarily driven by the recent orders of BioInk, but the company continues to expand its commercial operation for VergenixFG and VergenixSTR in Europe. We expect the company to continue to expand the territories where the products are available and currently forecast revenue of $917,000 (NIS3.20m) in FY18. G&A expenses for FY17 were $2.39m (NIS8.30m), which was higher than expected (NIS5.43m) primarily due to higher than expected share-based compensation associated with services received from Alpha Capital. The company ended the year with $5.14m (NIS17.82m) in cash, which along with the recent private placement should provide a cash runway into FY19. We expect the company to require $5.7m (NIS20.0m) in additional cash to meet operational needs until the company reaches profitability in FY21. We expect a large portion of this will be provided from outstanding warrants, although at this time we record it as illustrative debt in FY19.

Exhibit 2: Financial summary

NIS000s

2015

2016

2017

2018e

2019e

Year end 31 Dec

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

292

1,668.00

3,199.22

7,147.75

Cost of Sales

0

0

(52)

(1,600)

(3,574)

Gross Profit

0

292

1,616

1,600

3,574

R&D expenses,net

(11,864)

(16,789)

(14,066)

(13,363)

(14,031)

SG&A expenses

(6,950)

(11,048)

(8,303)

(7,133)

(7,847)

EBITDA

 

 

(18,026)

(27,023)

(19,670)

(17,822)

(16,873)

Operating Profit (before amort. and except)

 

(18,814)

(27,545)

(20,753)

(18,896)

(18,304)

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Operating Profit

(18,814)

(27,545)

(20,753)

(18,896)

(18,304)

Other

0

0

0

0

0

Net Interest

164

(348)

(127)

90

26

Profit Before Tax (norm)

 

 

(18,650)

(27,893)

(20,880)

(18,807)

(18,278)

Profit Before Tax (FRS 3)

 

 

(18,650)

(27,893)

(20,880)

(18,807)

(18,278)

Tax

0

0

0

0

0

Profit After Tax (norm)

(18,650)

(27,893)

(20,880)

(18,807)

(18,278)

Profit After Tax (FRS 3)

(18,650)

(27,893)

(20,880)

(18,807)

(18,278)

Average Number of Shares Outstanding (m)

84.7

100.6

133.2

179.7

188.7

EPS - normalised (NIS)

 

 

(22.03)

(27.72)

(15.68)

(10.46)

(9.69)

EPS - FRS 3 (NIS)

 

 

(22.03)

(27.72)

(15.68)

(10.46)

(9.69)

Dividend per share (NIS)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

4,971

6,364

5,631

6,816

6,259

Intangible Assets

1,721

1,631

1,454

1,454

1,454

Tangible Assets

2,612

4,008

3,582

4,767

4,210

Other

638

725

595

595

595

Current Assets

 

 

8,558

8,069

22,414

9,644

17,095

Stocks

0

487

700

700

700

Debtors

3,241

3,785

3,897

3,897

3,897

Cash

5,317

3,797

17,817

5,047

12,498

Other

0

0

0

0

0

Current Liabilities

 

 

(3,750)

(6,806)

(4,918)

(4,899)

(4,899)

Creditors

(2,496)

(5,189)

(2,922)

(2,922)

(2,922)

Short term borrowings

0

0

0

0

0

Short term leases

0

0

0

0

0

Other

(1,254)

(1,617)

(1,996)

(1,977)

(1,977)

Long Term Liabilities

 

 

0

(2,467)

(14,044)

(1,405)

(21,405)

Long term borrowings

0

(286)

(12,700)

(61)

(20,061)

Long term leases

0

0

0

0

0

Other long term liabilities

0

(2,181)

(1,344)

(1,344)

(1,344)

Net Assets

 

 

9,779

5,160

9,083

10,157

(2,950)

CASH FLOW

Operating Cash Flow

 

 

(14,496)

(19,384)

(17,903)

(12,592)

(11,651)

Net Interest

(2)

8

19

(90)

(26)

Tax

1

0

0

0

0

Capex

(1,389)

(492)

(447)

(2,260)

(873)

Acquisitions/disposals

0

0

0

0

0

Financing

10,010

18,219

20,234

14,811

0

Dividends

0

0

0

0

0

Other

27

0

0

0

0

Net Cash Flow

(5,849)

(1,649)

1,903

(131)

(12,550)

Opening net debt/(cash)

 

 

(11,062)

(5,317)

(3,511)

(5,117)

(4,986)

HP finance leases initiated

0

0

(253)

0

0

Other

104

(157)

(44)

0

0

Closing net debt/(cash)

 

 

(5,317)

(3,511)

(5,117)

(4,986)

7,563

Source: CollPlant reports, Edison Investment Research. Note: Equity financing adjusted for debenture liability.

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Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

Ellex Medical Lasers — Treatments for chronic eye diseases

Ellex offers products across the glaucoma severity spectrum, with Tango positioned as a primary therapy for earlier stages and iTrack providing further intraocular pressure (IOP) reduction when needed. 2RT provides the potential to tap into the underserved early ARMD market.

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