FREE

Realm Therapeutics plc: Moving to the timelines

Realm Therapeutics (RLM) reports alongside FY16 financial results that its clinical pipeline is advancing to plan. RLM also confirms that both of its lead candidates - PR022, a novel high concentration formulation of hypochlorous acid (HOCl) to treat Atopic Dermatitis (AD) and PR013 to treat Allergic Conjunctivitis (AC) - will move into Phase II studies in 2017. Consequently, top line data readouts for both candidates is anticipated during H118.
The novel topical treatments aim to provide efficacious and safer alternatives to standard treatments in both indications providing significant commercial potential. The year end 2016 cash position of $21m provides funding to cover the first Phase II study in each indication.
RLM has provided an update on the development timelines for its lead programmes confirming that following IND submission to the FDA, PR022 a potential immunomodulatory treatment for AD, is set to enter Phase IIa studies in H217, leading to an anticipated top line data readout in H118. Meanwhile, IND submission for PR013, a topical treatment for AC, is expected in Q317 subsequently leading to a Phase II study start in Q417. The timelines are in line with our estimates which could lead to eventual launch of PR013 in 2020 and of PR022 in 2021.
Financial highlights of FY16 included a widening of R&D expenditure which rose to $5m from $1.8m in FY15 (on a continuing operations basis) as development activities advanced. Overall operating expenses increased to $8m from $6.2m, driven by R&D investments, and led to a net loss of $0.5m, including the impact of the gain on the sale of the supermarket retail business. The end of year cash position stood at $21m, higher than our forecast of $19m mainly resulting from the timing of payment of costs related to the supermarket retail business shifting to 2017. We maintain our estimate that RLM has sufficient funding, based on end of December 2016 cash, to carry out Phase II trials for PR022 and PR013 and that it would need to raise $15-20m to complete the Phase II programme.
We reiterate our stance that the current market capitalisation ascribes negligible value to the pipeline, even though there is existing clinical validation of products with the same active.
Our sum of the parts DCF valuation of RLM is £40m or 80p per share, with our assumptions outlined in our initiation note. Once RLM initiates Phase II studies for both candidates, assuming it raises funding to complete the Phase II program, then our valuation would increase to £112m, net of Phase II trial costs and cash.