Formycon — H117 results show further business progress

Formycon (DB: FYB)

Last close As at 04/11/2024

61.30

−0.20 (−0.33%)

Market capitalisation

677m

More on this equity

Research: Healthcare

Formycon — H117 results show further business progress

In H117 Formycon disclosed that FYB202 is a proposed biosimilar of Stelara and it recently announced that it is in the process of entering into a co-investment agreement with Santo Holding to advance FYB202 through regulatory approval. The global Phase III study of Lucentis biosimilar FYB201 for neovascular age-related macular degeneration (nAMD) is progressing according to plan with US and EU launches slated for 2020 and 2022. Lastly, FYB203 (Eylea biosimilar) and FYB205 (undisclosed) are advancing in preclinical studies. Cash and equity at end H117 was €14.4m.

Analyst avatar placeholder

Written by

Healthcare

Formycon

H117 results show further business progress

Pharma & biotech

Scale research report - Update

06 October 2017

Price

€36.5

Market cap

€341m

Share price graph

Share details

Code

FYB

Listing

Deutsche Börse Scale

Shares in issue (post July 2017 equity raise)

9.3m

Cash at end June 2017

€14.4m

Business description

Formycon is a biotechnology company focused on biosimilars. The lead product is FYB201, a Lucentis biosimilar in Phase III; FYB203 is an Eylea biosimilar in the preclinical stage. They are both partnered. FYB202, a biosimilar candidate of Stelara is in the process of being partnered. It also has an undisclosed biosimilar FYB205, unpartnered.

Bull

Leading biosimilars company addressing an $11-12bn market.

Two partnered products and an additional agreement in preparation in potential multi-million euro deals.

Potential first-to-market advantage for FYB201.

Bear

No EMA guidance for intraocular biosimilars.

US biosimilar market immature.

Lucentis market declined in 2014-16.

Analysts

Juan Pedro Serrate

+44 (0)20 3681 2534

Jonas Peciulis

+44 (0)20 3077 5728

In H117 Formycon disclosed that FYB202 is a proposed biosimilar of Stelara and it recently announced that it is in the process of entering into a co-investment agreement with Santo Holding to advance FYB202 through regulatory approval. The global Phase III study of Lucentis biosimilar FYB201 for neovascular age-related macular degeneration (nAMD) is progressing according to plan with US and EU launches slated for 2020 and 2022. Lastly, FYB203 (Eylea biosimilar) and FYB205 (undisclosed) are advancing in preclinical studies. Cash and equity at end H117 was €14.4m.

Stelara biosimilar disclosed and partnership close

Formycon disclosed that FYB202 is a proposed biosimilar candidate of Stelara (ustekinumab, 2016 sales $3.2bn). Stelara is indicated for plaque psoriasis, psoriatic arthritis and Crohn’s disease. EvaluatePharma’s consensus forecasts predict a market of $4.5bn in 2020. Stelara’s patent protection ends in 2023 in the US and 2024 in the EU. Executing on its strategy, Formycon is in the process of partnering FYB202 with Santo Holding; according to the signed term sheet, it will have a 30% participation in total costs and revenue.

Phase III of Lucentis biosimilar approaches milestone

Formycon and its partner Bioeq IP continue the global Phase III clinical trial of lead asset FYB201, a biosimilar of Lucentis (2016 revenues $3.2bn). Formycon expects to achieve an undisclosed key milestone in the near future. Total development, regulatory and commercial milestones could be over three-digit million euros. The companies’ aim is to launch in the US in mid-2020 and the EU in 2022 on Lucentis’ patent expiration. We continue to view FYB201 as a potential first-to-market mover, as competitors are behind.

Eylea biosimilar candidate and FYB205 on track

FYB203 is a proposed biosimilar of Eylea for nAMD (2016 sales $5bn); it is partnered with Santo Holding in a deal that involves an upfront payment of single-digit million euros and ongoing payments for its product development activities up to regulatory approval; sales revenue may reach double digits per annum. Eylea patents expire in 2023 in the US and 2025 in the EU. With no other known competitors, we believe Formycon is uniquely positioned in the growing Eylea market. FYB205 is an undisclosed biosimilar in preclinical phase and unpartnered.

Valuation: Shares up c 50% year-to-date

Formycon’s current market cap is c €330m and enterprise value (EV) is c €310m. Progression of the pipeline and additional partnerships may unlock further value.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/15

17.30

0.60

N/A

0.0

N/A

N/A

12/16

19.53

(4.06)

(0.44)

0.0

N/A

N/A

12/17e

26.60

(0.10)

(0.01)

0.0

N/A

N/A

12/18e

28.65

(0.20)

(0.02)

0.0

N/A

N/A

Source: Bloomberg consensus estimates, Formycon data

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

H117 results review

Formycon’s revenues in the first half of the year were €8.10m (vs €8.76m in H116) mainly due to the two out-licensed products, FYB201 and FYB203. In line with previous guidance, the company expects to generate revenues of €25m for FY17. Implementation of the term sheet for FYB202 in H217 will contribute towards this target and improve the baseline results for the company. Operating expenses were €11.02m in H117 (vs €10.02m in H116) which includes research and development activities for FYB202. The company expects R&D expenses to increase towards the end of FY17 as development of its product pipeline continues. Formycon reported an operating loss of €2.88m in H117 vs €1.17m in H116. The net result was a loss of €2.91m in H117 compared to €1.18m in H116. The company generated €470k in cash due to a change in inventories and trade receivables of €4.27m following a switch in the invoice cycle. Cash and equivalents was €14.42m at end H117, which does not include an additional €6m raised in July 2017 when the company issued 190.5k shares at €31.5/share (2% of the share capital). Formycon has no financial debt.

Exhibit 1: Financial summary

Year end 31 December (€m)

2013

2014

2015

2016

H117

Income statement

Revenue

0.40

12.70

16.9

19.53

8.10

Profit before tax (as reported)

(7.77)

0.87

0.60

(4.06)

(2.91)

Net income (as reported)

(7.77)

0.87

0.60

(4.07)

(2.91)

EPS (as reported) (€)

N/A

N/A

N/A

N/A

N/A

Dividend per share (€)

0.00

0.00

0.00

0.00

0.00

Balance sheet

Total non-current assets

6.25

4.03

3.74

4.40

4.30

Total current assets

10.90

12.88

23.41

20.80

16.95

Total assets

17.20

16.91

27.15

25.19

21.25

Total current liabilities

(2.70)

(3.26)

(1.61)

(3.58)

(2.28)

Total non-current liabilities

(0.50)

(0.53)

(0.66)

(0.72)

(0.98)

Total liabilities

(3.19)

(3.80)

(2.28)

(4.30)

(3.26)

Net assets

13.90

13.11

24.87

20.89

17.99

Shareholders’ equity

13.90

13.11

24.87

20.89

17.99

Cash flow statement

Net cash from operating activities

(16.62)

(0.03)

0.52

(5.04)

0.76

Net cash from investing activities

(0.04)

(0.57)

(0.60)

(1.35)

(0.29)

Net cash from financing activities

17.43

(0.01)

11.15

0.06

(0.02)

Net cash flow

0.68

(0.61)

11.07

(6.33)

0.45

Cash & cash equivalent end of year

0.90

0.29

20.30

13.97

14.42

Source: Formycon accounts

Valuation

Due to successful business execution, Formycon’s share price has increased by nearly 50% year-to-date, with the market cap rising from €222m to c €330m. This translates into an enterprise value (EV) of c €310m, including the recent €6m raise. The company has two assets (FYB201 and FYB203) targeting the entire biologics nAMD market, which had global sales of $8.2bn in 2016 and is projected to reach c $10bn in 2020 according to EvaluatePharma. Assuming a 50% discount to the potential market size and applying a 50% penetration for biosimilars, the overall target market for Formycon’s nAMD products would be c $2.5bn, on which Formycon may potentially receive royalties and milestones. As an example, Stelara had sales of $3.2bn in 2016 and EvaluatePharma’s consensus forecast is c $4.9bn in 2022. Using the same assumptions as above, the potential market for a biosimilar of Stelara (such as FYB202) would be c $1.25bn in 2023 when the patent expires. We also believe that the valuation reflects the background, expertise and successful track record of the company’s management. Progression of the pipeline in the clinic and additional partnerships should unlock further value.

In our view, Formycon’s closest peers are Pfenex (market cap €62m; EV €12m at a $1.17/€ exchange rate), Xbrane (market cap €61.3m; EV €13.7m at a SEK9.6/€ exchange rate) and Coherus BioSciences (market cap €582m; EV €546m at a $1.17/€ exchange rate). However, relative valuation metrics, such as P/E, are difficult to assess, given the early-stage and often loss-making nature of these development companies. Furthermore, all are at different stages of development with multiple assets in the pipeline, further complicating any peer group comparisons.

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 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors.

Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

More on Formycon

View All

Latest from the Healthcare sector

View All Healthcare content

Research: TMT

Nanoco — Removal of elephant in the room

Nanoco’s planned raise of £8.6m (subject to approval) should remove a major constraint on the company’s ability to execute its strategy. The balance sheet strength should support customer negotiations at both the developmental level and as it moves towards volume shipments. The ability to attract and retain good staff and the ability to monetise and protect its IP both in display and beyond should also benefit, albeit at the expense of 20% dilution.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free