TiGenix: Funding Received And Cx611 Safety Data Provides Good News

TiGenix (TIG.BR) has completed a private placement issuing 8.6m shares for €6.7m cash at €0.78/share. FY12 operational burn was in line with expectations but some alternative funding sources have not materialised (a subsidiary sale did not occur) or been delayed into 2013. The good news is Cx611 (cultured adipose stem cells) safety data has shown no problems. Safety is an important issue for any systemic allogeneic stem cell therapy. Dose and some efficacy data are due in Q213. An indication will be selected for further development if efficacy is seen.

Product and trial progress: Cx611 safe, full data in Q2
The Cx611 Phase IIa dose-escalating study in 53 rheumatoid arthritis patients is the most clinically advanced use of stem cells to control an autoimmune disease. The endpoints are safety, tolerability and efficacy. The safety endpoint has been achieved and data released. Only two patients (4%) had adverse events and only one discontinued the study. This could lead to a Phase IIb with a disease score endpoint. The unblinded dose and efficacy data will be released in Q213 (due April). In other trials, the Cx601 Phase III in Crohn’s perianal fistula tracts started in July. The Cx621 inguinal (groin) lymph-node injection safety study showed the method was safe.

Cash placement and financial revision
Edison has scaled back its FY12 Chondrocelect sales target from 180 to 170 implying about €3.7m revenue. The 2013 target has been revised down to 350 from 450. Middle East distribution is now in place and a major EU country should sign in H113 (but is not now in our forecasts). ChrondroCelect may be cash neutral in 2014 but TiGenix overall will see cash outflows to 2016 unless a deal on Cx601 is struck (potentially globally in 2013). The new manufacturing site is licensed and will be operational in 2013 with excess capacity planned to be leased out. FY12 cash burn is estimated at €1.2m per month: €14m. With the placement cash due 27 December, the year-end cash will be about €11m. The placement with other funding should take TiGenix though 2013 but a Cx601 deal will be required to reach 2014.

Valuation: Placing of 8.6m shares, funding into 2014
The January 2013 indicative value has been revised to €1.90 on a 15-fold multiple due to lower immediate revenue expectations, more shares in issue and with a push back to 2016 for overall cash neutrality. Note: this excludes any deal value on Cx601 but this may be substantial. A low 1,000 maximum ChrodroCelect scenario indicates €1.55/share implying significant upside from the placing price of €0.78.

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