Restructured biotech Renovo says it will have plenty of cash left in 2011 when it produces crucial Phase III data for its highly anticipated anti-scarring treatment, Juvista. The Phase II results, published recently, were very well received in the City and by the medical community, with rare ‘congratulations’ ringing in from the normally acerbic Lancet magazine. Juvista has been signed up to an $825m (£505m) deal with Shire, of which $125m has been paid, with a further $25m still to come on filing with the FDA, $150m on approval and $525m of sales milestones plus royalties in the teens to follow.
With £65m in the bank in September and economic conditions not the most friendly, chief executive Mark Fergusson decided to slash costs, reducing total staff numbers from 180 to 108 to put the discovery business ‘on pause’. He and his board colleagues board have shown their confidence in the business by deferring bonuses and linked their incentives to those crucial Phase III results, firmly aligning their interests with those of shareholders.
The cash burn has been cut so that by the first half of 2011, having completed and reported the results of the Juvista trials and progressed advanced clinical tests for three other treatments, Renovo should still have £25m in the bank. If Juvista were to fail or be delayed, there would still be some healthy financial headroom for manoeuvre.
Recent results for the year to September revealed losses widening from £16.7m to £20.2m, though the City expects this to be limited to below £16m for the next two years. Over the next 18 months, KBC Peel Hunt analyst Paul Cuddon sees ‘downside limited to 35%, and upside being several multiples of the current price’ and has doubled his target price to 80p.
For investors willing to bear some risk, there is significant potential in the shares. Buy.
Biopharmaceutical specialist Renovo is discussing potential cosmetic uses for its Juvidex wound-healing product after trimming interim losses.
The formerly highflying fully-listed company, which focuses on scarring and tissues, cut its losses 16 per cent to £7.3 million before a £1.3 million tax credit in the six months to March, on revenues 27 per cent ahead at £5.2 million and ended its first half with combined investments and cash of £58 million.
Chief executive officer Professor Mark Ferguson, who has carried out a restructuring and cost cutting programme, says the annual cash burn has been reduced to £15 million and declares himself confident Renovo will have £25 to £30 million in the kitty when Juvista, its key scarring treatment, enters crucial Phase III trials around the world in the first half of 2011.
Claiming Juvista has an ‘eight to 10 year scientific lead’ over potential competitors, Ferguson says the first half of next year should also bring some trial results for Adaprev, Renovo’s treatment for scarring in lacerated tendons. Following ‘positive’ Phase II findings, the company has ‘improved the formulation’ for Prevascar, its scar reduction product and expects it to enter Phase III a year later.
Ahead of all these, suggests Ferguson, could be Juvidex, designed to accelerate wound healing, which has obtained 'positive trial data’. He says several cosmetic companies are showing interest in putting Juvidex into their products and comments ‘I hope to do a deal in 2010’.
At 24.75p, shares in Renovo trade at a fraction of their 2007 levels. Yet if Ferguson’s hopes are fulfilled, they could stage a rally. As such, they are well worth a punt.
No comments:
Post a Comment