SP Angel . Morning View. China $344bn stimulus to help economy
Vox Markets
SP Angel Morning View
12:27, 27th March 2020

SP Angel . Morning View . Friday 27 03 20

China $344bn stimulus to help economy

CLICK FOR PDF

 

MiFID II exempt information – see disclaimer below     

Anglo American (AAL LN) – Covid19 mitigation measures

Arkle Resources* (ARK LN) 0.7p, Mkt Cap £1m – Conditional fundraising

Chaarat Gold* (CGH LN) - BUY – 44p – Operations update in the light of the COVID-19 outbreak

Scotgold Resources* (SGZ LN) - BUY – Cononish development update

From our Healthcare team:

Evox Therapeutics strikes collaboration with Takeda 

Feedback plc (FDBK.L): Bleepa® platform as a potential coronavirus support tool

Diurnal (DNL.L): US licencing agreement

 

Production cuts in Peru, South Africa and elsewhere has potential to starve processors and manufacturers

  • Many mines are being forced to slow or even stop production as governments move to limit the spread of the Coronavirus
  • Mines in Peru and South Africa are more often closely associated with the communities that have grown up around them
  • In other cases mines which are relatively self-sufficient are able to limit the contact of their personnel through self-imposed isolation

Peru – state of emergency and night time curfew to slow Coronavirus spread

  • Lower copper and other metals prices are going to hit the Peru economy as the central bank cuts interest rates to zero
  • Suspension of operations at many mines will also decimate exports and taxes and will likely lead to recession
  • The government is carrying relatively low debt levels for the region which may help with the recovery

 

AIM Regulation introduces temporary measures to help AIM companies "navigate some of the challenges arising from COVID-19".

In a rare relaxation of some of the stringent rules on the AIM market the regulators have relaxed a certain rules as summarised below:

  • Where an AIM company  requires more time than might usually be the case to make a compliant announcement (for example, due to unavailability of staff or professional advisers or restricted access to information) , the company can approach AIM Regulation through its nominated adviser to discuss whether a temporary suspension is required. It will be necessary for the company to explain fully why a suspension is appropriate: the decision to suspend is at the discretion of AIM Regulation and, if granted, will be for a limited period of time to enable the company to make a fully compliant announcement.
  • Currently, once an AIM company's shares have been suspended for a period of 6 months its admission to AIM will be cancelled. AIM Regulation recognises that in the current circumstances logistical issues may mean that further time is needed to resolve the reason for suspension. Accordingly, for any AIM company that has been suspended between 30 September 2019 and 1 July 2020, the 6 month period will be extended to 12 months.
  • The general requirement for a nominated adviser to make a site visit  and meet the directors before taking on a new nomad client has been temporarily suspended provided alternative measures  are used (such as virtual meetings). Once it becomes practicable to do so, the new nomads should undertake a site visit.
  • Under the AIM Rules, an AIM company has 6 months after the end of its financial year to publish its annual audited accounts. An AIM company, through its nominated adviser, is now able to apply to AIM Regulation for a 3 month extension to the reporting deadline. This extension will be  available to companies with financial year-ends between 30 September 2019 and 30 June 2020.
  • AIM will continue to monitor the potential impact of COVID-19 on AIM companies and will provide further guidance as necessary.

 

Dow Jones Industrials

 

+6.38%

at

22,552

Nikkei 225

 

+3.88%

at

19,389

HK Hang Seng

 

+0.10%

at

23,375

Shanghai Composite

 

+0.26%

at

2,772

 

Economics

China implementing $344bn to help economy 

  • The money already spend includes $141bn in tax reductions, as well as liquidity released through targeted tools. 
  • Data from China today showed profits from Chinese industrial firms fell to their lowest in a decade in the first two months of 2020. 
  • Profits in the period dropped 38.3% from a year earlier to 410bn yuan ($58.15bn). 
  • Only four out of the 41 industries surveyed saw profit increases, two of which were non-ferrous metals and oil  + gas exploitation (NBS). 

 

G20 leaders to inject $5tr into global economy to help fight coronavirus 

  • The G20 pledged on Thursday to inject over $5tr into the global economy to limit job and income losses. 
  • The group also pledged to ensure the flow of vital medical supplies, and to resolve supply chain disruptions. 
  • G20 leaders also asked the IMF and the world bank to 'support countries in need using all instruments to the fullest extent'. 

 

Stimulus funding relating to the Coronavirus (Updates in bold, figures converted to US dollars)

G20 nations pledge to inject $5tr into global economy

  • $2tn US fiscal package approved by Congress
  • $1,000bn - IMF available
  • $963bn (€750bn) ECB scraps limits on sovereign bond purchases. + targeted loans to companies at an interest rate of -0.75%
  • ECB legal decision on the Pandemic Emergency Purchase Programme ‘PEPP’. The ECB may target shorter maturities in the hope that PEPP remains temporary.
  • The 33% issuer limit will not apply to emergency asset purchases.
  • No more limits to ECB QE!
  • $825bn (€756bn) Germany – Bundestag approved €156bn in extra borrowing and ~€600bn in emergency funds
  • $700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE is to buy Treasuries and mortgage-backed securities. The program in two parts $500bn + $200bn  
  • $344bn - China stimulus
  • $78bn (C$107bn) - Canada
  • $17.4bn Japan +  + Y300bn of inflation-linked bonds,
  • $400bn (£330bn) UK - Government-backed loan scheme. New business interruption loan scheme up to £5m with no interest. Will add whatever is required in COVID-bill + $242bn (£200bn) UK QE from Bank of England.
  • $39m – UK (£30bn) stimulus + $29bn (£20bn) – UK No business rates plus £25,000 cash grants for shops, pubs, clubs in hospitality sector inc. $5bn (£3.5bn)
  • $387bn (€304bn) – France - loan guarantees for French business inc. $50bn (€45bn) + €4bn for startups, + France to also pay half wages for employees in affected firms
  • $200bn (€200bn) – Spain
  • $127.2bn China - China stimulus was $586bn in 2009 to rescue itself and the global economy. This time it is simply lowering lending rates slightly and made $77bn of new loan capacity at banks,
  • $48bn Australia inc. fresh AU$66bn,
  • US$38.6bn - Singapore
  • $22.6bn - India
  • $15.4bn – Hong Kong relief package
  • $13.7bn South Korea, $12bn World Bank, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,
  • The world was slow to recover from the 2008 GFC due to a lack of stimulus allowing China to get ahead
  • This time the US and UK are likely to stimulate their economies to a far greater extent than seen in the GFC
  • $8.34tr – TOTAL stimulus offered to-date vs G20 GFC stimulus of ~$2 trillion or 1.4% of global GDP (ILO, EU, IILS)
  • >10tr expected if using the $7.4tr estimated by The Economist

 

India and Bangladesh close factories amid coronavirus lockdown

  • Factories are closing across India Bangladesh as the coronavirus spreads.
  • Demand is also falling in the US and Europe as consumers stay away from shops in the Lockdown.
  • Government orders to close factories to slows the spread of the virus have forced Foxconn while auto suppliers MRF and Maxxis are also suspended (Reuters).
  • Western buyers which have been looking outside China for components and apparel since the China lockdown are now forced to resource in China as it reopens.
  • China is restricting entry visas again as they report most new cases of Coronavirus are being brought in by foreigners now the epicentre of the pandemic is in the West
  • Bangladesh reports $2.4bn worth of ready-made garment order cancelations affecting 738 factoring (Anadolu Agency​).

 

US Manufacturers look to continue operating through the Coronavirus

  • Manufacturing has not been hit as hard as services businesses which are crippled in the lockdown and have sacked millions of staff in the US
  • US manufacturers are appealing to the President to maintain production albeit at reduced levels through the crisis
  • China, the world’s largest importer of ores, concentrates and metals, is restarting factories requiring the import of new material
  • Many manufacturers will be able to use the slowdown to reorganise operations and retool for new products such as Electric Vehicles
  • We expect new stimulus to resurrect vehicle scrappage schemes and other incentives to restart economic growth

 

US - Record number of American's file for unemployment 

  • Nearly 3.3 million registered to claim jobless benefits last week, nearly five times more than the previous record of 695,000 set in 1982. 
  • The sharp rise comes as restaurants, bars, hotels close among other industry, in an attempt to slow the spread of the virus. 
  • The figures are nearly five times higher than the worst point of the 2008 financial crisis, and places such as Illinois saw weekly jobless claims increase by 10 times.

 

Global debt crisis potential

  • Last week saw liquidity evaporate in western credit markets causing a near rerun of the Global Financial Crisis
  • Policymakers moved quickly in the US, UK and ECB to avert a crisis sparked by the sudden withdrawal of funds and participants in credit markets
  • High margins on leveraged money in exceptional volatility caused the unwinding of many trades causing markets to spiral lower
  • While policymakers may have averted a debt crisis for now in the west, Latin America, Africa and some parts of Asia may fare less well with significant potential for one or more regional debt crises if economies do not return to work within the next few months.
  • A combined Asian Crisis, Latin American debt crisis and African debt crisis might require more radical and innovative policy response.

 

Clearing banks report losses on trades as ABN Amro takes $200m hit from failure of single client

  • ABN Amro reported a $200m hit on the clearing of a trade with a single client (FT)
  • This sort of loss might not previously have been separately reported being simply absorbed by the bank some years ago.
  • Clearing houses are now required to fess up when they post significant client losses unsettling the market further as traders speculate on the source of the loss
  • In this case the client was leveraged, was not able to meet margin calls was ‘stopped out’ in the volatility seen over the past three weeks. 
  • While the loss may equate to around 10% of ABN profits it is seen as a cost of Clearing where significant profits are to be made.
  • We expect to see a number of leveraged hedge funds collapse in the recent and sudden volatility with rumours that three US hedge funds may be close to the edge.

 

UK – Derbyshire police use drones to monitor that walkers maintain the 2m social distancing rule. Not sure how they deliver the fine though. Big Brother is in Derbyshire!

 

Currencies

US$1.1028/eur vs 1.0928/eur yesterday.  Yen 108.80/$ vs 110.40/$.  SAr 17.517/$ vs 17.496/$.  $1.218/gbp vs $1.191/gbp.  0.607/aud vs 0.595/aud.  CNY 7.088/$ vs 7.091/$.

 

Commodity News

Gold US$1,622/oz vs US$1,603/oz yesterday - South Africa - Rand Refinery stops shipping gold to London

  • Africa's only gold refinery has stopped shipping gold to London due to the lack of commercial flights, adding further disruption to the bullion market. 
  • The refinery is already running at reduced capacity due to the virus outbreak, and further disruption is likely to have wider implications across the continent. 
  • Gold miners may scale back production if material cannot be refined, due to the security risk of storing mined gold. 

Buy 'the currency of last resort' - Goldman Sachs

  • Goldman Sachs told clients to buy gold this week, as the metal is at an inflection point and could hit $1,800/oz over the next 12 months (FT). 
  • Gold was hit by the mass sell-off earlier this month, as investors booked profits from gold to cover losses from other assets. 
  • Since then, gold has recouped its losses, sitting at over $1,600/oz compared to $1,460/oz last week. 
  • Goldman are recommending its clients buy gold as it acts as a hedge against currency debasement, all kinds of market volatility and also inflation. 
  • Gold is set for its best week in 11 years, so far gaining 8.2% this week, supported by weak US unemployment data and unprecedented economic stimulus measures (Reuters).

   Gold ETFs 89.1moz vs US$88.9moz yesterday

Platinum US$747/oz vs US$726/oz yesterday

Palladium US$2,391/oz vs US$2,268/oz yesterday

Silver US$14.48/oz vs US$14.32/oz yesterday

            

Base metals:    

Copper US$ 4,841/t vs US$4,782/t yesterday - Shanghai warehouse copper inventories fall 3.5% as China returns to work

 

Aluminium US$ 1,548/t vs US$1,534/t yesterday

Nickel US$ 11,290/t vs US$11,195/t yesterday

Zinc US$ 1,896/t vs US$1,822/t yesterday - Chinese zinc inventories in China fall sharply this week 

  • Zinc inventories across China decreased 20,700 tonnes to 307,000 tonnes this week, marking a second straight week of decline (SMM). 
  • Demand for zinc has picked up across China, with the biggest decline seen in Tianjin as large-scale galvanising plants made large purchases. 

Lead US$ 1,720/t vs US$1,643/t yesterday

Tin US$ 14,200/t vs US$13,855/t yesterday

            

Energy:            

Oil US$26.0/bbl vs US$26.6/bbl yesterday – 

  • Oil prices are trading down again this morning as Saudi Arabia fails to relent to pressure from the US to reduce oversupply slated for next month
  • With the oil price war between Saudi Arabia and Russia showing no signs of relenting, analysts are now warning that the standoff could extend into 2021 • Saudi Aramco announced earlier this month that it would ramp up oil production to 12.3MMbopd in April, a record amount, after Russia refused to cut production. Moscow has also vowed to increase its output.
  • Saudi policy now appears to revolve around inflicting pain on both OPEC and non-OPEC producers over the short term, with a long-term view to returning to its former role as the swing producer and price setter • The market collapse has led to a cut of tens of billions of dollars in capex (see below) and is threatening to force as many as 70% of US shale drillers into bankruptcy

Natural Gas US$1.629/mmbtu vs US$1.672/mmbtu yesterday

  • Natural gas prices edged lower following yesterday’s inventory report, however projections are that demand is set
  • to rise slightly in regional hubs driven by gains in the power sector
  • According to the EIA, total US consumption of natural gas rose by 3% compared with the previous report week
  • Natural gas consumed for power generation climbed by 8% week on week in the low natural gas price
  • environment
  • Industrial sector consumption increased by 1% during the week, whilst in the residential and commercial sectors,
  • consumption declined overall by 1%
  • Natural gas exports to Mexico also increased by 1%

Uranium US$26.60/lb vs US$25.90/lb yesterday

            

Bulk:    

Iron ore 62% Fe spot (cfr Tianjin) US$84.2/t vs US$84.8/t - China iron ore port stocks fall for seventh consecutive week

  • Iron ore port stocks continued to fall this week due to recovering demand and a decline in arrivals. 
  • Last week, 11.75mt of iron ore arrived at major Chinese ports, down 260,000 tonnes compared to the week prior (SMM).
  • Major iron ore producers such as South Africa, Malaysia and India have entered lockdown and despite increases from Australia and Brazil, Chinese ports are seeing less deliveries of iron ore.
  • As of today, iron ore average deliveries across major ports totalled 107.77mt, down 1.57mt from a week ago, and 27.98mt lower than a year ago. 
  • Despite the fall in stocks, Chinese iron ore prices posted its first weekly loss in four, falling 1.5% on the Dalian Exchange (Reuters). 
  • Iron ore on the Dalian has risen 16% from near three-year lows seen in early February. 

Chinese steel rebar 25mm US$527.9/t vs US$528.4/t - Steelmakers cute European output due to drop in demand

  • Tata Steel and Liberty steel have joined other steel groups in cutting European production as automakers and other industry suspend production. 
  • The lack of demand has led to Tata cutting steel production at both its facilities in both the UK and the Netherlands, however blast furnaces will continue to operate. 
  • Liberty steel have announced that steel plants in the UK, Poland and Romania are still open, however production is to be adjusted to satisfy the drop in demand. 
  • Liberty has temporarily suspended work at its three British businesses that produce components for the auto industry. 

Thermal coal (1st year forward cif ARA) US$57.8/t vs US$58.1/t

Coking coal swap Australia FOB US$148.0/t vs US$149.0/t

            

Other:   

Cobalt LME 3m US$30,000/t vs US$30,000/t

NdPr Rare Earth Oxide (China) US$38,092/t vs US$38,355/t - Chinese rare earth magnet exports fall 4.2% in first two months of 2020

  • China's magnet shipments to all countries were 4,646 tonnes in January and February, down from 4,852 tonnes a year earlier (Reuters). 
  • Exports to the US and Germany were up 13% to 641 tonnes and 14% to 912 tonnes respectively. 

Lithium carbonate 99% (China) US$5,643/t vs US$5,640/t

Ferro Vanadium 80% FOB (China) US$27.0/kg vs US$27.5/kg – vanadium prices fell further yesterday despite news of Bushveld closing its vanadium mine in SA

  • The closure along with all other South African mines and smelters is likely to cause a significant shortage of primary vanadium globally with only Largo still running in Brazil.
  • Chinese secondary production of vanadium which has been curtailed in recent years due to China’s Green Shield policies has been cut further in recent months due to the Coronavirus disrupting logistical supply chains and closing furnaces
  • Ferro-vanadium fell -4.1% to $11-11.4/lb in Pittsburgh, US (FastmarketsMB)
  • Ferro-vanadium fell -1.8% to $26-28/kgV in China          
  • Ferro-vanadium fell -2.3% to $22.4 – 24/kgV in Western Europe 

Antimony Trioxide 99.5% EU (China) US$5.1/kg vs US$5.1/kg

Tungsten APT European US$240-245/mtu vs US$240-245/mtu

Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t

Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t

 

Battery News

Tesla reduce workforce at Gigafactory 1

  • Tesla have will send home 75% of staff working at their Nevada Gigafactory this week. (Reuters)
  • Two employees at Tesla have tested positive for the coronavirus and have been self-isolating it was revealed in an internal company email. Tesla did not say at which site or in which team the affected workers were from.
  • Having temporarily postponed production at their Fremont factory as a result of the lockdown in the San Francisco Bay area and repurposed their New York site for ventilator production Tesla stated the Nevada site would remain open for production.   
  • The Nevada facility produces electric motors and battery packs for Model 3 sedans. (Seeking Alpha)
  • Earlier this week Panasonic had suspended production at the Nevada Gigafactory. (Reno Gazette Journal)

 

Penso Power to add two more giant batteries in the UK

  • Penso Power Chairmen Richard Thwaites has revealed the Company is ‘3 months away from being investment ready’ at its next 100MW storage site, with a third in the pipeline. (Recharge)
  • The Company’s current site, consisting of two 50MW ternary lithium batteries is located in Wiltshire, South West England and is the largest battery storage development in Europe. (Energy Storage News)
  • Earlier this week Penso Power announced that the Wiltshire sit will add another 50MW of capacity having signed an offtake agreement with Shell. (Business Green)
  • The Chairmen suggested that Penso’s vision is to tap into the rapidly expanding requirement for storage as output from variable renewables flows into the grid.
  • The storage facility in Wiltshire, called the Minety Project is due to be installed by autumn 2020 using batteries from Samsung and CATL. (Recharge)

 

Aceleron develops a new recyclable and reusable EV battery

  • Clean technology company Aceleron has teamed up with electric quadbike manufacturer Eco Charger to install their long life batteries into the latter’s all-terrain vehicles to demonstrate the efficiency and benefits of recycled batteries. (Business Green)
  • The new lithium-ion battery which can be repaired, upgraded, reused or recycled will enable Aceleron to repurpose over 90% of Eco Charger’s batteries through a buy-back scheme. (Air quality news)
  • The new batteries will make use of management software that enables remote performance monitoring to enhance battery life. Aceleron said that regular servicing could extend battery life up to 8x, a life of up to 24yrs which would also cut battery waste.
  • The circular economy technology can be applied to a range of energy storage products including EVs.  
  • The lithium-ion batteries, manufactured in the UK would be half the size of a lead acid battery but pack four times the power and are much lighter.

 

Company News

Anglo American (AAL LN) 1,359.6p, Mkt cap £18.3bn – Covid19 mitigation measures

  • Anglo American reports that, with the welfare of its personnel and suppliers a first priority, it is implementing the South African Government’s requirements for a 21 day cessation of operations across its operations ʺin order to help curb the spread of COVID-19 in South Africa.ʺ
  • Following consultation with the relevant authorities in detail, the Kumba iron ore mines at Sishen and Kolomela ʺcontinue to operate with a c.50% level of workforceʺ, while, the platinum mines at Mogalkwena and Mototolo are to operate with a reduced workforce while the underground platinum mines at Amandelbult, Modikwa and Kroondal are to be put on care and maintenance along with the Waterval and Mortimer smelters.
  • De Beers Venetia mine is to continue with a 75% reducedd workforce while the company’s coal operations continue with a 50-70% reduced workforce.
  • Elsewhere, the company has previously announced the withdrawal of the majority of its workforce from the Quellaveco project in Peru.
  • In the UK, is pausing the development at the recently acquired Woodsmith mine in Yorkshire in accordance with the measures implemented by the British Government.
  • The company also confirms that ʺProduction from Anglo American's major operations in other countries has not been impacted materially to date and we are taking all appropriate preventative measures to reduce the probability of the virus spreading, including by reducing the density of people on our sites.ʺ

 

Arkle Resources* (ARK LN) 0.7p, Mkt Cap £1m – Conditional fundraising

  • Arkle Resources reports that it has undertaken the conditional placing of 50.4m new shares at a price of 0.5p/share to raise £252,000. The shares are being placed with existing shareholders.
  • ʺAs the Placing Price is lower than the current nominal value of the Company’s existing ordinary shares (“Existing Ordinary Shares”), being €0.01 (1 euro cent) each, the Company will shortly be convening an extraordinary general meeting (“EGM”), to be held on 22 April 2020, at which it will be proposed that each of the Existing Ordinary Shares be sub-divided into one New Ordinary Share with a nominal value of €0.0025 and one Deferred Share with a nominal value of €0.0075 (the “Share Capital Reorganisation”).ʺ
  • Directors James Finn, David Cockbill and Patrick Cullen have subscribed for 2.5m, 2.5m and 2m shares respectively.

*SP Angel is Nomad and Joint-Broker to Arkle Resources

 

Chaarat Gold* (CGH LN) 27p, Mkt Cap £126m – Operations update in the light of the COVID-19 outbreak

BUY – 44p

  • At Kapan, operations continue as normal.
  • Supply chains and shipments of products are continuing to operate with little disruption as quarantine measures are not applied to commercial freight.
  • Lower oil prices and a depreciation of the AMD against the USD (~-3% from last year) are expected to help operating costs.
  • Local costs account for 84% of total Kapan expenses.
  • At Tulkubash, construction works are expected to slow down as the government declared a state of emergency with all local employees having been sent home.
  • The delay in the mobilisation of the workforce will see first gold now moved by six months to Q3/22..
  • New commissioning target will have a negligible capital cost affect.
  • Weaker oil prices and a depreciation in the Kyrgyz SOM (-12.5% from last year) is expected to benefit project economics.
  • Project funding is being postponed as well amid the outbreak of the virus and is now targeted for completion in H2/20.
  • On $17m loan refinancing, the Company is in advanced discussions with the holder of the debt that matures on 31 Mar/20.
  • The team is planning to update the market on negotiations once final agreement is in place.

Conclusion: Kapan operations continue as normal supplying precious and base metals concentrates with supply chains reported to be little affected by quarantine measures enacted globally. Tulkubash commissioning schedule is being revised with first gold now expected in Q3/22 and funding completion due in H2/20. While base metal prices pulled back on the back of weaker demand driven by a drop in economic activity, higher gold prices, cheaper oil and depreciation in local currencies should act as headwinds for Kapan and Tulkubash.

*SP Angel acts as Broker to Chaarat Gold

 

Scotgold Resources* (SGZ LN) 49p, Mkt Cap £25m – Cononish development update

BUY

  • First gold production will be delayed beyond May/20 on the back of bad weather conditions experienced during the January-February period and COVID-19 measures to contain the spread of the virus.
  • The Company reported that construction works were affected by one of the wettest starts to the year on record as the weather exceeded all planned allowances.
  • On COVID-19, the team is now closing down its mining operations at Cononish placing the site on care and maintenance making sure guidelines are followed and staff is safe with operations to be resumed as soon as possible.
  • “Going forward, we are currently uncertain as to the impact the pandemic will have on our supply chain and our specialist contractor's ability to mobilise for the building construction and plant assembly activities,” the announcement read.
  • “We will continue to work with our various stakeholders in this regard to mitigate all such risks and to provide greater clarity in due course on what the ultimate impact on schedule and costs might be,” the Company added.

Conclusion: The duration of COVID-19 containment period is hard to predict at this point with the team placing the Cononish on care and maintenance while remaining ready to restart construction works as fast as possible. The Company benefits from a supportive shareholder base with its main lender being one of its major shareholders while it has also recently collected ~£0.9m in proceeds from exercised options. Cononish high grade gold project economics remain highly attractive with high gold prices, weak currency and low oil prices lending further support to the investment case.

*SP Angel acts as Nomad and Broker to Scotgold Resources

 

 

 

SP Angel Healthcare team - Vadim Alexandre, Liam Gascoigne-Cohen

Evox Therapeutics strikes collaboration with Takeda 

·      Oxford-based rare disease biotech, Evox Therapeutics (private) struck a collaboration agreement with Japanese multinational, Takeda Pharmaceuticals (TAK.NY).

·      The collaboration aims to generate up to five novel protein replacement and mRNA therapies based on DeliverEX™, Evox’s exosome modification platform. 

·      As part of the agreement, Evox is eligible for c.$44m in upfront, near-term milestone payments and research funding.

·      Evox could receive a total of c.$882m in bio-dollars if Takeda commercialises all five candidates. 

·      Evox will be responsible for R&D up until IND-enabling studies and manufacturing up to and including Phase 1 clinical trials and will be reimbursed for manufacturing costs.

An impressive agreement for a preclinical stage company with Takeda looking to expand its rare disease pipeline after it acquired rare-disease specialist Shire Pharma in 2019 for $62bn. The agreement should extend Evox’s cash runway into late 2022 and support the Group’s plans to initiate first-in-man trials for a urea cycle disorder programme in 2021. Exosomes represent a novel treatment methodology based on a cellular communication system. Cells can be modified to produce exosomes which encapsulate therapeutic doses and deliver them to a target site. On AIM, ReNeuron (RENE.L) is developing an exosome platform based on its CTX cell line.

Company Update

Feedback plc (FDBK.L): Bleepa® platform as a potential coronavirus support tool

Share price:1.03; Market Capitalisation: £5.6m

·      Feedback plc, a medical imaging specialist, announced it will provide its Bleepa® platform, as a tool to support medical staff in response to the coronavirus.

·      Bleepa® is a secure image-based communication platform which provides access to clinical grade medical images.

·      Feedback and Pennine NHS Trust have paused a pilot study focused on specific clinical workflow applications of Bleepa and are evaluating options for a wider rollout to support the NHS Trust’s response to COVID-19.

With the COVID-19 pandemic putting significant pressure on medical staff, the availability of digital healthcare solutions, such as Bleepa®, should enable clinicians to continue with patient care whilst working remotely. Medical imaging is an important diagnostic and monitoring tool and Bleepa® can provide a remote working tool for medical image review, case discussion and diagnosis whilst operating in self-isolation. 

Diurnal (DNL.L): US licencing agreement

Share price: 30.1p; Market Capitalisation: £26.5m

·      Diurnal, the developer of therapies for rare hormonal diseases, struck a US licencing agreement with Eton Pharmaceuticals (ETON.NQ) regarding its Alkindi® treatment.

·      As part of the exclusive agreement, Diurnal will receive an upfront payment totalling $5m, of which $3.5m is in cash and the remainder in Eton shares.

·      Diurnal is responsible for obtaining US registration for Alkindi® Sprinkle with Eton responsible for commercialisation activities, such as pricing and reimbursement.

·      The Group is eligible for a further $2.5m cash milestone payment upon initial US sales, double-digit royalty payments and sales-based milestone payments of up to $45m.

·      Alkindi® Sprinkle is a hormone replacement therapy for adrenal insufficiency, an orphan disease, in patients under 17 years old.

Earlier this year, Diurnal had its New Drug Application (NDA) for Alkindi® Sprinkle accepted by the US FDA earlier this year and expects an approval decision and grant of Orphan Drug Status in Q420. Alkindi® has already been approved in Europe and posted H1-20 revenues of £1.1m (H1-19: £0.2m).A recent £11.2m placing has provided the Group with capital to commercialise its second asset, Chronocort® for the treatment for adult and adolescent patients with the rare condition congenital adrenal hyperplasia (CAH), larger addressable patient population than adrenal insufficiency. In December the Group submitted a Market Authorisation Application (MAA) to the EMA, the European regulator, for Chronocort® with a decision expected in Q121.

*One of the authoring analysts has an interest in Diurnal shares

 

Analysts

John Meyer – 0203 470 0490

Simon Beardsmore – 0203 470 0484

Sergey Raevskiy – 0203 470 0474 

 

Sales

Richard Parlons – 0203 470 0472 

Abigail Wayne – 0203 470 0534 

Rob Rees – 0203 470 0535 

 

SP Angel                                                             

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

 

Sources of commodity prices

 

Gold, Platinum, Palladium, Silver

BGNL (Bloomberg Generic Composite rate, London)

Gold ETFs, Steel

Bloomberg

Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt

LME

Oil Brent

ICE

Natural Gas, Uranium, Iron Ore

NYMEX

Thermal Coal

Bloomberg OTC Composite

Coking Coal

SSY

RRE

Steelhome

Lithium Carbonate, Ferro Vanadium, Antimony

Asian Metal

Tungsten

Metal Bulletin

 

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II - Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

Comments
info
Login or register to post comments

Recent Articles
Watchlist