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Is There A Rabbit To Come Out Of A Hat?

|About: Benitec Biopharma Limited (BNTC)
Summary

Half Yearly Report has a number of messages.

More capital required.

Time for new Chairman to show what he is made of.

There is no doubt that Benitec’s (BNTC) latest Half Yearly Report is sobering reading and the mood of tomorrow’s conference call may be sombre. So let us deal with some of the negativity and move on.

First, the company now has less than US$10m in the bank. This is not sufficient to fund the company’s stated objective of having two programs in the clinic by the end of 2018. Additional capital will be required, and soon.

Second, two of its five pipeline programs are now effectively mothballed.

Third, its out-licensed programs have been devastated. The agreement with uniQure regarding Huntington’s disease has been terminated. Spark are no longer pursuing the ddRNAi technology they inherited with the acquisition of Genable and the CSL purchase of Calimmune has left the HIV program in limbo.

So, where does this leave the company?

There is no doubt that it is in a precarious position, but such is the lot of a biotech company. Benitec has been in this situation in the past and pulled through, and it can do so again.

For a start, the company management is continuing to demonstrate that it delivers on its commitments. A commitment was made to start a clinical trial for BB-401, the antisense treatment for head and neck cancer, in Q1 2018. The trial has now been registered and final approval (the timeframe for which is beyond Benitec’s control) is all that prevents the dosing of the first patient. So, it would seem that this commitment is on track. Also, the trial seems to have been scaled back, perhaps to save costs. Last November, the company was anticipating enrolling up to sixty patients but is seems that the number will be more like thirty. This action may also shorten the time before primary trial data is available thus speeding up the availability of price sensitive news.

Now that two programs have been mothballed, all available funds will be channelled into the programs that are closest to producing in-human results. Having very limited capital, this is a sound business scenario. Furthermore, the remaining programs have a much lower risk profile than previous pipeline products. They all use non-systemic delivery. BB-401 has had success in previous clinical trials and BB-301, for oculopharyngeal muscular dystrophy, has been granted Orphan Drug status both in Europe and the US. 

While these things are important, they are not yet rabbits and so more is needed if further commitments are to be met. Enter the new Chairman, Dr Jerel Banks. Before joining Benitec’s board, he was Chief Investment Officer for Nant Capital. If Benitec is to raise the additional funds that it needs, it has to tap into the US capital market and, for the first time, Benitec now has a Board that should be able navigate its way through the market obstacles. This will be Dr Banks’s first test as Chairman, and being associated with such a high profile company such as Nant, I am sure that he will not want to fall at the first hurdle.

So, Dr Banks, show us what you have got and produce a deal that will benefit all shareholders. Pull the rabbit out of the hat.

Disclosure: I am/we are long BNTC.

Additional disclosure: This article is not intended to be investment advice. Readers should do their own research.