Faron Pharmaceuticals Oy

 
Faron Pharmaceuticals Oy (LON: FARN) is a Turku, Finland-based clinical-stage biopharmaceutical company that aims to tackle life-threatening medical conditions, such as Acute Respiratory Distress Syndrome (ARDS) and pancreatic cancer through its two drug development programs, Traumakine® and Clevegen®. The company is listed on the AIM of the London Stock Exchange, and its development pipeline is based on endothelial receptors concerned with the regulation of immune responses.

On 20th March 2020, the company will announce the financial statement results for the full year 2019.

Recent News
On 11th December 2019, Faron Pharmaceuticals announced MATINS -trial update. The new data from the trails is to be presented at ESMO Immuno-Oncology Congress in Geneva, Switzerland. The phase I/II of the trail shows the efficacy, safety and tolerability of the Clevegen. 

On 28th November 2019, the company announced that the US FDA (Food and Drug Administration) had endorsed the group's IND (Investigational New Drug) application for Clevegen®, enabling the development of its continuing MATINS trial into the United States.

Financial Highlights – H1 Financial Year 2019 (30^th June 2019, EUR, thousand)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2019, the company was successful in raising around €4.5 million from current and new investors, directors and employees. In the first half of 2019, the company was not able to generate any revenue. For the six months ended 30 June 2019, the group incurred a loss from operations of €6.3 million as compared to a loss of €14.0 million in H1 FY18. In H1 FY19, the research and development expenditure decreased by €6.7 million to €5.0 million as compared to €11.7 million in H1 FY18. The administrative expenses reduced by €1.0 million to €1.4 million in the first half of 2019 against the €2.4 million in the first half of 2018. The Administrative expenses and R&D expenses, both have factored IFRS charge driven by the allocation of options. For the current period, the group’s loss after taxation was stated at €6.4 million as compared to a loss of €14.1 million in H1 FY18. Basic loss per share stood at €0.17 in H1 FY19 from a loss €0.45 in H1 FY18. On 30th June 2019, the group’s total cash and cash equivalents were reported at €2.9 million.

Share Price Performance

Daily Chart as of  December 13^th, 2019, before the market close (Source: Thomson Reuters)

Faron Pharmaceuticals Oy shares were trading at GBX 245.55 at the time of writing before the market close (at 8:53 AM GMT) on 13^th December 2019 and were down by 1.78% versus the previous day closing price. Stock's 52 weeks High is GBX 320.50 and Low is GBX 50.04.The company’s stock has given investors 17.60 per cent of a negative return in the last week.

Conclusion
As a clinical-stage drug development company, Faron has not yet reported any revenue and its programme and costs have been funded through fundraising. There is also the risk that the main products of the company may not be successful in the clinical trials or may come under the regulatory lens, hindering the profitable monetisation of the product. While the company has a cash preservation program to reduce the cash burn and preserve existing resources, it has incurred significant losses since its inception and expects to incur losses for the foreseeable future.

Presently, the company is trading near the 52-week High, raising doubts at its upside potential at the current price level. The company’s trailing 12 months P/CF, P/E, and EV/EBITDA multiple are negative as compared to the trailing 12 months industry multiple. The company witnessed wide fluctuations in the Biotechnology price in the international market and expect the same in the coming future, which might have an adverse effect on the company’s financial performance.

On the basis of above rationale, we recommend investors to keep a “Watch” on the stock at the current price of GBX 257.50 (as on 13^th December 2019, before the market close at 8:00 AM GMT), while we look for any upcoming catalysts.

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