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Data continue to impress in Phase I UV1 study

Ultimovacs 3 September 2021 Update
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Ultimovacs

Data continue to impress in Phase I UV1 study

Clinical data

Pharma & biotech

3 September 2021

Price

NOK98.9

Market cap

NOK3.2bn

Net cash (NOKm) at end Q221

382

Shares in issue

32.0m

Free float

90%

Code

ULTI

Primary exchange

Euronext Oslo

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

31

19.4

101

Rel (local)

28.3

16.2

52.2

52-week high/low

SEK110.8

SEK47.6

Business description

Ultimovacs is a biotechnology company developing novel immunotherapies against cancer. The lead product candidate, UV1, is a peptide-based vaccine against the universal cancer antigen telomerase (hTERT). Around 85% of all cancer types express high levels of hTERT. Therefore, UV1 has a broad potential in a variety of different settings and combinations with other cancer treatments.

Next events

Cohort 1 24-month follow-up data from Phase I trial of UV1 plus CPI in melanoma

Q421

First patient in Phase II DOVACC

Q321

TENDU Phase I trial with second lead asset interim safety data

Q421

Q321 results

11 November 2021

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Sean Conroy

+44 (0)20 3077 5700

Ultimovacs is a research client of Edison Investment Research Limited

The highlight of Ultimovacs’ Q221 analyst call was the presentation of data from the second cohort of patients enrolled in the Phase I trial in melanoma (UV1 plus Keytruda). This is the first Ultimovacs’ trial in the US and the main goals are to gather initial insights on how UV1 combines with a checkpoint inhibitor (CPI) and to test different doses of adjuvant. Ultimovacs has an ongoing Phase II trial in melanoma with a different combination of CPIs. The Phase I trial was therefore not the primary driver in Ultimovacs’ investment case until positive first data were presented at this year’s ASCO conference in June, which came as a surprise. With the caveat that these are still early-stage results from a Phase I trial, the second set of data announced in August 2021 showed a very similar response, which helps maintain our high expectations Our valuation is increased to NOK4.08bn or NOK128/sh (versus NOK114/sh previously).

Year end

Revenue (NOKm)

PBT*
(NOKm)

EPS*
(NOK)

DPS
(NOK)

P/E
(x)

Yield
(%)

12/19

0.0

(61.2)

(2.67)

0.0

N/A

N/A

12/20

0.0

(120.6)

(3.98)

0.0

N/A

N/A

12/21e

0.0

(152.5)

(4.77)

0.0

N/A

N/A

12/22e

0.0

(159.0)

(4.97)

0.0

N/A

N/A

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

Another set of good data and…

After the minimum 12-month follow-up period, in cohort 2 (n=10) the overall response rate (ORR) was 60% (six out of 10 patients), of which 30% were complete responses (CRs; 3/10), so these results match those in cohort 1 presented at ASCO. The overall survival (OS) rate was 90% after 12 months of follow-up. Median progression-free survival (mPFS) was not reached. The safety and tolerability profile was good and Ultimovacs confirmed that it will continue to use the higher dose of the adjuvant in its ongoing Phase II programme. For comparison, Phase III trials of Keytruda in advanced melanoma and post-hoc analyses after approval show that the ORR was 33–37% and CR 5–12%, with mPFS at 5.5–11.6 months.

…it’s only just the beginning

The next catalyst is the 24-month follow up data from cohort 1, which is expected in Q421. The final readout (24 months of follow-up) from both cohorts is expected sometime in 2022. This will be a significant catalyst and set expectations for Ultimovacs’ Phase II trial INITIUM (n=154), where patients in the active arm are treated with triple combination UV1 plus nivolumab plus ipilimumab. Readouts are expected in 2022 and 2023 from most or all trials and all are within cash reach, so Ultimovacs is entering an active newsflow period.

Valuation: NOK4.08bn or NOK128 per share

Our updated valuation is NOK4.08bn or NOK128 per share (versus NOK3.65bn or NOK114.1 per share previously). After a second set of strong data, we increase the price of UV1 to $110k per patient per year from $90k in our model (in the US; 50% discount in Europe), which is the main reason for the increase in valuation. For comparison, Keytruda’s cost is estimated at $150k in the US. Rolling the model forward largely offsets the lower net cash position.

Phase I trial in melanoma: Cohort 2 data review

On 12 August 2021, Ultimovacs reported the second set of data from a different group of patients (cohort 2) enrolled into a Phase I trial of UV1 in advanced melanoma in combination with Keytruda. This study is in the US, where Ultimovacs is exploring two different doses of adjuvant to establish its effect on the safety profile (adjuvants can cause rare, but significant allergic reactions). There are two arms with different levels of adjuvant: 37.5µg (cohort 1, 20 patients) and 75µg (cohort 2, 10 patients) (Exhibit 1A). The first set of data from cohort 1 was announced on 19 May 2021 and presented in detail at this year’s ASCO conference in June (see our review of the data). The results of the first set of data were:

After the minimum 18-month follow-up period (median of 21 months), CRs were achieved in 30% (n=6 out of 20) of patients, where the tumour was reduced to an undetectable level. Partial responses were seen in another five patients, resulting in 55% ORR (11 out of 20). Note that one patient with a partial response in cohort 1 was reclassified to stable disease after the original press release.

The median mPFS was 18.9 months and the OS was 85% (after 12 months of follow-up).

The second set of data announced on 12 August include:

After the minimum 12-month follow-up period, in cohort 2 (n=10) ORR was 60% (six out of 10 patients), of which 30% were CRs (3/10), so these results match those in cohort 1.

OS rate was 90% after 12 months of follow-up. The mPFS was not reached.

The safety and tolerability profile was good and Ultimovacs confirmed that it will continue to use the higher dose of the adjuvant in its ongoing Phase II programme.

Exhibit 1 summarises the pooled data from both cohorts.

Exhibit 1: Design and interim data from the Phase I melanoma trial in the US

Source: Ultimovacs. Note: 1, 2Robert et al, 2019, see text.

Our view

Keytruda’s (pembrolizumab, anti-PD-1, Merck & Co; global sales of $14.4bn in 2020, consensus forecast of $27.0bn sales in 2026) development helps to put these results in context. Phase III trials of Keytruda in advanced melanoma and post-hoc analyses after approval showed that the ORR was 33–37% and CR 5–12%, with mPFS at 5.5–11.6 months (Robert et al 2019; FDA label). Therefore, the benefit of the addition of UV1 seems to be very strong. These new data are still at an early stage and the comparison is against historical data. However, we find the large difference reassuring. In addition, this second set of results closely follows the first, which gives us confidence in the company’s existing R&D strategy (UV1 in combination with CPIs. We note that the scientific rationale for cancer vaccines is to increase the durability of response, so there is potential for overall survival data to surprise again.

Flurry of catalysts ahead

The next catalyst is 24-month follow-up data from cohort 1, which is expected in Q421. The final readout (24 months of follow up) from both cohorts is expected sometime in 2022. This will be a significant catalyst and set expectations for Ultimovacs’ Phase II trial INITIUM (n=154), where melanoma patients in the active arm are treated with triple combination UV1 plus nivolumab plus ipilimumab. We also believe there is read across to other cancer types as long as tumours express telomerase and are known to respond to CPI treatment. Readouts are expected in 2022 and 2023 from most or all trials (Exhibit 2) and all are within cash reach, so Ultimovacs is entering an active newsflow period in the next two to three years.

Exhibit 2: R&D pipeline

Source: Ultimovacs

R&D pipeline progress update

Ultimovacs’ R&D strategy is to combine UV1 with CPIs due to an expected synergy. The current Phase II programme includes four Phase II trials:

The INITIUM trial (n=154) with UV1 plus ipilimumab and nivolumab in first-line metastatic melanoma. As of 19 August 2021, 68 patients were enrolled versus 40 patients in the Q121 report. The trial is fully sponsored by the company and results are expected in H222.

The NIPU trial (n=118) with the same combination as above in second-line mesothelioma. As of 19 August 2021, 38 patients were enrolled versus 29 patients in the previous quarterly report. The trial is led by Oslo University Hospital network, with combination drugs supplied by Bristol-Myers Squibb. Results are expected in H222.

The DOVACC trial (n=184) with UV1 plus durvalumab and olaparib in second-line maintenance in ovarian cancer. Regulatory approval is in place, with the first patient expected during Q321. The trial is led by the Nordic Society of Gynaecological Oncology (NGSO) supported by the European Network of Gynaecological Oncological Trial Groups (ENGOT), with drugs supplied by AstraZeneca. Results are expected in 2023.

The FOCUS trial (n=75) with UV1 plus standard-of-care pembrolizumab in first-line head and neck cancer. First patient enrolled in July 2021. The trial is led by University of Medicine Halle, part of Martin Luther University. Results are expected in 2023.

These trials will enrol a total of more than 500 patients. Approximately 100 patients have been recruited during the past 12 months, which included the peak pandemic months in many Western countries where Ultimovacs has active centres. So, although trial enrolment is still affected by the pandemic to some extent, overall progress has been good so far. The previously guided readout timelines remain unchanged.

Phase I TENDU: Good safety profile in first cohort of patients

In addition, Ultimovacs has made progress with its second lead asset from the TET platform. Enrolment of the first cohort of three prostate cancer patients to Phase I trial TENDU and treatment with the lowest dose is complete. There were no safety concerns and the trial is enrolling the second cohort of patients, who will be treated with a higher dose.

The platform technology is different from UV1. TET is a first-in-class cancer vaccine solution using the proprietary Tetanus-Epitope Targeting (TET) platform technology. The TET technology represents a new mechanism of action, where vaccine immunisation builds on the patient’s existing antibodies from the common tetanus vaccination in childhood. This is a highly differentiated and novel approach that allows adjuvant and vaccine to be incorporated into one molecule.

Valuation

Our updated valuation is NOK4.08bn or NOK128 per share (NOK3.65bn or NOK114.1 per share per share). The emerging picture of UV1 benefit gives us confidence and we increase the cost of UV1 to $110k per patient per year from $90k in our model (in the US market; we apply a 50% discount in Europe), which is the main reason for the increase in valuation (in our last note, after the first set of data were announced, we increased the success probability to 25% from 20%). For comparison, Keytruda’s cost is estimated at $150k in the US.

Our valuation is based on risk-adjusted NPV analysis using a 12.5% discount rate, including net cash of NOK382m at end-Q221. Our model includes four rNPV projects, with UV1 being evaluated in Phase II trials in all four indications. We use a bottom-up approach to calculate the market sizes and industry average data for the basis of our other assumptions. More details can be found in our recent initiation report.

Exhibit 3: Valuation of Ultimovacs

Product

Launch

Peak sales*
($m)

NPV (NOKm)

NPV/share (NOK/share)

Probability

rNPV (NOKm)

rNPV/share (NOK/share)

UV1 – malignant melanoma

2028

1,230

3,521.5

110.1

25.0%

1,075.2

33.6

UV1 – mesothelioma

2028

560

1,679.4

52.5

25.0%

531.8

16.6

UV1 – ovarian cancer

2028

764

2,250.9

70.4

25.0%

732.7

22.9

UV1 – H&N cancer

2028

1,330

4,093.5

128.0

25.0%

1,363.0

42.6

Net cash, last reported

 

 

381.8

11.9

100.0%

381.8

11.9

Valuation

 

 

11,927.1

373.0

4,084.6

127.7

Source: Edison Investment Research. Note: Peak sales rounded to the nearest $10m.

Financials

Ultimovacs reports no revenues, while operating spend was NOK70.4m in H121, slightly up from NOK67.4m in H120. The operating spend should increase somewhat in H221, as more Phase II trials have been initiated. This is reflected in our forecasts for total opex of NOK157m and NOK163m in 2021 and 2022, respectively, versus total spend of NOK124m in 2020.

The company had cash of NOK382m at the end of Q221 and no debt. According to Ultimovacs, and in line with our model, the cash will be sufficient to fund budgeted activities until 2023. By that time, readouts from all four Phase II trials should be announced, which will be significant catalysts for the share price.

Exhibit 4: Financial summary

Year end 31 December

NOK'000s

2018

2019

2020

2021e

2022e

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Total revenues

0

0

0

0

0

Cost of sales

0

0

0

0

0

Gross profit

0

0

0

0

0

SG&A (expenses)

(27,078)

(20,160)

(50,989)

(58,637)

(60,103)

R&D costs

(28,844)

(43,995)

(70,438)

(95,091)

(99,846)

Other income/(expense)

0

0

0

0

0

Exceptionals and adjustments

 

0

0

0

0

0

Reported EBITDA

 

(55,922)

(64,155)

(121,427)

(153,729)

(159,949)

Depreciation and amortisation

(601)

(2,063)

(2,720)

(3,114)

(2,991)

Reported Operating Profit/(loss)

(56,523)

(66,218)

(124,147)

(156,842)

(162,940)

Finance income/(expense)

1,242

5,051

3,593

4,322

3,958

Other income/(expense)

0

0

0

0

0

Exceptionals and adjustments

0

0

0

0

0

Reported PBT

(55,281)

(61,167)

(120,554)

(152,520)

(158,983)

Income tax expense

0

0

0

0

0

Reported net income

 

(55,281)

(61,167)

(120,554)

(152,520)

(158,983)

Basic average number of shares, m

15.6

22.9

30.3

32.0

32.0

Basic EPS (NOK)

 

(3.55)

(2.67)

(3.98)

(4.77)

(4.97)

Diluted EPS, (NOK)

(3.55)

(2.67)

(3.98)

(4.77)

(4.97)

BALANCE SHEET

Property, plant and equipment

 

736

536

377

359

341

Intangible assets

56,418

55,519

64,551

61,737

59,046

Other non-current assets

0

3,523

3,630

3,630

3,630

Total non-current assets

68,135

70,429

80,353

77,521

74,812

Cash and equivalents

 

115,540

399,607

440,925

299,590

149,304

Trade and other receivables

0

0

0

0

0

Other current assets

6,184

8,004

8,438

8,438

8,438

Total current assets

121,724

407,611

449,363

308,028

157,742

Non-current loans and borrowings*

0

0

0

0

0

Total non-current liabilities

 

10,981

13,152

13,870

13,870

13,870

Trade and other payables

 

2,978

11,768

8,611

10,190

9,400

Other current liabilities

15,996

7,164

17,149

17,149

17,149

Total current liabilities

18,974

20,257

27,467

29,046

28,256

Equity attributable to company*

159,904

444,632

488,380

342,637

190,431

CASH FLOW

Operating Profit/(loss)

 

(56,523)

(66,218)

(124,147)

(156,842)

(162,940)

Depreciation and amortisation

601

2,063

2,720

3,114

2,991

Other adjustments

0

0

0

0

0

Movements in working capital

5,528

(1,862)

6,395

1,579

(789)

Interest paid / received

0

0

0

0

0

Income taxes paid

0

0

0

0

0

Cash from operations (CFO)

(50,389)

(62,989)

(108,224)

(141,051)

(150,004)

Capex

(513)

(172)

(282)

(282)

(282)

Acquisitions & disposals net

 

0

0

0

0

0

Other investing activities

1,247

4,490

(455)

0

0

Cash used in investing activities (CFIA)

(3,852)

4,318

(737)

(282)

(282)

Net proceeds from issue of shares

0

344,582

152,933

0

0

Movements in debt

0

0

0

0

0

Other financing activities

0

(1,579)

(1,916)

0

0

Cash from financing activities (CFF)

0

343,003

151,017

0

0

Increase/(decrease) in cash and equivalents

(54,269)

284,067

41,317

(141,333)

(150,286)

Cash and equivalents at beginning of period

169,808

115,539

399,606

440,923

299,590

Cash and equivalents at end of period

115,539

399,606

440,923

299,590

149,304

Net (debt) cash

115,540

399,607

440,925

299,590

149,304

Source: Ultimovacs accounts, Edison Investment Research. Note: *Long-term debt used instead of equity issue.


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

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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

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

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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

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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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