Join our community of smart investors

4D Pharma and the burden of proof

An ambitious range of trials and studies have raised the group's costs significantly
April 24, 2018

Small-cap and Aim pharma developers can come unstuck through any number of variables, but valuations rest on assumptions linked to the addressable market for their products, the perceived chance of clinical success, and the likely capital allocation needed to achieve it.

IC TIP: Sell at 127.5p

So, even though 4D Pharma (DDDD) can point to an upcoming Phase II trial for Blautix, its treatment for irritable bowel syndrome, the completion of the Phase I study of Thetanix, a clinical programme in paediatric Crohn’s Disease, together with completion of the first clinical trial of the MicroDx diagnostic platform, the shares have still lost 62 per cent of their value over the past 12 months. The market isn’t anticipating near-term commercial success.

In fairness, the biotherapeutics specialist makes no secret of the scale of its task, noting that it is not only trying to launch a novel drug, but a completely new method of treating illness. Considering US regulators approve an average of just 31 drugs every year, 4D's chance of success is currently not high. 

4D PHARMA (DDDD)   
ORD PRICE:128pMARKET VALUE:£84m
TOUCH:125-131p12-MONTH HIGH:467pLOW: 114p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:107p*NET CASH:£50m
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013nil-1.1nana
2014nil-2.4-4.8nil
2015nil10.1-12.6nil
2016nil-11.7-15.2nil
2017nil-24.0-31.4nil
% change----
Ex-div:na   
Payment:na   
*Includes intangible assets of £14.7m, or 22p a share