Crossject

Crossject FY22 results. Operating income reached €9.718m vs €6.772m, the operating result was €-19.386m vs €-11.823m, and the net result €-17.255m vs €-10.806m. The company “had cash of €8m (€10m a year ago), plus €6.2m in non- dilutive financing and €3.8m from the same plan, yet to be received, of which €2m is conditional on obtaining Emergency Use Authorisation (EUA) from the FDA”.

As always, note that the current numbers are of little relevance since the story of Crossject is based on the future launch of Zeneo combined with the NTEs the group is targeting. In particular, the group’s top-line has little meaning along with the losses posted by the company. Note that this income includes c.€1.8m stemming from the BARDA invoicing. Nonetheless, operating income increased quite substantially (+43% to €9.7m including c. €6.1m in capitalized production). Again, not such an important number in absolute terms, but still positive news (by the way, note that the P&L mentioned in the English version of the release in page 5 is…wrong since the capitalized production is missing). On a less positive front, operating expenses steadily increased to €23m vs €18.6m, an acceleration vs the H122 where they “only” reached €10m. While this is understandable for a company that is still in a ramp-up phase with personnel expenses and purchases/external charges growing by some €4m, this is certainly part of the explanation for the mild market reaction to these numbers, on top of communication that we deem to be “awkward”.

On the financing front, the company has reached a number of agreements and proceeded with a few capital issuances which have secured the structure of its balance sheet (roughly speaking €11m in capital increase and loans, the latter reaching a total of €14m of which €4m were granted in FY22 – also see our Latest dated 12 January 2023). Thus the available cash at year-end FY22 amounted to €7.8m, broadly stable on a year-on-year basis given the cash-burn. The latter reached €-5.1m in operating terms and €-6.8m in capex, for a total of c.€12m. The company again indicated that it was confident in “its ability to find the necessary financing to continue its development”, taking into account the amount of available cash, the remaining part of the €14m loan from banks and the expected cash-in from the BARDA contract (monthly invoicing). We regret that the management no longer mentions pursuing its strategy of focusing on non-dilutive instruments in its future financing. In fact, they indicate that the use of such instruments its much less likely than before but do not rule them out completely. As far as capex is concerned (roughly €7m for both FY22 and FY21), we see no reason for this figure to increase materially before the first contracts are signed (i.e. after the product filings). As mentioned above, this should also be financed by the growing income from the BARDA agreement (US$1.8m in FY22) with a total of US$35m to come (on a monthly basis) over the next three years. It is worth mentioning that these billings are not evenly split but will grow as time goes by so we don’t expect US$12-15m in FY23. Some more financing will nonetheless come from this source and, although no detail is given, we estimate that the group should be able to cash in at least a good €5m in FY23 (to remain conservative).

At the end of the day, the market reaction (c.-12%) was a mix of several elements in our view. It was not due to the numbers as such, which did not send any particularly negative signals. Still, we believe that investors expected more on the development side. The agreement with the BARDA was good news in FY22, but has been known since…last June. Moreover, nothing has changed (i.e. no additional details given) on the EUA (Emergency Use Authorization) with the first products still expected to be delivered by the year-end. We also found the group’s communication with the financial markets rather awkward, in particular in terms of information distribution and organization, with the analysts’ meeting taking place almost two days after the release. We believe the group also has to work on this, even if the market is primarily expecting progress on the marketing of the group’s products.

These numbers will not change our forecasts much. We will fine-tune our model on the basis of the FY22 accounts but, since the group’s valuation is essentially based on its mid to long term prospects, our valuation is unlikely to change significantly.