New funds for growth; research use sales to KOL

Angle 27 May 2016 ADR Update

Angle

New funds for growth; research use sales to KOL

Private placing

Pharma & biotech

27 May 2016

ADR research

Price

$11.19

Market cap

$66m

ADR/Ord conversion ratio 1:10

Net cash ($m) as at 31 October 2015

8.5

ADRs in issue (7.5m post issue from 31 May)

5.9m

ADR Code

ANPCY

ADR exchange

OTCQX

Underlying exchange

AIM

Depository

Bank of New York Mellon

ADR share price performance

52-week high/low

$15.78

$9.37

Business description

Angle is a pure-play specialist diagnostics company. The proprietary Parsortix cell separation platform can be used for the detection and harvesting of very rare cells from a blood sample, including circulating tumor cells (CTCs). The resulting liquid biopsy enables the analysis of these cells for precision cancer care.

Next events

Results from KOL studies in other cancer indications

H216

Start of enrolment for ovarian cancer clinical trial

H116

FY16 results

July 2016

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Lala Gregorek

+44 (0)20 3681 2527

Angle is a research client of Edison Investment Research Limited

Angle has raised net $14.1m (£9.6m) via a private placing. This supports Angle’s focus on commercializing Parsortix, with the funds being applied to a range of clinical studies to demonstrate utility of Parsortix. Additionally, Angle announced that Cancer Research UK Manchester Institute is adopting Parsortix for routine research use, which will provide recurring sales. FY16 results in July will provide a trading update and more details on the R&D expansion strategy, likely to be scaled up with the benefit of the fund raising.

Year end

Revenue ($m)

PTP*
($m)

EPADR
($)

DPADR
($)

P/E
(x)

Gross Yield
(%)

04/14

0.0

(3.0)

(0.35)

0.0

N/A

N/A

04/15

0.0

(5.2)

(1.10)

0.0

N/A

N/A

04/16e

0.5

(7.7)

(1.25)

0.0

N/A

N/A

04/17e

3.1

(4.8)

(0.75)

0.0

N/A

N/A

Converted at US$1.47 to £1. Investors should consult their tax advisor regarding the application of any domestic and foreign tax laws. *PTP and EPS are normalized. Changes compared to our last note are solely due to foreign exchange rate changes.

New funds add safety margin to reach profitability

Angle has raised a net $14.1m (£9.6m) by issuing 15.8m new shares at $0.95 (£0.65). The fact the shares were priced with no discount shows a strong demand, in our view. The new shares trade from 31 May and the post-raise cash position will be c $19.3m (c £13.1m). In addition to existing investors who backed the issue, the placing also brought in three new major shareholders, which indicates growing interest from institutional investors. Our forecast had assumed reaching net profitability in 2019 and a funding need of $1.9m (£1.3m). The new funds provide not only a comfortable financing margin, but also give scope to scale up the operations. Management states that the funds will be used to advance applications (additional ovarian cancer study in the US), and to initiate trials in new applications that recently seen positive KOL evaluations: prostate and metastatic breast cancer. Angle will also ramp up efforts in research use sales before the data from clinical trials start driving clinical sales (we expect in 2019).

Update on trading hints decent progress with sales

Angle’s near term commercial opportunity lies in research use sales with the first orders announced in December 2015. On 25 May, management indicated that the sales pipeline is progressing to plan. When FY16 results are released in July, we expect to see some £340k in first commercial revenues from Parsortix. Angle also announced that the Clinical and Experimental Pharmacology group at Cancer Research UK (CRUK) Manchester Institute will adopt Parsortix in routine use in clinical trials and research. Currently it is being used in 10 clinical trials with an additional four planned. Notably, CRUK is running around 620 clinical trials, so there is significant potential for Parsortix to be used in more studies. This is the first KOL that will adopt Parsortix for routine use and will generate recurring revenues for Angle.

Valuation: Strong balance sheet boosts prospects

We will review our forecasts and valuation after the FY16 results in July. We see the private placement as a first step towards initiating clinical trials with new indications, giving scope for future valuation uplift (albeit diluted by the new shares for now).

Exhibit 3: Financial summary

USD:GBP

1.47

$'000s

2013

2014

2015

2016e

2017e

Year end April

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,424

0

0

501

3,213

Cost of Sales

0

0

0

(150)

(953)

Gross Profit

1,424

0

0

351

2,260

Research and development

(441)

(1,323)

(2,352)

(4,528)

(3,613)

EBITDA

 

 

(991)

(2,931)

(5,074)

(7,486)

(4,497)

Operating Profit (before amort. and except.)

(1,019)

(3,015)

(5,238)

(7,727)

(4,783)

Intangible Amortisation

(453)

(146)

(300)

(527)

(556)

Share-based payments

(104)

(90)

(163)

(512)

(706)

Other

0

0

0

0

0

Operating Profit

(1,576)

(3,250)

(5,701)

(8,765)

(6,045)

Net Interest

61

19

13

49

22

Pre-tax Profit (norm)

 

 

(958)

(2,996)

(5,224)

(7,678)

(4,761)

Pre-tax Profit (FRS 3)

 

 

(1,515)

(3,231)

(5,687)

(8,716)

(6,023)

Tax

0

0

0

294

294

Discontinued operations

0

1,411

(26)

0

0

Net Income (norm)

(958)

(1,585)

(5,251)

(7,384)

(4,467)

Net Income (FRS 3)

(1,515)

(1,820)

(5,714)

(8,422)

(5,729)

0

0

0

0

0

Average Number of Shares Outstanding (m)

41

45

48

59

59

Average Number of ADRs Outstanding (m)

4

5

5

6

6

EPS - normalised ($)

 

 

(0.02)

(0.04)

(0.11)

(0.12)

(0.08)

EPS - normalised and fully diluted ($)

 

(0.02)

(0.04)

(0.11)

(0.12)

(0.08)

EPS - (IFRS) ($)

 

 

(0.04)

(0.04)

(0.12)

(0.14)

(0.10)

Earnings per ADS - normalized ($)

 

 

(0.24)

(0.35)

(1.10)

(1.25)

(0.75)

Earnings per ADS - normalized and fully diluted ($)

(0.24)

(0.35)

(1.10)

(1.25)

(0.75)

Earnings per ADS - (IFRS) ($)

 

 

(0.37)

(0.40)

(1.20)

(1.43)

(0.97)

Dividend per ADS ($)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

70.0

70.3

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

5,261

2,767

2,311

1,867

1,381

Intangible Assets

1,587

1,678

1,689

1,321

896

Tangible Assets

203

205

622

546

485

Investments

3,471

883

0

0

0

Current Assets

 

 

5,604

6,289

14,183

6,724

2,655

Stocks

91

76

290

288

367

Debtors

667

482

1,482

714

880

Cash

2,687

5,730

12,411

5,721

1,407

Other

2,158

0

0

0

0

Current Liabilities

 

 

(888)

(948)

(1,663)

(1,372)

(1,840)

Creditors

(888)

(948)

(1,663)

(1,372)

(1,840)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

0

0

0

0

0

Long term borrowings

0

0

0

0

0

Other long term liabilities

0

0

0

0

0

Net Assets

 

 

9,977

8,107

14,831

7,219

2,196

CASH FLOW

Operating Cash Flow

 

 

(1,985)

(2,792)

(5,017)

(6,664)

(4,275)

Net Interest

161

(6)

7

49

22

Tax

0

0

0

221

294

Capex

(205)

(122)

(478)

(165)

(225)

Acquisitions/disposals

226

6,359

185

0

0

Financing

3,036

(397)

11,983

0

0

Dividends

0

0

0

0

0

Net Cash Flow

1,233

3,043

6,681

(6,559)

(4,184)

Opening net debt/(cash)

 

 

(1,454)

(2,687)

(5,730)

(12,411)

(5,721)

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

(131)

(131)

Closing net debt/(cash)

 

 

(2,687)

(5,730)

(12,411)

(5,721)

(1,407)

Source: Company accounts, Edison Investment Research. Historic reported revenues relate to the legacy business which has now been divested. FY14 has been restated to exclude discontinued operations. Note: financials will be updated in due course to reflect the private placement and the investment in the clinical studies and developing research use sales.

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by <Insert Company> and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document.
A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Share this with friends and colleagues