B56C9260-77A1-4FDB-AD0D-3D7F1C7781D7

A definitive year ahead

Oasmia Pharmaceutical 6 December 2021 Update
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Oasmia Pharmaceutical

A definitive year ahead

Q321 update

Pharma & biotech

6 December 2021

Price

SEK2.09

Market cap

SEK937m

$0.12/SEK

Net cash (SEKm) at 30 Sep 2021 (including short-term investments)

149.7

Shares in issue

448.4m

Free float

75%

Code

OASM

Primary exchange

Stockholm

Secondary exchange

Frankfurt

Share price performance

%

1m

3m

12m

Abs

(3.2)

(27.9)

(45.7)

Rel (local)

(2.1)

(26.4)

(58.0)

52-week high/low

SEK4.38

SEK2.09

Business description

Oasmia Pharmaceutical is a Swedish speciality pharma company focusing on its proprietary XR-17 technology platform to develop novel formulations of well-established cytostatic oncology treatments for human and animal health. Key assets include Apealea (partnered with Elevar), docetaxel micellar and Cantrixil.

Next events

Divestment of animal health business

2021/22

Oncology in-licensing/M&A deals

2021/22

Update on Apealea US development

2021/22

Analysts

Dr Sean Conroy

+44 (0)20 3077 5700

Dr Jonas Peciulis

+44 (0)20 3077 5728

Oasmia Pharmaceutical is a research client of Edison Investment Research Limited

We believe Oasmia is entering a definitive phase of its transformation in the months ahead. Apealea is due to be launched in Europe (early 2022), enabling an inflow of commercial revenues in 2022. Importantly however, licensee Elevar has notified Oasmia that it is reviewing the previously communicated strategy for Apealea in the United States; we note that accelerating timelines (expected launch 2025) or expansion into indications beyond advanced ovarian cancer could potentially present upside to our current assumptions. Progress on its underlying strategy to further diversify the pipeline will also be key over the near term. In October, Oasmia settled its legal disputes, clearing outstanding litigation risks. We note this has slightly shortened our forecast cash runway and additional financing is now likely to be required before end-2022. Our valuation is unchanged at SEK2.89bn.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

04/19

2.0

(168.5)

(0.7)

0.00

N/A

N/A

04/20

201.8

(43.4)

0.0

0.00

N/A

N/A

12/21e**

16.5

(128.1)

(0.2)

0.00

N/A

N/A

12/22e**

46.8

(139.1)

(0.3)

0.00

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **New reporting period from 1 January 2021.

Apealea EU launch in 2022, US route under review

In our view, Apealea (Cremophor-free paclitaxel) remains the primary value driver for Oasmia over the near term. European launch is expected in early 2022 (Germany and the UK) by commercial partner Inceptua, enabling the first flow of royalties to Oasmia. Ultimately, the United States remains the key market for Apealea and partner Elevar is currently reviewing the previously planned clinical and regulatory path. We expect an update in the coming months, but understand that Elevar’s overarching goal is to maximise Apealea's commercial potential and shorten timelines. For now, we maintain our assumptions.

Stringing together a diversified oncology pipeline

We expect Oasmia can continue to make progress on several fronts with the underlying strategy to diversify its oncology pipeline. The company’s scientific advisory board met to discuss the clinical pathway for recently in-licensed asset Cantrixil. The planned initiation of the Phase IIa trial for advanced ovarian cancer will be delayed slightly until a new manufacturing partner(s) is secured. Docetaxel micellar recently started a Phase Ib trial for advanced prostate cancer and recruitment is expected to complete by end 2022. Oasmia will continue to evaluate opportunities to further diversify its pipeline through in-licensing or M&A, although we believe this will likely be contingent on additional financing or divestment of its animal health business.

Valuation: SEK2.89bn or SEK6.45/share

Rolling forward our model and updating for net cash, our valuation is unchanged at SEK2.89bn or SEK6.45/share. Our rNPV is largely driven by our forecast $282m WW peak sales for Apealea contributing SEK3.41/share (c 53%), of which US assumptions form a substantial component (SEK1.17/share) and would be subject to revisions should Elevar’s strategy substantially change.

Valuation and financials

We have rolled our model forward and include net cash of SEK149.7m at 30 September 2021, less SEK24.5m net payment as a result of settling outstanding legal disputes in October with MGC Capital, former board members and former management. We have updated our forecasts to remove the short-term liability relating to the claim made by MGC Capital (SEK80m) which stemmed from it not being able to subscribe for shares by warrants. Likewise, we have removed the receivable relating to a counterclaim held by Oasmia (book value SEK40m). The settlement has a positive effect on our FY21 earnings forecasts of SEK32.5m, relating to the adjustment to fair value for the booked value of the counterclaim (non-cash). Management has guided that monthly cash burn reached c SEK9m during Q321 and cash levels provide a 12-month runway. We believe additional financing will likely be required before end 2022, hence we now include SEK100m of illustrative debt in FY22e.

Our valuation does not include Oasmia’s proprietary technology platform and unconfirmed candidates at an early stage in preclinical development. Consequently, additional indications for Apealea and docetaxel micellar, plus advancing new candidates into the clinic would provide further upside. Oasmia’s valuation is sensitive to the contribution from Apealea (c 53%) and Elevar has notified Oasmia that it is reviewing the previously communicated strategy to commercialise Apealea in the United States. We note that accelerating timelines (expected launch 2025) or expansion into indications beyond advanced ovarian cancer could potentially present upside to our current assumption. For example, as previously illustrated, if we assume $350m peak sales from ‘another cancer indication’ with launch in FY25, 15–20% tiered royalties on sales and cumulative $100m milestones (development, regulatory approval and sales milestones), discounted at 75% probability of success, we yield an additional risk-adjusted NPV of SEK1.53bn or SEK3.42/share.

Exhibit 1: Oasmia SOTP NPV

Product

Indication

Launch

Peak sales ($m)

Value (SEKm)

Probability of success

rNPV (SEKm)

NPV/share (SEK/share)

Apealea US

Ovarian cancer

2025

128

700.2

75%

525.1

1.17

Apealea EU5

Ovarian cancer

2020/22

62

590.8

100%

590.8

1.32

Apealea RoW

Ovarian cancer

2020

92

489.2

90%

440.2

0.98

Docetaxel micellar Global

Prostate cancer

2025

239

1,497.3

25%

385.0

0.86

Cantrixil Global

Ovarian cancer

2027

302

1,131.6

35%

327.3

0.73

Animal health

Multiple cancers

2024

163

995.8

50%

497.9

1.11

Net cash* 

 

125.2*

100%

125.2

0.28

Valuation

 

 

5,530.1

2,891.6

6.45

Source: Edison Investment Research. Note: *SEK149.7m as of 30 September 2021 less net payment of SEK24.5m relating to legal settlements due in Q421.

Exhibit 2: Financial summary

Accounts: IFRS, year-end: 31 December, SEK000s

2019

2020

2019 (8M)

2020 (8M)

2021e

2022e

 

01/05/18– 30/04/19

01/05/19– 30/04/20

01/05/19– 31/12/19

01/05/20– 31/12/20

01/01/21– 31/12/21

01/01/22– 31/12/22

PROFIT & LOSS

 

 

 

 

 

 

Operating revenues

1,980

201,843

565

482

16,500

46,780

Other operating income

755

427

12

2,489

39,904

2,904

Total operating expenses*

(121,966)

(212,324)

(109,641)

(105,536)

(153,548)

(156,142)

EBITDA (reported)

(119,231)

(10,054)

(109,064)

(102,565)

(97,144)

(106,458)

Depreciation and amortisation

(31,005)

(20,032)

(8,193)

(28,930)

(23,336)

(22,953)

Reported operating Income

(150,236)

(30,086)

(117,257)

(131,495)

(120,480)

(129,411)

Operating margin %

N/A

N/A

N/A

N/A

N/A

N/A

Finance income/(expense) excluding lease expense

(18,240)

(12,267)

(8,829)

(8,777)

(7,120)

(9,151)

Leasing expense

0

(1,003)

0

0

(502)

(502)

Exceptionals and adjustments

0

0

0

0

0

0

Reported PBT

(168,476)

(43,356)

(126,086)

(140,272)

(128,101)

(139,064)

Income tax expense (includes exceptionals)

(32,822)

32,822

32,822

0

0

0

Reported net income

(201,298)

(10,534)

(93,264)

(140,272)

(128,101)

(139,064)

Basic average number of shares, m

253.3

398.4

260.4

448.4

448.4

448.4

Year-end number of shares, m

294.6

448.4

447.4

448.4

448.4

448.4

Basic EPS (SEK)

(0.8)

(0.0)

(0.4)

(0.3)

(0.3)

(0.3)

Adjusted EPS (SEK)

(0.7)

0.0

(0.3)

(0.2)

(0.2)

(0.3)

Dividend per share (SEK)

0

0

0

0

0

0

BALANCE SHEET

 

 

 

 

 

 

Property, plant and equipment

14,701

28,014

36,322

17,630

16,067

14,887

Intangible assets

10,497

9,759

10,040

9,197

47,545

51,705

Capitalised development costs

433,130

433,357

433,507

420,334

400,901

381,468

Other non-current assets

2,002

2,002

2,002

302

302

302

Total non-current assets

460,330

473,132

481,871

447,463

464,815

448,362

Cash and equivalents

116,272

201,018

325,658

40,128

13,568

84,041

Short-term investments

0

234,080

0

247,277

97,277

0

Inventories

7,420

28,837

15,833

51,496

16,850

17,535

Trade and other receivables

6,545

43,907

50,634

44,552

10,487

14,325

Other current assets

14,472

24,372

19,863

32,628

32,628

32,628

Total current assets

144,709

532,214

411,988

416,081

170,810

148,529

Non-current loans and borrowings

0

0

0

0

0

100,000

Long-term leasing liabilities

0

8,845

10,183

6,545

6,545

6,545

Other non-current liabilities

32,822

0

0

0

0

0

Total non-current liabilities

32,822

8,845

10,183

6,545

6,545

106,545

Trade and other payables

17,666

22,524

22,570

10,678

8,111

8,440

Current loans and borrowings

139,568

80,000

80,000

80,000

0

0

Short-term leasing liabilities

0

5,320

5,296

4,204

4,204

4,204

Other current liabilities

31,485

69,268

37,321

81,919

64,668

64,668

Total current liabilities

188,719

177,112

145,187

176,801

76,983

77,312

Equity attributable to company

383,498

819,390

738,491

680,197

552,096

413,031

CASH FLOW STATEMENT

 

 

 

 

 

 

Operating Profit/(loss)

(150,236)

(30,086)

(117,257)

(131,495)

(120,480)

(129,411)

Depreciation and amortisation

6,005

13,651

0

0

23,336

22,953

Share based payments

0

120

0

0

0

0

Other adjustments

32,086

12,738

0

0

(32,500)

0

Movements in working capital

(3,657)

1,065

(10,176)

(33,817)

25,893

(4,193)

Interest paid/received

(3,037)

(4,354)

(4,125)

(677)

(5,120)

(7,151)

Income taxes paid

0

0

0

0

0

0

Other financing charges

0

0

0

0

(2,502)

(2,502)

Cash from operations (CFO)

(118,839)

(6,866)

(131,558)

(165,989)

(111,373)

(120,304)

Capex**

(12,031)

(12,873)

(9,749)

(4,366)

(6,500)

(6,500)

Acquisitions & disposals net

0

0

0

0

(34,188)

0

Other investing activities

(2,000)

(275,251)

(40,251)

(10,000)

150,000

97,277

Cash used in investing activities (CFIA)

(14,031)

(288,124)

(50,000)

(14,366)

109,312

90,777

Net proceeds from issue of shares

151,852

401,863

402,951

0

0

0

Movements in debt

81,648

0

0

0

0

100,000

Other financing activities

0

(22,141)

(20,616)

(4,010)

(24,500)

0

Cash from financing activities (CFF)

233,500

379,722

382,335

(4,010)

(24,500)

100,000

Cash and equivalents at beginning of period

15,580

116,272

116,272

201,018

40,129

13,568

Increase/(decrease) in cash and equivalents

100,630

84,732

200,777

(184,365)

(26,561)

70,473

Effect of FX on cash and equivalents

62

15

8

(5,938)

0

0

Cash and equivalents at end of period

116,272

201,019

317,057

10,715

13,568

84,041

Net (debt)/cash

56,704

435,098

325,658

287,405

110,845

(15,959)

Source: Company accounts, Edison Investment Research. Note: From 1 January 2021, Oasmia will use the calendar year as its financial year. *Includes non-capitalised R&D costs. **Includes capitalised development costs.


General disclaimer and copyright

This report has been commissioned by Oasmia Pharmaceutical and prepared and issued by Edison, in consideration of a fee payable by Oasmia Pharmaceutical. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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Level 4, Office 1205

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NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Oasmia Pharmaceutical and prepared and issued by Edison, in consideration of a fee payable by Oasmia Pharmaceutical. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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