Positive early-stage trial results, hitherto enthusiastic regulators and the promise of commercial partnerships mean nothing to a biotech company if its lead drug fails its final phase trial. Faron Pharmaceuticals (FARN) learnt this the hard way. The failure of its Acute Respiratory Distress Syndrome (ARDS) treatment, Traumakine, in a pivotal trial knocked 85 per cent off the share price in just one day.
It’s a painful blow for investors who have contributed £25m in cash in the past year to support the pre-launch activity of the drug. The failed trial increased research and development costs by €9.1m (£8m), bringing the annual outlay to €19.1m, feeding through to an operating loss of €20.7m, against €9.7m in the prior year.
But the heavy financial commitment may not be in vain over the long haul. Traumakine is being assessed in ARDS patients in Japan, while management thinks it also has potential in other types of medical emergencies which currently don’t have treatments. Meanwhile, the group’s second drug, Clevegen, is set to move into human studies in the second half of this year, supported by the £5m fundraising completed last March.
| FARON PHARMACEUTICALS (FARN) | ||||
| ORD PRICE: | 142p | MARKET VALUE: | £44m | |
| TOUCH: | 137-143p | 12-MONTH HIGH: | 890p | LOW: 65p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 15.3ȼ | NET CASH: | €9.3m | |
| Year to 31 Dec | Turnover (€'000) | Pre-tax profit (€m) | Earnings per share (ȼ) | Dividend per share (p) |
| 2013* | 200 | -1.5 | na | na |
| 2014* | 906 | -1.4 | -0.09 | nil |
| 2015 | 520 | -6.1 | -0.30 | nil |
| 2016 | 952 | -10.1 | -0.42 | nil |
| 2017 | nil | -21.1 | -0.76 | nil |
| % change | - | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Pre-IPO figures | ||||
