On the road to becoming a clinical company

Nuevolution 24 November 2017 Update
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Nuevolution

On the road to becoming a clinical company

July to September 2017 results

Pharma & biotech

24 November 2017

Price

SEK18.5

Market cap

SEK794m

SEK8.43/US$

Net cash (SEKm) at 30 September 2017

142.3

Shares in issue

42.9m

Free float

56%

Code

NUEV

Primary exchange

Nasdaq First North Premier

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.5)

20.1

87.8

Rel (local)

2.2

15.8

69.4

52-week high/low

SEK22.6

SEK9.7

Business description

Nuevolution is a Copenhagen-based biopharmaceutical company. Its patent-protected Chemetics drug discovery platform enables the selection of drugs to an array of tough-to-drug disease targets. To date it has entered into 17 agreements with major pharmaceutical companies.

Next events

Up-list to Nasdaq Stockholm Main Market

FY18

Sign new out-licence/risk-sharing collaboration

FY18

Move one programme into the clinic

2018

Analysts

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Dr Susie Jana

+44 (0)20 3077 5700

Nuevolution is a research client of Edison Investment Research Limited

July to September 2017 results highlight the continued progression of Nuevolution into a clinical company. Ongoing partnerships with Almirall, Amgen and Janssen continue to advance as we expect and we anticipate that Almirall’s RORγt inhibitor programme will be the first Nuevolution asset to enter the clinic (in dermatology and psoriatic arthritis), which we forecast for H218/H119. Lead assets in the internal pipeline are nearing clinical readiness and Nuevolution anticipates a new partnership in the next three to 12 months. In the near term, up-listing to Nasdaq Stockholm’s Main Market and expansion of the investor base will position the company for future development. We value Nuevolution at SEK917m.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

06/16

21.3

(151.9)

(4.0)

0.0

N/A

N/A

06/17

120.3

(9.4)

(0.6)

0.0

N/A

N/A

06/18e**

182.8

45.9

0.7

0.0

N/A

N/A

06/19e**

133.9

(7.0)

(0.1)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Nuevolution has announced a change in year end to December, which we will take into account once reported.

Collaborations continue to provide validation

Nuevolution’s core collaborations continue to progress as expected. In vivo proof of concept is expected in two cancer programmes in the Amgen collaboration within the next three to six months. In the Almirall collaboration we expect Nuevolution to give a detailed update on the programme in H118; we forecast that it will enter the clinic in H218/H119. Nuevolution’s unpartnered assets are progressing well to clinical readiness, the RORγt inhibitor (outside Almirall-licensed indications) is in ongoing API production and the company expects to select the optimal indication for clinical development by year end. The BET BD1 programme is following closely behind with API production expected to start in H118. Nuevolution expects to announce a new collaboration/licensing deal in the next 3-12 months.

Financials: Financed into 2019

For the three-month period covering July to September 2017 operating expenses increased to 31.9m from SEK29.5m in 2016. This resulted in an increased net loss of SEK28.6m (2016: SEK25.6m). Net cash as of 30 September of SEK142.3m gives a cash runway into CY19. We have adjusted our SG&A costs upwards in FY18 and beyond to reflect the one-off and ongoing costs of the Main Market Nasdaq up-listing. We have increased our revenue forecasts as a result of updating exchange rates for the Almirall and Amgen deals.

Valuation: rNPV of SEK917m (SEK21.4/share)

We value Nuevolution at SEK917m ($109m) vs SEK902m previously. It is exclusively based on a risk-adjusted model of the future milestone payments we expect from the Almirall, Amgen and Janssen deals plus net cash. We have rolled forward our valuation, updated it for net cash and adjusted it for current exchange rates. For a full breakdown of our valuation please see our previously published note Defining year as partnerships progress on track.

Exhibit 1: Financial summary

Accounts: IFRS, Year-end: June, SEK000s

 

 

2016

2017

2018e

2019e

Income Statement

Total revenues

 

 

21,314

120,318

182,833

133,932

Reported gross profit

 

 

21,314

120,318

182,833

133,932

SG&A (expenses)

 

 

(57,493)

(23,216)

(25,538)

(24,261)

R&D costs

 

 

(115,707)

(107,587)

(112,966)

(118,615)

Adjusted EBIT

 

 

(151,886)

(10,485)

44,329

(8,944)

Reported EBIT

 

 

(151,886)

(10,485)

44,329

(8,944)

Finance income/ (expense)

 

 

(22)

1,045

1,575

1,980

Adjusted PBT

 

 

(151,908)

(9,440)

45,904

(6,964)

Reported PBT

 

 

(151,908)

(9,440)

45,904

(6,964)

Income tax expense

 

 

6,911

(16,046)

(16,066)

2,437

Adjusted net income

 

 

(144,997)

(25,486)

29,838

(4,527)

Reported net income

 

 

(144,997)

(25,486)

29,838

(4,527)

Earnings per share

 

 

 

 

 

 

Basic EPS (SEK)

 

(4.0)

(0.6)

0.7

(0.1)

Diluted EPS (SEK)

 

(4.0)

(0.6)

0.7

(0.1)

Adjusted basic EPS (SEK)

 

(4.0)

(0.6)

0.7

(0.1)

Adjusted diluted EPS (SEK)

 

(4.0)

(0.6)

0.7

(0.1)

Average number of shares - basic

 

36.5

42.9

42.9

42.9

Average number of shares - diluted

 

36.5

43.6

43.6

43.6

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

Property, plant and equipment

 

 

5,494

5,538

5,761

5,973

Other non-current assets

 

 

8,585

6,397

1,665

4,102

Total non-current assets

 

 

14,079

11,935

7,426

10,075

Cash and equivalents

 

 

205,955

179,595

220,072

211,896

Trade and other receivables

 

 

367

93

93

93

Other current assets

14,564

10,032

2,902

2,902

Total current assets

 

 

220,886

189,720

223,067

214,891

Non-current loans and borrowings

 

 

3,482

2,939

2,939

2,939

Total non-current liabilities

 

 

3,482

2,939

2,939

2,939

Trade and other payables

 

 

12,162

10,986

10,986

10,986

Current loans and borrowings

 

 

1,222

1,482

1,482

1,482

Other current liabilities

 

 

20,044

16,286

15,286

14,286

Total current liabilities

 

 

33,428

28,754

27,754

26,754

Equity attributable to company

 

 

198,055

169,962

199,800

195,273

 

 

 

 

 

 

 

Cash flow statement

 

 

 

 

 

 

Profit before tax

 

 

(151,908)

(9,440)

45,904

(6,964)

Depreciation of tangible assets

 

 

1,328

1,703

277

288

Share based payments

 

 

48,528

(153)

0

0

Other adjustments

 

 

22

(1,045)

(1,575)

(1,980)

Movements in working capital

 

 

19,594

(962)

0

0

Net cash from operating activities (pre-tax)

 

 

(82,436)

(9,897)

44,606

(8,656)

Interest paid / received

 

(224)

(798)

1,575

1,980

Income taxes paid

 

 

1,210

(12,520)

(4,204)

0

Cash from operations (CFO)

 

 

(81,450)

(23,215)

41,977

(6,676)

Capex (includes acquisitions)

 

 

(504)

(715)

(500)

(500)

Other investing activities

 

 

(51)

(9)

0

0

Cash used in investing activities (CFIA)

 

 

(555)

(724)

(500)

(500)

Net proceeds from issue of shares

 

 

242,061

0

0

0

Other financing activities

 

 

(1,119)

(1,253)

(1,000)

(1,000)

Cash from financing activities (CFF)

 

 

240,942

(1,253)

(1,000)

(1,000)

Increase/(decrease) in cash and equivalents

 

 

158,937

(25,192)

40,477

(8,176)

Cash and equivalents at beginning of period

 

 

46,250

205,955

179,595

220,072

Cash and equivalents at end of period

 

 

205,955

179,595

220,072

211,896

Source: Edison Investment Research, Nuevolution accounts

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Nuevolution and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investments Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Nuevolution and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investments Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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