Finncap12 May 2021 08:50
On email....
Synairgen reported FY 2020 results that showed an adjusted net loss of £13.7m, with year-end cash of £75.0m, some £27m higher than our expectations. The delta can largely be accounted for by delays in starting enrolment into the Phase III trial as well as the treatment of prepayments for drug substance and nebulisers: the latter reflected in working capital rather than expensed through the income statement. Near-term focus remains on the outcome of the Phase III study (SG018), and with the enrolment rate into this trial having accelerated after a slower than expected start due to regulatory approvals, top-line data is still expected to be presented during H2 2021. The US NIH-sponsored ACTIV-2 Phase II trial in outpatients is also expected to complete during this period, which should add to the evidence base for use of inhaled interferon in COVID-19 patients. The company will continue to invest material amounts of cash into supply chain activities in preparation for launch. The recent weakness in the share price, reflecting investor uncertainty over recent Phase II outpatient data, is considered unwarranted and we reiterate our 505p target price.
?Full-year results. An adjusted net loss of £13.7m (FC est. -£46m) was reported, with net cash at 31 December 2020 of c.£75.0m (FC est. £48m).
?COVID-19 Phase III trial (SG018) update. Although slow to start, Synairgen’s Clinical Research Organisation, Parexel, now has regulatory approvals to enrol patients in 12 countries (including UK), with five more expected to come on stream in the next few weeks. We expect a material acceleration in patient enrolment.
?Upcoming value inflection. Trial readouts are expected from both the international SG018 Phase III trial in hospitalised COVID-19 patients as well the US NIH- sponsored ACTIV-2 Phase II trial in COVID-19 outpatients during H2 2021.
?Manufacturing and commercial scale up continues apace. Synairgen will continue to prepare for commercialisation and plans to scale up manufacturing and supply capacity ultimately to a targeted 100,000 treatment courses per month, with the aim of making the drug readily available internationally in the event of regulatory approval. This equates to peak potential monthly revenues of c.$300-350m.
?Forecasts. We have made significant changes to forecasts to reflect the timing of R&D costs and increased manufacturing costs, with FY 2021 adjusted net loss of c.£70m (vs. c.£7m). We estimate net cash at 31 December 2021 to be c.£13m (vs. previous £24m), which assumes significant investment in launch stocks.
?Valuation. Despite the marginally lower cash at year-end 2021, we reiterate our target price of 505p (based on an rNPV, assuming a 70% probability of SNG001).
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