European companies hoping for a Christmas bonus

Analysis

With Christmas almost upon us some European companies are having to watch what they spend during the festive season and into next year. Although equity and debt markets are certainly a lot more buoyant than they were 12 months ago, cash remains king and for those companies hit hard by clinical setbacks or a failure to secure a partner, the challenges ahead are likely to dampen any festive spirit.

Forecast data from EvaluatePharma reveals 14 public European companies with less than two years of cash, a length of runway which starts to make investors nervous and inevitably puts pressure on share prices; indeed, six companies are expected to require new funds within the next 12 months (see table below). While some companies are cutting their cloth according to cash constraints, others like Biotie Therapies and Amsterdam Molecular Therapeutics (AMT) are taking it to the wire in the hope that pivotal events will turn out positive.

The following analysis is based on dividing latest cash figures (mostly 30 Sep 2010) by forecast cash burn rate in 2011, according to consensus estimates from EvaluatePharma. European companies with less than two years of cash are shown here.

European companies with less than 2 years of cash - all data in US$m (except share price)
Cash & Equivalents (YE 2010) Cash Burn (2011) Years of Cash Market Cap Net Debt & Cash - Latest Latest Debt Latest Cash Enterprise Value Share price, local (17 Dec10) Share price performance YTD 2010 Local Currency
Less than 1 year of cash
1 Wilex 7 (34) 0.2 120 11 (0) 11 109 4.71 19% EUR
2 Biotie Therapies 6 (25) 0.2 88 (23) (36) 12 112 0.32 -42% EUR
3 Antisoma 16 (20) 0.8 61 51 0 51 10 0.06 -81% GBP
4 Silence Therapeutics 5 (6) 0.8 29 11 0 11 18 0.07 -63% GBP
5 Santhera Pharmaceuticals 24 (26) 0.9 34 38 (2) 41 (5) 8.85 -65% CHF
Amarin 18 (19) 0.9 573 31 0 31 542 7.16 401% USD
Less than 2 years of cash
7 Amsterdam Molecular Therapeutics 24 (24) 1.0 65 33 (7) 30 42 1.95 -36% EUR
8 4SC 25 (25) 1.0 179 29 0 29 150 3.25 8% EUR
9 PAION 17 (15) 1.2 80 11 (10) 21 68 2.27 -9% EUR
10 Evolva Holding 35 (32) 1.1 280 38 (10) 48 242 1.88 81% CHF
11 TiGenix 16 (15) 1.1 56 10 (7) 17 46 1.28 -66% EUR
12 NeuroSearch 87 (65) 1.3 444 83 (41) 124 361 93 21% DKK
13 MediGene 12 (8) 1.5 114 15 0 15 99 2.07 -43% EUR
14 e-Therapeutics 2 (1) 1.5 26 1 (2) 3 25 0.25 -37% GBP

Many of these companies have tough decisions about what to do with dwindling cash reserves and all can only look on with envy at the amounts of money that their American counterparts are able to raise (Who were the cash call kings of 2010?,December 21, 2010).

Taking it to the wire

For Biotie the company is approaching a classic make-or-break moment, with phase III data on its alcohol dependence therapy, nalmefene, due any moment (Event - Nalmefene is Biotie's big moment, November 5, 2010).

Although Biotie does have a standby equity agreement in place with Yorkville Advisors giving access to up to €20m if required – the company recently raised €500,000 from this agreement by offering up 1.5 million treasury shares to Yorkville – whether its shareholders will be keen on such a life support mechanism should the pivotal data be negative is debateable.

As for AMT, a recent share issue to raise €14m means it could have just about enough cash to launch Glybera, AMT’s gene therapy to treat lipoprotein lipase deficiency, should the European regulators grant a landmark approval next year; the likely significant share price gains on approval would make another share sale very tempting to bolster its coffers.

AMT’s chief executive, Jörn Aldag, told EP Vantage this summer that waiting until the European decision, before entering into serious partnership discussions, was a risk worth taking (EP Vantage Interview - AMT hoping to pop the cork with Glybera approval, August 25, 2010).

Clinical setbacks

Clinical setbacks in various forms have accounted for the somewhat precarious positions that Antisoma and Santhera Pharmaceuticals find themselves in, while Silence Therapeutics’ failure to make significant advances with its RNAi technology platform appears to be turning investors away.

It is no coincidence that all three companies hold the worst performing stocks so far this year.

Antisoma’s world fell apart in March this year when ASA404/AS1404 failed a phase III test in non small cell lung cancer (Antisoma rethinks strategy after lung cancer drug fails pivotal trial, March 29, 2010). The UK company’s shares have flat-lined since then and continue to trade at record lows of just 6p.

Although Antisoma has already implemented some cash conservation initiatives, a major overhaul of the business is being held at bay by the prospect of positive clinical data next year for two further pipeline candidates: phase III data for AS1413 in acute myeloid leukaemia (AML) and phase IIb results for AS1411, also in AML.

Meanwhile Santhera has also failed to recover from the failure of its lead pipeline candidate, Catena (idebenone) in Friedriech’s ataxia (Catena once again Santhera's downfall, May 20, 2010).

Although a major initiative to reduce its cash burn and the recent licensing of Parkinson's Disease dyskinesia drug, fipamezole, to Ipsen for €13m should help the Swiss group extend its runway beyond 12 months, the fact its shares trade below cash suggests investor confidence remains low.

As for Silence, its shares drifted towards record lows of just 5p in the summer, before the company announced in September it was the subject of takeover discussions which pepped up the stock for a while; although this has proved short-lived with the stock on the slide once more in the absence of any further developments on the takeover scene.

Although the company announced a milestone payment today of up to $1.5m from partner Quark Pharmaceuticals, which should ease some funding concerns, its critics have yet to be silenced. The whole field of RNAi technology has had a tough year and validation of this approach seems just as far away as ever; the failure of sector leader Alnylam Pharmaceuticals to retain the support of its big pharma partners is indicative of this.

Sitting pretty

Of the remaining companies with less than 12 months of cash, Wilex and Amarin are in much stronger positions, reflected in their share price gains so far this year, particularly so for Amarin.

Encouraging phase III data for fish-oil pill AMR101 in patients with high triglycerides has sent Amarin’s stock into orbit in the last few weeks, leaving the company in an enviable position of being able to weigh up its various financing options, with investors clearly hopeful a lucrative partnership can be struck (Amarin soars on good news from Marine biologists on AMR101, November 29, 2010).

Although Wilex’s progress has been far less spectacular this year, the German company has made decent advances this year; its position in the table, while technically warranted, is less of a concern given its modus operandi is to run on minimal cash reserves and its largest shareholder is Dievini Hopp BioTech, supported by German biotech angel investor, Dietmar Hopp (EP Vantage Exclusive - Hopp denies Wilex takeover ambitions, June 11, 2010).

The company tends to raise just enough money to tide it over to the next important event; just last week it secured €10m in loans from Dievini Hopp BioTech and its second largest shareholder, UCB.

Wilex’s most important short term event is phase III data for Rencarex (girentuximab) in kidney cancer and long-awaited results are due to report out within the next few months.

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