Probiodrug — Update 14 April 2016

Probiodrug — Update 14 April 2016

Probiodrug

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Probiodrug

Chronic toxicology data de-risk PQ912

Company update

Pharma & biotech

14 April 2016

Price

€21.71

Market cap

€161m

Net cash (€m) at end 2015

21.4

Shares in issue

7.4m

Free float

56%

Code

PBD

Primary exchange

Euronext Amsterdam

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.6)

(17.9)

19.3

Rel (local)

(13.9)

(23.7)

34.8

52-week high/low

US$26.5

US$17.5

Business description

Probiodrug is a German biopharmaceutical company developing its clinical pipeline for the treatment of Alzheimer’s disease. Lead product candidate, PQ912, has entered Phase IIa. PQ912 is a small molecule inhibitor of glutaminyl cyclase (QC), which is essential for the formation of pGlu-Abeta. Two further products are in preclinical stages.

Next events

AGM

19 May 2016

Q116 results

12 May 2016

PQ912 first Phase IIa data

End-2016

PQ912 full Phase IIa data

Early 2017

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Lala Gregorek

+44 (0)20 3681 2527

Probiodrug is a research client of Edison Investment Research Limited

Probiodrug announced a positive outcome in the chronic toxicology studies confirming a favourable therapeutic margin and further de-risking the lead asset PQ912. Availability of study results is a regulatory prerequisite and, if approved by the health authorities, allows longer treatment trials with Alzheimer’s disease (AD) patients. Probiodrug is now exploring possibilities for longer-term studies, which may be carried out as an extension of the ongoing Phase IIa SAPHIR trial or as a separate study. Our increased valuation of Probiodrug is €303m or €40.7/share.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/14

0.0

(11.4)

(2.35)

0.0

N/A

N/A

12/15

0.0

(13.5)

(1.96)

0.0

N/A

N/A

12/16e

0.0

(14.2)

(1.91)

0.0

N/A

N/A

12/17e

0.0

(11.2)

(1.50)

0.0

N/A

N/A

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

Green light for long-term treatment with PQ912 trial

On 4 April Probiodrug announced results from chronic toxicology studies, during which PQ912 was tested in rats and dogs for six and nine months respectively. There were no new findings and no aggravation of the minimal to slight findings compared to the previous shorter one-month and three-month studies conducted in the same animal species. Chronic toxicology studies are a regulatory prerequisite for long-term treatment in patients.

Full SAPHIR results early 2017

As a reminder, according to the latest estimate from the company, the first results from the Phase IIa study should be released around end-2016, with the full data in early 2017. With no new safety issues in chronic animal models, Probiodrug believes that the safety profile of chronic treatment with PQ912 is confirmed with a comfortable safety margin and has started exploring opportunities for a longer-term clinical study (patients in the SAPHIR trial receive PQ912 for three months). This could be an extension to SAPHIR or a separate trial. Notably, no other details were provided regarding the possible trial design.

Valuation: Increased to €303m due to de-risking

The main change to our valuation model is an increase in success probability for PQ912 to reach the market from 20% to 25%. Rolling our valuation model forward in time also had a positive effect on our risk-adjusted NPV, which now stands at €303m or €40.7/share vs €242m or €32.6/share. Our other assumptions for PQ912 remain unchanged.

Valuation

Our Probiodrug valuation is increased to €303m (from €242m) or €40.7/share. We view the positive outcome of chronic animal treatment studies as a significant de-risking event and increase our probability of success from 20% to 25%. We leave our other assumptions unchanged, including our estimated partnering deal in 2017, according to which a partner will fund further development of PQ912 until the potential launch in 2022. While no value is assigned to the preclinical pipeline given its earlier stage of development, it represents a potential upside to our current valuation, which could be added as the projects progress into clinical stage. A summary of our other assumptions and a breakdown of our rNPV valuation, which uses a discount rate of 12.5%, are shown in Exhibit 1.

Exhibit 1: Probiodrug rNPV valuation

Product

Indication

Launch

Peak sales (€m)

Value (€m)

Probability

rNPV (€m)

NPV/Share (€/share)

PQ912

Alzheimer's disease

2022

6,200

1,100.8

25%

281.9

37.9

Net cash (at end 2015)

21.4

100%

21.4

2.9

Valuation

 

 

 

1,122.2

303.2

40.7

Source: Edison Investment Research, Probiodrug. Note: Peak sales are rounded to the nearest €100m.

Exhibit 2: Financial summary

€000s

2012

2013

2014

2015

2016e

2017e

December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

6

0

0

0

0

0

Cost of Sales

0

0

0

0

0

0

Gross Profit

6

0

0

0

0

0

Research and development

(9,255)

(8,004)

(8,008)

(10,158)

(11,105)

(7,669)

EBITDA

 

 

(10,206)

(9,387)

(11,173)

(13,337)

(14,449)

(11,190)

Operating Profit (before amort. and except.)

(10,521)

(9,675)

(11,241)

(13,363)

(14,475)

(11,216)

Intangible Amortisation

(37)

(26)

(26)

(30)

(30)

(26)

Exceptionals

0

0

0

0

0

0

Other

0

0

0

0

0

0

Operating Profit

(10,558)

(9,701)

(11,267)

(13,393)

(14,505)

(11,242)

Net Interest

(314)

(106)

(170)

(112)

293

66

Profit Before Tax (norm)

 

 

(10,835)

(9,781)

(11,411)

(13,475)

(14,182)

(11,150)

Profit Before Tax (FRS 3)

 

 

(10,872)

(9,807)

(11,437)

(13,505)

(14,213)

(11,176)

Tax

(656)

0

0

0

0

0

Profit After Tax (norm)

(11,491)

(9,781)

(11,411)

(13,475)

(14,182)

(11,150)

Profit After Tax (FRS 3)

(11,528)

(9,807)

(11,437)

(13,505)

(14,213)

(11,176)

Average Number of Shares Outstanding (m)

4.1

4.3

4.9

6.9

7.4

7.4

EPS - normalised (€)

 

 

(2.84)

(2.30)

(2.35)

(1.96)

(1.91)

(1.50)

EPS - normalised and fully diluted (€)

 

(2.84)

(2.30)

(2.35)

(1.96)

(1.91)

(1.50)

EPS - (IFRS) (€)

 

 

(2.85)

(2.30)

(2.35)

(1.97)

(1.91)

(1.50)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

996

425

186

140

84

32

Intangible Assets

67

101

82

56

26

0

Tangible Assets

926

321

101

81

55

29

Investments

3

3

3

3

3

3

Current Assets

 

 

9,009

5,856

21,294

21,726

8,294

3,365

Stocks

18

0

0

0

0

0

Debtors

5

0

0

0

0

0

Cash

7,726

4,421

20,920

21,361

7,929

3,000

Other

1,260

1,435

374

365

365

365

Current Liabilities

 

 

(3,570)

(9,320)

(4,580)

(4,911)

(4,672)

(4,359)

Creditors

(3,570)

(3,974)

(4,580)

(4,911)

(4,672)

(4,359)

Short term borrowings

0

(5,346)

0

0

0

0

Long Term Liabilities

 

 

(1,070)

(1,265)

(929)

(822)

(822)

(6,365)

Long term borrowings

0

0

0

0

0

(5,543)

Other long term liabilities

(1,070)

(1,265)

(929)

(822)

(822)

(822)

Net Assets

 

 

5,365

(4,304)

15,971

16,133

2,884

(7,328)

CASH FLOW

Operating Cash Flow

 

 

(12,090)

(8,477)

(10,540)

(12,149)

(13,725)

(10,538)

Net Interest

22

9

(54)

0

293

66

Tax

28

9

5

2

0

0

Capex

(64)

(4)

(2)

(6)

0

0

Acquisitions/disposals

0

0

0

0

0

0

Financing

9,516

(188)

32,436

12,594

0

0

Dividends

0

0

0

0

0

0

Net Cash Flow

(2,588)

(8,651)

21,845

441

(13,432)

(10,473)

Opening net debt/(cash)

 

 

(10,314)

(7,726)

925

(20,920)

(21,361)

(7,929)

HP finance leases initiated

0

0

0

0

0

0

Other

0

0

0

(0)

0

0

Closing net debt/(cash)

 

 

(7,726)

925

(20,920)

(21,361)

(7,929)

2,543

Source: Edison Investment Research, Probiodrug accounts

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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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