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Bird Construction Inc. Announces 2020 Second Quarter Financial Results

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LISTING: TORONTO STOCK EXCHANGE
SYMBOL: BDT

MISSISSAUGA, ON, Aug. 11, 2020 /CNW/ – 

HIGHLIGHTS:

  • During the second quarter of 2020, the Company recorded net income of $5.6 million on construction revenue of $282.8 million compared with a net income of $1.0 million on $315.4 million of construction revenue in 2019. Basic and diluted earnings per share in the second quarter of 2020 and 2019 was $0.13 and $0.02, respectively. Volume was slightly lower, however gross profit improved significantly year-over-year driven by growth in the industrial work program. The year-over-year increase in second quarter net income is primarily attributable to the mix of the higher margin industrial work program. The second quarter of 2020 included approximately $1.3 million of pre-tax acquisition costs related to the due diligence and agreement to acquire Stuart Olson Inc. (“SOX”) that was announced subsequent to quarter end.
  • Adjusted Earnings and Adjusted Earnings Per Share in the second quarter of 2020 were $6.6 million and $0.15, respectively, compared with Adjusted Earnings and Adjusted Earnings Per Share in the second quarter of 2019 of $1.0 million and $0.02, respectively. The year-over-year increase in second quarter Adjusted Earnings is reflective of the improvement in earnings attributable to the mix of higher margin industrial work program.
  • Adjusted EBITDA and Adjusted EBITDA Margin in the second quarter of 2020 were $12.3 million and 4.36%, respectively. Adjusted EBITDA increased $6.9 million from the Adjusted EBITDA of $5.4 million in the second quarter of 2019. Adjusted EBITDA Margin increased 263 basis points from the Adjusted EBITDA margin of 1.73% recorded in the second quarter of 2019. The year-over-year improvement was driven by an increase in gross profit due to the revenue mix, and the impact of increased costs on a certain contract incurred in 2019 that did not recur in 2020.
  • During the first half of 2020, the Company recorded net income of $6.7 million on construction revenue of $604.4 million compared with a net loss of $5.5 million on $577.2 million of construction revenue in 2019. Basic and diluted earnings per share in the first half of 2020 and 2019 were $0.16 and a loss of $0.13, respectively. The 4.7% year-over-year increase in revenue was driven by growth in the industrial work program, while the commercial and institutional work program was effectively flat. The year-over-year increase in net income is primarily attributable to the mix of the higher margin industrial work program. The first half of 2019 was negatively impacted by a Public Private Partnership (“PPP”) project that incurred additional cost due to design related scope growth and acceleration expenses. There were substantial changes to the scope of the project requested by the client that are in commercial negotiation. This PPP project achieved substantial performance in the first quarter of 2020.
  • Adjusted Earnings and Adjusted Earnings Per Share in the first half of 2020 were $7.7 million and $0.18, respectively, compared with an Adjusted Loss of $5.5 million and Adjusted Loss Per Share of $0.13 in the first half of 2019. The year-over-year increase in second quarter net income is reflective of the improvement in earnings attributable to the mix of the higher margin industrial work program and the previously described PPP project.
  • Adjusted EBITDA year-to-date at June 30, 2020 was $19.9 million compared to $2.3 million in the comparable period in 2019. Adjusted EBITDA Margin during the first half of 2020 was 3.29% and increased 289 basis points from the 0.40% recorded in the first half of 2019. The year-over-year improvement was driven by an increase in gross profit due to the revenue mix, and the impact of increased costs on a certain contract incurred in 2019 that did not recur in 2020.
  • The COVID-19 pandemic has added uncertainty to the construction industry as each provincial government has responded with different measures to address the threat to public health. While certain preventative measures have eased in various provinces to varying degrees, the duration continues to be unknown and the corresponding impacts to our workforce, supply chain and project sites are key variables that have uncertainty as a result. The financial results of second quarter 2020 were impacted by the COVID-19 pandemic in April and early May when the Company experienced temporary project shutdowns and reduced productivity on project sites. The health and safety of employees is paramount and, as a result of the pandemic, the Company has increased health and safety initiatives such as physical distancing and added additional measures to normal safety protocols. The situation remains extremely fluid; however, the Company responded to the challenges presented in the first half of 2020 and is well-positioned to respond to fluctuating scenarios in the near term.
  • In 2020, the Company secured $702.4 million of new contract awards and change orders and executed $604.4 million of construction revenues. Backlog of $1,645.4 million at June 30, 2020, increased 19.3% from Backlog of $1,379.7 million at June 30, 2019. Backlog increased by $98.0 million, or 6.3% from the $1,547.4 million of Backlog recorded at December 31, 2019 despite some awards that were expected in the first half of 2020 being delayed as a result of the COVID-19 pandemic.
  • In the first six months of 2020, cash and cash equivalents decreased $8.9 million, before the effects of foreign exchange, to $171.5 million from $180.3 million at the end of 2019. Most of the changes in cash and equivalents during the period relate to changes in the non-cash net current asset/liability position which can fluctuate significantly in the normal course of business. During the second quarter, the Company repaid $16.3 million that it had drawn in the first quarter from one of its committed bank facilities for working capital purposes.
  • During the second quarter the Company was awarded several new projects and achieved substantial completion of certain contracts:
    • Bird was awarded the Eric Hamber Secondary School Replacement Project in Vancouver, British Columbia for approximately $92 million, under a design-build contract.
    • The Company was awarded a construction management services contract for 185 Enfield Place Project in Mississauga, Ontario for approximately $107 million for GWL Realty Advisors (“GWLRA”).
    • The Company was awarded a stipulated sum contract for the Louvre Residence at Century Park Project (“Louvre”) in Edmonton, Alberta for approximately $57 million under development by Procura Real Estate Services Ltd.
    • The Company signed a contract for construction at a liquefied natural gas (“LNG”) Liquefaction Export Terminal Facility located in northwestern British Columbia. The contract is for the construction of concrete foundations and paving inside the battery limits of the LNG trains process area and is one of the largest concrete foundation packages ever awarded to Bird. The contract will start immediately and continue into 2022.
    • The Company achieved substantial completion for the Niagara Falls Entertainment Centre in the first half of 2020. Designed and constructed to LEED V4 standards, the new 5,000 seat facility features performance space with multiple stage configurations.
  • The Board has declared an eligible dividend of $0.0325 per common share for each of July, August, September and October 2020.
  • Subsequent to quarter end, the Company announced the sale of Bird Capital Limited’s 20 per cent interest in the P3 concessions responsible for 18 schools and nine childcare facilities in Saskatchewan to its project partner, Concert Infrastructure. Developed as the Saskatchewan Joint-Use Schools Project I (SJUSP I) and Saskatchewan Joint-Use Schools Project II (SJUSP II), the projects made up the largest school construction program in the history of the province at the time of construction.
  • Subsequent to quarter end, on July 29, 2020, the Company entered into a definitive arrangement agreement under which the Company will acquire all of the outstanding common shares of Stuart Olson Inc., pursuant to an arrangement under the Business Corporations Act (Alberta) for aggregate consideration of $96.5 million. The aggregate consideration of $96.5 million will consist of $30.0 million cash and $66.5 million of the common shares of Bird, based on the five-day volume weighted average trading price of the common shares of Bird ending July 17, 2020, of $6.32 per share. The proposed transaction, which was unanimously approved by the Boards of Directors of both companies, is expected to close early in the fourth quarter of 2020, subject to obtaining the required approvals of the Court of Queen’s Bench of Alberta, the Competition Bureau, the SOX shareholders, secured bank lenders and unsecured convertible debenture holders of Stuart Olson Inc., and other customary closing conditions.

“Our Company has shown resilience in the second quarter with its seventh sequential quarter where our trailing twelve month Adjusted EBITDA has improved.  The credit has to go to our field staff that safely worked through the height of the pandemic and ensured that our Company delivered its projects,” said Teri McKibbon, President & CEO.  “Our near record Backlog and Pending Backlog will provide ample work at good margins to help the Company be considerably more profitable in 2020 than recent years despite a projected decline in revenue year-over-year.”






Financial Results





(in thousands of Canadian dollars, except per share amounts)







Three months ended June 30, 


Six months ended June 30, 



2020


2019


2020


2019










Construction revenue

$

282,766

$

315,428


604,412

$

577,205










Net income (loss)

$

5,624

$

1,001


6,747

$

(5,465)










Basic and diluted earnings (loss) per share

$

0.13

$

0.02


0.16

$

(0.13)










Adjusted earnings (loss) per share (1)

$

0.15

$

0.02


0.18

$

(0.13)










Adjusted EBITDA (1)

$

    12,328


5,447


19,890


2,314










Cash flows from operations before changes in
non-cash working capital (2)

$

8,990

$

6,512


16,049

$

825

  • In the first six months, cash flows from operations before changes in non-cash working capital of $16.0 million increased $15.2 million year-over-year from the $0.8  million cash generated in 2019 primarily due to the $12.2 million improvement in net income, a $4.6 million higher non-cash addback for income tax expense year-over-year, a $1.9 million higher non-cash addback of finance and other costs,  partially offset by $2.2 million higher non-cash reduction for income from equity accounted investments.

Bird Construction Inc. also announced that its Board of Directors has approved monthly eligible dividends for the following months in the amount of $0.0325 per common share to be paid as follows:

i) 

The August dividend of $0.0325 per share will be paid on September 18, 2020 to the Shareholders of record as of the close of business on August 31, 2020.

ii)

The September dividend of $0.0325 per share will be paid on October 20, 2020 to the Shareholders of record as of the close of business on September 30, 2020.

iii) 

The October dividend of $0.0325 per share will be paid on November 20, 2020 to the Shareholders of record as of the close of business on October 31, 2020.

Bird will host an investor webcast to discuss the quarterly results on Wednesday, August 12, 2020 at 10:00 a.m. ET, to discuss the quarterly results. Analysts and investors may connect to the webcast via URL at http://services.choruscall.ca/links/bird20200812.html. They may also dial 1-855-328-1925 for audio only or to enter the question queue,  attendees are asked to be on the line 10 minutes prior to the start of the call. The presentation can also be found on our website at https://www.bird.ca/investors/publications#investor-presentations.

Related financial documents will be filed and available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

Non-GAAP Measures
Adjusted Earnings, Adjusted Earnings Per Share, Adjusted EBITDA and Adjusted EBITDA Margin have no standardized meaning under IFRS and are considered non-GAAP measures. Therefore, these measures may not be comparable with similar measures presented by other companies. Management uses Adjusted Earnings and Adjusted EBITDA to assess the operating performance of its business. Management believes that investors and analysts use these measures, as they may provide predictive value to assess the ongoing operations of the business and a more consistent comparison between financial reporting periods.

Adjusted Earnings 




Three months ended June 30,



Six months ended June 30,

(in thousands of Canadian dollars, except per share amounts)


2020


2019



2020


2019












Net income (loss)


$

5,624

$

1,001


$

6,747

$

(5,465)

Add:   Acquisition and Integration costs



1,276




1,276


Add:   Restructuring costs (1)







Income tax effect of the above costs



(334)




(334)













Adjusted Earnings (Loss)


$

6,566

$

1,001


$

7,689

$

(5,465)












Adjusted Earnings (Loss) Per Share (2)



0.15


0.02



0.18


(0.13)












Notes











(1)Restructuring costs as defined in accordance with IFRS.










(2)Calculated as Adjusted Earnings divided by basic weighted average shares.








Adjusted EBITDA 




Three months ended June 30,


Six months ended June 30,

(in thousands of Canadian dollars, except percentage amounts)



2020


2019


2020


2019











Net income (loss)


$

5,624

$

1,001

$

6,747

$

(5,465)

Add:   Income tax expense (recovery)



2,261


480


2,679


(1,915)

Add:   Depreciation and amortization 



3,287


3,559


7,155


6,778

Add:   Finance and other costs



1,549


1,316


4,643


2,768

Less:  Finance income



(325)


(551)


(1,091)


(1,129)

Add:   Loss/(gain) on sale of property and equipment



(1,344)


(413)


(1,519)


(648)

Add:   Restructuring and severance costs (1)




55



1,925

Add:   Acquisition and Integration costs



1,276



1,276


Add:   Restructuring costs (2)
















Adjusted EBITDA


$

12,328

$

5,447

$

19,890

$

2,314

Adjusted EBITDA Margin (3)



4.36%


1.73%


3.29%


0.40%











Notes:










(1)Restructuring and severance costs did not meet the criteria to be classified under restructuring costs as defined in accordance with IFRS.

(2)Restructuring costs as defined in accordance with IFRS.

(3)Calculated as Adjusted EBITDA divided by revenue.

Forward Looking Information

This news release contains forward-looking statements and information (“forward-looking statements”) within the meaning of applicable Canadian securities laws. The forward-looking statements contained in this news release are based on the expectations, estimates and projections of management of Bird as of the date of this news release unless otherwise stated. The use of any of the words “believe”, “expect”, “anticipate”, “contemplate”, “target”, “plan”, “intends”, “continue”, “may”, “will”, “should” and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this news release contains forward-looking statements concerning: the timing and anticipated receipt of required lender, debenture holder, shareholder, court, regulatory, stock exchange and other third party approvals for the transaction; and the ability of Stuart Olson and Bird to satisfy the other conditions to, and to complete, the transaction.

In respect of the forward-looking statements concerning the completion of the transaction, the timing and anticipated receipt of required third party approvals and the anticipated timing for completion of the transaction, Bird and Stuart Olson have provided such in reliance on certain assumptions that they believe are reasonable at this time, including assumptions as to the time required to prepare and mail shareholder meeting materials, including the Circular; the ability of the parties to receive, in a timely manner, the necessary lender, debenture holder, shareholder, court, regulatory, stock exchange and other third party approvals, including but not limited to the receipt of applicable competition approvals; and the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Arrangement Agreement.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the industries in which Bird operates in general such as: operational risks, industry and inherent project delivery risks; delays or changes in plans with respect to growth projects or capital expenditures; costs and expenses; health, safety and environmental risks; commodity price, interest rate and exchange rate fluctuations; compliance with environmental laws risks; competition, ethics and reputational risks; ability to access sufficient capital from internal and external sources; global pandemics; repayment of credit facility; collection of recognized revenue; performance bonds and contract security; potential for non-payment and credit risk and ongoing financing availability; regional concentration; regulations; dependence on the public sector; client concentration; labour matters; loss of key management; ability to hire and retain qualified and capable personnel; subcontractor performance; unanticipated shutdowns, work stoppages, strikes and lockouts; maintaining safe worksites; cyber security risks; litigation risk; corporate guarantees and letters of credit; volatility of market trading; failure of clients to obtain required permits and licenses; payment of dividends; economy and cyclicality; Public Private Partnerships project risk; design risks; completion and performance guarantees/design-build risks; ability to secure work; estimating costs and schedules/assessing contract risks; quality assurance and quality control; accuracy of cost to complete estimates; insurance risk; adjustments and cancellations of backlog; joint venture risk; internal and disclosure controls; Public Private Partnerships equity investments; and changes in legislation, including but not limited to tax laws and environmental regulations. Risks and uncertainties inherent in the nature of the transaction include the failure of Stuart Olson or Bird to obtain, as applicable, necessary lender, debenture holder, shareholder, court, regulatory, stock exchange and other third party approvals, or to otherwise satisfy the conditions to the transaction, in a timely manner, or at all. Failure to so obtain such approvals, or the failure of Stuart Olson or Bird to otherwise satisfy the conditions to the transaction, may result in the transaction not being completed on the proposed terms, or at all. In addition, the failure of Stuart Olson or Bird to comply with the terms of the Arrangement Agreement may result in Stuart Olson or Bird being required to pay a non-completion or other fee to the other party.

The forward-looking statements in this news release should not be interpreted as providing a full assessment or reflection of the unprecedented impacts of the recent COVID-19 pandemic (“COVID-19”) and the resulting indirect global and regional economic impacts.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of the parties, and the combined company, including any risk factors related to COVID-19, are included in reports on file with applicable securities regulatory authorities, including but not limited to; Bird’s Annual Information Form for the year ended December 31, 2019, which may be accessed on Bird’s SEDAR profile at www.sedar.com.

The forward-looking statements contained in this news release are made as of the date hereof and the parties undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.

For further information contact:
T.L. McKibbon, President & C.E.O or
W.R. Gingrich, C.F.O
Bird Construction Inc.
5700 Explorer Drive, Suite 400
Mississauga, ON, L4W 0C6
Phone: (905) 602-4122 Fax: (905) 602-1516

SOURCE Bird Construction Inc.

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RBI Has More Room for Bond Buys as India’s Banks Return Cash

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(Bloomberg) — Indian banks are returning money they borrowed from the central bank earlier this year, boosting the monetary authority’s capacity to make more direct purchases of government bonds.The Reserve Bank of India on Thursday said it would buy 100 billion rupees ($1.4 billion) of bonds from the secondary market on Sept. 24 in the first such direct purchase in six months. This marks a departure from its preference so far this year for Federal Reserve-like Operation Twists.

While direct open market operations end up adding cash to the banking system, twist operations are typically liquidity neutral as they involve simultaneous buying and selling.

Sovereign bonds gained on Friday, with the 10-year yield down 2 basis points to 6.01%.Traders said there is more scope for direct OMOs now because banks are taking the option to return about 1.25 trillion rupees they borrowed from the RBI in February and March.

These funds were borrowed when the repurchase rate was at 5.15%, making it more attractive for banks to return it now and look to borrow again at a lower rate. So far, about 989 billion rupees has been repaid in four tranches and the remaining money is expected to be repaid Friday.

This creates more space for OMOs at the same time as a run down in the RBI’s stock of Treasury bills acts as a constraint on twist operations, said Shailendra Jhingan, chief executive officer at ICICI Securities Primary Dealership Ltd. In Mumbai.

The RBI has to keep an eye on how much surplus banking liquidity it wants amid rising inflation. Consumer prices rose 6.7% in August, exceeding RBI’s upper limit of 6% for a fifth month.

The central bank has been largely trying to keep yields anchored around 6% via its Operation Twists, discreet purchases and auction signaling, traders say.“The RBI has kept banking liquidity in a surplus of 6-7 trillion rupees in the past three-four months,” said Pankaj Pathak, a fixed income fund manager at Quantum Asset Management Ltd. in Mumbai. “If it wants to maintain similar levels of liquidity, it will open up space for 1-1.5 trillion rupees of OMO.”

(Adds Friday’s bond prices, updates money banks returned to RBI)

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Futures flat after tech rout drags down Wall Street

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TipRanks

3 “Strong Buy” Healthcare Stocks With Major Catalysts Approaching

Reflecting the ultimate risk and reward, healthcare stocks are capable of delivering big returns at what feels like the drop of a hat, but investors need to be prepared for big risk, too.Unlike companies in other sectors, the survival of many healthcare players, especially when they are in the early stages, hinges on only clinical trials of their therapies or products in development and regulatory rulings, with updates on either front acting as catalysts that can send shares in either direction.So, any piece of good news can propel shares to sky-high levels. Disappointing outcomes, however, can send investors running for the hills.Given the inherently volatile nature of the space, due diligence is necessary before making investment decisions. That’s where the Wall Street pros can lend a hand, as they know the ins and outs of the industry.Bearing this in mind, we used TipRanks’ database to pinpoint healthcare stocks that have received overwhelmingly bullish support from the Street ahead of potential catalysts. Locking in on three in particular, each ticker boasts a “Strong Buy” consensus rating from the analyst community.Aquestive Therapeutics (AQST)Using its patented PharmFilm technology, Aquestive Therapeutics works to improve the delivery of approved drug active ingredients. Ahead of the fast-approaching PDUFA date for one of its products, some members of the Street think that now is the time to get in on the action.Back in February, AQST announced that the FDA had accepted the NDA for Libervant, its diazepam buccal film designed to manage refractory and repetitive seizures (ARRS; seizure clusters), and the PDUFA date had been set for September 27. The NDA was based on results from a single-dose crossover study, which demonstrated comparable systemic diazepam exposures to Diastat (a diazepam rectal gel that was used as a reference) with significantly less variability.Writing for Wedbush, 5-star analyst Liana Moussatos points out that VALTOCO, a nasal spray product developed for use in cluster seizures, got the FDA’s stamp of approval in January, with seven-year orphan drug U.S. marketing exclusivity also granted. “Of note, VALTOCO orphan drug exclusivity approval may prevent a subsequent product approval (same active moiety as well as an indication) during the exclusivity period unless the new product can demonstrate ‘clinical superiority’ to the approved products,” she explained.To this end, Moussatos remains optimistic and sees Libervant’s approval as a major potential catalyst. “Aquestive is confident that Libervant (oral) is clinically superior to the two currently approved device-driven products (rectal gel and nasal spray) and that it meets one or more attributes required by the FDA to be considered a major contribution to patient care. In our view, Libervant may expand patient choice as the first orally delivered diazepam product available to ARRS patient,” she stated.While the COVID-19 pandemic has led to many delays throughout the industry, management doesn’t expect any delays for the review of Libervant. Additionally, if approved, the company has said it’s ready for a launch, with it estimating U.S. net revenues of about $300 million at its peak.Based on the above, Moussatos keeps an Outperform (i.e. Buy) rating and $33 price target on the stock. Should her thesis play out, a potential twelve-month gain of 326% could be in the cards. (To watch Moussatos’ track record, click here)All in all, other analysts echo Moussatos’ sentiment. 3 Buys and no Holds or Sells add up to a Strong Buy consensus rating. With an average price target of $18.67, the upside potential comes in at 136%. (See AQST stock analysis on TipRanks)Eton Pharmaceuticals (ETON)Primarily focused on developing, acquiring and commercializing hospital injectable and pediatric rare disease products, Eton Pharmaceuticals wants to improve the lives of patients from all over the world. With several product candidates currently under review at the FDA, it’s no wonder Wall Street focus has zeroed in on this name.On September 16, ETON announced that its partner hadn’t received any update from the FDA regarding its decision on the review of EM-100, its eye drop product for allergic conjunctivitis. Although the candidate’s Generic Drug User Fee Act (GDUFA) target action date was September 15, H.C. Wainwright’s Raghuram Selvaraju believes approval is imminent. Should approval ultimately be granted, the 5-star analyst thinks it could drive serious upside.On top of this, Eton is awaiting a decision from the FDA for its taste-neutral sprinkle (granule) formulation of hydrocortisone (Alkindi Sprinkle), as a replacement therapy for pediatric adrenal insufficiency (AI). A PDUFA date is set for September 29, 2020.”We assign a 90% probability of regulatory approval to EM-100 and Alkindi Sprinkle […] Currently, we project total revenue of $9M for 2020—essentially unchanged vs. the previous $9.4M—and $43.9M in revenue for 2021, down somewhat from the previous $50.7M. We have accordingly revised our loss per share estimates for 2020 to $1.04 per share vs. the prior net loss of $1.28 per share, while maintaining our net loss per share projection for 2021 of $0.20. We continue to expect Eton to potentially achieve cash flow breakeven during 2H21. […] Our assumptions yield a roughly $420M firm value,” Selvaraju noted.To this end, Selvaraju maintains a Buy rating on ETON shares, along with an $18 price target. This figure suggests 141% upside potential from current levels. (To watch Selvaraju’s track record, click here)Are other analysts in agreement? They are. Only Buy ratings have been issued in the last three months, 3 to be exact. Therefore, the message is clear: ETON is a Strong Buy. Given the $15 average price target, shares could double in the next year. (See Eton stock analysis on TipRanks)Mesoblast (MESO)Last but not least we have Mesoblast, which develops therapeutics and medical devices based on its mesenchymal precursor stem cell platform. After an Oncologic Drugs Advisory Committee (ODAC) voted in favor of its therapy, several of the Street’s pros have high hopes for this healthcare company ahead of the September 30 PDUFA date.On August 13, the FDA held an AdCom meeting to discuss MESO’s biologics license application (BLA) filing for Ryoncil (remestemcel-L), which was designed as a treatment for children with steroid-refractory acute graft versus host disease (SR-aGVHD). Acute GVHD occurs in roughly half of the 30,000 patients who undergo allogeneic bone marrow transplant (BMT).At the meeting, the committee members voted 9-to-1 in support of the drug’s efficacy in a difficult indication. 5-star analyst Jason McCarthy, of Maxim Group, told clients, “This was in contrast to the briefing documents ahead of the Adcom on August 11, which stated concerns related to efficacy that resulted in MESO shares plummeting 35% at that time. Our view is that it was a premature ‘knee-jerk’ reaction to an Adcom that didn’t even happen yet. As such, Ryoncil is very much still on track and the PDUFA is next.”Looking more closely at the data, two randomized Phase 3 trials in GvHD, study 265 and study 280, were conducted by Osiris Therapeutics, which previously owned the candidate. Both studies missed their primary endpoints compared to the placebo, but study 265 “was conducted in newly-treated GvHD patients (not steroid refractory), and therefore is not entirely relevant to Ryoncil’s BLA,” according to McCarthy. As for study 280, it missed its durable complete response endpoint in the target population, but overall response at day 28 was 64% for Ryoncil and 36% for placebo.“Ultimately, these studies were not in the target population for the current BLA, and in patients that fit the criteria, a positive effect was observed,” McCarthy commented. Additionally, he points out that an aggregated dataset demonstrated a consistent response across three separate trials including study 280.Speaking to the unmet needs in this indication, in patients with severe disease, there is currently a 90% mortality rate and there are no approved therapies for pediatric steroid-refractory patients. Jakafi has been approved for patients aged 12 and older, but McCarthy believes Ryoncil compares favorably. He said, “Considering the positive safety profile of Ryoncil compared to other therapies and the unmet need in the indication, we continue to see a high likelihood of approval.”In line with his optimistic approach, McCarthy reiterated a Buy rating and $22 price target. This target conveys his confidence in MESO’s ability to climb 22% higher in the next year. (To watch McCarthy’s track record, click here)Other analysts don’t beg to differ. 5 Buys and no Holds or Sells add up to a Strong Buy consensus rating. At $21.60, the average price target implies 22% upside potential. (See Mesoblast stock analysis on TipRanks)To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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Onxeo Reports its Financial Results for the First Half of 2020 and Provides an Update on its Activities | 2020-09-17 | Press Releases

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  • The cash position of €19.6 million, which was strengthened in the first half of the year by two strategic transactions, provides financial visibility into Q1 2022
  • Patient inclusion process has started in the Phase 1b/2 REVOCAN study evaluating the effect of AsiDNA™ on resistance to niraparib and preliminary results are expected in early 2021
  • Topline results of the AsiDNA™ DRIIV-1b study in combination with chemotherapy are expected in late 2020/early 2021
  • Invus, new reference shareholder, has been coopted as a director of the Company

PARIS, Sept. 17, 2020 (GLOBE NEWSWIRE) — Onxeo S.A. (Euronext Paris, NASDAQ Copenhagen: ONXEO), (“Onxeo” or “the Company”), a clinical-stage biotechnology company specializing in the development of innovative drugs targeting tumor DNA Damage response (DDR), in particular against rare or resistant cancers, today reported its consolidated financial results for the six months ended June 30, 2020, and provided an update on its activities.

Judith Greciet, CEO of Onxeo, said:The first half of 2020 has truly been extraordinary, with a pandemic that has directly or indirectly impacted the lives of every one of us. I would like to take this opportunity to thank all of our employees who have been able to adapt to this unprecedented context and whose mobilization and team spirit have made it possible to achieve an exceptional first half of the year in terms of preclinical and clinical development as well as financial performance. We are delighted that AsiDNA™’s development is gaining momentum and that we are progressively moving closer to our strategic objectives: to finalize the DRIIV-1b study to confirm AsiDNA™’s interest in combination with DNA breakers and to demonstrate AsiDNA™’s ability to abrogate the acquired resistance of tumors to certain targeted therapies. Indeed, while the efficacy of cancer treatments is increasingly improving, resistance is a real problem in the short and medium term and delaying or even preventing its emergence represents one of the major challenges in oncology today. This is the objective of REVOCAN, a phase 1b/2 study set up with Gustave Roussy, in which AsiDNA™ is being tested in patients with relapsed ovarian cancer showing signs of acquired resistance to niraparib treatment. The patient inclusion process in this study has started and, in accordance with our road map, we expect preliminary results as early as the first quarter of 2021.

“It is also important to note that, despite the highly uncertain environment in the financial markets, we have considerably strengthened Onxeo’s financial position with two major strategic transactions. In April, we received €6 million from our US partner Acrotech in consideration for the grant of additional exclusive rights to belinostat, and in early June, we completed a €7.3 million private placement with Financière de la Montagne, our historical shareholder, and Invus, a strategic international investor. In addition to reinforcing the financial visibility until the first quarter of 2022, well beyond the expected key clinical results, this operation has brought into the capital, with a seat on the Board of Directors, a second reference investor who is able to support the company’s growth strategy over the long term.

“Thus, the impact of Covid-19 on our activities remains limited to date and we remain fully mobilized to deliver tangible results and confirm the value of our assets”.

FINANCIAL RESULTS1 OF THE 1st HALF-YEAR 2020

Revenues for the first half of 2020 amounted to 1.1 million euros and consisted mainly of direct sales of Beleodaq® under the European Controlled Access Program (NPP), transferred to the partner Acrotech Biopharma as part of the agreement signed in early April, and to royalties on sales of Beleodaq® in the United States by Acrotech, used in full to repay the bond loan from SWK Holdings. These revenues have been recognized up to the date of the agreement signed with Acrotech, which explains the decrease compared to the recurring revenues of EUR 1.4 million recorded in H1 2019.

Operating expenses amounted to EUR 5.5 million in H1 2020, a significant decrease compared to the expenses recognized in H1 2019. This change is mainly due to completion in 2019 of industrial activities for clinical trial purposes relating to AsiDNA™.

The agreement concluded with Acrotech Biopharma on April 6, 2020 was analyzed under IFRS as a disposal of belinostat-related assets. This led to the recognition of the following items in other operating income and expenses (non-current):

  • A net income of 5,686 thousand euros corresponding to the transaction price of 6,116 thousand euro less the amount of future belinostat development costs to be borne by Onxeo estimated at 430 thousand euros.
  • An expense of 2,769 thousand euros corresponding to the net carrying amount of Beleodaq®/belinostat-related R&D assets.
  • In the context of the bond loan from SWK, an income of 7,171 thousand euros corresponding to the estimated royalties still to be received from the initial license2 as of the date of signature of the new agreement with Acrotech. These royalties will be entirely allocated to the repayment of the balance of the bond loan. Although this future income is booked upfront in accordance with IFRS, the interest expense relating to the bond loan from SWK will continue to be booked on an annual basis.

After taking into account the financial result and a tax related to the transaction with Acrotech, Onxeo reported a net profit of €5 million for the first half of 2020, compared to a loss of €8.5 million in 2019.

__________________

1Limited review procedures have been performed on the interim financial statements. The review report was issued after the completion of the procedures required for the publication of the interim financial report.

2In March 2019, Acrotech acquired from Spectrum Pharmaceuticals (SPPI) the license to belinostat for certain territories, including the United States, Canada, Mexico, and India. The new agreement grants Acrotech a royalty-free license to belinostat in all other territories.

Consolidated income statement (IFRS)

In thousands of euros
06/30/2020 06/30/2019
Revenues, including:
1,082
1,703
Recurring revenues 1,076 1,425
Non-recurring revenues 6 278
Operating expenses (5,067) (8,637)
Other current operating income 34
Current operating income (3,951) (6,934)
Other non-current operating income and expenses 10,040
Share of profit (loss) of companies accounted for by the equity method (28)
Operating profit after equity method income (loss) 6,089 (6,962)
Financial result (224) (1,550)
Pre-tax income 5,065 (8,512)
Income tax (823) 2
Net income 5,042 (8,510)

CASH AND CASH EQUIVALENTS AS OF JUNE 30, 2020

At June 30, 2020, the Company had consolidated cash and cash equivalents of 19.6 million euros, compared to 5.7 million euros at December 31, 2019.

This strong increase is mainly due to the financing implemented during the six-month period through private placement and equity line, which provided Onxeo with net proceeds of EUR 10.5 million, as well as the agreement with Acrotech Biopharma for a net amount of EUR 5.1 million after payment of the share to SpePharm. These cash inflows added to the receipt of the 2019 research tax credit for an amount of 1.4 million euros and to license revenues and direct sales under the NPP program for 3 million euros have allowed the absorption of operating expenses.

On the basis of its development plan, Onxeo has sufficient financial visibility to carry out its projects beyond the next key milestones until the first quarter of 2022.

HIGHLIGHTS OF THE 1st HALF-YEAR 2020, RECENT DEVELOPMENTS AND OUTLOOK

AsiDNA™

  • In January 2020, Onxeo entered into a clinical research agreement with Gustave Roussy to conduct REVOCAN, a Phase 1b/2 clinical trial of AsiDNA™ in the treatment of relapsing ovarian cancer. This study, which is sponsored by Gustave Roussy, is designed to evaluate the effect of AsiDNA™ on acquired resistance to the PARP inhibitor niraparib (PARPi) in the maintenance treatment of relapsing second-line ovarian cancer.
  • In May 2020, the REVOCAN Phase 1b/2 study evaluating the effect of AsiDNA™ on resistance to niraparib, a PARP inhibitor, in relapsed ovarian cancer received approval from the French National Agency for the Safety of Medicines and Health Products (ANSM) and the Committee for the Protection of Persons (CPP).
  • At the AACR (American Association for Cancer Research) Annual Meeting held virtually from June 22-24, 2020, Onxeo presented the results of preclinical studies supporting the ability of AsiDNA™ to reverse PARPi resistance by preventing the regrowth of persistent cells. These results are extremely encouraging for the progress of the REVOCAN study and clearly reinforce AsiDNA™’s interest in the fight against resistance.
  • On August 25, 2020, the final results of DRIIV, dose-escalation study of AsiDNA™ via intravenous (IV) route, were published in the British Journal of Cancer. This study demonstrated the activity and optimal dose for AsiDNA™ IV in combination. Enrollment of the last two patients in the DRIIV-1b extension study, which is analyzing the combination of AsiDNA™ with chemotherapy in patients with advanced solid tumors, is ongoing and topline results are expected in late 2020/early 2021.
  • On September 3, 2020, Onxeo received a Notice of Intent from the U.S. Patent and Trademark Office for a new patent strengthening the protection of AsiDNA™ and its related compounds by systemic administration in the treatment of triple negative breast cancer and chemo-resistant lung cancer, alone or in combination with chemotherapy, radiotherapy or other agents that damage tumor DNA. It will be valid in the United States until 2037.

OX401

  • In late January 2020, Onxeo presented to the scientific community OX401, a next-generation PARP agonist sourced from its proprietary decoy agonist platform, platON™, at the PARP & DDR Inhibitors Summit 2020 in Boston, USA.
  • In February 2020, Onxeo announced the acceptance of a poster presentation of OX401 at the ESMO-TAT 2020 congress, which is dedicated to research on targeted cancer therapies.
  • In June 2020, Onxeo preclinically confirmed the profile of OX401. Through its action on PARP and the activation of an anti-tumor immune response via the cGAS-STING pathway, OX401 demonstrated in vivo a higher potency of activity than current PARP inhibitors, as evidenced by complete control of tumor growth.
  • The next key preclinical milestone will be the study combining OX401 with immune checkpoint inhibitors. For this phase, Onxeo benefits from the expertise accumulated during the development of AsiDNA™ and has thus obtained in a few months an optimized compound, which is ready to enter the final stages of preclinical validation. These translational studies will allow Onxeo to best prepare the compound for entry into the clinic, which could take place within 18 to 24 months.

FINANCING & CORPORATE

  • In February 2020, Onxeo announced that it had reached an out-of-court settlement agreement with SpePharm and SpeBio. As part of this agreement, Onxeo sold its shares in SpeBio to SpePharm at their nominal value, thereby transferring its share of the joint venture’s cash to SpePharm for an amount of approximately 3.5 million euros. In addition, Onxeo is required to pay 15 to 20% of the net amounts to be received under future commercial agreements relating to Onxeo’s R&D assets, for a total cumulative amount of 6 million euros within 4 years.
  • On April 6, 2020, Onxeo entered into exclusive agreements with Acrotech Biopharma LLC to extend Acrotech’s rights to belinostat to all countries not covered by the previous agreement between Onxeo and Acrotech. In consideration, Onxeo received a payment of $6.6 million (6 million euros) from Acrotech, of which $0.9 million is allocated to the aforementioned settlement agreement. Onxeo will continue to receive from Acrotech the royalties and milestone payments relating to belinostat in the United States for an amount equivalent to the outstanding loan and interest due to SWK Holding. Beyond that, belinostat will no longer generate additional revenues and is therefore no longer considered a strategic product for the Company.
  • On May 27, 2020, the investment bank Bryan Garnier & Co initiated Onxeo’s coverage with a “buy” recommendation.
  • On June 9, 2020, Onxeo completed a private placement for a total amount of approximately €7.3 million with a new investor, Invus Public Equities LP, and its historical shareholder, Financière de la Montagne.
  • On July 29, 2020, the Company announced the transfer of the listing of Onxeo shares from the regulated market Euronext Paris (compartment C) to the multilateral trading facility Euronext Growth Paris. This transfer is intended to enable Onxeo to be listed on a market which is more appropriate to the Company’s size and its market capitalization and will be effective at the earliest on October 31, 2020 .

GOVERNANCE

  • At its meeting on September 17, 2020, the Board of Directors of Onxeo co-opted Mr. Julien Miara, representing Invus Public Equities LP, as a director of the Company, to replace Mr. Jean-Pierre Kinet who resigned. The Board warmly thanks Mr. Kinet for his significant contribution to its work since 2016.

    This cooptation of Mr. Miara follows his appointment as observer to the Board of Directors on June 2, 2020 and will be submitted to the shareholders for approval at the Company’s next ordinary general meeting. The Board of Directors is currently composed of 7 members, 4 men and 3 women, including 4 independent members.

COVID-19 PANDEMIC CONTEXT

  • As of March 12, 2020, the Company has implemented appropriate measures to ensure the safety of its employees and the continuity of its operations within the framework of the rules imposed by French health and government authorities. At the date of publication of this press release, the impact of the pandemic is limited on the Company’s planned or ongoing activities. The situation is being closely monitored by Onxeo’s management and will be reassessed and adjusted as the health situation evolves.

The 2020 half-yearly financial report will be available to the public on the Company’s website.

About Onxeo

Onxeo (Euronext Paris, NASDAQ Copenhagen: ONXEO) is a clinical-stage biotechnology company developing innovative oncology drugs targeting tumor DNA-binding functions through unique mechanisms of action in the sought-after field of DNA Damage Response (DDR). The Company is focused on bringing early-stage first-in-class or disruptive compounds from translational research to clinical proof-of-concept, a value-creating inflection point appealing to potential partners.

platON™ is Onxeo’s proprietary chemistry platform of oligonucleotides acting as decoy agonists, which generates new innovative compounds and broaden the Company’s product pipeline.

AsiDNA™, the first compound from platON™, is a first-in-class, highly differentiated DNA Damage Response (DDR) inhibitor based on a decoy and agonist mechanism acting upstream of multiple DDR pathways. Translational research has highlighted the distinctive properties of AsiDNA™, notably its ability to abrogate tumor resistance to PARP inhibitors regardless of the genetic mutation status. AsiDNA™ has also shown a strong synergy with other tumor DNA-damaging agents such as chemotherapy and PARP inhibitors. The DRIIV-1 (DNA Repair Inhibitor-administered IntraVenously) phase I study has evaluated AsiDNA™ by systemic administration (IV) in advanced solid tumors and confirmed the active doses as well as a favorable human safety profile. The ongoing DRIIV-1b extension study is assessing the safety and efficacy of a 600 mg dose of AsiDNA™ in combination with carboplatin and then with carboplatin and paclitaxel, in patients with solid tumors who are eligible for such treatments. Preliminary results from the first cohort with carboplatin alone showed good tolerability, stabilization of the disease and an increase in the duration of treatment compared to previous treatments.

OX401 is a new drug candidate from platON™, optimized to be a next-generation PARP inhibitor acting on both the DNA Damage Response and the activation of immune response, without inducing resistance. OX401 is undergoing preclinical proof-of-concept studies, alone and in combination with immunotherapies.

For further information, please visitwww.onxeo.com.

Forward looking statements

This communication expressly or implicitly contains certain forward-looking statements concerning Onxeo and its business. Such statements involve certain known and unknown risks, uncertainties and other factors, which could cause the actual results, financial condition, performance or achievements of Onxeo to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Onxeo is providing this communication as of this date and does not undertake to update any forward-looking statements contained herein as a result of new information, future events or otherwise. For a discussion of risks and uncertainties which could cause actual results, financial condition, performance or achievements of Onxeo to differ from those contained in the forward-looking statements, please refer to chapter 3 “Risk Factors” (“Facteurs de Risque“) of the Company’s universal registration document filed with the Autorité des marchés financiers on April 27, 2020 under number D.20-0362, which is available on the websites of the Autorité des marchés financiers (www.amf-france.org) and the Company (www.onxeo.com).

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