Investment Perspective

Scancell has reported H119 results in line with expectations. The cash position was £7.6m, with the net loss of £3.24m compensated for by the two equity raises, totalling £14.9m, over the past year. Development appears to be progressing well, with important clinical programmes expected to start patient recruitment during the next two quarters. Additionally, in January 2019 the management team has been strengthened by two important new hires. As detailed in our Initiation note, we value the company, using a risk-adjusted DCF model, at £82.0m, or 21.1p a share.

Investment Perspective

Approval of EGM resolutions paves the way for the IPO of Hutchison China MediTech (Chi-Med) on the Hong Kong Stock Exchange (SEHK) in the coming months. This IPO should enhance Chi-Med’s access to capital, broaden its shareholder base, further raise its profile in its home market, and, importantly, improve liquidity. Liquidity will be further boosted by an associated global offering (size and structure are not yet disclosed), the secondary placement of shares by majority shareholder CK Hutchison Holdings Ltd, and a share split effective May 30th. Each ordinary AIM share is being divided into 10 new shares; an adjustment to the ADS ratio ensures there is no effect on the NASDAQ trading price. Accounting for this share split, our valuation remains $35.57/ADS ($4.74bn) but is now £5.47/share (£3.65bn) vs £54.72/share previously.

Investment Perspective

Mereo BioPharma has reported encouraging interim results from BPS-804’s Phase IIb trial in osteogenesis imperfecta (OI). Interim data from the open label arm of the 112-patient ASTEROID study showed a 1.4% improvement over baseline in the primary endpoint at three months and a 3.2% improvement at six months. The secondary endpoint showed a 3.5% improvement at six months. Clearly the sample size in this study arm is small (11 and 12 patients), but these data suggest the 12 month results (expected in Q419) should show further improvement. Importantly, no cardiac safety signals were noted. We value Mereo BioPharma at 506p/share or $25.59/ADS.

Investment Perspective

Nexstim has successfully secured funding to enable the commercialisation of its proprietary Navigated Brain Therapy (NBT) platform in MDD (major depressive disorder). The near-term challenges now shift to maximising the uptake of NBT in specialist centres in North America and Europe. Initial indications are encouraging, with notable support from major centres and key opinion leaders. Our valuation and financial models have been updated to reflect the capital raise. We value Nexstim at €18.8m or €0.53 per share (€0.40 diluted), against €35.5m, or €1.00/share (€0.73/share diluted) were the remaining financial risks removed.

Investment Perspective

Q119 results provide evidence that the strategic initiatives put in place during 2018 are beginning to deliver results. Bonesupport posted a second successive quarter of CERAMENT sales growth and, with various growth drivers gaining traction, this momentum is set to continue during 2019 and beyond. Management are targeting 40%+ revenue growth from 2020 onwards. Key drivers include the expanded global commercial footprint becoming fully operational, leverage of key clinical and health economics data, new product launches (including potentially CERAMENT G in the US in 2021), and continued improvement in market access/reimbursement. We maintain our Bonesupport valuation of SEK39/share (or SEK 2.034bn).

Investment Perspective

e-therapeutics ended its FY19 (year-ending 31 January 2019) on a high, securing its first commercial collaboration with Novo Nordisk in December (see Update note). Business development and cost control were the focus areas for FY19. The Novo deal in Type 2 diabetes marked a first success on the former, providing important validation for e-therapeutics’ proprietary Network-Driven Drug Discovery (NDD) platform. Prudent cost management means end-FY19 cash of £5.9m, coupled with an anticipated £1.1m tax credit, provides a two-year runway on our estimates. The goal is to now capitalise on ongoing, and new, business development discussions covering the full range of e-therapeutics’ assets and capabilities, to help progress NDD-derived projects and further exploit the NDD platform. Our valuation is £57.8m (21.9p/share).

Investment Perspective

MaxCyte’s sales rose by 19% in FY18, with a 24% CAGR over the past four years, and double-digit revenue growth should be sustained for the foreseeable future. In the short/mid-term, new products, extra investment in sales & marketing, and the increased number of licensed cell therapy programmes should underpin growth. The number of gene-modified cell therapies in development is also increasing rapidly, which, together with potential milestones from commercial licences, augurs well for the long-term prospects of MaxCyte. The first clinical trial with the lead CARMA therapy, MCY-M11, is proceeding as expected, and the initial data due this year could act as major share price catalysts. We value MaxCyte at £195m or 341p per share.

Investment Perspective

Kind Consumer is poised to introduce Voke, a novel nicotine delivery device, into the UK market. Voke closely mimics the key aspects of cigarette smoking, but without tobacco’s harmful effects. The notable recent shifts in consumer acceptance of such novel devices suggest market adoption will be positive. The development, regulatory, and production processes have now been completed. Management is seeking funds to execute its commercialisation plans. Our rDCF valuation, using modest assumptions for the UK only, yields a value of £154m.

Investment Perspective

BerGenBio has presented further early Phase II proof-of-concept data at ASCO, which support bemcentinib’s potential in NSCLC and AML as a part of a combination regimen. Data in NSCLC shows that bemcentinib enhances pembrolizumab activity in patients with AXL-expressing tumours, particularly in PD-L1-negative tumours which do not normally respond to PD-1/PD-L1 monotherapy. In AML, combination with low dose chemotherapy in poor prognosis patients improves treatment outcomes. Safety data indicate that bemcentinib in combination is well-tolerated. Larger randomised Phase II studies are in planning; detail on these and additional clinical data is expected in H219. Ahead of this, we value BerGenBio at NOK3.14bn (NOK57.45/share).