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e-Therapeutics plc: THE INVESTMENT CASE
INVESTMENT OVERVIEW

One year on, new boss is spearheading turnaround at drug discovery firm e-therapeutics

In the group’s 2017 results statement at the end of March, Ray Barlow - who took over as CEO on 6 April 2017 - commented: “We are now focused on the right activities"
Drug discovery
INVESTMENT OVERVIEW: ETX The Big Picture
His comments came as e-therapeutics reported a reduced full-year operating loss of £6.8mln for the year ended 31 January 2018

Almost exactly one year on from his appointment, new boss Ray Barlow is spearheading a turnaround at drug discovery firm e-therapeutics PLC (LON:ETX), with the CEO having undertaken a systematic review of the group’s operations.

In the group’s 2017 results statement at the end of March, Barlow - who took over as CEO on 6 April 2017 - commented: “We are now focused on the right activities. With prudent cost control, we are creating as many opportunities for value creation as our current resources allow.”

READ: e-therapeutics sees full-year operating loss significantly reduced

The group’s CEO added: Our business development efforts are beginning to bear fruit and we are now viewed as a serious and credible innovator with a unique set of technologies and assets.

"In the coming year, we will continue to take a pragmatic approach to explore all avenues of value creation for our Shareholders. We are increasingly optimistic about our future."

Barlow’s comments came as the AIM-listed firm reported a reduced full-year operating loss of £6.8mln for the year ended 31 January 2018, down from a £16.3mln loss a year earlier.

The computer-based group said cash and deposits at its year-end were £9.6mln, down from £14.0mln a year earlier, but with the cash and deposits burn of £4.4mln less than the £10.8mln reduction the year before.

In a recent note, Capital Network analyst Riccardo Lowi said e-therapeutics results “reflect good progress on the main research programs.”

The analyst said he values e-therapeutics leading programmes at about £60mln and attribute a value of £50mln to the firm’s network-drive drug discovery (NDD) platform.

WATCH: Riccardo Lowi on e-therapeutics

Lowi added: “Taking into consideration the cash balance at the end of January 2018 and the £1.4mn tax credit due in 1H19 (Feb-Jul of calendar year 2018), we get to a valuation of about £120mln.

“Applying a 30% discount to account for potential future dilution, we reach our intrinsic value of £83mn, about 4x current market cap.”

At its current share price of 7.7p, e-therapeutics has a market capitalisation of around £20.67mln.

Back in January, e-therapeutics signed two collaboration deals which it said will enhance and extend its artificial intelligence (AI) technology capabilities.

Both Intellegens and Biorelate have AI tools which, after pilot studies, have been shown to complement e-therapeutics’ existing computational NDD technology.

Intellegens is a spin-out from the University of Cambridge that has developed a unique AI method for training neural networks from incomplete data.

READ: e-Therapeutics enhances its AI technology capabilities as it signs two collaboration deals

As for Manchester-based Biorelate, it uses AI to create databases by analysing published literature around a certain topic – digging out the most important and relevant pieces of information from masses of research journals and papers.

Jonny Wray, e-therapeutics’ head of discovery informatics commented at the time: “We already utilize machine learning heavily in our discovery platform to augment empirical biological and chemical data

“These partnerships will enhance and extend our internal capabilities via collaborations with companies at the cutting edge of AI research and application.”

“Open the aperture”

Networks are a rapidly growing area of drug research. Instead of focusing just on one gene mutation or single target, the network approach looks at the broader interactions within disease mechanisms.

e-therapeutics’ platform is founded on the ability to “open the aperture” and look at disease biology as an interconnected network.

The in-silico part of the engine uses a very sophisticated computational approach enhanced with artificial intelligence tools and other state-of-the-art analytical approaches to build and analyse network models of disease’.

The final part maps which compounds will have a positive impact on disease from a database of tens of millions of active compounds.

Over the year he has been in charge, e-therapeutics boss Barlow - who joined the group from US giant Amgen - has narrowed the group’s focus on internal discovery projects from six to the two most commercially attractive.

That will see the company take its Hedgehog tumour treatment and an anti-influenza programme to the industry as potential out-license opportunities and to help demonstrate the effectiveness of its NDD approach.

Network pioneer

The CEO’s strategic review was carried out with help of a number of big pharma and biotech peers and a systematic analysis of data, market opportunity and unmet commercial and clinical need which led to those two products being selected.

Barlow has said he believes e-therapeutics was ahead of its time in pioneering the network route, but now the industry is coming around to the group’s way of thinking.

"Our network-driven view of biology and disease is gaining more and more attention in literature and the industry.

“We are looking forward to ride the wave at the amazingly exciting intersection of biology and technology.”

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e-Therapeutics plc Timeline

CN Video
March 28 2018

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