| Key Data | | EPIC | ETX | | Share Price | 38p | | NMS | 3,000 | | Spread | 37p - 39p | | Total no of Shares | 138.13 million | | Market Cap | £52.49 million | | 12 Month Range | 25.25p - 44p | | Market | AIM | | Website | www.etherapeutics.co.uk | | Sector | Biopharma | | Contact | Malcolm Young,
Chief Executive -
0191 233 1317 Daniel Elger, Chief Financial Officer - 07909 915068 | |
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e-Therapeutics, the AIM listed biotechnology company, announced preliminary results for the year ended 31st January 2012 on 22nd May 2012. Highlights include:
· Further intellectual property gains surrounding the company's novel network pharmacology platform · US and UK regulator approval around cancer drug ETS2101 for phase I clinical trials · Newly established drug discovery site in Oxford · Strengthened Team – New CFO, Non-Executive Director and other scientific hires · Equity placing resulting in net cash of £13.9 million at year-end · £3.2 million net loss in light of increased business investment e-Therapeutics' discovery activities are centred around its unique, patented Network Pharmacology (NP) platform, which has been granted two further European patents – announced with the preliminary results. The platform is now operated and developed entirely in-house, primarily at the newly established drug discovery centre in Oxford. A plethora of new scientific talent has been employed at this site, with new scientists making a number of improvements to the already productive platform. They will continue to improve and develop it in tandem with its use for drug discovery operations. Further, the company's expansion at Oxford has allowed it to add a new string to its bow. e-Therapeutics initially used the platform to discover new approaches to target a disease, then sought existing drugs within the marketplace that could treat via this new approach. This development process has benefits – many of these drugs already have evidence of safety in humans, accelerating their progression into clinical trials – however its scope is limited and the generation and ownership of Intellectual Property (IP) rights can be more challenging when repurposing established drugs, when compared with new drug development. The company, using the platform, is now able to explore the discovery of brand new drugs, which in time could greatly enhance its pharmaceutical offering. Drug Candidates Three drug candidates are due to enter clinical trials this year – anti-cancer candidate ETS2101, depression candidate ETS6103, and anti-MRSA candidate ETX1153a. ETS2101 previously failed efficacy tests as a phase III candidate for trauma patients, where it showed good tolerance within humans. e-Therapeutics has identified its potential as an anti-cancer treatment, with strong indicated potency and the ability to permeate the blood-brain barrier (a rare property of anti-cancer treatments). It is due to begin two parallel phase I trials in 2012; one in the UK targeting patients with various solid tumours, and one in the US targeting patients with brain cancer. The trials have been approved by regulators, and are expected to yield initial dosing, safety and activity results by the end of 2012. ETS6103 is due to enter a phase IIb clinical trial in the third quarter of 2012, following on from good results seen in phase IIa trial data. Results of this trial are expected in the second half of 2013. ETX1153a is a topical approach to tackle MRSA, due to start a phase I trial in the fourth quarter of 2012. A report of this trial is expected in 2013. The company's final drug candidate, ETX1153c (an anti-infective vs C. difficile ), has shown promising preclinical data against this bacterium, and in particular against the drug-resistant strain NAP-1. e-Therapeutics is not progressing immediately with this drug as it does not consider the current form of the drug to be stable enough – as such the company does not have a development timetable for it. However, the company does intend to continue pre-clinical studies to further investigate its potential as a development candidate.
Financial Position and Growth Plans In March 2011 e-Therapeutics raised net proceeds of £16.7 million through a share placing. While some cash was used to pay back debt by redeeming a £1.0 million loan note – the company is now debt free – the proceeds are primarily available to fund development plans. Under its current cash flow plan, the company is fully funded until 2014, with £13.9 million in the bank. The primary use of this cash will be to continue and expand Research and Development (R&D). The majority of the R&D spend will be used to further drug development, through clinical trials and other activities. The remainder of the R&D budget will be spent on discovery; using the NP platform to create new products. The company is also planning to increase its business development activities, through initiatives such as marketing of development-stage products to potential partners for late stage clinical trials and ultimately to bring products to market. In addition, e-Therapeutics will target other biopharma companies for potential collaborations in drug discovery. It should be noted that this cash flow and development plan does not include the effect of any income from potential partners before 2014. In addition, there have been two major appointments made since the 2011 year-end. Dr Daniel Elger was appointed as Chief Financial Officer (CFO), having previously worked in significant roles within corporate strategy for Antisoma plc. He replaced former finance director John Cordiner. In addition, on 6th February 2012 the company announced that Dr Rajesh Chopra has been appointed as a Non-Executive Director (NED). Dr Chopra has been Vice President of Translational and Early Drug Development at Celgene Corporation, a major US biotech company, since 2009.
Valuation and Conclusion
We feel e-Therapeutics is in a strong position to continue its development, with no debt and adequate cash resources to continue comfortably along its planned development path into 2014. Three drugs are due to enter clinical trials in the near future, and are expected to return trial data shortly thereafter. New plans have been put in place to increase cash expenditure on R&D, and thus ramp up drug development and discovery. There have also been two additions to the board, with the appointment of a new CFO and NED. Further, the company is actively utilising its NP platform to create new drug candidates for major conditions, either from existing drugs, or through the creation of brand new drug candidates. Indeed, we feel it bodes well for the company that there has been an apparent increase in focus of the biopharma industry towards Network Pharmacology. Our model remains relatively unchanged – we have derived a Net Present Value for the company's potential future cash flows, indicating a value per share of 88p. This is based on a Discounted Cash Flow (DCF) of expected revenues from the company's two major drug candidates – ETS2101 and ETS6103. The DCF from each drug is then risk-weighted by the probability of success. The model only includes revenues that could be achieved through exploitation of intellectual property over candidate drugs. We have not assigned any quantifiable value to the company's drug discovery platform, and as such we feel this adds to the conservative nature of our model and underpins the valuation. We have also increased our forecasted R&D costs for next year, and we now expect a pre-tax loss of £5.7 million for 2013. Our stance remains buy at 38p with an 88p target price. Financial Records and Forecasts Table Year ended
31st January | Sales (£000) | PBT (£000) | EPS (pence) | PE Ratio (x) | Dividend (pence) | Yield (%) | 2010A | 0 | (2,255) | (3.0) | NA | 0.00 | 0.00 | 2011A | 0 | (2,655) | (3.5) | NA | 0.00 | 0.00 | 2012A | 0 | (3,863) | (2.5) | NA | 0.00 | 0.00 | 2013E | 0 | (5,700) | (4.1) | NA | 0.00 | 0.00 | Source: Company and Growth Equities & Company Research 
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