Faron Pharmaceuticals Oy & OptiBiotix Health PLC: Significant Updates on Manufacturing & Distribution Agreement Announced

The United Kingdom market opened higher today (on 5^th May 2020, before the market closed) with a revival in economic activities as several countries easing out the Covid-19 imposed restrictions. Meanwhile, it has been observed that the Pharmaceutical sector has been performing resiliently during the Coronavirus mayhem. Today, we are going to discuss two FTSE listed stocks from Pharmaceutical and Biotechnology industry – Faron Pharmaceuticals Oy (LON:FARN) and OptiBiotix Health PLC (LON:OPTI) as both the Companies have signed an agreement for manufacturing and distribution of products. While the FARN has progressed in the development of Clevegen, OPTI is expanding the commercialization of its products. Following the updates on contracts, the stock price of both FARN and OPTI surged over 2 per cent (at the time of writing, GMT 9.25 AM). Let’s walk through the fundamentals of these two Companies, and understand their respective business activities, financial position, and outlook to gauge the magnitude of their recent contracts.

Faron Pharmaceuticals Oy (LON:FARN): Health Care Group with Sustainable Business Model

Faron Pharmaceuticals Oy is a FTSE AIM-listed clinical-stage biopharmaceutical company. It is engaged in developing a medical treatment for unmet medical conditions. The Company is headquartered in Turku, Finland. It holds a pipeline for endothelial receptors including - Clevegen (precision immunotherapy) and Traumakine (for prevention of vascular leakage and organ failures). It is listed on the London Stock Exchange (LSE) since 17^th November 2015 and listed on NASDAQ Helsinki since 2019.

(Source: Company Website)

Pipeline focusing on Rare and Hard-to-Treat Disease

The Group’s pipeline comprises of the following two drug developments –

• Clevegen: It is an antibody (novel anti-CLEVER-1), which targets activating immunity to fight several types of cancers.
• Traumakine: Targets prevention of organ failure and vascular damage by stopping the leakage.

Key Updates of 2020

• 5^th May 2020: Faron Pharmaceuticals signed an agreement with AGC Biologics (global contract development and manufacturing company) for commercial-scale manufacturing of Clevegen. This agreement will help in flexible and cost-efficient manufacturing along with future regulatory filings in the US and Europe.
• 23^rd April 2020: FARN Group affirmed that €14 million of gross proceeds had been raised through Equity Issuance.
• 1^st April 2020: Regulatory approval obtained regarding global platform (Randomized, Embedded, Multifactorial Adaptive) trial for REMAP-CAP (Community-Acquired Pneumonia) program; including interferon and intravenous (IV) beta-1a, as a new treatment arm.

Highlights for FY19 – Reflecting Significant Progress and Maintaining Momentum in the Delivery of its Novel Pipeline

• On 20^th March 2020, the company reported its financial statements for the year ended 31 December 2019. For the company, 2019 was a significant year. The management team made significant progress in executing the Group’s strategy.
• From the perspective of financial highlights, the company had successfully raised €15.6 million gross (€14.5m net) through several fundraises during 2019; continued tight cash management into 2020; cash balance of €7.1 million as on 31 December 2019 (2018: €4.1 million); loss before income tax stood at €13.3 million (2018: €20.1 million); net loss for 2019 was €13.3 million (2018: €20.1 million); net assets of €1.6 million as on 31 December 2019 (2018: €0.4 million).
• On 3^rd December 2019, FARN started trading on Nasdaq First North Growth Market (Nasdaq First North). This is in addition to the company’s listing, since November 2015, on Alternative Investment Market (AIM).
• As per the operational highlights, all the major goals were achieved. In Clevegen®, the switch in immune cell profiles towards increased immune activation confirmed in cancer patients, down regulation of a range of major inhibitory immune checkpoints, and first target lesion responders observed (CRC (colorectal cancer) and melanoma). In Traumakine®, INTEREST trial results explained by molecular interference of concomitant corticosteroid use, and FDA (US Food and Drug Administration) acceptance of new clinical study plan for Traumakine in ARDS (acute respiratory distress syndrome) patients.

Share Price Performance

Daily Chart as of May 5th, 2020, before the market close (Source: EODHD/Others, Thomson Reuters)

FARN’s shares were trading at GBX 371.99 on 5^th May 2020 (before the market close at 8:53 AM GMT+1). Stock's 52 weeks High is GBX 595.00 and Low is GBX 64.99.

2020 Outlook – Pipeline Progress and Catalysts

For 2020, the main focus of the company will be to report the drug development findings data to regulatory authorities and to continue to expedite Clevegen’s clinical development through part II and part III of the MATINS (Macrophage Antibody To Inhibit immune Suppression trial). In order to progress the INTEGRITY and CALIBER clinical trials, the group will also continue to work in close collaboration with the regulatory authorities. Faron’s will secure Traumakine’s future development pathway. The business is continuing to make growth with potential partners regarding both Traumakine and Clevegen. Faron has not yet reported any revenue, and its programme and costs have been funded through fundraising. The working capital of the company is sufficient for the first quarter of 2020. The Group is looking forward to updating the market on the progress throughout the course of the year. Presently, there is only one industry, Biotech, that is most likely to benefit from the COVID-19 outbreak as well as profit in the long-term.

OptiBiotix Health PLC (LON:OPTI): Decent order book with focus on new collaborations to expand business operations

OptiBiotix Health PLC (OPTI) is a FTSE AIM-listed life sciences company, which is involved in the research and development of microbiome modulators under its pipeline. The Company was formed in 2012 and listed on the LSE since 5^th August 2014. The Company develops and identify microbial strains, supplements and active compounds, compounds and formulations for potential health benefits. The group is differentiated into three screening platform, namely OptiBiotics, OptiScreen, and OptiBiome.

(Source: Annual Report, Company Website)

Recent Developments – Reflecting Commercialization Agreement and Equity Placing

• 5^th May 2020: OptiBiotix signed a three-year contract with Pierce ESIM Pte Limited (a subsidiary of Pierce Group Asia) for rights to import and commercialize - SlimBiome® and LPLDL®. The agreement is focused on Chinese and Hong Kong market, and the portfolio of OptiBiotix product will address the problems related to obesity and other chronic diseases.
• 4^th May 2020: The Group signed a license agreement with Smart For Life, Inc., regarding the commercialization of SlimBiome® in the USA and Canada.
• 17^th April 2020: The Group issued 2,500,000 new ordinary shares at a price of 40 pence per share to raise £1.0 million.

Trading Update (as on 17^th January 2020) – Reflecting Strong Commercial Progress

• During the 12 months to 30 November 2019, the company expanded its geographical reach to 24 new countries.
• Twelve agreements have started contributing revenues while seven others are bringing growth in y-o-y sales in every division.
• Total sales for 12 months to 30 November 2019 were £808 thousand with other income at £617 thousand.
• The total amount of income, including, inter alia, income ensuing from the partial disposal of SkinBioTherapeutics Plc shares, for 12 months to 30 November 2019 stood at £1.43 million (2018: £542 thousand).
• On 30 November 2019, the group had cash in the bank of GBP 687,699 with debtors of GBP 514 thousand, totaling GBP 1,201,699.
• OPTI signed eighteen commercial agreements in 12 months to 30 November 2019. Further, it signed five agreements in December 2019. This both makes a total count of 23 agreements for the full year 2019.

Share Price Performance

Daily Chart as of May 5th, 2020, before the market close (Source: EODHD/Others, Thomson Reuters)

OPTI’s shares were trading at GBX 58.44 on 5^th May 2020 (before the market close at 8:53 AM GMT+1). Stock's 52 weeks High is GBX 89.85 and Low is GBX 23.20.

Short Term Scenario

In 2019, the company saw robust commercial progress with brand presence to 24 new countries and more deals generating revenues for the first time or growing sales and OptiBiotix extending its geographic reach. In the second half of the year, the majority of income was generated with total income for 12 months to 30 November 2019 of just more than GBP 1.4 million. Further, the group expect revenue growth in the year 2020 as a UK launch of SlimBiome and LPLDL®. In the microbiome, the company believe interest will continue to grow and the market opportunity will increase. As an extension of this plan, OPTI has commissioned advisors to explore the potential of a dual NASDAQ listing. The company rely on its cash balances and fundraised from the stock market for all the operational tasks.