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York Pharma (YRK.L) - preliminary results
YRK.L
Comment by Objective Capital , Nov 23, 2007
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York Pharma has reported its preliminary results for fiscal year 2007 that ended on September 30th. It was an eventful year. YRK raised a total of £8.25 million spread over 2 equity placements, one of which related to the acquisition of Rosanto Pharmaceuticals.
YRK reported cash at period end of £4.7 million and made a loss of £6.5 million for the full year which management indicated was lower than their expectations. Subsequent to the period end, it acquired Derms Development Ltd (DDL), a company with two topical dermatological products on the market and an international marketing platform. A further placing of £5.35 million was executed to complete this transaction. As a result, current cash is estimated to be north of £6 million.
While Abasol still awaits a regulatory nod from the MHRA, both Sabarep(TM) and Vampex(TM) have advanced to late stage Phase II development which should begin in the near term. YRK are also paving the way for clinical trials on both of these in the US.
York indicated that it is in advanced discussions with a number of parties for the licensing of Abasol in various regions and globally. It also indicated that while it had expressions of interest to sign prior to approval in the UK, it leans towards awaiting Abasol approval so as to extract more of the potential value. Management expressed confidence particularly in:
- the upcoming approval of Abasol;
- a high value deal with third parties on Abasol for skin applications;
- its ability to move closer to self-financing based on revenues from DDL, upfront payments from putative partners and royalty payments.
Objective's view:
The absence so far of pro forma DDL financials inevitably compromises the process of quantifying the outlook. We believe that YRK will fill that information gap in due course. Until then, and given the significance of DDL, we are able to make qualitative judgements.
The programme delays arose from a combination of factors: the longer approval process for Abasol and the delayed entry of both Sabarep(TM) and Vampex(TM) into the latter stages of Phase II clinical testing. The latter delays were caused by the additional time it took to develop novel formulations for both pipeline components so that their ability to reach their therapeutic target was optimised.
Clearly the programme delays are likely to have had a knock-on effect on the ultimate timing of revenue generation. However, the additional testing and the validation of the novel formulations which caused the delays should provide greater confidence in those revenue streams. In the meantime the delays have also resulted in operating costs significantly below our expectations.
The quantitative impact of the DDL acquisition should become apparent as pro forma data become available. However it is qualitatively apparent that the impact will include the positive effects of the native DDL revenue stream and the synergy benefits with YRK’s own products. Against that will be set the additional number of shares issued in the course of the year during which YRK raised £13.5m
