COVID-19 vaccines versus RV001

RhoVac 26 April 2021 Update
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RhoVac

COVID-19 vaccines versus RV001

FY20 results

Pharma & biotech

26 April 2021

Price

SEK18.6

Market cap

SEK354m

Net cash (SEKm) at end-2020

77.5

Shares in issue

19.0m

Free float

84%

Code

RHOV

Primary exchange

Spotlight Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.1)

(26.2)

78.5

Rel (local)

(10.9)

(30.1)

34.6

52-week high/low

SEK27.3

SEK11.4

Business description

RhoVac is an immunotherapy company listed on the Spotlight stock market in Sweden, with a 100%-owned subsidiary in Denmark. It is developing a peptide-based immunotherapy, RV001, which aims to train the immune system to specifically target cancer cells with metastatic potential. This is a novel approach that could have utility across a range of cancer settings.

Next events

Phase IIb BRaVac study fully enrolled

Q321

Phase IIb BRaVac interim results

2022

Updates on partnering process

2021/22

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Sean Conroy

+44 (0)20 3077 5700

RhoVac is a research client of Edison Investment Research Limited

While returning clinical practice to normality is unequivocally desired by all stakeholders, the somewhat paradoxical consequence of the global roll-out of COVID-19 vaccines has been an unavoidable disruption to the routine administration of other vaccines. RhoVac reported in March 2021 that as the COVID-19 vaccine was being rolled out in the age brackets of the ongoing Phase II BRaVac trial, the treatment with RV001 had to be delayed, albeit only by one quarter. The trial readout is still achievable within the existing budget and management has reported no other disruptions to the trial. Our valuation is slightly higher at SEK68.5/share (versus SEK64.2/share).

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/19

6.0

(36.1)

(2.33)

0.0

N/A

N/A

12/20

6.0

(46.9)

(2.06)

0.0

N/A

N/A

12/21e

7.9

(41.7)

(1.79)

0.0

N/A

N/A

12/22e

5.9

(38.9)

(1.64)

0.0

N/A

N/A

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

COVID-19 vaccine rollout effect on BRaVac enrolment

Current guidance on COVID-19 vaccines from the US CDC’s Advisory Committee on Immunization Practices is to allow for a minimum of 14 days before or after the administration of any other vaccine. As a result, full recruitment into RhoVac’s Phase IIb BRaVac trial has now been pushed back to Q321 (from Q221), so a minor delay. This should be mitigated to some extent by the opening of new trial centres with the latest addition being Mount Sinai Hospital, New York, which started enrolling patients this month. Sites in six other European nations are also up and running.

Funding in place for key readout poised for mid-2022

According to RhoVac, and in line with our modelling, current funding should still be sufficient to complete the Phase IIb BRaVac trial. The primary endpoint is time to PSA progression, defined as the time from randomisation to the doubling of PSA from the baseline value. Key interim results are expected around mid-2022, while 12-month follow-up data in patients without further RV001 treatment should be ready a year later. Our detailed description of the investment case can be found in our latest outlook report.

Valuation: SEK1.30bn or SEK68.5/share

Our RhoVac valuation is higher at SEK1.30bn or SEK68.5/share due to rolling the model forward offset by a lower cash position (SEK77.5m at end-2020). The slight delay in the interim data readout from the Phase IIb trial does not affect our valuation as the company expects the readout is still achievable with existing funds.

Financials and valuation

With its FY20 results RhoVac reported income of SEK6.0m, which was the allocated portion of the EU Horizon 2020 grant (a total of €2.5m or c SEK27m, of which SEK12m had been received by the end of 2020). Operating costs in FY20 were SEK53.5m versus SEK42.5m a year ago reflecting the continued R&D uplift as new patients are enrolled into the BRaVac study, despite the COVID-19 headwinds outlined above. In 2021 and 2022 we forecast spending will continue at a similar level at c SEK45–50m, partly offset by the remaining instalments expected from the EU Horizon 2020 grant.

The reported end-2020 cash position was SEK77.5m and with no interest-bearing debt. RhoVac will still receive the remaining part of the grant (c SEK15m) and expects around SEK18m in tax credits during the duration of the BRaVac trial. These expected amounts plus pre-paid expenses of SEK15m (current asset on the balance sheet) mean that the total expected funding is around SEK125m, which is sufficient to complete the ongoing Phase IIb study.

Our RhoVac valuation (Exhibit 1) is higher at SEK1.30bn or SEK68.5/share, versus SEK1.22bn or SEK64.2/share, due to rolling the model forward, which offset the lower cash position. Detailed assumptions for our risk-adjusted net present value (rNPV) model can be found in our most recent Outlook note.

Exhibit 1: Sum-of-the-parts RhoVac valuation

Product

Launch

Peak sales
(US$m)

Unrisked NPV (SEKm)

Technology probability (%)

rNPV
(SEKm)

rNPV/share (SEK)

RV001 – prostate cancer

2027

1,775

5,415.0

15%

1,227.0

64.4

Net cash, last reported

77.5

100%

77.5

4.1

Valuation

5,492.6

1,304.6

68.5

Source: Edison Investment Research. Note: WACC = 12.5% for product valuations.

In Exhibit 2 below we provide a sensitivity analysis that looks at the potential effect on our valuation of a successful Phase IIb outcome, by rolling forward our model to several future dates during 2022 when the BRaVac data might become available. Assuming the data are positive, we would expect to increase the technological success probability to 40% from our current base case of 15%. Because a successful Phase IIb outcome would also be the first clinical proof-of-concept, we believe this would increase RV001’s potential in other indications. This would allow us to reflect a larger portion of comparable deal economics (currently adjusted at a conservative 40%, as explained in our last published outlook report). There are no historical comparators as to how much this portion should increase, so we will review the totality of data (RhoVac may also conduct preclinical studies in other indications in parallel to the Phase IIb trial).

Exhibit 2: Phase IIa BRaVac trial read-out sensitivity analysis on RV001’s rNPV (SEK/share)

Discount to licensing deal economics

rNPV

10%

20%

40%

80%

100%

Readout timing

May 2022

101.5

117.1

148.2

210.5

241.6

June 2022

102.5

118.3

149.7

212.6

244.0

July 2022

103.5

119.4

151.2

214.7

246.4

August 2022

104.6

120.6

152.7

216.8

248.9

Source: Edison Investment Research

Exhibit 3: Financial summary

SEK'000s

 

2018

2019

2020

2021e

2022e

December

Local GAAP

Local GAAP

Local GAAP

Local GAAP

Local GAAP

PROFIT & LOSS

Revenue

 

 

0

5,979

6,012

7,926

5,945

Cost of Sales

0

0

0

0

0

Gross Profit

0

5,979

6,012

7,926

5,945

Research and development

(19,154)

(38,743)

(45,974)

(50,000)

(45,000)

EBITDA

 

 

(20,148)

(36,498)

(47,468)

(42,074)

(39,055)

Operating Profit (before amort. and except.)

 

 

(20,148)

(36,498)

(47,468)

(42,074)

(39,055)

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Other

0

0

0

0

1

Operating Profit

(20,148)

(36,498)

(47,468)

(42,074)

(39,054)

Net Interest

(64)

382

577

363

148

Profit Before Tax (norm)

 

 

(20,212)

(36,116)

(46,891)

(41,711)

(38,907)

Profit Before Tax (reported)

 

 

(20,212)

(36,116)

(46,891)

(41,711)

(38,906)

Tax

2,936

3,837

7,744

7,700

7,700

Profit After Tax (norm)

(17,276)

(32,279)

(39,147)

(34,011)

(31,206)

Profit After Tax (reported)

(17,276)

(32,279)

(39,147)

(34,011)

(31,206)

Average Number of Shares Outstanding (m)

8.9

13.9

19.0

19.0

19.0

EPS - normalised (SEK)

 

 

(1.95)

(2.33)

(2.06)

(1.79)

(1.64)

EPS - normalised and fully diluted (SEK)

 

 

(1.95)

(2.33)

(2.06)

(1.79)

(1.64)

EPS - (reported) (SEK)

 

 

(1.95)

(2.33)

(2.06)

(1.79)

(1.64)

Dividend per share (SEK)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

100.0

100.0

100.0

100.0

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

 

 

2,848

0

0

0

0

Intangible Assets

2,848

0

0

0

0

Tangible Assets

0

0

0

0

0

Investments

0

0

0

0

0

Current Assets

 

 

20,372

149,928

101,947

69,742

37,363

Stocks

0

0

0

0

0

Debtors

240

14,391

14,619

15,201

11,401

Cash

16,060

129,543

77,524

44,737

16,158

Other

4,071

5,994

9,804

9,804

9,804

Current Liabilities

 

 

(4,380)

(12,574)

(7,147)

(9,116)

(7,942)

Creditors

(4,380)

(12,574)

(7,147)

(9,116)

(7,942)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(596)

0

0

0

0

Long term borrowings

0

0

0

0

0

Other long term liabilities

(596)

0

0

0

0

Net Assets

 

 

18,245

137,354

94,800

60,627

29,421

CASH FLOW

Operating Cash Flow

 

 

(17,097)

(43,482)

(53,838)

(40,687)

(36,428)

Net Interest

(64)

(1,834)

(468)

200

148

Tax

2,229

2,986

3,808

7,700

7,700

Capex

0

0

0

0

0

Acquisitions/disposals

0

0

0

0

0

Financing

21,756

154,715

0

0

0

Other

(191)

1,098

(1,521)

0

0

Dividends

0

0

0

0

0

Net Cash Flow

6,632

113,483

(52,019)

(32,787)

(28,579)

Opening net debt/(cash)

 

 

(9,428)

(16,060)

(129,543)

(77,524)

(44,737)

HP finance leases initiated

0

0

0

0

0

Other

(0)

0

0

0

0

Closing net debt/(cash)

 

 

(16,060)

(129,543)

(77,524)

(44,737)

(16,158)

Source: RhoVac accounts, Edison Investment Research


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This report has been commissioned by RhoVac and prepared and issued by Edison, in consideration of a fee payable by RhoVac. Edison Investment Research standard fees are £49,500 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

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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.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

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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

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 RhoVac and prepared and issued by Edison, in consideration of a fee payable by RhoVac. Edison Investment Research standard fees are £49,500 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.

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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