Nuevolution — Pipeline and partnerships continue to strengthen

Nuevolution — Pipeline and partnerships continue to strengthen

With the completion of the up-listing to the Nasdaq Stockholm main market and the successful gross SEK110m capital raise, Nuevolution continues to strengthen both its investor base and financial position. Amgen’s opt-in on the first programme in its multi-target collaboration and the identification of much sought-after small-molecule IL-17A inhibitors continue to validate Nuevolution’s Chemetics technology. Its transition to a clinical asset-focused company continues with the Almirall RORγt inhibitor programme likely to enter the clinic in 2019 and additional internal programmes (RORγt and BET-BD1) nearing clinical readiness. In addition to current partnerships, the company forecasts that a new deal is possible by year end. We value Nuevolution at SEK1,127m or SEK22.8/share.

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Written by

Nuevolution

Pipeline and partnerships continue to strengthen

H118 results

Pharma & biotech

25 September 2018

Price

SEK15.80

Market cap

SEK782m

SEK8.86/US$; US$1.70/€; SEK10.37/€

Net cash (SEKm) at 30 June 2018

158.0

Shares in issue

49.5m

Free float

55%

Code

NUEV

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.8)

(5.5)

(3.6)

Rel (local)

(3.3)

(12.0)

(9.8)

52-week high/low

SEK22.6

SEK15.3

Business description

Nuevolution is a Copenhagen-based biopharmaceutical company. Its patent-protected Chemetics drug discovery platform enables the selection of drugs to an array of tough-to-drug disease targets. To date it has entered into 17 agreements with major pharmaceutical companies.

Next events

Sign new out-licence/risk-sharing collaboration

H218/H119

Start of Almirall’s RORγt Phase I trial

2019

Analysts

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Dr Susie Jana

+44 (0)20 3077 5700

Dr Sean Conroy

+44 (0)20 3681 2534

Nuevolution is a research client of Edison Investment Research Limited

With the completion of the up-listing to the Nasdaq Stockholm main market and the successful gross SEK110m capital raise, Nuevolution continues to strengthen both its investor base and financial position. Amgen’s opt-in on the first programme in its multi-target collaboration and the identification of much sought-after small-molecule IL-17A inhibitors continue to validate Nuevolution’s Chemetics technology. Its transition to a clinical asset-focused company continues with the Almirall RORγt inhibitor programme likely to enter the clinic in 2019 and additional internal programmes (RORγt and BET-BD1) nearing clinical readiness. In addition to current partnerships, the company forecasts that a new deal is possible by year end. We value Nuevolution at SEK1,127m or SEK22.8/share.

Year end**

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

06/16

21.3

(151.9)

(4.0)

0.0

N/A

N/A

06/17

120.3

(9.4)

(0.6)

0.0

N/A

N/A

12/18e

112.6

(20.9)

(0.3)

0.0

N/A

N/A

12/19e

286.8

150.0

2.0

0.0

7.9

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **FY-end has changed to 31 December.

Amgen opt-in highlights potential of Chemetics

Amgen has exercised its opt-in right for the first programme in its multi-target relationship. This is the first of two programmes focused on undisclosed oncology targets that have been ‘fast tracked’ through development. Amgen is now responsible for all further costs incurred by both parties and will work collaboratively on late-stage research. It will be fully responsible for preclinical and clinical development. Should Amgen exercise its option to license a candidate before the end of Phase I, Nuevolution will receive an initial licensing fee of at least $10m and potential milestone payments of up to $410m.

Cytokine X programme focused on interleukin-17A

Identifying small molecule inhibitors for interleukins is notoriously difficult. Nuevolution announced that it has several lead interleukin-17A (IL-17A) candidates in development for use in either topical or oral forms. IL-17A is a well-known pathway in many autoimmune and inflammatory disorders and patients are currently treated with expensive intravenous IL-17A antibodies (eg Cosentyx: HY18 sales of $1.3bn).

Financials: H118 results

SG&A rose to SEK16.5m (H117: SEK11.5m), primarily as a result of up-listing to the Nasdaq Stockholm main market, while R&D costs fell to SEK49.9m (H117: SEK54.6m). Net loss reduced to SEK53.5m in H118 compared with SEK56.3m in H117. Net cash was SEK158.0m at 30 June2018 (30 June 2017: SEK173.7m).

Valuation: SEK22.8/share (SEK1,127m)

We value Nuevolution at SEK22.8/share (SEK1,127m) vs SEK21.0/share (SEK901m) previously. We have rolled forward our model, updated for end-June cash and foreign exchange rates.

H118: Cementing a position for growth

Nuevolution’s business model embodies continuous revenue generation and risk mitigation, executed through a ‘multiple shots on goal’ approach to drug development. Underpinning this is the internally developed DNA-encoded drug discovery platform, Chemetics, which comprises compound libraries (of up to 40 trillion molecules) that have been designed to rapidly select drugs for an array of ‘tough-to-drug’ targets. The ability to attract Almirall and Amgen into signing deals has acted as validation of Chemetics and a mark of quality for Nuevolution’s pipeline. Transitioning its pipeline assets into the clinic will be further validation of this approach and Nuevolution is currently well positioned to achieve this.

Fuelled by Nuevolution’s Chemetics technology, the company has a number of late-stage preclinical assets, alongside more than 10 earlier-stage programmes (varying from hit identification to hit optimisation). Exhibit 1 highlights Nuevolution’s pipeline, which is set to deliver multiple inflection points over the coming 12-18 months.

Exhibit 1: Nuevolution’s pipeline

Target

Indication

Stage

Ownership

Notes

RORγt
(inverse agonist)

Chronic inflammatory diseases

Preclinical

Partnered with Almirall in dermatology and psoriatic arthritis.

RORγt plays an important part in the generation of pro-inflammatory cytokines, notably IL-17A, which is implicated in multiple inflammatory and autoimmune conditions. Inverse agonists of RORγt inhibit this pathway and Nuevolution’s product candidates (under Almirall’s stewardship) could provide oral based treatments for psoriasis (PsO) and psoriatic arthritis (PsA).We expect Almirall to initiate a Phase I trial in 2019.

Preclinical

Other indications 100% ownership NUE

Nuevolution retains the rights to pursue other indications, primarily focusing on ankylosing spondylitis (AS), with inflammatory bowel disease (IBD) as a secondary indication. Scale-up of its internal lead candidate in Q118 has enabled further preclinical work to commence – Nuevolution forecasts that its program has the potential to be clinically ready in 2019.

BET-BD1

Inflammatory diseases

Preclinical

100% ownership NUE

BET-BD1 is a novel target class offering a new mode of action for treating cancer and inflammatory diseases. With numerous BET inhibitors in clinical development for oncology, Nuevolution has chosen to pursue atopic dermatitis (AD) and/or psoriasis as the primary indication, with secondary indications in fibrosis (scleroderma) and lupus. Two compounds have been selected as pre-candidates before progressing to candidate nomination – Nuevolution forecasts that its program has the potential to be clinically ready in 2019.

Undisclosed target(s)

Cancer & CNS diseases

Preclinical

Partnered with Amgen

Amgen has exercised its right to opt in on the first of at least three undisclosed targets (multi-target collaboration). With the programme moving into preclinical development, Amgen has also initiated preclinical proof-of-concept work for a second oncology target and a third programme is in earlier stages of hit optimisation.

IL-17A

Inflammatory diseases

Discovery:
lead optimisation

100% ownership NUE

IL-17A inhibitors work downstream of RORγt in the pro-inflammatory cascade. Small molecule inhibitors of this target are much sought after in drug discovery, as they are likely to offer more favourable dosing and cost than the antibody-based therapies currently on the market for PsO, PsA and AS.

GRP78

Cancer

Discovery: hit-to-lead

50% ownership*

GRP78 is a member of the chaperone family of proteins; it is over-expressed in many tumour types including breast cancer and brain tumours. Selected compounds are now in the control of CRT/ICR and further progression is reliant on them

RORγt
(agonist)

Cancer

Discovery: hit optimisation

100% ownership NUE

In conjunction with the RORγt inverse agonist (inhibitor) programmes, Nuevolution’s Chemetics platform has also enabled the identification of agonists (activators) which have potential applications in (immun)oncology. Currently hits are being optimised and tested in vivo (mouse breast tumour model).

Undisclosed
targets

Various

Discovery: various

100% ownership NUE

10+ discovery programmes in a range of undisclosed indications including oncology, inflammatory diseases and immunoncology.

Undisclosed
targets

Various

Discovery: various

Drug discovery collaboration with Janssen

Ongoing technology access agreement signed in October 2015 for Janssen to use Nuevolution’s Chemetics platform. Generated SEK8.8m in deferred revenue in H118.

Source: Nuevolution, Edison Investment Research. Note: *Collaboration with CRT and ICR.

Amgen, Almirall and future partnerships

In July 2018, Amgen exercised its right to opt in on the first of at least three undisclosed programmes (multi-target collaboration across oncology and neuroscience) and has assumed responsibility for all further costs incurred by both parties. Should Amgen exercise its option to license a candidate from this programme before the end of Phase I, Nuevolution will receive an initial licensing fee of at least $10m, clinical and commercial milestone payments (of up to $410m in total depending on project success) and subsequent royalties on sales if commercialised. In the second oncology programme, Nuevolution is testing compounds to determine target engagement and mechanisms of action, while the third programme (undisclosed disease focus) is in hit optimisation and expected to reach cellular proof-of-concept by year end.

The Almirall RORγt inhibitor programme is likely to enter the clinic in 2019 and will trigger the start of payments to Nuevolution, which could increase to €172m in development and regulatory milestones (€270m in tiered commercial sales milestones will also be available if the product is commercialised). The timing and design of any clinical trial is ultimately Almirall’s decision and we await further information on these elements.

Apart from the Almirall and Amgen partnerships, Nuevolution forecasts that it will be able to enter into another partnership before year end. This could take the form of either out-licensing a pipeline asset (similar to the Almirall out-licensing of the RORγt inhibitor) or a research collaboration (similar to the Amgen deal). In addition to the Almirall and Amgen partnerships, Nuevolution has already formed partnerships with other mid- and large-cap industry peers (including Novartis, Janssen, GSK, Boehringer Ingelheim and Merck & Co), and we are confident that Nuevolution can achieve another deal. However, this could be finalised outside Nuevolution’s stated time period.

RORγt: Programmes progress cautiously

RORγt plays a role in the maturation of T helper 17 cells (TH17) leading to the secretion of the pro-inflammatory cytokines including interleukin-17A (IL-17A), which mediates for the production of additional pro-inflammatory components and, ultimately, tissue inflammation. Inhibiting RORγt has been a strategy employed by Nuevolution and others to develop drugs that counteract the dysregulation underlying a range of autoimmune disorders, with significant interest focusing on developing agents capable of treating psoriasis (PsO) and psoriatic arthritis (PsA).

As per the out-licensing agreement signed in December 2016, progression of Nuevolution’s asset into Phase I trials is subject to Almirall’s discretion. With the Phase II failure of Allergan’s RORγt inverse agonist AGN-242428 (due to undisclosed safety reasons and written off in Q118), along with the Phase I suspension of AstraZeneca’s asset AZD0284 (due to preclinical findings), the delays in reaching this milestone are presumably due to Almirall ensuring that it has identified any liabilities and that the attrition of competitor compounds is not endemic to the mechanism of action (ie RORγt inhibitor). We expect Phase I initiation to occur in 2019, which should trigger a milestone payment to Nuevolution. In the long term, the deal could provide up to €172m in development and regulatory milestones, and €270m in commercial sales milestones, in addition to tiered royalties on future net sales.

Nuevolution retains the rights to pursue other indications, primarily focusing on ankylosing spondylitis (AS) with inflammatory bowel disease (IBD) as a secondary indication. Scaling up its internal lead candidate in Q118 has enabled further preclinical work to commence (formulation and regulatory safety). Several back-up compounds have also been identified and are currently being investigated to compare efficacy and toxicity profiles. The programme is expected to be clinically ready in 2019 and further clinical development will depend on funding or potential partnerships. While separate in its development, the programme is likely to be heavily influenced by the outcome of the Almirall RORγt programme.

In conjunction with the RORγt inverse agonist (inhibitor) programmes, Nuevolution’s Chemetics platform has also enabled the identification of agonists (activators) that have potential applications in (immun)oncology, where the same mechanisms underlying autoimmune conditions can be amplified to bolster the immune response to tumours. Lycera is currently running a Phase I/IIa trial investigating a RORγt agonist LYC-55716 in patients with solid tumours and a Phase Ib trial investigating a combination with Keytruda (pembrolizumab) in patients with non-small cell lung cancer (NSCLC). Nuevolution is still in a discovery phase, optimising compounds that are being tested in a mouse breast tumour model to demonstrate proof of concept. To our knowledge, few RORγt agonists exist in preclinical or clinical development. We expect interest in the space to pick up if clinical data from Lycera are positive.

BET-BD1: Candidate selection in 2019

Nuevolution’s second lead internal programme is focused on the first bromodomain (BD1) of the bromodomain and extra-terminal domain (BET) family of proteins, which play an important role regulating genes involved in both cancer and inflammation. The company has prioritised atopic dermatitis and/or psoriasis as its lead indication, while fibrosis (IPF and scleroderma) and systemic lupus erythematosus are secondary indications. In H217, Nuevolution demonstrated in vivo efficacy for some of these compounds in multiple inflammatory mouse models, including a psoriasis/atopic dermatitis model (IL-23 induced ear edema), a collagen-induced arthritis model (IL-17) and a fibrosis model. In H118, Nuevolution reported selecting two compounds as pre-candidates, which are undergoing final studies before progressing to candidate nomination, which we would expect to occur in 2019.

IL-17A: A proven target in autoimmune diseases

Working downstream of RORγt and targeting IL-17A directly is a proven strategy for treating moderate to severe psoriasis (PsO), psoriatic arthritis (PsA) and AS, with anti-IL-17A monoclonal antibody therapies approved across all these indications including Novartis’s Cosentyx and Eli Lily’s Taltz. Several other antibody therapies acting against other pro-inflammatory cytokines (IL-23 and TNFα) are also approved as treatments. Although costly, injectable biologic agents have revolutionised the treatment of these chronic inflammatory conditions and generate significant revenue streams, as highlighted in Exhibit 2.

Exhibit 2: Leading marketed therapies for PsO, PsA and AS

Drug class

Target

Drug
(generic name)

Company

Indication(s)

Global sales

Phase

2017

2024e

Antibody

IL-17A

Cosentyx
(secukinumab)

Novartis

PsO, PsA & AS

$2.1bn

$5.3bn

Marketed
(2015)

Taltz
(ixekizumab)

Eli Lilly

PsO & PsA

$0.6bn

$2.3bn

Marketed
(2016)

IL-23

Tremfya
(guselkumab)

J&J

PsO

$0.07bn

$3.1bn

Marketed
(Jul 2017)

IL-23
(& IL-12)

Stelara
(ustekinumab)

J&J

PsO & PsA*

$2.7bn*

$3.5bn*

Marketed
(2009)

TNFα

Humira
(adalimumab)

AbbVie

PsO, PsA & AS*

$5.8bn*

$4.8bn*

Marketed
(2008)

Small molecule

PDE4

Otezla
(apremilast)

Celgene

PsO & PsA

$1.3bn

$2.5bn

Marketed
(2014)

Source: EvaluatePharma, forecasts based on consensus analyst estimates. Note: *Excluding sales for indications other than PsO, PsA and AS.

Small molecules generally have four key advantages over biologics: the ability to target intracellular components (potential to reach novel targets), cheaper cost of production (lower pricing), oral or topical dosing (improved compliance vs injectable) and shorter half-life (important if side effects need to be controlled). While offering important practical advantages, novel small molecule drug candidates have high efficacy hurdles to meet, while ensuring low toxicity profiles. Oral, small molecule PDE4 inhibitors (which indirectly reduce pro-inflammatory cytokine levels) do to some extent address this, with Celgene’s Otezla (apremilast) approved to treat moderate to severe PsO and PsA since 2014, generating $1.3bn from global sales in 2017. Favourable dosing means Otezla is currently positioned as a prior therapy to antibody-based treatments. However, a low to moderate efficacy of Otezla means patients invariably progress to antibody-based therapies.

Exhibit 3: Efficacy data for Otezla and Cosentyx in treating moderate to severe plaque psoriasis

Drug class

Target

Drug
(generic name)

Trial

Dose

Primary endpoint (efficacy)

PASI-75

Patients

Antibody

IL-17A

Cosentyx
(secukinumab)

ERASURE

300mg subcutaneous*

81.6% (12w)

245

Placebo

4.5% (12w)

246

Small molecule

PDE4

Otezla
(apremilast)

ESTEEM1

30mg oral twice daily

33.1% (16w)

562

Placebo

5.3% (16w)

282

Source: Edison Investment Research. Note: *Once weekly for four weeks then once every four weeks.

We note that comparisons of trial data should be made with caution, as variability in patient demographics, disease states, treatment regimens and mechanisms of action could all skew any observations. However, studying the registration clinical trials for Cosentyx and Otezla highlights a difference in efficacy for treating patients with moderate to severe psoriasis. The number of patients achieving PASI-75 (75% reduction in the Psoriasis Area and Severity Index score) is significantly greater with Cosentyx (81.6% after 12 weeks) compared to Otezla (33.1% after 16 weeks). Small molecule IL-17A inhibitors, topical or orally dosed, will aim to bridge this efficacy gap.

Directly targeting the IL-17A protein/protein interaction (PPI) with a small molecule is no easy feat because of the large flat protein structures involved. Enabled by Nuevolution’s Chemetics platform, hit identification utilised one of Nuevolution’s 40 trillion compound collections to identify three series amenable to lead optimisation based on their synthetic tractability and good lead-like properties (MW <500, IC50 <100nM, LLE >5). Structural elucidation of these inhibitors bound to IL-17A protein has highlighted distinct mechanisms of binding across series, which increases Nuevolution’s chances of developing small molecule candidates. Furthermore, in vivo proof-of-concept work has demonstrated efficacy comparable to an anti-IL-17A antibody for one of the lead assets (NUE), when dosed subcutaneously in a collagen-induced arthritis mouse model (Exhibit 4).

Exhibit 4: In vivo collagen-induced arthritis (CIA) mouse model for IL-17A inhibitor

Source: Nuevolution

A look at the small molecule IL-17A inhibitor competitor space (Exhibit 5) shows that Nuevolution’s programme is well positioned to deliver first-in-class clinical candidates. We would anticipate clinical readiness for a topical-based therapy in 2020/21 and an oral-based therapy in 2021/22 due to the tiered complexity of ensuring the safe and efficacious systemic free exposure required for an oral drug. Bearing in mind Nuevolution’s current strategy to mitigate its risk through a ‘multiple shots on goal’ approach, we forecast that an agreement akin to the Almirall deal could be possible for the IL-17A programme.

Exhibit 5: Small-molecule IL-17(R)A inhibitors in development

Company

Delivery

Status

Notes

Nuevolution

Oral/topical

Lead optimisation

Using its Chemetics DNA-encoded screening platform, Nuevolution has been able to rapidly identify hits for tough-to-drug disease targets. Several series of small molecule IL-17A inhibitors are currently in lead optimisation.

HitGen
(private)

Oral/topical

Lead optimisation

HitGen is a China-based drug-discovery company that utilises a DNA-encoded screening platform to identify hits. It has an IL-17RA inhibitor programme in lead optimisation.

C4X Discovery

Oral

Hit to lead

C4X is a spin-out of the University of Manchester, which listed on the LSE in 2015. It has built a broad pipeline from its Taxonomy3 and Conformetrix platforms. C4X has reported developing an oral small-molecule IL-17A inhibitor.

Source: Nuevolution, Evaluate Pharma, HitGen, C4X Discovery

Valuation: SEK22.8/share (SEK1,127m)

We value Nuevolution at SEK22.8/share (SEK1,127m) vs SEK21.0/share (SEK901m) previously.

We have rolled forward our model, updated for end-June cash (SEK161.7m) and updated foreign exchange rates. Updating exchange rates, particularly in relation to the Almirall deal, has had a positive impact on our valuation. However, we note that the May 2018 capital fund-raise has diluted the per share value.

Our valuation of SEK1,127m, including net cash of SEK158.0m, is based exclusively on a risk-adjusted model of the future milestones we expect from the Almirall (SEK11.4 per share), Amgen (SEK7.8 per share) and Janssen (SEK0.4 per share) deals (ie excluding any value from the technology itself, other pipeline assets and excluding future deal opportunities), using a 12.5% discount rate. We have not ascribed value at this point to the unique platform and multiple candidates at an early stage of preclinical development. Consequently, we see potential upside as further deals are made and/or assets move into clinical development.

For further information on how we value Nuevolution, please see our outlook report, Pipeline and strategic execution drives prospects, published on 15 March 2018.

Exhibit 6: Sum-of-the-parts NPV

Product

Partner

Indication

Phase

NPV of milestone payments
(SEKm)

rNPV of milestone payments
(SEKm)

NPV of
royalties on
sales (SEKm)

rNPV of

royalties on
sales (SEKm)

Total rNPV (SEKm)

Total rNPV/
share (SEK)

RORγt inhibitor

Almirall

Psoriasis & PsA

Preclinical

1,784.6

404.9

1,594.9

159.5

564.4

11.4

Various

Amgen

Oncology & neuroscience

Drug discovery

739.5

384.0

0.0

0.0

384.0

7.8

Janssen

Anti-infective

Drug discovery

47.0

20.9

0.0

0.0

20.9

0.4

Net cash (at 30 June 2018)

158.0

3.3

Valuation

1,127.3

22.8

Source: Edison Investment Research

Financials

For the first six months of 2018 (H118), revenues of SEK8.8m (H117: SEK7.4m) were solely from the technology access agreement with Janssen and primarily driven by a licence fee payment of SEK6.3m received in Q118 for an undisclosed anti-infective target.

R&D costs fell to SEK49.9m (H117: SEK54.6m) due to a reduction in patent and contract research organisation (CRO) expenses. With several assets nearing preclinical development, we would expect these R&D costs to rise in H218 (unless these are out-licensed sooner).

SGA increased to SEK16.5m (H117: SEK11.5m) due to one-off costs from the Nasdaq Stockholm main market up-listing in Q218. H118 losses were partially offset by Danish R&D tax credits of SEK3.7m; net loss was SEK53.5m (H117: SEK56.3m).

The up-listing to the Nasdaq Stockholm main market in June 2018 has broadened Nuevolution’s access to both institutional and international investors and will aid its growth into a multi-asset clinical company. Gross proceeds of SEK110.0m (SEK104.0m net) from the issue of 6.7m shares (SEK16.50 per share) in May 2018 resulted in a net cash position of SEK158.0m at end June 2018, which should enable a cash runway into late-2019 if no additional revenues from milestones are received. While it is inherently difficult to predict revenues from further deals, we forecast significant near-term revenues from the Amgen and Almirall deals. The cash runway into late 2019 is not dependent on expected milestone payments in the period.

While Nuevolution has changed its financial year end to 31 December (from 30 June), we retain a 30 June year-end in our model for historic numbers, but have altered our forecasts to take into account the new year end. Once Nuevolution has reported a full year under the new format, we will update our historic financials.

Exhibit 7: Financial summary

Accounts: IFRS, Year-end: June for Historic, Dec for forecast, SEK000s

 

 

2016*

2017*

2018e

2019e

INCOME STATEMENT

 

 

 

 

 

 

Total revenues

 

 

21,314

120,318

112,611

286,831

Reported gross profit

 

 

21,314

120,318

112,611

286,831

SG&A (expenses)

 

 

(57,493)

(23,216)

(25,305)

(24,040)

R&D costs

 

 

(115,707)

(107,587)

(109,739)

(115,226)

Adjusted EBIT

 

 

(151,886)

(10,485)

(22,434)

147,565

Reported EBIT

 

 

(151,886)

(10,485)

(22,434)

147,565

Finance income/ (expense)

 

 

(22)

1,045

1,575

2,397

Adjusted PBT

 

 

(151,908)

(9,440)

(20,859)

149,962

Reported PBT

 

 

(151,908)

(9,440)

(20,859)

149,962

Income tax expense

 

 

6,911

(16,046)

7,301

(52,487)

Adjusted net income

 

 

(144,997)

(25,486)

(13,558)

97,475

Reported net income

 

 

(144,997)

(25,486)

(13,558)

97,475

Earnings per share

 

 

 

 

 

 

Basic EPS (SEK)

 

 

(4.0)

(0.6)

(0.3)

2.0

Diluted EPS (SEK)

 

 

(4.0)

(0.6)

(0.3)

2.2

Adjusted basic EPS (SEK)

 

 

(4.0)

(0.6)

(0.3)

2.0

Adjusted diluted EPS (SEK)

 

 

(4.0)

(0.6)

(0.3)

2.2

Average number of shares - basic (m)

 

 

36.5

42.9

45.5

49.5

Average number of shares - diluted (m)

 

 

36.5

43.6

43.6

43.6

BALANCE SHEET

 

 

 

 

 

 

Property, plant and equipment

 

 

5,494

5,538

5,761

5,973

Other non-current assets

 

 

8,585

6,397

20,828

1,665

Total non-current assets

 

 

14,079

11,935

26,589

7,638

Cash and equivalents

 

 

205,955

179,595

261,805

377,231

Trade and other receivables

 

 

367

93

93

93

Other current assets

14,564

10,032

2,902

2,902

Total current assets

 

 

220,886

189,720

264,800

380,226

Non-current loans and borrowings

 

 

3,482

2,939

2,939

2,939

Total non-current liabilities

 

 

3,482

2,939

2,939

2,939

Trade and other payables

 

 

12,162

10,986

10,986

10,986

Current loans and borrowings

 

 

1,222

1,482

1,482

1,482

Other current liabilities

 

 

20,044

16,286

15,286

14,286

Total current liabilities

 

 

33,428

28,754

27,754

26,754

Equity attributable to company

 

 

198,055

169,962

260,696

358,171

CASH FLOW STATEMENT

 

 

 

 

 

 

Profit before tax

 

 

(151,908)

(9,440)

(20,859)

149,962

Depreciation of tangible assets

 

 

1,328

1,703

277

288

Share based payments

 

 

48,528

(153)

0

0

Other adjustments

 

 

22

(1,045)

(1,575)

(2,397)

Movements in working capital

 

 

19,594

(962)

0

0

Net cash from operating activities (pre-tax)

 

 

(82,436)

(9,897)

(22,157)

147,853

Interest paid / received

 

(224)

(798)

1,575

2,397

Income taxes paid

 

 

1,210

(12,520)

0

(33,324)

Cash from operations (CFO)

 

 

(81,450)

(23,215)

(20,582)

116,926

Capex (includes acquisitions)

 

 

(504)

(715)

(500)

(500)

Other investing activities

 

 

(51)

(9)

0

0

Cash used in investing activities (CFIA)

 

 

(555)

(724)

(500)

(500)

Net proceeds from issue of shares

 

 

242,061

0

104,292

0

Other financing activities

 

 

(1,119)

(1,253)

(1,000)

(1,000)

Cash from financing activities (CFF)

 

 

240,942

(1,253)

103,292

(1,000)

Increase/(decrease) in cash and equivalents

 

 

158,937

(25,192)

82,210

115,426

Cash and equivalents at beginning of period

 

 

46,250

205,955

179,595

261,805

Cash and equivalents at end of period

 

 

205,955

179,595

261,805

377,231

Source: Edison Investment Research, Company accounts. Note: *Historic financials have a 30 June year end. Forecasts have a 31 December year end.


Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Nuevolution and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Nuevolution and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

TransContainer — Revenue and cost initiatives paying off

TransContainer (TC) has continued to show strong results, with Q218 EBITDA, reported on 29 August, increasing by 13% y-o-y. The company is benefiting from structural growth, especially switching rail cargo to containers, and Russia’s economic recovery. Recent monthly market data bode well for TC’s Q318 results. It has also continued to pursue initiatives that are benefiting the EBITDA margin by increasing the proportion of Integrated Services, profit-making runs and block trains. Our DCF model gives a valuation of RUB5,200/share (unchanged), which offers 12% upside to the current share price.

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