TiGenix Extends Knee Sales, Aims For Crohn’s Deal

TiGenix is making solid progress in growing ChondroCelect sales for knee cartilage repair, with 2014 sales potentially in the €7.5-9m range. The July €6.5m funding provided cash into Q114, but management indicates a further €12m might be needed up to Q314. A deal on the Phase III Cx601 (cell therapy for fistulising Crohn’s disease) is anticipated with an upfront fee; non-dilutive funding is being actively explored. Phase IIa Cx611 data in April showed good responses in highly-refractory rheumatoid arthritis patients. The next Cx611 stage is in discussion but this is a massive opportunity.

Cash control
TiGenix has pruned core costs to invest in marketing to get extra Spanish and some UK sales. R&D (€6.7m) fell 9.6% as the Cx611 Phase IIa trial ended, but may rise in 2014 if further studies are initiated. Administration fell 20% to €2.5m. Cash operating expenses for FY13 (R&D, admin, sales) are expected to be €16m. Net cash outflow after financing is expected to be about €10m. Following the gross €6.5m funding in July 2013 at €0.25/share, TiGenix had €8.9m in cash. This is sufficient to last into H114 before any deals and non-dilutive funding.

Developing prospects
TiGenix has a solid position to develop. Sales may reach €5.2m in 2013 given the 55% H1 growth. The Spanish reimbursement for ChondroCelect in May is taking time to result in sales, but should generate increasing revenues over 2014; UK sales may strengthen in 2014. Total 2014 sales might be in the €7.5-9m range and this could move ChrondroCelect into cash neutrality by H214. Cx601 for fistulising Crohn’s disease is in partnering talks and a US deal is possible. This would enable a further trial for FDA approval. Cx611 produced excellent exploratory Phase IIa data in April. Further trials may confirm this and enable partnering, possibly for refractory Rheumatoid arthritis.

Valuation: €1.14/share before deals
Edison’s indicative value has been revised to €144m based on ChondroCelect breaking even in 2014 and the revised cost base. This equates to €1.14/share based on 126m shares post the July funding, using a multiple of 20-fold on 2020 risk-adjusted sales. However, there is a funding gap of perhaps €12m to Q314, depending on ChondroCelect sales. TiGenix could do deals and obtain non-dilutive finance, for example, on the facility or using soft loans. If Cx601 is successful in its Phase III, EU sales should develop from 2016.

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