Amniotics Q4 2023: Investigator-sponsored trial in lung transplantation needs funding
Research Update
2024-02-26
07:10
Redeye comments on Amniotics’ Q4 report. The company will need funding before it can start an investigator-sponsored clinical trial in lung transplantation with PulmoStem, its lead stem-cell candidate. However, the company is in a problematic financial situation.
RR
Richard Ramanius
Contents
Investment thesis
Quality Rating
Discussion
Financial results
Valuation
Financials
Rating definitions
The team
Download article
PulmoStem
Amniotics has presented more details about the clinical study in lung transplantation which is planned for H2 2024. It will be an investigator-sponsored study in Sweden, which has two centres for lung transplantation (Malmö and Gothenburg), with six patients recruited and results available soon after (likely H1 2025). It will be similar to the preclinical experiment on pigs, but the lungs will not be circulated with PulmoStem before the transplantation. The patients will receive two injections. The study primarily investigates safety, as these are immunosuppressed and very fragile individuals. But other parameters, such as the grade of primary graft dysfunction, will also be measured. This will be a cost-effective study, as Amniotics only has to provide the drug material, which has already been produced in a sufficient quantity and is cryopreserved. Positive results would lead to a phase IIb in 2025. However, the trial initiation relies on additional funding to prolong the company’s runway.
HyperTargIPS-NK
Amniotic’s NK-cells program will develop both CAR-NK and non-CAR cells targeting cancer. CAR-T is a hot area with many big pharma deals, and no one wants to miss out on the opportunities in this sector. For example, AstraZeneca acquired Gracell for cUSD1bn in December to gain control of its clinical-stage CART-T program. NK-cell therapy might be the next big cell therapy area in cancer, but this likely lies some years in the future. The HyperTargIPS-NK aims to find a lead candidate ready for pre-clinical development.
Base Case under review
Our previously stated base case was SEK0.04, including dilution from TO3. However, Amniotics is in a problematic financial situation as it depends on TO3 to fund this year’s activities into H1 2025, but the share trades below the strike price, meaning another source of funding needs to be found. The cash position of cSEK8m is expected to last until the end of March, with some still outstanding loans due by then. There is a clear risk that the company will not be able to continue its operations, represented by our bear case of 0. We judge it is not meaningful to show a base case before the funding issue is resolved.
Key financials
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 0.55 | 6.5 | 0.00 | 0.00 | 107.9 |
| Revenue Growth | 1006% | 1075% | -100% | nm. | nm. |
| EBITDA | -44.9 | -27.4 | -23.7 | -23.6 | 81.9 |
| EBIT | -46.7 | -29.4 | -23.7 | -23.6 | 81.9 |
| EBIT Margin | nm. | nm. | nm. | nm. | 75.9% |
| Net Income | -48.0 | -29.4 | -23.7 | -23.6 | 81.9 |
| EV/Sales | nm. | nm. | nm. | nm. | 0.1 |
| EV/EBIT | -0.5 | -0.6 | -0.8 | -1.8 | 0.2 |
Investment thesis
Case
Stem cells for lung transplantation
Evidence
Minimal side effects and proof-of-principle in lung transplantation
Supportive Analysis
Challenge
Clinical results
Challenge
More funds needed
Valuation
Lung transplantation is a promising indication
Quality Rating
People: 2
Senior executive and board members have extensive experience within drug development and business development. The company has an entrepreneurial background. Its short history on the market and recent organisational changes preclude a higher rating.
Business: 3
Cell therapy treatments have great potential to treat diseases and conditions that cannot otherwise easily be treated. The sector is in its infancy and a high growth rate is expected. Amniotics has a unique platform that should be more potent and productive than that of the competition. The company recently is in the clinical stage of development.
Financials: 0
Amniotics is a pre-revenue biotech company that will need to raise more cash before it can potentially reach a licensing agreement, after which it will most likely need to raise further cash to advance its pipeline before it can become cash-flow neutral.
Discussion
In Q4, Amniotics received an orphan drug designation from the EMA for PulmoStem as a treatment for primary graft dysfunction in lung transplantation, which we commented in a note. This will aid further clinical development and give ten years of market exclusivity in Europe, which is an extra layer of protection over the patents Amniotics already possesses protecting the production of stem cells (the cells themselves cannot be patented).
Financial results
Operating costs decreased to less than SEK8m in Q4. The cash position was SEK8m as of Q4, which should last until the end of March. An outstanding loan to Buntel AB will have to be paid on 31 March 2024. This means Amniotics will need to secure funding before this date, in the amount of around SEK25m to fund another year of operations.
Valuation
We have made some changes to costs, decreasing the projected costs for the clinical study in lung transplantation as the first study will be investigator-sponsored while increasing the general and administrative costs. Amniotics depends on TO3 for further funding. However, as the share trades below the strike price, there is a high risk it will fall out of the money. This could mean that Amniotics will have to cease operations and sell its assets. For this reason, we have set our valuation as under review. For transparency, we show our valuation of Amniotics assuming TO3 would be fully subscribed below.
| Asset | Indication | LoA | Royalties | Peak sales (USDm) | Est. launch | Deal size (USDm) | rNPV (SEKm) |
| PulmoStem, Infections | ARDS | 12% | 0% | 0 | 2032 | 0 | 0 |
| PulmoStem, Transplantation | Lung Transplantation | 22% | 13% | 220 | 2031 | 200 | 227 |
| NK Cell Therapy | Cancer | 2% | 12% | 700 | 2034 | 500 | 44 |
| Project value (SEKm) | 271 | ||||||
| Net cash | 8 | ||||||
| Shared costs incl. tax (SEKm) | -93 | ||||||
| Fair value (SEKm) | 186 | ||||||
| Shares outstanding (2022) | 2711 | ||||||
| Value per share (SEK) | 0.07 | ||||||
| Value per share (SEK), fully diluted | 0.04 |
Financials
| Income statement | |||||
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 0.55 | 6.5 | 0.00 | 0.00 | 107.9 |
| Cost of Revenue | -0.55 | -6.5 | 0.00 | 0.00 | 0.00 |
| Operating Expenses | 45.5 | 33.9 | 23.7 | 23.6 | 26.0 |
| EBITDA | -44.9 | -27.4 | -23.7 | -23.6 | 81.9 |
| Depreciation | 1.8 | 2.0 | 0.00 | 0.00 | 0.00 |
| Amortizations | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| EBIT | -46.7 | -29.4 | -23.7 | -23.6 | 81.9 |
| Shares in Associates | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Interest Expenses | 1.4 | 0.00 | 0.00 | 0.00 | 0.00 |
| Net Financial Items | -1.4 | 0.00 | 0.00 | 0.00 | 0.00 |
| EBT | -48.0 | -29.4 | -23.7 | -23.6 | 81.9 |
| Income Tax Expenses | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Net Income | -48.0 | -29.4 | -23.7 | -23.6 | 81.9 |
| Balance sheet | |||||
| Assets | |||||
| Non-current assets | |||||
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Property, Plant and Equipment (Net) | 6.8 | 5.6 | 5.6 | 5.6 | 5.6 |
| Goodwill | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Intangible Assets | 6.6 | 8.1 | 8.1 | 8.1 | 8.1 |
| Right-of-Use Assets | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Other Non-Current Assets | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total Non-Current Assets | 13.4 | 13.7 | 13.7 | 13.7 | 13.7 |
| Current assets | |||||
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Inventories | 0.00 | 0.53 | 0.00 | 0.00 | 73.9 |
| Accounts Receivable | 0.00 | 0.00 | 0.00 | 0.00 | 17.7 |
| Other Current Assets | 6.5 | 3.6 | 0.00 | 0.00 | 8.6 |
| Cash Equivalents | 9.1 | 8.2 | 7.9 | -15.7 | 12.2 |
| Total Current Assets | 15.6 | 12.4 | 7.9 | -15.7 | 112.4 |
| Total Assets | 28.9 | 26.1 | 21.6 | -2.0 | 126.1 |
| Equity and Liabilities | |||||
| Equity | |||||
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Non Controlling Interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Shareholder's Equity | 1.5 | 15.5 | 15.2 | -8.4 | 73.5 |
| Non-current liabilities | |||||
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Long Term Debt | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Long Term Lease Liabilities | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Other Non-Current Lease Liabilities | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total Non-Current Liabilities | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Current liabilities | |||||
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Short Term Debt | 19.0 | 0.00 | 0.00 | 0.00 | 0.00 |
| Short Term Lease Liabilities | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Accounts Payable | 0.00 | 0.00 | 0.00 | 0.00 | 35.5 |
| Other Current Liabilities | 8.4 | 10.5 | 6.4 | 6.4 | 17.2 |
| Total Current Liabilities | 27.4 | 10.5 | 6.4 | 6.4 | 52.7 |
| Total Liabilities and Equity | 28.9 | 26.1 | 21.6 | -2.0 | 126.2 |
| Cash flow | |||||
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Operating Cash Flow | -42.8 | -29.1 | -23.7 | -23.6 | 27.9 |
| Investing Cash Flow | -1.4 | -2.7 | 0.00 | 0.00 | 0.00 |
| Financing Cash Flow | 14.5 | 30.9 | 23.4 | 0.00 | 0.00 |
Rating definitions
The team
Disclosures and disclaimers
Contents
Investment thesis
Quality Rating
Discussion
Financial results
Valuation
Financials
Rating definitions
The team
Download article