Wilex Strategic Funding And H112: Data Priced In

Wilex AG (WL6.DE) reported H1 revenues of €7.2m made of €5.9m of research payments and deferred income from the 2011 Prometheus deal plus €0.2m of diagnostic and €1.2m of research for customers. Other income, including grants, was €1m. Guidance for FY12 has increased to €16-18m; the H2 rise of €2m is mainly due to the deferred recognition of $17.5m cash received from Prometheus in July in respect of Rencarex. H1 operating costs were €13.3m, of which €6.9m was R&D. The cash use is €1.7-2m per month. (€20-24m annually). Losses in H1 reduced to €5.6m vs €10.6m.

Money for Rencarex US rights; Redectane ODAC
Wilex had an option on either a marketed product in respect of the Rencarex US rights or $20m cash. On 10 July, it took the cash in a restructured deal. The payment now due is $17.5m with the other $2.5m added to the milestones for filing, assumed to be received in 2013. There is an agreement to introduce Wilex to the holder of a product (believed to be Proleukin marketed by Novartis for renal cancer) so a deal might still be done. However, Wilex needed additional cash and taking the product would have needed alternative cash funding ahead of Rencarex ARISER data in Q4. The 25 July ODAC meeting will illuminate the future Redectane development options and any additional cash needs for further trials.

Financial position
Edison has modelled the July $17.5m (€13.4m) payment as deferred income over 36 months adding €1.9m in FY12 and €4.5m in FY13; the exact treatment is not disclosed. The 2011 $19m Prometheus signing fee is modelled in FY12 as €5.4m plus a contribution, assumed to b €5.5m, for Rencarex development; this is fully offset in cost of sales but reduces R&D. Heidelberg (ADC technology: delivery of cytotoxic drugs by antibodies) revenues are running at €2.4m with Diagnostics at €0.4m. The cash need is estimated at €20m. This is being covered by the earlier equity issue of €9.8m and the $17.5m (€13.4m) received in July. Wilex could have about €6.7m cash by 30 November, although this could be €4m lower depending on trial costs.

Valuation: Priced in data
Edison’s indicative valuation for Wilex is €207m, or €7.35/share. The value of some technologies (like ADC) is not included but could be significant. Further funds of at least €15m will be needed in FY13; some of these should come from milestones. A Mesupron deal, with a significant fee, is expected in 2013 after good trend data was seen in both the pancreatic and breast cancer studies.

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