Hybrigenics: Main Value Driver Remains Inecalcitol

Hybrigenics’ (ALHYG.PA) main value driver remains inecalcitol, based on its potential in oncology, while its development in its former key indication, psoriasis, is on hold. Key data from a Phase II trial in chronic lymphocytic leukaemia (CLL) are due in 2013 and could lead to a licensing deal, and potentially, resumption of trials in castration resistant prostate cancer (CRPC). Meanwhile, Hybrigenics is expanding its service division to reduce its dependence on inecalcitol and recently launched its novel small molecule screening service, YChemH. Our base case valuation is reduced to €23m excluding psoriasis, rising to €29m if trials in this indication resume.

Important data on inecalcitol expected in 2013
Interim data from the Phase II proof-of-concept trial with inecalcitol in CLL are due in H113 and final data could be reported in Q413. If the results suggest that the compound delays progression of the disease, this should lead to the partnering of the product and the resumption of its development in CRPC. The strategy for inecalcitol in psoriasis should also become clearer once the CLL results are reported.

Expanding the services division
Hybrigenics has initiated its expansion strategy for its services division with the launch of YChemH, a novel small molecule screening service. The new service was developed with UK medicinal chemistry company, Charnwood Molecular and is the first step towards creating a more integrated range of services in order to reduce its dependence on inecalcitol. Further expansion either organically or via M&A is likely.

Financials, headline sales figures
Total FY12 revenue was €5.8m, including a €0.96m grant. Hybrigenics received a €1.7m upfront payment from Servier in 2011, so total revenue fell 12% from €6.6m. Headline recurring revenue (excluding the grant) stood at €4.8m, flat on 2011. Services revenue fell c 2% at €3.3m, (H1 sales fell 16% and recovered c 9% in H2).

Valuation: Base case DCF of €23m
Our base case valuation is €23m, excluding inecalcitol in psoriasis as it is now on hold (previously €51m, included €31m for the psoriasis indication). We now value the psoriasis programme at only €6m after reviewing our assumptions. We value the services division on 2x FY13e sales at €7.2m. The company had cash of €3.5m at end-December 2012 and a further €6.9m is available from the Yorkville equity line, which could finance the company through to late 2014.

To Read the Entire Report Please Click on the pdf File Below.