Active Biotech Q2’22: Our comments
Research Update
2022-08-04
12:01
Redeye comments on Active Biotech's second quarter report and the rights issue that was simultaneously announced.
RR
Richard Ramanius
Tasquinimod
Orphan drug designation was obtained in the US in myelofibrosis. We discussed this in a research note.
Results from the combination study in multiple myeloma are expected are expected by late 2022 or early 2023. A new proof-of-concept trial in myelofibrosis, financed by Oncode Institute, is planned to start in early 2023.
Laquinimod
The single-ascending dose part and the first two multiple ascending dose parts have been successfully completed, with no safety issues. A further multiple-ascending dose group has been added to determine the dose for the planned phase II trial, set to start next year.
Naptumomab
The first stage of the phase IIa clinical trial in combination with docetaxel was successfully completed. We discussed it in a research note. NeoTX expects to have the full result of the study late next year.
Key Financials
| SEKm | 2021 | 2022e | 2023e | 2024e |
| Revenues | 0.00 | 0.00 | 0.00 | 130.5 |
| EBIT | -48.0 | -53.0 | -49.0 | 88.0 |
| Net Income | -48.0 | -54.0 | -49.0 | 88.0 |
| EV/EBIT | -4.7 | -4.1 | -5.5 | 2.0 |
| EV/Revenue | nm. | nm. | nm. | 1.3 |
Financials
The company had no revenue in Q1. Operating costs were slightly lower compared to the previous quarter at SEK 14m (the Q1 figure was 15.3m). Cash flow for the period was negative SEK 16m (Q1 was -15.3m).
The cash position at the end of Q2 was SEK 22m. A rights issue of SEK 55m was announced today. According to Active Biotech, it will finance ongoing and planned development programs until the end of 2023. A large part of the issue, 46 percent, is either guaranteed or covered by a promise to subscribe from the main owner, MGA Holding AB och Peter Thelin, at no cost. Only administrative costs related to the rights issue will therefore apply (for legal advice, prospectus, etc.).
Valuation
The rights issue announced was slightly smaller than we assumed, at SEK 55m (we assumed SEK 75m). The smaller-sized equity issue has a positive effect on our fully diluted base case. Active Biotech’s plan going forward is to seek economic support for the planned phase II trials with tasquinimod and laquinimod. It will therefore likely need less capital than we anticipated. We have therefore modified our costs assumptions slightly, lowering the project-specific costs and raising the shared costs slightly.
We have made some adjustments to our project valuation assumptions. Concerning tasquinimod, we have assumed that the anticipated phase IIb trial will be largely financed by an external party (such as a charitable organization), leading to lower costs for Active Biotech. Tasquinimod’s current phase I/IIa clinical trial is largely financed by Leukemia & Lymphoma Society in the USA. It is not clear if external financing will entail any costs for Active Biotech in the form of licensing fees. We will therefore assume a more conservative structure for the licensing deal after the completion of phase IIb. We now assume a more back-loaded structure, with a smaller upfront payment of USD 30m (previously around USD 60m). We still assume a total deal value of USD 580m and a royalty rate of 15 percent. We have raised the LOA for laquinimod due to clinical progress and lowered the costs associated with the anticipated phase II trial, leading to a slight increase in valuation.
Our new fully diluted Base Case, assuming a fully subscribed rights issue, is SEK 2.7.
| Income statement | ||||
| SEKm | 2021 | 2022e | 2023e | 2024e |
| Revenues | 0.00 | 0.00 | 0.00 | 130.5 |
| Cost of Revenue | 0.00 | 0.00 | 0.00 | 0.00 |
| Operating Expenses | 48.5 | 53.5 | 49.5 | 42.5 |
| EBITDA | -48.0 | -53.0 | -49.0 | 88.0 |
| Depreciation | 0.00 | 0.00 | 0.00 | 0.00 |
| Amortizations | 0.00 | 0.00 | 0.00 | 0.00 |
| EBIT | -48.0 | -53.0 | -49.0 | 88.0 |
| Shares in Associates | 0.00 | 0.00 | 0.00 | 0.00 |
| Interest Expenses | 0.00 | 1.0 | 0.00 | 0.00 |
| Net Financial Items | 0.00 | -1.0 | 0.00 | 0.00 |
| EBT | -48.0 | -54.0 | -49.0 | 88.0 |
| Income Tax Expenses | 0.00 | 0.00 | 0.00 | 0.00 |
| Net Income | -48.0 | -54.0 | -49.0 | 88.0 |
| Balance sheet | ||||
| Assets | ||||
| Non-current assets | ||||
| SEKm | 2021 | 2022e | 2023e | 2024e |
| Property, Plant and Equipment (Net) | 0.00 | 6.6 | 6.6 | 6.6 |
| Goodwill | 0.00 | 0.00 | 0.00 | 0.00 |
| Intangible Assets | 0.00 | 0.20 | 0.20 | 0.20 |
| Right-of-Use Assets | 0.90 | 0.00 | 0.00 | 0.00 |
| Other Non-Current Assets | 0.00 | 0.00 | 3.6 | 3.6 |
| Total Non-Current Assets | 0.90 | 6.8 | 10.4 | 10.4 |
| Current assets | ||||
| SEKm | 2021 | 2022e | 2023e | 2024e |
| Inventories | 0.00 | 0.00 | 0.00 | 0.00 |
| Accounts Receivable | 0.00 | 0.00 | 0.00 | 10.4 |
| Other Current Assets | 2.7 | 3.7 | 0.00 | 10.4 |
| Cash Equivalents | 53.1 | 53.4 | 3.9 | 99.7 |
| Total Current Assets | 55.8 | 57.1 | 3.9 | 120.6 |
| Total Assets | 56.7 | 63.9 | 14.3 | 131.0 |
| Equity and Liabilities | ||||
| Equity | ||||
| SEKm | 2021 | 2022e | 2023e | 2024e |
| Non Controlling Interest | 0.00 | 0.00 | 0.00 | 0.00 |
| Shareholder's Equity | 47.9 | 48.2 | -1.4 | 86.7 |
| Non-current liabilities | ||||
| SEKm | 2021 | 2022e | 2023e | 2024e |
| Long Term Debt | 0.00 | 0.00 | 0.00 | 0.00 |
| Long Term Lease Liabilities | 0.00 | 0.00 | 0.00 | 0.00 |
| Other Non-Current Lease Liabilities | 0.00 | 7.0 | 6.9 | 6.9 |
| Total Non-Current Liabilities | 0.00 | 7.0 | 6.9 | 6.9 |
| Current liabilities | ||||
| SEKm | 2021 | 2022e | 2023e | 2024e |
| Short Term Debt | 8.7 | 8.7 | 8.7 | 8.7 |
| Short Term Lease Liabilities | 0.00 | 0.00 | 0.00 | 0.00 |
| Accounts Payable | 0.00 | 0.00 | 0.00 | 15.7 |
| Other Current Liabilities | 0.00 | 0.00 | 0.00 | 13.1 |
| Total Current Liabilities | 8.7 | 8.7 | 8.7 | 37.4 |
| Total Liabilities and Equity | 56.6 | 63.9 | 14.3 | 131.0 |
Summary Redeye Ratings
The rating consists of three valuation keys, each consituting an overall assesment of several factors that are rated on a scale of 0 to 1 points. The maximum score for a valuation key is 5 points.
People: 3
Business: 3
Financials: 0
Disclosures and disclaimers