A new NTE in the pipeline…and further delays

Crossject released its H1 17 results. Revenues reached €1,635k (vs €1,600k), operating result €-4,256k (vs €-2,779k), and the net result €-3,360k (vs €-2,831k).

Net cash at the end of H1 17 was €6,096k vs €2,634k at the end of FY16, including the €4,985k capital increase carried out in March.

The company also announced it will engage in the development of a new product (Zeneo Terbutaline) in the field of acute asthma.

Lastly, the group indicated that the priority US filings will be delayed by c. 6 months, due to the “PARC” production line in Dijon (tubes “Prêts A Remplir” ready-to-fill tubes).

As usual, the numbers as such are of little relevance given the fact the story of Crossject is based on the future launch of Zeneo combined with the NTEs the group is targeting. This said, we stress that the cash position has improved thanks to the capital increase and the payment of refundable incentives from PIAVE and BPI France and despite the increase in operating charges (c. +€1.4m to €5.9m, or +35%) which corresponds to the ramp-up of the production team and consulting and external charges (the PARC production line, purchase of components).

We view these expenses as investments, thus no reason for worry and all the more so since Crossject will benefit from €5.9m in cash before year-end (refunding of the tax credit, incentives, equity line…) which secures its net cash position.

On the positive side, the group also announced it will develop a new NTE (Zeneo Terbutaline) targeting the acute asthma market. Around 235m people suffer from asthma worldwide, 10% of whom in its acute form, with only a few being offered an emergency solution.

This seems to be a target for Crossject, although we need a bit of time to dig into this. On the less positive side, Crossject foresees new delays due to industrial issues in the Dijon production unit. In short, market approval files in Europe and the US should be delayed by c. 6 months, which has no impact on the group’s strategy to focus on emergency NTEs amongst its current portfolio of 7 NTEs, and, more specifically, on the products that could lead to early distribution agreements (with upfront fees) in the US.

The group also maintains its target of negotiating an exclusive distribution agreement in the US for Zeneo Sumatriptan and to launch a call for the tender of Zeneo Midazolam in FY17.

Altogether, the outcome is unclear. Short term, there will be pressure on the stock because of new delays in the launch of Crossject’s first products on the market.

At the same time, Zeneo Terbutaline offers a new opportunity, in the long term though.

All in all, the group’s valuation is based on future products, so delays should lower it, as the discount of cash flows should be higher, while a new opportunity also has to be integrated into the group’s portfolio. We will review our model after talking in more detail with the company but, again, we expect a rather negative reaction to this release.

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