finnCap Research Company Notes - 21 May 2018

Sector: Technology and Telecoms

CyanConnode (CYAN): FY 2018 revenue on track with new regions opened

Key data                              

• Share price (p): 11.3
• Target price (p): U/R
• Market cap (£m): 14.4
• Enterprise value (£m): 9.0           

2017 results are largely as expected after January’s trading update. Affected by a delayed delivery, revenue fell 36% YoY to £1.2m contributing to a cash loss of £10.7m. R&D spend increased during 2017 with development of a new standards based product which is now complete. Cash at the YE was £5.4m after an £11.3m equity injection in the year and we calculate current cash of under £3m but with a further £1.4m due from R&D tax credits. The cash burn will be reduced during 2018, and whilst there is no visibility on the Bangladesh order, new territories have been opened up and a large order for $3.2m in India is announced with the results. The cash should be sufficient through to Q4, when the bulk of the year’s £10m expected revenues are due to be booked. To be prudent, our forecasts do not include anything from Bangladesh and little from Iran; however, delivering them will require additional working capital (our forecasts assume £2m from equity) with a number of sources being considered, including licensing. The uncertainty on timing and funding means this remains a highly speculative holding and we place our TP under review. We do see opportunity in a huge order book and strong IP; also a shift of emphasis from hardware to software with a licence and royalty model for the new product developed during the year.

Lorne Daniel | ldaniel@finncap.com

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Sector: Life Sciences

Omega Diagnostics (ODX): VISITEC CD4 update

Key data                              

• Share price (p): 12.5
• Target price (p): U/R
• Market cap (£m): 15.9
• Enterprise value (£m): 16.7         

The company has confirmed that its VISITECT CD4 test for advanced HIV disease (CD4 cell counts <200 cells/mm3) is progressing in line with expectation and that it has moved into a formal optimisation phase. Forecasts and valuation remain under review, pending FY 2018 results.

Allergy Therapeutics (AGY): Positive Phase II PQ data – significant value inflection

Key data                              

• Share price (p): 24.5
• Target price (p): 47.0
• Market cap (£m): 145.6
• Enterprise value (£m): 133.1

A highly statistically significant dose response from the Phase II Grass MATA MPL/PQ Grass trial in Europe enables the company to confidently select a dose to take into a pivotal Phase III trial for US and European registration purposes. This is the first of two material clinical trial readouts this year. The Phase III Birch allergy study is expected in H2 2018, safety data from which might be able to be included as part of the safety package needed by the FDA for Grass MATAMPL. We maintain a target price of 47p and expect to upgrade on positive PQ Birch results. Further upside (33p) exists for the Pollinex Quattro Grass programme in the US.

Mark Brewer | mbrewer@finncap.com

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