US interest rate prospects moderating

FTSE-100
FTSE-100 Chart (1 Year)

FTSE-100 1 Year Chart

Today’s edition features:

  • Motif Bio (MTFB.L)
  • Tissue Regenix Group (TRX.L)

Visit Company News »


US interest rate prospects moderating

"The big news from the US on Friday was the large drop in the May Non-farm payroll number to a gain of just 138,000 against the widely-expected 185,000. At 4.3%, the unemployment rate hit a 16-year low but the underlying message was of a slowing economy. Consequently, the outlook for the trend in future interest rates has turned softer. However, despite this dip towards a more typical jobs growth rate, it is still widely expected that at the US Federal Reserve’s next FOMC meeting on the 14th June will produce another 25-basis point rise. A question mark is raised though over the outlook for the rest of the year, particularly September, for any other rate rises. Inevitably, the US bond market yields eased in line with the implied lower rate trajectory while the Dollar also lost ground.

President Trump’s decision to drop out of the Paris Accord on Climate Change left the price of crude oil below $50 pb on the prospect of increased US oil production. The President argues that the terms agreed by the Obama Administration discriminate against the US and it should be expected that Trump will attempt to negotiate a better deal at some stage. This is to be hoped for since some of the thinking behind the decision to leave looks a little flawed.

On the UK General Election trail, the tragic terrorist attacks on Saturday night might have been expected to provide political ammunition to opposition parties around the adequacy of current security measures and the level of investment. Whilst the facts may not be allowed to interfere with a good sound bite against the Tory Party, it does appear that the police rapid-response units were well-prepared, with the attackers being dealt with just 8 minutes after the first alert went out. After yet another temporary suspension of electioneering, there are now just three more days of campaigning left to the parties until Polling Day. As might be assumed, weekend press comment highlights the likely risk to Sterling from a Labour Party victory or a Labour-SNP alliance, as we indicated last week."
– Mike Franklin, Chief Investment Strategist



Markets

Europe
The FTSE-100 finished Friday’s session 0.05% higher at 7,547.63 whilst the FTSE AIM All-Share index was up 0.10% at 991.80. In continental Europe, the CAC-40 finished up 0.47% at 5,343.41 whilst the DAX was 1.25% higher at 12,822.90.

Wall Street
In New York on Friday night, the Dow Jones rose 0.29% to 21,206.29, the S&P-500 firmed 0.37% to 2,439.07 and the Nasdaq gained 0.94% to stand at 6,305.8.

Asia
In Asian markets this morning, the Nikkei 225 had fallen about 0.0% to 20,176.99, while the Hang Seng slipped 0.33% to 25,838.21.

Oil
In early trade today, WTI crude was up 1.36% to $48.31/bbl and Brent was up 1.36% to $50.63/bbl.


Headlines

London attack: PM’s condemnation of tech firms criticised
Prime Minister Theresa May has been warned that her promise to tighten regulation on tech firms after the London attacks will not work. Mrs May said areas of the internet must be closed because tech giants provided a “safe space” for terrorist ideology. But the Open Rights Group said social media firms were not the problem, while an expert in radicalisation branded her criticism “intellectually lazy”. Twitter, Facebook and Google said they were working hard to fight extremism. Google (which owns Youtube), Facebook (which owns WhatsApp) and Twitter were among tech companies already facing pressure to tackle extremist content – pressure that intensified on Sunday. Mrs May said: “We cannot allow this ideology the safe space it needs to breed. “Yet that is precisely what the internet, and the big companies… provide.”

Source: BBC News



Company news

Motif Bio (MTFB.L, 33.75p) – Speculative Buy
Motif Bio, the AIM and NASDAQ-quoted clinical stage biopharmaceutical company specialising in developing novel antibiotics, on Friday announced that it has successfully raised £20.0m (US$25.8m) by way of an issue of 66,666,667 new ordinary shares to both new and existing investors at the placing price of 30p. The placing shares will represent 34% of the issued ordinary share capital of the Company prior to the placing. The Placing Price represents a discount of 11.7% to the trailing ten day VWAP of 34p and a discount of 21.1% to the Company’s mid-market closing price as at 1 June 2017. The placing remains conditional, inter alia, on the passing of certain resolutions by shareholders of the Company at a general meeting expected to be held on 22 June 2017. Upon approval, application is expected to be made for the new placing shares to be admitted to trading on AIM at 8.00 am on 23 June 2017. The new placing shares will rank pari passu with the Company’s existing Ordinary Shares. Motif Bio’s CEO, Graham Lumsden, commented “This financing has been well received and gives us the resources to complete the REVIVE-2 Phase 3 clinical trial and file a New Drug Application and Marketing Authorisation Application in the first half of 2018 to achieve marketing approval of iclaprim in the US and Europe. I am delighted by the support shown by our existing shareholders and also welcome a number of new institutional holders to the register”.

Our view: Clouds are rapidly disappearing! Motif Bio has now secured necessary funding to complete its Phase III REVIVE-2 study for treatment of acute bacterial skin and skin structure infections (‘ABSSSI’). Subject to shareholder approval, the total raise of £20.0m (US$25.8m), before expenses, will take Motif to submission of NDA (FDA) and a MAA (EMA) for its novel antibiotic candidate, iclaprim, in ABSSSI, while also provide funding for general corporate purposes. Iclaprim appears capable of creating considerable value for Motif shareholders, as seen back in 18 April 2017, where the Group announced a positive Phase III Topline Results for iclaprim in REVIVE-1 for treatment of ABSSSI. Motif is currently working on REVIVE-2, its second Phase III ABSSSI trial, which more than 80% of the total patients has now enrolled. The Board is increasingly confident as REVIVE-2 uses an identical protocol to REVIVE-1 at different trial centres. Topline Data for REVIVE-2 is expected in the H2 2017. Assuming positive results for REVIVE-2, together with REVIVE-1, this will comprise sufficient regulatory data to complete NDA submissions to both the FDA and EMA early in H1 2018. Unlike current standard of care antibiotics, in clinical trials to date, nephrotoxicity has not been observed with iclaprim and dosage adjustment has not been required in renally impaired patients. This is important, given that it is estimated that up to 26% of the 3.6 million ABSSSI patients hospitalised annually in the US have kidney disease. This suggests very significant prospective demand for this novel antibiotic. Moreover, preparations are now completed for INSPIRE, the Phase III trial designed to study the safety and efficacy of iclaprim in patients with hospital acquired bacterial pneumonia (‘HABP’), including ventilator associated bacterial pneumonia (VABP), infections often caused by MRSA (methicillin resistant Staphylococcus aureus). Beaufort considers this platform antibiotic could achieve a value in excess of US$1bn following successful commercialisation of just the molecule’s first two indications. Now that funding gap being fulfilled, with Motif’s market capitalisation of just £65m against its most obvious comparative, Paratek Pharmaceuticals’ US$567m, the giant valuation gap with its peer could rapidly close. Beaufort reiterate its Speculative Buy rating with a target price of 110p. Motif Bio is one of Beaufort’s Tips for 2017.

REQUEST A CALL FROM A BROKER REGARDING THIS RECOMMENDATION

Tissue Regenix Group (TRX.L, 15.50p) – Hold
Tissue Regenix Group, the regenerative medical devices company, on Friday announced its annual results for the 11 months ended 31 December 2016 (‘FY2016’). The period comprised of 11 months due to change in accounting reference period to a December year end. During the period, revenue advanced by +77% to £1.4m, against the comparative period (FY2015), primarily driven by +64% increase in sale of DermaPure to £1.3m, together with first revenue contribution from its controlled German Joint Venture, GBM-V. An increased investment in sales and marketing has led to an operational loss of £11.1m (FY2015: 10.2m), result in loss for the year of £9.9m (FY2015: £9.5m) and basic loss per share of 1.29p against 1.27p a year ago. Cash and cash equivalents at the period-end stood at £8.2m (January 2016: £19.9m) and the Group has no debt. On the operational front, for DermaPure, the continued focus on adoption and advocacy was rewarded with further Medicare approvals (93% covered) and the Group signed 3 US Group Purchasing Organisations (‘GPO’) Agreements including top 2 GPO’s in US, Premier and Vizient, securing 75% coverage of GPO hospital beds in US. For OrthoPure XT, the Group has submitted initial clinical data for CE mark approval and signed first EU distribution agreement with a commercial roll-out targeted during 2017. Tissue Regenix’s CEO, Antony Odell, commented “We believe that the progress we have made across each of our business units and the exciting organic growth opportunities afforded by our broad development pipeline of innovative products and the recently signed GPO contracts means that we are well placed for future growth”.

Our view: Tissue Regenix made good operational progress in FY2016. In the US, its wound care business has recorded a revenue growth of +64% and successfully secured expanded Medicare coverage of 93% (for outpatient use) of Medicare beneficiaries, while signing of 3 US GPO Agreements means over 1 million (c.75%) hospital beds in the US is now accessible to the Group’s DermaPure. Additionally, Tissue Regenix was added to the Federal Supply Schedule. In the EU, application for CE mark has been submitted for OrthoPure XT (orthopaedic – knee injuries) that the Group is now targeting launch and commercialisation during this year. All positive progress, so only possible cause that triggered c.-5% fall in its share price on Friday was due to its accelerated cash burn (c.£1m per month), which led to a fall in cash balance to just £5.4m at the end of 30 April 2017, which indicates that the Group is only funded through the end of Q3 2017. The Group continue to expect similar level of cash burn for the following 12 months and noted that “further funding is envisaged as the Group seeks to commercialise and develop its products”. This has led to an expectation that there will be equity fund raise before the end of Q3 2017 for continue operations. The Group has demonstrated its ability to successfully commercialise its products, whilst also identifying further market entry opportunities. At this moment, however, given anticipated near-term fund raise, we believe there will be limited positive share price movement before this is satisfied. Beaufort therefore downgrade Tissue Regenix from Speculative Buy rating to a Hold in anticipation to seek opportunity at the placing.

REQUEST A CALL FROM A BROKER REGARDING THIS RECOMMENDATION

To read Beaufort’s full research archive click here

Compiled by:
Barry Gibb, Kazunaga Senga, Sheldon Modeland, Charles Long & Ben Maitland
(t) +44 (0) 207 382 8384
(e) info@beaufortsecurities.com


Weekly diary


Click here to see all this week’s planned corporate and economic announcements.


Recommendations
During the three months to end-May 2017, the number of stocks on which Beaufort Securities published recommendations was 196, and the recommendations were as follows: Buy – 77; Speculative Buy – 100; Hold – 17; Sell – 2.

Full definitions of the recommendations used by Beaufort Securities in its publications and their respective meanings can be found on our website here.

Important Risk Warnings and Disclaimers
This report is published by Beaufort Securities Ltd (“Beaufort Securities”). Beaufort Securities Ltd is Authorised and Regulated by the Financial Conduct Authority and is a Member of the London Stock Exchange.

RELIANCE ON THIS NOTE FOR THE PURPOSE OF ENGAGING IN ANY INVESTMENT ACTIVITY MAY EXPOSE YOU TO A SIGNIFICANT RISK OF LOSING ALL OF THE FUNDS, PROPERTY OR OTHER ASSETS INVESTED OR OF INCURRING ADDITIONAL LIABILITY.

This document is not an offer to buy or sell any security or currency. This document does not provide you with individually tailored investment advice. It has been prepared without regard to the your financial circumstances and objectives The appropriateness of a particular investment or currency will depend on your individual circumstances and objectives. The investments and shares referred to in this document may not be suitable for you.

This research is non-independent and is classified as a Marketing Communication under FCA rules. As such it has not been prepared in accordance with legal requirements designed to promote independence of investment research and it is not subject to the prohibition on dealing ahead of the dissemination of investment research in COBS 12.2.5. However Beaufort Securities has adopted internal procedures which prohibit analysts from dealing ahead of non-independent research, except for legitimate market making and fulfilling clients’ unsolicited orders.

By receiving this document, you will not be deemed a client or provided with the protections afforded to clients of Beaufort Securities. When distributing this document, Beaufort Securities is not acting for you and will not be responsible for providing advice to you in relation to this document. Accordingly, Beaufort Securities will not be responsible to you for providing the protections afforded to its clients.

Beaufort Securities may effect transactions in shares mentioned herein and may take proprietary trading positions in those shares, and may receive remuneration for the publication of its research and for other services. Beaufort Securities may be a shareholder in any of the companies mentioned in this report. Accordingly, this document may not be considered as objective or impartial. Additionally, information may be available to Beaufort Securities or the Group, which is not reflected in this material. The remuneration of the author of this report is not tied to the recommendations on any shares mentioned nor to the any transactions undertaken by Beaufort Securities or any affiliate company. Further information on Beaufort Securities’ policy regarding potential conflicts of interest in the context of investment research and Beaufort Securities’ policy on disclosure and conflicts in general are available on request. Please refer to http://www.beaufortsecurities.com/important-info.

Past performance is not a guarantee of future performance. Investments may go down in value as well as up and you may not get back the full amount invested. The listing requirements for securities listed on AIM or NEX are less demanding and trading in them may be less liquid than main markets. This may make it more difficult to buy and sell these securities.

This document includes certain statements, estimates, and projections with respect to the anticipated future performance of securities listed on stock exchanges and as to the market for these shares. Such statements, estimates, and projections are based on information that we consider reliable and may reflect various assumptions made concerning anticipated economic developments, which have not been independently verified and may or may not prove correct. No representation or warranty is made as to the accuracy of such statements, estimates, and projections or as to its fitness for the purpose intended and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and may change without notice. Other third parties may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views, and analytical methods of the analysts who prepared them. This report has not been disclosed to any of the companies mentioned herein prior to its publication.

This document is based on information Beaufort Securities has received from publicly available reports and industry sources. Beaufort Securities may not have verified all of this information with third parties. Neither Beaufort Securities nor its advisors, directors or employees can guarantee the accuracy, reasonableness or completeness of the information received from any sources consulted for this publication, and neither Beaufort Securities nor its advisors, directors or employees accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document (except in respect of wilful default and to the extent that any such liability cannot be excluded by the applicable law). You should not rely on this document and should not use it substitution for the exercise of the independent judgment of yourself or your adviser.

The information contained in this document is confidential and is solely for use of those persons to whom it is addressed and may not be reproduced, further distributed to any other person or published, in whole or in part, for any purpose. Other persons who receive this document should not rely on it. Beaufort Securities, its directors, officers and employees may have positions in the securities mentioned herein.


Beaufort Securities Limited, 63 St Mary Axe, London, EC3A 8AA.
Authorised and regulated by the Financial Conduct Authority (Register No. 155104).
Members of the London Stock Exchange, NEX and QCA.

Be Sociable, Share!

Comments are closed.