Quantum Genomics — Additional Financing Secured

Quantum Genomics (PAR: ALQGC)

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Research: Healthcare

Quantum Genomics — Additional Financing Secured

Quantum Genomics recently announced a financing agreement with Negma Group, a London-based specialist financing institution that has provided €500m in capital to companies since inception. As part of the agreement, Negma will provide an €8m interest-free loan, which will be repaid with warrants by Quantum Genomics. The agreement can be renewed two times so Quantum Genomics has access to €24m in total.

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Written by

Healthcare

Quantum Genomics

Additional financing secured

Development update

Pharma & biotech

9 April 2020

Price

€2.04

Market cap

€38m

Net cash (€m) at 31 December 2019

11.2

Shares in issue

18.6m

Free float

95.5%

Code

ALQGC

Primary exchange

Euronext Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

(20.0)

(35.8)

(62.4)

Rel (local)

(6.9)

(13.0)

(53.5)

52-week high/low

€5.77

€1.88

Business description

Quantum Genomics is a biopharmaceutical company developing firibastat, a brain aminopeptidase A inhibitor for treating hypertension and heart failure. Its mechanism is implicated in the 25% of patients resistant to treatment. The Phase IIb study in hypertension was very positive and a Phase III was recently initiated. Also, a Phase IIb study in heart failure is currently enrolling patients.

Next events

QUORUM heart failure study data

H220

Analysts

Maxim Jacobs

+1 646 653 7027

Wiktoria O’Hare

+1 646 653 7028

Quantum Genomics is a research client of Edison Investment Research Limited

Quantum Genomics recently announced a financing agreement with Negma Group, a London-based specialist financing institution that has provided €500m in capital to companies since inception. As part of the agreement, Negma will provide an €8m interest-free loan, which will be repaid with warrants by Quantum Genomics. The agreement can be renewed two times so Quantum Genomics has access to €24m in total.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

0.0

(13.6)

(0.94)

0.0

N/A

N/A

12/19

0.0

(10.8)

(0.53)

0.0

N/A

N/A

12/20e

0.0

(20.7)

(0.96)

0.0

N/A

N/A

12/21e

0.0

(21.6)

(0.97)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Phase III FRESH study launched

The pivotal FRESH study is a three-month, 500-patient study comparing firibastat to placebo in difficult-to-treat or resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes (firibastat and placebo will be added on top of the current treatment) yet still have systolic automated office blood pressure (AOBP) above 140mmHg. The primary endpoint will be a change from baseline in systolic AOBP. Data continues to be expected in H221 despite the current pandemic (we currently believe the impact of coronavirus on clinical trial enrolment generally will be around three months).

Phase IIb QUORUM study enrolment ongoing

The Phase IIb QUORUM study is enrolling 294 subjects from 40 centres in the US and Europe within 72 hours of suffering acute myocardial infarction (AMI), commonly referred to as a heart attack. The primary endpoint will be the change from baseline in the left ventricular ejection fraction (LVEF) after a three-month treatment. The company expects results in H220 though the exact timing may shift depending upon the impact of coronavirus (the company is adding additional sites to try to mitigate any impact).

Partnership discussions continue despite pandemic

The company continues to seek regional partnership deals for firibastat in hypertension. The company has stated that it is in discussions with several potential partners at present with a focus on the Asian region and that these are continuing despite the pandemic (a final agreement though may be postponed).

Valuation: €963m or €51.74 per share

We have adjusted our valuation from €909m or €51.80 per share to €963m or €51.74 per share. The total value increased due to rolling forward our NPVs, while the per share value falls due to a higher number of shares. Additionally, 5m warrants will be issued to Negma Group to cover the initial €8m loan, which would lead to 27% more shares if fully exercised.

Trials progressing

Quantum Genomics has launched its Phase III programme for firibastat for the treatment of difficult-to-treat or resistant hypertension patients. The FRESH study is a three-month, 500-patient study comparing firibastat (at a dose of 500mg twice a day) to placebo in difficult-to-treat or resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes (firibastat and placebo will be added on top of the current treatment) yet still have systolic automated office blood pressure (AOBP) above 140mmHg. The trial, once all sites are online, is expected to be conducted in approximately 70 hospitals total across Europe (especially France, Germany, Poland, Spain and the Czech Republic), Canada, the United States and Latin America (primarily Brazil and Mexico). The primary endpoint will be a change from baseline in systolic AOBP. Data is expected in H221 and is not likely to be affected by coronavirus according to management.

Based on feedback from the FDA, two studies will be required for approval, one focused on efficacy (FRESH) and one focused on safety. The safety study will enrol 750 patients, with 650 staying on the drug for six months and 100 staying on it for a year. Precise timing for the initiation of the safety study has not been announced.

In terms of the heart failure programme, Quantum Genomics is continuing to enrol the QUORUM study, which is assessing the safety and efficacy of Quantum’s drug firibastat compared to ramipril, an angiotensin-converting enzyme inhibitor, in 294 subjects enrolled within 72 hours of suffering AMI, who were treated with primary percutaneous coronary intervention and have reduced LVEF. There are three arms in this randomised, double-blind, active-controlled study with patients receiving either 100mg of firibastat twice a day, 500mg of firibastat twice a day or 5mg of ramipril twice a day. The primary endpoint is the change from baseline in LVEF after a three-month treatment. Secondary endpoints will include cardiac events, functional status and change in heart failure biomarkers. The subjects will be recruited from 40 centres in the US and Europe and trial results are expected in H220 though the exact timing may shift depending upon the impact of coronavirus (the company is adding additional sites in new countries to try to mitigate any impact).

Quantum Genomics is also conducting a trial in patients with renal failure. Based on analysis of the NEW-HOPE study, firibastat appears to not have any impact on renal function, which is a problem with many popular treatments such as Diovan. To confirm this finding, the company initiated a small study investigating one 500mg dose of firibastat in 14 healthy volunteers and 14 patients with severe renal failure. Results had originally been expected in April 2020, but trial enrolment was temporarily halted due to the coronavirus after all the patients in the renal failure cohort and about half of the healthy volunteer cohort were enrolled. The company is currently planning to conduct an interim analysis of the patients already enrolled in the study and will conduct a final analysis once it is fully enrolled. If the safety signal is confirmed in renal failure patients, this finding would help expand the market and provide a marketing edge for firibastat.

Valuation

We have adjusted our valuation from €909m or €51.80 per share to €963m or €51.74 per share. The total value increased due to rolling forward our NPVs, while the per share value fell due to a higher number of shares. Additionally, 5m warrants will be issued to Negma Group to cover the initial €8m loan, which would lead to a 27% increase in the number of shares if fully exercised (the exact level of dilution is unclear as it would depend on the share price when warrants are exercised).

Exhibit 1: Quantum Genomics valuation

Product

Main indication

Local

Status

Probability of success

Launch year

Peak sales ($m)

Patent protection

rNPV
(€m)

Firibastat (QGC001)

Hypertension

US

Phase IlI

50%

2023

1,110

2031

496.57

Firibastat (QGC001)

Hypertension

Europe

Phase IlI

50%

2023

959

2031

421.31

Firibastat (QGC001)

Development costs

 

 

 

 

(157.56)

Firibastat (QGC001)

Heart failure

US

Phase IIb

20%

2023

574

2031

126.79

Firibastat (QGC001)

Heart failure

Europe

Phase IIb

20%

2023

687

2031

150.45

Firibastat (QGC001)

Development costs

(85.36)

Total

 

 

 

 

 

 

 

952.19

Net cash (31 December 2019) (€m)

11.16

Total firm value (€m)

963.35

Total shares (29 February 2020) (m)

18.62

Value per basic share (€)

51.74

Source: Edison Investment Research

Financials

The company reported an operational loss of €10.8m in 2019 compared to €13.6m in 2018, with the decrease primarily driven by the completion of the NEW-HOPE study. The 2019 operating loss was less than our €16.5m estimate as we expected a bigger ramp in R&D expenses at the end of the year. We have kept our 2020 estimates the same with an operating loss of €20.7m expected due to the costs of the FRESH and QUORUM studies. We are also introducing our 2021 estimates with a €21.6m net loss, which reflects a continued high rate of R&D efforts.

Quantum had €11.2m in cash and investments at the end of 2019. The company raised €4.0m through an equity line of credit with Kepler Cheuvreux in the second half of the year and drew down the remaining €1.7m in March. The company has now entered into a new financial agreement with Negma Group, a London-based specialist financing institution that has provided €500m to date in capital to companies. As part of the agreement Negma will provide an €8m no-interest loan, which will be repaid with warrants (that will then be exercised by Negma) by Quantum Genomics. The loan will be distributed every 30 trading days in four instalments of €2m each with a 12-month maturity for each instalment. Five million share subscription warrants will be issued to Negma once the first instalment is received (expected shortly). The agreement can be renewed two times, so Quantum Genomics has access to €24m in total financing. The precise level of dilution is unknown as more warrants will be exercised if the share price falls and fewer warrants will be exercised if it rises. Assuming 5m warrants are exercised for every €8m in financing, a total of 15m warrants will be exercised, leading to an 80.6% increase in the number of shares outstanding.

We currently model €36m in financing needs through the end of 2021, €24m of which may be covered by the Negma financing. The rest may be covered through additional financing arrangements or through non-dilutive funding coming from partnerships.

Exhibit 2: Financial summary

€000s

2018

2019

2020e

2021e

Year end 31 December

PCG

PCG

PCG

PCG

PROFIT & LOSS

Revenue

 

 

0

0

0

0

Cost of Sales

0

0

0

0

Gross Profit

0

0

0

0

EBITDA

 

 

(13,598)

(10,760)

(20,704)

(21,572)

Operating Profit (before amort. and except.)

 

 

(13,598)

(10,760)

(20,704)

(21,572)

Intangible Amortisation

0

0

0

0

Other

0

(0)

0

0

Exceptionals

0

0

0

0

Operating Profit

(13,598)

(10,760)

(20,704)

(21,572)

Net Interest

0

0

0

0

Other

150

134

0

0

Profit Before Tax (norm)

 

 

(13,598)

(10,760)

(20,704)

(21,572)

Profit Before Tax (FRS 3)

 

 

(13,448)

(10,626)

(20,704)

(21,572)

Tax

1,458

1,547

2,692

2,804

Deferred tax

0

0

0

0

Profit After Tax (norm)

(12,140)

(9,213)

(18,013)

(18,768)

Profit After Tax (FRS 3)

(11,990)

(9,078)

(18,013)

(18,768)

Average Number of Shares Outstanding (m)

12.8

17.5

18.7

19.4

EPS - normalised (€)

 

 

(0.94)

(0.53)

(0.96)

(0.97)

EPS - FRS 3 (€)

 

 

(0.94)

(0.52)

(0.96)

(0.97)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

626

884

896

904

Intangible Assets

0

360

360

360

Tangible Assets

24

27

39

47

Other

602

497

497

497

Current Assets

 

 

17,855

14,222

13,897

15,121

Stocks

422

333

333

333

Debtors

2,636

2,486

2,486

2,486

Cash

14,797

11,164

10,840

12,063

Other

0

239

239

239

Current Liabilities

 

 

(5,764)

(4,061)

(4,061)

(4,061)

Creditors

(5,762)

(4,060)

(4,060)

(4,060)

Short term borrowings

(2)

(1)

(1)

(1)

Long Term Liabilities

 

 

(849)

(874)

(16,874)

(36,874)

Long term borrowings

(12)

(6)

(16,006)

(36,006)

Other long term liabilities

(837)

(869)

(869)

(869)

Net Assets

 

 

11,868

10,171

(6,142)

(24,910)

CASH FLOW

Operating Cash Flow

 

 

(10,901)

(10,665)

(18,006)

(18,759)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(16)

(118)

(18)

(18)

Acquisitions/disposals

0

0

0

0

Financing

15,071

7,382

1,700

0

Dividends

0

0

0

0

Other

(446)

(232)

0

0

Net Cash Flow

3,708

(3,633)

(16,324)

(18,777)

Opening net debt/(cash)

 

 

(11,069)

(14,783)

(11,157)

5,167

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

6

7

0

0

Closing net debt/(cash)

 

 

(14,783)

(11,157)

5,167

23,944

Source: Quantum Genomics accounts, Edison Investment Research. Note: The Negma Group warrants will be included in shares outstanding only once they are exercised.


General disclaimer and copyright

This report has been commissioned by Quantum Genomics and prepared and issued by Edison, in consideration of a fee payable by Quantum Genomics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

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New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

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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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Quantum Genomics and prepared and issued by Edison, in consideration of a fee payable by Quantum Genomics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Research: Healthcare

Oxford BioMedica — Juno deal expands CAR-T revenue streams

Following the 2017 commercial launch of partner Novartis’s Kymriah (a CD19-targeting CAR-T that is approved for pALL and DLBCL), Oxford Biomedica (OXB) is the only FDA-approved lentiviral vector manufacturer worldwide. Validation of its capabilities continues with the recent licence and clinical supply agreement (LSA) with Juno Therapeutics (part of BMS group), a pioneer in cell and gene therapy research. The LSA grants Juno a non-exclusive licence to OXB’s LentiVector platform for its application in a number of novel CAR-T and TCR-T programmes. This is a significant deal, albeit early stage, in terms of multiple programmes and further diversifies OXB’s revenue streams. As these assets move towards approval, commercial manufacturing supply provides further upside. Our valuation of OXB increases to £718m.

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