Morning Equity Briefing
AGI Therapeutics
(USc) (AGI ID)
Interim results
Jack Gorman
| Closing Price: | $0.04 | Rating: | Neutral | 14/04/10 |
ANALYSIS: Net cash reserves at the end of June 2010 stood at $10.4m, down $1.6m from six months earlier. This comprised a $1.05m operating cash outflow and a $0.55m effect from FX changes (AGI retained some of its cash in euros). Our projected FY cash burn of $5.3m looks too high given this outturn.
Several R&D updates were also provided in the statement. Management has concluded that further development of Rezular in chronic diarrhoea is not justified, balancing the scientific merit of the approach with the regulatory costs and burden associated with its further development. Exploration of Rezular’s utility in a non-GI indication, namely pulmonary arterial hypertension (PAH), requires further pre-clinical work which will take some time to complete (partners may be sought to advance this). A separate, undisclosed product candidate has been identified and is undergoing feasibility assessment; AGI expects to meet with the FDA in the next quarter to help make a final determination on its potential. Licensing activity of potential new candidates is also ongoing.
DAVY VIEW: AGI's cash and modest running costs allow for R&D investment in 2010/11 to rebuild its pipeline. When there is more visibility on the pipeline, it will be possible to establish a more accurate valuation beyond cash value. Cash value stands at approximately 12c per share, based on the June 2010 reserves.