Intrinsic Value AB Science S.A. (0Q77.L)

• Previous Close: £1.41
• Intrinsic Value: £0.56
• Upside potential: -60%

Stock Valuation Context

Business Model And Market Position

AB Science S.A. is a clinical-stage pharmaceutical company specializing in the development of protein kinase inhibitors, primarily targeting severe and rare diseases. Its lead candidate, masitinib, is a tyrosine kinase inhibitor undergoing Phase III trials for oncology and neurodegenerative conditions, as well as Phase II for COVID-19. The company also explores synthetic microtubule destabilizers like AB8939 for acute myeloid leukemia. Operating in the highly competitive biopharmaceutical sector, AB Science focuses on niche therapeutic areas with high unmet medical needs, positioning itself as an innovator in kinase inhibition. Its revenue primarily stems from limited commercial sales of Masivet in Europe, while R&D partnerships and grants supplement funding. The company’s pipeline depth and focus on difficult-to-treat diseases provide differentiation, though commercialization risks remain significant given its reliance on clinical trial outcomes.

Revenue Profitability And Efficiency

AB Science reported modest revenue of EUR 0.97 million in FY 2023, primarily from veterinary sales of Masivet, while net losses widened to EUR -10.05 million. Operating cash flow was negative at EUR -16.87 million, reflecting heavy R&D investments. Capital expenditures were minimal (EUR -0.35 million), indicating a lean operational model focused on clinical development rather than infrastructure.

Earnings Power And Capital Efficiency

The company’s diluted EPS of EUR -0.20 underscores its pre-revenue stage, with earnings constrained by high R&D costs. Capital efficiency remains under pressure due to prolonged clinical trials, though masitinib’s potential in multiple indications could improve returns if approvals are secured. Cash burn is a critical monitorable given limited commercial operations.

Balance Sheet And Financial Health

AB Science held EUR 6.07 million in cash and equivalents at FYE 2023, against total debt of EUR 19.10 million, indicating liquidity constraints. The negative operating cash flow and reliance on external funding highlight financial vulnerability, necessitating successful trial outcomes or additional capital raises to sustain operations.

Growth Trends And Dividend Policy

Growth hinges on masitinib’s clinical progress, with no near-term revenue diversification expected. The company does not pay dividends, reinvesting all resources into pipeline advancement. Investor returns are contingent on regulatory milestones and partnership deals.

Valuation And Market Expectations

The market cap of EUR 72.17 million reflects high-risk speculation on masitinib’s potential, with a beta of 1.624 indicating volatility. Valuation is driven by binary clinical catalysts rather than fundamentals, typical of developmental biotech firms.

Strategic Advantages And Outlook

AB Science’s focus on kinase inhibitors for orphan diseases offers regulatory and pricing advantages if approved. However, the path to profitability is protracted, and failure in key trials could severely impact viability. The outlook remains speculative, dependent on clinical success and funding stability.

Sources

Company filings, London Stock Exchange data