Redx Pharma plc (LON:REDX): Third drug development candidate
Market Cap: £67m; Current Price: 103p
Discovery of MRSA compound
- Redx announced that it reached pre-clinical development stage with a new anti-infective compound designed to tackle Methicillin-Resistant Staphylococcus Aureus (MRSA).
- The discovery is a milestone for Redx's commercial partnership with the NHS, working with The Royal Liverpool and Broadgreen University Hospitals Trust.
- This collaboration, signed in September 2013, was formed to find new drugs to combat the growing threat of drug-resistant bacteria, including MRSA.
- The next stage of development will see the compound undergo pre-clinical testing managed by Redx.
NORTHLAND CAPITAL PARTNERS VIEW: Antibiotics are essential to modern medical practice. They are used not only to treat common infections, but are critical to many routine medical procedures. However, due to the long standing overuse of these drugs, many microbes have developed resistance to them—so much so that the issue of antibiotic resistance is now a major public health concern. Already today, it is estimated that close to 50,000 deaths annually across Europe and the US are caused by antibiotic resistance. Jim O’Neill, chairman of the UK’s Review on Antimicrobial Resistance, estimates that if the problem of antibiotic resistance is not urgently addressed, the world could face ten million lives lost every year and up to US$100 trillion in lost productivity by 2050. Despite this looming crisis, the global pipeline of novel antibiotics is thin due to chronic underinvestment by the pharmaceutical industry. This situation provides a unique opportunity to novel antibiotic developers such as Redx, and its AIM-listed peer Motif Bio plc—which has a clinical-stage phase 3 compound under development.
Fastjet (LON:FJET): FINALS
Market Cap: £76m; Current Price: 114p
Top line more than doubles
- The business more than doubled revenue in Fasjet Tanzania to US$53.8m (US$26.1m) on the back of an 85% increase in utilisation, 64% increase in passengers carried and a 26% increase in average revenue per passenger to US$90. Furthermore, Cost per Available Seat Kilometer (CASK) reduced by 20% to 11.27c. Despite the increase in revenue and decrease in some cost areas the group posted an operating loss before exceptional items and discontinued operations of US$31m (US$33.7m).
- During the early part of FY15 the business secured a Zambia Air Service permit, where the first aircraft is expected to be deployed in the 3Q15. Furthermore, the business raised £50m at 100p after a share capital reorganisation of 1 for 100 and is expected to take delivery of a new A319 in 3Q15.
- FY15 looks encouraging. The current fleet is fully utilised so business required extra capacity to meet demand. The additional A319 will add 1000 more seats per day available to customers. Based on 75% load factor the expanded fleet is expected to carry 275,000 passengers per annum.
NORTHLAND CAPITAL PARTNERS VIEW: Substantial improvement in top line for the business as Fastjet Tanzania more than doubles revenue. The stock trades on c. 2x FY14 Revenue which is not particularly undemanding however the foundations are being put in place to grow the business into a pan-African low cost carrier by expanding the fleet to up to 34 aircraft over time and the recent £50m equity fund raise lends support to the business’s expansion plans.
Northland Capital Partners Monthly Summary – June 2015
Some greater certainty post the election but EU remains high on the agenda
US and UK indices generally tracked sideways in May with much greater excitement to be found on Asian markets. The Shanghai Composite saw a brief pullback at the end of the month before returning to growth at the start of June – it’s up 40% YTD to record levels. The Hang Seng is up a more sedate 17% YTD including a couple of high profile casualties (Hanergy Thin Film and Goldin Properties and Goldin Financials lost a combined $30bn in market capitalisation at one point). Further volatility looks assured given considerable inflows and elevated ratings.
On the home front, with the General Election out of the way and the Conservatives unexpectedly winning a small but workable majority, attention has immediately turned to the UK’s relationship with the EU and the promised referendum. The chances of ‘full-on’ treaty change ahead of the referendum look remote but the initial mood music from the main EU leaders seems generally positive and some accommodation seems likely. Meanwhile Greece remains high on the agenda with a number of deadlines due to fall in June and negotiations ongoing.
In terms of the UK economy, further Public Sector cuts loom but there remain opportunities for private sector suppliers offering more efficient services. The greater certainty offered by a majority Tory government is also likely to support further M&A, given healthy balance sheets, persistent low borrowing costs and reasonably buoyant markets. A potential catalyst would be any changes to Entrepreneurs’ Relief or Capital Gains Tax - with the government searching for additional revenue sources, nothing can be considered sacred. IPO and secondary placing activity has picked up post the election and the pipeline looks reasonably congested in the run up to the summer.
Mining: Last month’s positive rally in London listed mining and exploration companies slowed in May with 46% showing positive share price movements down from 60% in April. This is still significantly up on the 20% seen in 2014 and 2015. This month we initiated coverage on Mariana Resources* (LON:MARL) and Premier African Resources* (LON:PREM) with SPECULATIVE BUY ratings. We also downgraded our forecasts and price target for DiamondCorp (LON:DCP) to 16.4p (from 17.7p).
Healthcare: Our top Healthcare pick, Motif Bio plc (LON:MTFB), continues to advance. The stock is up over 36% since our last monthly report was published on May 6th. The company’s lead drug, iclaprim, is set to fill a major market void in the battle against antibiotic resistance. Antibiotic resistance has become a major public health concern, with close to 50,000 deaths annually across Europe and the US attributed to the problem. Despite this looming crisis, the global pipeline of novel antibiotics is insufficient, creating an opportunity for specialist drug developers, such as Motif. If approved, iclaprim could achieve over $1bn/year in sales. We maintain our BUY rating and 89p price target.
Consumer/Leisure: The share price in Plus500 (LON:PLUS) a CFD trading platform to retail customers, declined c. 70% on the back of it freezing UK customer accounts pending appropriate Know Your Customer (KYC) and Anti-Money Laundering (AML) checks. The share price decline prompted software provider Playtech (LON:PTE) into bid action with a recommended 400p all cash offer. The acquisition would make sense for PTEC as it would add additional exposure and enhance scale to its current fintech offering. PTEC recently acquired TradeFX, a CFD and binary options provider, for an initial cash payment of €208m and cash earn-out based on future profits of up to €250m.
TMT: Starcom (LON:STAR) announced a £0.5m placing (01/06/15) following disappointing prelims in mid-May. Revenue fell 14.4% to $5.0m as the company rebuilt its customer base following the loss of a major Ukrainian distributor. The majority of products are now fully developed and we expect revenue growth in H2 plus the prospect of a second generation Watchlock product in Q4 that will be actively marketed by JV partner Assa Abloy. Amino Technologies (LON:AMO) made a small acquisition with Booxmedia Oy providing a cloud-based platform for the delivery of ‘TV everywhere’ to IP enabled devices. Anite (LON:AIE) announced Q4 trading in line with expectation with trends reported earlier in the year continuing – cash was better than forecast. It also announced the China Telecom, an existing customer, had selected its interoperability and performance test solution, SAS, for LTE data throughput testing.