cells

Fast Track designation granted by FDA

RhoVac 27 November 2020 Update
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RhoVac

Fast Track designation granted by FDA

R&D update

Pharma & biotech

27 November 2020

Price

SEK18.8

Market cap

SEK357m

Net cash (SEKm) at end-Q320

97.5

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

5.2

3.6

30.6

Rel (local)

(6.7)

(2.6)

36.4

52-week high/low

SEK20.75

SEK8.75

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

Q221

Phase IIb BRaVac interim results

Early-2022

Start of exploratory clinical study in other cancer indications

H220

Updates on partnering process

2021/22

Analyst

Jonas Peciulis

+44 (0)20 3077 5728

RhoVac is a research client of Edison Investment Research Limited

Following the submission of an application in September, the US FDA has now granted Fast Track designation to RhoVac’s lead drug RV001. Although we had expected this, it indicates a third-party validation for RhoVac and its ongoing clinical programme. Importantly, this designation should make RV001 more appealing to potential partners, given it eases some of the regulatory processes ahead. Other developments include the news that RhoVac’s Phase I/II data have been published in a peer-reviewed article, which gave some additional details. The COVID-19 pandemic continues to cause delays, but the BRaVac study timelines still fit within the existing budget. Our valuation is SEK64.2/share (vs SEK61.8/share).

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/18

0.0

(20.2)

(1.95)

0.0

N/A

N/A

12/19

6.0

(35.9)

(1.55)

0.0

N/A

N/A

12/20e

12.0

(37.4)

(2.19)

0.0

N/A

N/A

12/21e

8.0

(41.6)

(2.61)

0.0

N/A

N/A

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

Fast Track designation benefits

The benefits of Fast Track designation include more frequent meetings and written correspondence with the FDA, potential for accelerated approval or priority review if additional criteria are met, and rolling review, which means a company can submit completed sections of its Biologic License Application (BLA) for review by the FDA, rather than waiting until the full application is complete.

Phase I data published in a peer-reviewed article

RhoVac obtained another form of external validation when a peer-reviewed article with the Phase I/II results was published in the Journal Of ImmunoTherapy of Cancer (JITC) in November. Full results had previously been published via a press release, but this publication also included some new PSA data as well as in-depth analysis of the pharmacodynamic results (more details below).

COVID-19-related delays covered with existing funds

The COVID-19 pandemic’s second wave is causing delays with clinical trials across the board. In October, RhoVac issued an update on the recruitment into its Phase IIb BRaVac prostate cancer trial, which has continued to be adversely affected by the ongoing pandemic. Based on current estimates, full recruitment into the trial is now expected during Q221 (from Q420), which pushes out the expected timing for key interim data to early-2022 (from Q421), but still within the existing budget.

Valuation: SEK1.22bn or SEK64.2/share

Our RhoVac valuation is higher at SEK1.22bn or SEK64.2/share due to rolling the model forward and a lower cash position (SEK97.5m at end-Q320). The slight delay in expected interim data from the Phase IIb trial does not affect our valuation, given this is primarily focused on the licensing potential, which we still expect could happen during 2022.

Published article provides granular Phase I/II review

Information about the Phase I/II study of RV001 and the results that have been released so far can be found in our outlook report published in October 2020. The Phase I/II clinical study included 22 patients who had previously undergone radical prostatectomy. These patients received injections subcutaneously with RV001 for a total of 30 weeks.

After a long-term follow up of the 21 evaluable patients, 18 (86%) had shown a robust, polyfunctional CD4+ T cell response during vaccination, with three HLA-class II epitopes identified relating to RV001. CD8+ response was observed in one patient (1/21 or 5%) and this was restricted to one HLA class-I epitope. These immunological effects were durable, with responses detectable for at least 10 months post vaccination.

Prostate-specific antigen (PSA) doubling time – the time it takes for the PSA level to double – versus pre-study levels is considered an effective surrogate endpoint for a clinical effect in prostate cancer. Despite the trial not being designed to investigate clinical response, PSA levels were still monitored throughout the course of the Phase I/II study. Only two patients had measurable levels of PSA at the base line, so the PSA doubling is not evaluable in other patients. The investigators saw that in these two patients the PSA doubling time increased during the course of the study (in one patient from 1.3 to 2.1 years and in the second patient from 1.95 to 3.8 years). This would imply a clinical response to treatment. Although the results from these two patients are anecdotal (only two cases), the fact that both patients had delayed progression is intriguing, in our view. In the ongoing Phase IIb BRaVac trial, the inclusion criteria are designed to recruit patients with measurable PSA levels at the base line. A clearer picture on PSA doubling time will come from this trial, which is powered to show this effect as the primary endpoint.

Overall, we view the Phase I/II results as positive, as RV001 looks to be a very safe treatment and elicits a long-lasting immune response in a large majority of patients. So, RV001 appears to do what it was designed for. The question of whether this CD4 biased immune activation induced by RV001 can translate into clinical efficacy will be addressed in a controlled Phase IIb trial. There is an ongoing debate in the scientific community about the extent to which CD4+ and CD8+ are involved in the anti-cancer response. The authors of the article published in the JITC in November argued that ‘CD4 T cells are crucial for CD8 T cell activation and expansion, as well as for the generation and maintenance of CD8 T cell memory; They also display a range of antitumoral effects, such as secretion of tumour necrosis factor and interferon-γ activation of macrophages or natural killer cells and direct cytotoxicity’.

Financials and valuation

Operating costs in the first nine months of 2020 (9M20) were SEK37.5m vs SEK41.9m a year ago. The Phase IIb BRaVac study started recruiting patients in November 2019, so in 2020 and 2021 we expect stable cash burn. Our operating cost estimates for 2020 and 2021 are SEK50m. Tax credits in 9M20 were SEK6.8m versus SEK6.7m in 9M19. The reported end-Q320 cash position was SEK97.5m with no interest-bearing debt. Our estimates are unchanged.

Our RhoVac valuation (Exhibit 1) is higher at SEK1.22bn or SEK64.2/share, versus SEK1.18bn or SEK61.8/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

5,432.7

15%

1,225.8

59.1

Net cash, last reported

97.5

100%

97.5

5.1

Valuation

5,530.2

1,223.2

64.2

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

To model a successful Phase IIb outcome, as an indicative scenario we have set the model to a future date (1 January 2022) and increased the technological success probability to 40% from 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 (which are currently set only at 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 provides a sensitivity analysis.

Exhibit 2: Valuation per share sensitivities in positive Phase IIb study scenarios

Comparable licensing deal value adjustment

60%

80%

100%

Valuation per share (SEK)

184

215

245

Source: Edison Investment Research

Exhibit 1: Financial summary

SEK000s

 

2018

2019

2020e

2021e

Year-end 31 December

Local GAAP

Local GAAP

Local GAAP

Local GAAP

PROFIT & LOSS

Revenue

 

 

0

5,979

12,000

8,000

Cost of Sales

0

0

0

0

Gross Profit

0

5,979

12,000

8,000

Research and development

(19,154)

(38,570)

(50,000)

(50,000)

EBITDA

 

 

(20,148)

(36,325)

(37,997)

(41,992)

Operating Profit (before amort. and except.)

 

 

(20,148)

(36,325)

(38,000)

(42,000)

Intangible Amortisation

0

0

0

0

Exceptionals

0

0

0

0

Other

0

0

0

0

Operating Profit

(20,148)

(36,325)

(38,000)

(42,000)

Net Interest

(64)

382

577

363

Profit Before Tax (norm)

 

 

(20,212)

(35,943)

(37,423)

(41,637)

Profit Before Tax (reported)

 

 

(20,212)

(35,943)

(37,423)

(41,637)

Tax

2,936

3,837

7,900

0

Profit After Tax (norm)

(17,276)

(32,106)

(29,523)

(41,637)

Profit After Tax (reported)

(17,276)

(32,106)

(29,523)

(41,637)

Average Number of Shares Outstanding (m)

8.9

14.3

19.0

19.0

EPS - normalised (ore)

 

 

(195.00)

(155.00)

(219.00)

(261.00)

EPS - normalised and fully diluted (SEK)

 

 

(1.95)

(2.25)

(1.55)

(2.19)

EPS - (reported) (SEK)

 

 

(1.95)

(2.25)

(1.55)

(2.19)

Dividend per share (SEK)

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

100.0

100.0

100.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

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

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

2,848

3,021

3,021

3,021

Intangible Assets

2,848

3,021

3,021

3,021

Tangible Assets

0

0

0

0

Investments

0

0

0

0

Current Assets

 

 

20,372

149,928

119,431

77,239

Stocks

0

0

0

0

Debtors

240

14,391

14,391

14,391

Cash

16,060

129,543

99,046

56,854

Other

4,071

5,994

5,994

5,994

Current Liabilities

 

 

(4,380)

(12,574)

(12,574)

(12,574)

Creditors

(4,380)

(12,574)

(12,574)

(12,574)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(596)

(624)

(624)

(624)

Long term borrowings

0

0

0

0

Other long term liabilities

(596)

(624)

(624)

(624)

Net Assets

 

 

18,245

139,751

109,254

67,062

CASH FLOW

Operating Cash Flow

 

 

(17,097)

(43,309)

(37,997)

(41,992)

Net Interest

(64)

(1,834)

200

200

Tax

2,229

2,986

7,900

0

Capex

0

0

(600)

(400)

Acquisitions/disposals

0

0

0

0

Financing

21,756

154,715

0

0

Other

(191)

925

0

0

Dividends

0

0

0

0

Net Cash Flow

6,632

113,483

(30,497)

(42,192)

Opening net debt/(cash)

 

 

(9,428)

(16,060)

(129,543)

(99,046)

HP finance leases initiated

0

0

0

0

Other

(0)

0

0

0

Closing net debt/(cash)

 

 

(16,060)

(129,543)

(99,046)

(56,854)

Source: RhoVac’s accounts, Edison Investment Research


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 2020 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 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 2020 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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