CeNeS releases upbeat year results
Biopharma group says aims to break even in 2003
By Saskia Wirth, FTMarketWatch.com 4:57:00 PM BST Apr 4, 2001
LONDON (FTMW) - Britain's CeNeS Pharmaceuticals [UK:CEN] on Wednesday released upbeat full-year results, reporting a jump in revenues due to good performance in its pharmaceutical services division.
CeNeS concentrates its research and development on disorders of the central nervous system (CNS) and pain control. It also uses its technology to improve the delivery of drugs by controlling the amount, timing and location of its release in the body. Its lead product is Moraxen, a treatment for cancer pain.
Year revenues jumped to £6.6 million from £31,000 the previous year, boosted by good performance of the company's pharmaceutical services division.
However, operating loss for the period widened to £20.8 million from £8.6 million in 1999, including a one-time £12.3 million write-off for drug delivery and development licenses acquired throughout the year. The loss also includes an increase in research and development costs to £7.7 million from £4.9 million.
CeNeS closed up 1.3 percent at 38 pence in London trade. Shares have halved in value since November to a 52-week low and have underperformed the pharmaceutical sector as a whole. See graph
Broker Beeson Gregory, who rates CeNeS a "buy", said the company's results were in line with expectations and would help restore confidence in the stock, and that the expected news flow over the next six months would drive the share price higher towards their target price of 185 pence.
Expansion
__ "We expect to significantly increase revenues in 2001 with the full contribution of sales from our new pharmaceutical division." CEO
Daniel Roach, chief executive of CeNeS, said the company had successfully launched its pharmaceutical business, which is expected to raise substantial revenues in the current financial year, through the acquisition of three pain products from GlaxoSmithKline [UK:GSK] in November last year.
"We expect to significantly increase revenues in 2001 with the full contribution of sales from our new pharmaceutical division," he said. "Our strategy of acquiring further CNS pharmaceutical products continues and we expect to add to this portfolio during 2001."
Mr. Roach told FTMarketWatch.com that CeNeS aimed to break even by the end of 2003 with the launch of M6G, a treatment for post-operative pain, currently in Phase II trials. Analysts estimate the drug could reach peak sales of £100 million.
Beeson Gregory said the company would need only limited additional funding to reach profitability and is expected to break even in 2004.
Low-risk strategy
CeNeS has adopted a "low-risk" business model that it widely welcomed by market observers. The company balances its R&D expenditures with a network of revenue generating in- and out-licensing partnerships for which it receives milestone payments and royalties.
The pharmaceutical sales business was launched in November last year with the acquisition of three pain relief drugs - Cyclimorph, Diconal, Valoid - from GlaxoSmithKline. The products had combined annual sales of £2.2 million in 2000 and future revenues will be channelled into the expansion of the company's portfolio.
The move makes sense for a relatively small company like CeNeS since drug development is extremely expensive. To develop a new drug costs between $500 and $750 million and can take up to ten years of research and clinical trials. Apart from providing a steady revenue flow, the deal will help CeNeS to build up a marketing and sales infrastructure for its own products.
__ "The company's technology roots and particularly strong pipeline give the potential for high returns, while the risk is reduced com-pared to the traditional biotechnology model ." Broker
Similarly, CeNeS has licensed marketing rights for Moraxen to Amarin for the U.S., Bioglan Pharma [UK:BGP] for Continental Europe and Schwarz Pharma [DE:722190] for the U.K. CeNeS manufactures the drug and is expected to receive around £10 million a year from European sales and royalties alone.
CeNeS intends to market its products in the U.K. and license them to other companies elsewhere. These partnerships allow the company to enter different pharmaceutical markets without the burden of marketing and sales costs.
The company also sells its drug delivery technology to other pharmaceutical and biotechnology companies.
Potential blockbuster
The most risky product in the company's portfolio is Sipatrigine, a treatment for stroke patients currently in Phase II trials. Similar compounds have shown a high failure rate in clinical trials, but - if successful - the drug has the potential to become a real blockbuster since there is currently no similar treatment on the market.
Beeson Gregory is upbeat about CeNeS's business strategy. "The technology roots and particularly strong pipeline give the potential for high returns," the broker said. "The risk is reduced compared to the traditional biotechnology model due to the immediate revenues from the contract research business and the U.K. pharmaceutical sales which significantly reduce the cash burn."
CEO Roach said that in the year ahead, CeNeS plans to further expand its sales forces, seek more acquisitions as well as marketing and research partnerships with other companies, and that the company plans to obtain funding for the launch of Moraxen on the Japanese market.
Saskia Wirth is a reporter for FTMarketWatch.com in London. |
