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

Data at AACR from two key non-small cell lung cancer (NSCLC) trials has shown that savolitinib has encouraging anti-tumour activity and an acceptable safety profile both as monotherapy in exon 14m/del NSCLC, and in combination with osimertinib in MET+ EGFR-TKI refractory NSCLC. These presentations increase our confidence in Hutchison China MediTech (Chi-Med) and partner AstraZeneca’s ability to launch savolitinib, as the first available selective c-Met inhibitor, in its respective NSCLC settings in 2021 (China: MET exon 14m/del) and 2022 (Global: in combination with osimertinib), subject to positive trial read outs and subsequent approvals. We upgrade our valuation to $35.57/ADS or £54.72/share.

Investment Perspective

Mereo BioPharma has built a pipeline of four late-stage clinical assets as it focuses on becoming a rare disease, specialty pharmaceutical company. Its orphan disease products are BPS-804 for osteogenesis imperfecta (brittle bone disease), and MPH-966 for the treatment of alpha-1 antitrypsin deficiency (AATD). The strategy is to in-license more late-stage assets for the treatment of rare diseases. A proposed combination with OncoMed Pharmaceuticals would add two more clinical programmes but, more importantly, extends the cash runway through 2020, brings US infrastructure, and a NASDAQ listing. Pending approval, we have suspended our forecasts and valuation. Our prior valuation was £510m, or 615p a share (fully diluted).

Investment Perspective

Tissue Regenix Group grew underlying revenues by 47% to £11.6m, ahead of our forecasts. This was achieved through the efficient integration of CellRight Technologies and the benefits of the new commercialisation strategy. Tissue Regenix now has a more focused direct marketing approach and is leveraging the return on its research and manufacturing capabilities by entering into strategic partnerships, such as those signed with ARMS Medical and Arthrex, Inc. These new relationships should sustain the strong growth of Tissue Regenix. Our valuation is unchanged for now at 20.9p/share.

Investment Perspective

Nexstim is embarking on the next stage of its journey in commercialising its Navigated Brain Therapy (NBT) platform in MDD (major depressive disorder). The recently reported FY18 results confirmed operational progress was much as expected. A sizeable rights issue is planned, with the aim of securing sufficient funding to support the commercial roll-outs of NBT in depression in North America and Europe. It was also announced that the NBS pre-surgical mapping platform may be divested. We have updated our valuation and financial model to reflect the expected changes. We now value the company at €10.5m or €3.23 per share (also €3.23 diluted), against €32.0m, or €10.5/share (also €10.5 diluted) were financial risk removed.

Investment Perspective

Bonesupport has emerged from its transition year with FY18 results highlighting the progress, and investment, in implementing commercial initiatives to accelerate global CERAMENT penetration. The switch to direct sales from October 23 and prior supply issues at the exclusive distributor impacted US sales (SEK34.1m vs SEK 78.1m in FY17). Europe/ROW delivered strong sales growth (+22% to SEK62.5m) as the high margin antibiotic eluting products continue to gain traction. We anticipate increased sales in 2019 as the expanded global commercial footprint beds down, key clinical data (eg CERTiFy) are leveraged, and new US GPO contracts are secured. This provides a solid foundation for the company to achieve its target of 40%+ revenue growth from 2020 onwards. We value Bonesupport at SEK39/share (SEK 2.042bn).

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 saw strong progress on all fronts in H218. There was a marked acceleration in revenues and in new cell therapy licenses, and the first patient was treated with MaxCyte’s wholly-owned CARMA therapy. Sales growth in FY18 was c19% compared to 14% in FY17 following an increase in revenues of c25% in H218. The number of licensed cell therapy programmes has risen by c15 to >70 over the last six months; and commercial licensing agreements were signed with two companies. On top of this, MaxCyte advanced its first CARMA therapy into the clinic; promising results from this trial could lead to the CARMA platform becoming the main value driver for MaxCyte. We have increased our valuation by 11p/share to 358p/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 reported promising results from its broad Phase II programme with bemcentinib focussed on acute myeloid leukaemia (AML) and non-small cell lung cancer (NSCLC) throughout 2018. Most notable were the data from the study in NSCLC in combination with the PD‑1 inhibitor pembrolizumab, in which patients with PD-L1 negative tumours responded well to therapy. The results thus far indicate the importance of biomarkers to identify those patients with Axl+ tumours, who are most likely to benefit from bemcentinib. The company is planning a series of randomised Phase II trials to confirm the findings to date, which are due to start in H219. BerGenBio also has two other products that have just entered clinical development. We value the company at NOK3.14bn, or NOK57.45/share.