# Zeus Capital Q&A with Dr Gary Waanders: C4X Discovery Holdings PLC (LON:C4XD)

- Link: https://www.directorstalkinterviews.com/zeus-capital-qa-dr-gary-waanders-c4x-discovery-holdings-plc-lonc4xd/412720523
- Published: 2017-01-10T11:45:11+00:00
- Author: Amilia Stone

**Zeus Capital** Healthcare Research Director Dr Gary Waanders caught up with DirectorsTalk
for an exclusive interview to discuss **C4X Discovery Holdings PLC** (LON:C4XD)

 

**Q1: Now, C4X Discovery released its results for the year to July 31st 2016 last
Friday, can you run through the important highlights for us?**

**A1**: Sure. So on the financial side revenues were flat at about £0.2 million 
compared to the prior year, as expected expenses increased, mainly as a result of
greater investment in R&D so they’ve moved from £3.9 million prior year up to £5.2
million but we need to remember that this year was the first full year of the public
company, the prior year was only three quarters of the year. The company ended the
year with £1.3 million in cash but this was topped off post period end with the 
raise of a further £5 million in September.

The important events from an operational perspective to the company were 2 acquisitions
during the year which helped in building the C4X Drug Discovery Engine. The company
acquired Adorial Limited which bought with it a high sensitivity smart drug discovery
platform called Taxonomy3 which is based on multi-various analysis on DNA databases,
importantly this helps to identify genetically-validated clinically meaningful novel
targets for new drug discovery programmes. The second acquisition was one of the
assets from a company called Molplex which included the pioneering chemoinformatics
and artificial intelligence software platform.

So these 2 acquisitions combined with C4X’s proprietary Conformetrix platform create
a drug discovery engine which we believe holds great promise for more growth discovery.

 

**Q2: The Company has shifted its strategy recently, how’s this changed and what
do you think will be the benefits of those changes?**

**A2**: So the strategy, C4X has moved from essentially being a fee-for-service 
company to focussing on its proprietary drug discovery programmes. So under a fee-
for-service profile, margins are generally quite thin and the company has limited
control over its own technology development. With that I think the value generation
is restricting somewhat so the shift moves the company, I would say, up to the pharmaceutical
value chain, evidence of that is seen in recent pre-clinical, in-licencing trends
which have shown a strong increase in value over the past 4/5 years.

So the new strategy will enable the company to control the use of its resources 
on the one hand and also enables it to focus on disease areas where it sees higher
value opportunities.

 

**Q3: Now, what’s the outlook for the company over the next 5 years?**

**A3**: I think we need to step back a bit and look at the industry as a whole and
how it’s performed so despite enormous investment over the past 20 years or so the
drug discovery operations of large pharmaceutical companies have failed to generate
enough high quality new drug candidates to feed their late stage pipelines. So, 
as I mentioned previously, the industry is doing quite a lot more in terms of in-
licensing deals where it’s looking for early stage new drug candidates and this 
has increased quite dramatically over the past 5 years. So the value of these deals
has increased and we’re looking at values moving from about $10 million per pre-
clinical programme a few years ago up to more than $30 million in 2015 and I think
that trend is set to continue.

So we expect that the quality of C4X new drug candidates, which we think of as first
and best in class, and the novel targets there are identifying in high value therapeutic
markets should attract significant large pharma interest. We see the company signing
at least one out-licensing deal in the next 12 months and I think that’s a trend
that’s probably going to continue in the coming years. It’s an important fact that
with these new in-licensing and out-licensing deals there’s usually an upfront payment
associated with each deal, while they are important and they will actually change
the profile sequence quite dramatically, there is a longer term value in these deals
as we’d expect each new licence would generate further revenue from milestone payments
and ultimately royalties. So quite clearly the company will increase in value with
each licensing deal that it executes.

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