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A positive H122 supports clinical activity

Cantargia 31 August 2022 Update
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Cantargia

A positive H122 supports clinical activity

H122 update

Pharma and biotech

31 August 2022

Price

SEK4.39

Market cap

SEK733m

SEK/US$ 10.67

Estimated net cash and short-term investments at end-August 2022 (SEKm)

575.2

Shares in issue

167.0m

Free float

99%

Code

CANT

Primary exchange

Nasdaq Nordic

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(25.3)

(71.9)

(80.1)

Rel (local)

(19.9)

(69.1)

(74.1)

52-week high/low

SEK22.97

SEK4.13

Business description

Cantargia is a clinical-stage biotechnology company based in Sweden. It is developing two assets against IL1RAP, CAN04 and CAN10. CAN04 is being studied in several solid tumours with a main focus on NSCLC and pancreatic cancer. The most advanced trial is in Phase II.

Next events

PanCAN PDAC Phase III study begins

NSCLC Phase III study begins

2023

2023

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Harry Shrives

+44 (0)20 3077 5700

Cantargia is a research client of Edison Investment Research Limited

The interim clinical data in non-small cell lung cancer (NSCLC) and pancreatic duct adenocarcinoma cancer (PDAC) (presented at ASCO 2022) is encouraging, in our view, and Cantargia’s nadunolimab (CAN04) development programme appears to be on track. In H122, the company increased R&D spend to SEK207.1m, from SEK150.1m in H121, as patient enrolment continued in five separate clinical trials. An estimated cash and short-term investments position of SEK575.2m (including the recent rights issue) is anticipated to fund operations into H124, past key readouts from a large portion of the development pipeline. We value Cantargia at SEK7.35bn or SEK44.0 per share compared to SEK6.02bn or SEK60.1 per share previously. The absolute value uplift comes from improved FX, higher net cash and adjustments as we roll our model forward, while our per share figures now include the c 67m new shares from the rights issue.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/20

0.0

(173.1)

(1.94)

0.0

N/A

N/A

12/21

0.0

(370.3)

(3.70)

0.0

N/A

N/A

12/22e

0.0

(393.8)

(2.95)

0.0

N/A

N/A

12/23e

0.0

(367.5)

(2.20)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

ASCO data supports development

Cantargia reported encouraging results for its IL1RAP antibody, nadunolimab, from a Phase IIa trial in NSCLC (CANFOUR) and a Phase I/IIa trial in first-line PDAC (CANFOUR), at ASCO 2022. In this, nadunolimab demonstrated notable improvements over historical response and survival rates in both indications. While these data are interim and were interpreted in comparison to historical results (which must be done with care), we see this as important support for clinical development.

Rights issue extends cash runway

With an estimated cash and short-term investment position of SEK575.2m at end-August 2022 and a H122 burn rate of SEK215.9m, we estimate Cantargia is funded into H124. Our runway considers our updated expense forecasts in light of H122 results. In a turbulent market we see Cantargia’s cash runway as a considerable positive as it affords the company significant flexibility in future development plans, in our view.

Valuation: SEK7.35bn or SEK44.0 per share

Based on a risk-adjusted NPV calculation for CAN04 in NSCLC and PDAC, we value Cantargia at SEK7.35bn or SEK44.0 per share, up from SEK6.02bn or SEK60.1 per share, previously. This largely reflects updated exchange rates and our estimated net cash and short-term investment position of SEK575.2m (including SEK225m from the rights issue). Our per share calculations incorporate the post-rights issue share count of 167.0m versus 100.2m previously.

Valuation

We value Cantargia at SEK7.35bn, or SEK44.0 per share, compared to SEK6.02bn, or SEK60.1 per share, previously. Our valuation is based on a risk-adjusted NPV calculation for nadunolimab in NSCLC (rNPV SEK3.28bn or SEK19.6 per share) and PDAC (rNPV SEK3.51bn or SEK21.0 per share) and reflects an estimated net cash and short-term investment position of SEK575.2m, including SEK225m from the rights issue post-H122. Key assumptions are summarised in Exhibit 1.

Exhibit 1: Cantargia valuation breakdown

Product

 

Launch

Peak Sales ($m)

NPV (SEKm)

NPV/share (SEK)

Probability

rNPV (SEKm)

rNPV/share (SEK)

CAN04 - NSCLC

2026

2,900

11,356.8

68.0

25.0%

3,267.6

19.6

CAN04 - Pancreatic Cancer

2027

1,988

7,981.8

47.8

40.0%

3,509.1

21.0

Estimated Net Cash (including rights issue capital)

575.2

3.4

100%

575.2

3.4

Valuation

 

 

 

19,913.8

119.3

 

7,351.9

44.0

Source: Edison Investment Research

The increase in the absolute valuation is largely due to the increase in the foreign exchange rate and adjustment to cash as we roll our model forward four months. Our valuation incorporates the following rates, 1 EUR/US$ (previously 1.18 EUR/US$) and 10.67 SEK/US$ (previously 8.46 SEK/US$), which have raised our rNPV for both NSCLC and PDAC. These estimates are offset slightly by the anticipated increase in R&D expenses, in line with H122 results. Our per share calculation incorporates the higher post-rights issue share count of 167.0m versus 100.2m, previously. Our remaining underlying assumptions are unchanged.

Financials

As expected, Cantargia reported no revenues in H122. The company’s R&D-related expenses for the period amounted to SEK207.1m, 38% higher than H121 (SEK150.1m), as continued positive data for CAN04 have supported a ramp-up in clinical activities. In total, operating expenses in H122 came to SEK217.6m, contributing to a cash outflow from operations of SEK215.9m over the period. Considering the H122 results, we have increased our total operating expense estimate for FY22 to SEK393.8m from SEK368.5m previously (Exhibit 2). In FY23 we expect R&D-related expenses for decrease from FY22 as some clinical trials in the CAN04 development programme end.

The company reported a cash and short-term investment position of SEK350.2m (SEK114.1m cash, SEK236.1m short-term investments) at the end of June 2022. Including funds raised through the rights issue in August 2022 of SEK225m (as communicated by management) and with a H122 cash burn rate of SEK215.9m, we estimate this will fund the company’s operations into H124. We note that any delays in clinical trials of larger-than-expected expenses could shorten our runway estimate.

Exhibit 2: Financial summary

SEK'000s

2019

2020

2021

2022e

2023e

December

PROFIT & LOSS

Revenue

 

 

0

0

0

0

0

Cost of Sales

0

0

0

0

0

Gross Profit

0

0

0

0

0

Research and development

(97,477)

(158,396)

(352,709)

(372,712)

(350,000)

EBITDA

 

 

(111,577)

(170,697)

(366,821)

(390,358)

(364,024)

Operating Profit (before amort. and excepts.)

 

 

(111,589)

(173,945)

(370,267)

(393,804)

(367,470)

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Other

0

0

0

0

0

Operating Profit

(111,589)

(173,945)

(370,267)

(393,804)

(367,470)

Net Interest

780

860

0

0

0

Profit Before Tax (norm)

 

 

(110,809)

(173,085)

(370,267)

(393,804)

(367,470)

Profit Before Tax (reported)

 

 

(110,809)

(173,085)

(370,267)

(393,804)

(367,470)

Tax

0

0

0

0

0

Profit After Tax (norm)

(110,809)

(173,085)

(370,267)

(393,804)

(367,470)

Profit After Tax (reported)

(110,809)

(173,085)

(370,267)

(393,804)

(367,470)

Average Number of Shares Outstanding (m)

71.1

89.4

100.2

133.6

167.0

EPS - normalised (ore)

 

 

(155.74)

(193.65)

(369.55)

(294.78)

(220.06)

Dividend per share (ore)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

6,868

12,622

9,556

9,556

9,556

Intangible Assets

0

7,360

6,459

6,459

6,459

Tangible Assets

6,868

5,262

3,097

3,097

3,097

Investments

0

0

0

0

0

Current Assets

 

 

159,189

912,892

590,687

432,931

74,001

Stocks

0

0

0

0

0

Debtors

0

0

0

0

0

Cash

39,870

693,354

247,322

160,196

37,400

Other*

119,319

219,538

343,365

272,735

36,601

Current Liabilities

 

 

(23,785)

(30,469)

(66,607)

(69,116)

(69,116)

Creditors

(23,785)

(30,469)

(66,607)

(69,116)

(69,116)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

0

(3,111)

(892)

(892)

(892)

Long term borrowings

0

0

0

0

0

Other long term liabilities

0

(3,111)

(892)

(892)

(892)

Net Assets

 

 

142,272

891,934

532,744

372,479

13,549

CASH FLOW

Operating Cash Flow

 

 

(111,852)

(156,887)

(347,370)

(388,054)

(358,929)

Net Interest

597

500

924

0

0

Tax

0

0

0

0

0

Capex

(6,880)

(890)

0

0

0

Acquisitions/disposals

0

0

0

0

0

Financing

98,037

917,545

0

224,680

(317)

Net (Purchase)/Sale of short-term investments

(16,560)

(106,784)

(99,586)

76,247

236,451

Dividends

0

0

0

0

0

Net Cash Flow

(36,658)

653,484

(446,032)

(87,126)

(122,795)

Opening net debt/(cash)

 

 

(76,528)

(39,870)

(693,354)

(247,322)

(160,196)

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(39,870)

(693,354)

(247,322)

(160,196)

(37,400)

Source: Cantargia company accounts and Edison Investment Research. *Includes short-term investments.


General disclaimer and copyright

This report has been commissioned by Cantargia and prepared and issued by Edison, in consideration of a fee payable by Cantargia. 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 2022 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.

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

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

General disclaimer and copyright

This report has been commissioned by Cantargia and prepared and issued by Edison, in consideration of a fee payable by Cantargia. 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 2022 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.

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

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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