Phase IIa set to start in Q418

Cantargia 13 September 2018 Update
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Cantargia

Phase IIa set to start in Q418

Q218 company update

Pharma & biotech

 

13 September 2018

Price

SEK19.05

Market cap

SEK1261m

US$:SEK9.11

Estimated net cash (SEKm) at end Q218

213

Shares in issue

66.2

Free float

90%

Code

CANT

Primary exchange

Nasdaq Stockholm First North

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(11.4)

23.7

182.0

Rel (local)

(11.5)

19.8

166.6

52-week high/low

SEK22.8

SEK6.4

Business description

Cantargia is a clinical stage biotechnology company based in Sweden, established in 2009 and listed on Nasdaq Stockholm First North in 2015. It is developing two antibodies against IL1RAP, CAN04 and CANxx. CAN04 is being studied in a Phase I/II CANFOUR in solid tumours focusing on NSCLC and pancreatic cancer.

Next events

Final results from Phase I of CANFOUR

Q418

Start of Phase IIa CANFOUR

Q418

Q318 results

15 November 2018

Preclinical data

H218

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Alice Nettleton

+44 (0)20 3077 5700

Cantargia is a research client of Edison Investment Research Limited

Cantargia continues to progress its main R&D programme, a Phase I/IIa CANFOUR trial with its lead drug candidate, which was given its official generic name nidanilimab (CAN04 previously) in June. Cantargia reported no concerning side effects from the first 15 patients in the Phase I part of the CANFOUR trial. As the maximum tolerated dose has not been reached, this part will enrol several more patients, although Phase IIa should still start in Q418, as planned. Our valuation is slightly higher at SEK1.79bn or SEK27.1/share.

Year end

Revenue (SEKm)

PBT* (SEKm)

EPS* (SEK)

DPS (SEK)

P/E (x)

Yield (%)

12/16

0.0

(47.5)

(2.72)

0.0

N/A

N/A

12/17

0.0

(60.3)

(1.86)

0.0

N/A

N/A

12/18e

0.0

(83.3)

(1.47)

0.0

N/A

N/A

12/19e

0.0

(93.5)

(1.41)

0.0

N/A

N/A

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

Phase IIa likely to start in Q418 as planned

Nidanilimab is a fully humanised, dual-action IgG1 antibody that targets IL1RAP and also has an antibody-dependent cellular cytotoxicity (ADCC) effect. In August 2018, Cantargia reported progress with its lead programme Phase I/IIa CANFOUR trial which tested nidanilimab in patients with various solid cancers (non-small cell lung cancer, pancreatic cancer, colorectal cancer or triple negative breast). The announcement focused on the Phase I part of the trial, which is a typical 3x3 dose escalation used to establish safety and the recommended dose for Phase IIa. In total 15 patients have been enrolled and in general, nidanilimab was well tolerated. As of the announcement date, the maximum tolerated dose has not been reached. Therefore, Cantargia will enrol several more patients before continuing to Phase IIa in Q418, as expected.

CANFOUR results early 2020

In the near term Cantargia will focus on the Phase IIa part of the trial and will look at the efficacy of nidanilimab in NSCLC and pancreatic cancer specifically. It will include three arms which, in total, will recruit around 60-80 patients. Nidanilimab will be tested as a monotherapy or in combination with standard of care therapies for respective cancers (Exhibit 2): in NSCLC with cisplatin/gemcitabine in patients not previously treated with chemotherapy and in pancreatic cancer with gemcitabine/nab-paclitaxel. The recruitment to Phase IIa will take 12 months with results potentially available in early 2020. In the case of a positive data readout, Cantargia is open to various pathways for further development including an out-licensing deal.

Valuation: SEK1.79bn or SEK27.1/share

We value Cantargia at SEK1.79bn (SEK213m in cash) or SEK27.1/share, slightly higher than our previous SEK1.64bn or SEK24.8/share, mainly due to rolling our model forward and a positive forex effect. We make no changes to our assumptions. The near-term catalyst is the final safety results from the Phase I part of the CANFOUR trial in Q418.

Phase I/IIa CANFOUR design

Exhibit 1: Phase I/IIa CANFOUR design, total n=65

Trial

Stage

Trial status, design and upcoming events

CANFOUR

Phase I

Study ongoing (started September 2017)

Patients with relapsed or refractory NSCLC, pancreatic cancer, breast cancer or colorectal cancer

Design – open label, non-randomised, dose escalation followed by dose expansion, safety and tolerability study. Dose escalation: patients receiving intravenous nidanilimab once weekly in cohorts of three

Well tolerated by the first 15 patients; final safety findings in Q418

Phase IIa

Patients with advanced NSCLC or pancreatic cancer

Design – open label, non-randomised, three treatment arms: monotherapy; combinations in NSCLC and pancreatic cancer

Results early 2020

Primary endpoint – treatment related AEs (safety and tolerability)

Secondary endpoints – pharmacokinetic parameters, preliminary signs of efficacy as assessed by tumour response

Study sites in EU

Source: Edison Investment Research, Cantargia, clinicaltrials.gov. Note: AEs = adverse events; MTD = maximum tolerated dose.

Exhibit 2: Phase I/IIa

Novartis’s canakinumab in three Phase III trials

The patients in the Phase IIa CANFOUR trial will be relapsed or refractory, so presenting with an advanced disease. When it comes to clinical setting, it is premature to envision the precise positioning, but due to its differentiated mode of action from other therapies in oncology, nidanilimab has the potential to be used in various combinations and across different stages of the disease (as long as IL-1RAP is sufficiently expressed). This is supported by Cantargia’s newly released findings (June 2018) that provided a preclinical proof-of-concept for the combination with cisplatin. In an animal model, nidanilimab and cisplatin led to a stronger antitumor effect than a monotherapy using either of the drugs. In addition, the side effects in the combination group were less pronounced than the cisplatin-alone group.

A guide on how wide nidanilimab’s application could be recently came from Novartis. As we described in detail in our initiation report, Novartis conducted a large, six-year Phase III trial CANTOS (n=10,062) with canakinumab to establish the role of IL-1β inhibition in atherosclerosis in patients who had a history of myocardial infarction. While this is an unrelated area for nidanilimab, additional analysis by Novartis revealed that IL-1β inhibition had an effect on cancer incidence in these patients. Compared with the placebo arm, canakinumab reduced lung cancer mortality by 77% and reduced lung cancer incidence by 67%. Since canakinumab targets IL-1β, it acts upstream to nidanilimab and does not affect IL-1α. Therefore it does not completely abolish IL-1 pathway signalling like nidanilimab does. Theoretically, nidanilimab could have a more robust effect.

Following these findings, Novartis initiated three new Phase III trials. The most recent updates on clinicaltrials.gov show that Novartis will focus on NSCLC patients starting as early as a neo-adjuvant therapy (NCT03447769, n=1,500), to combination with first-line (NCT03631199, n=627) and second-line treatments (NCT03626545, n=240). This shows Novartis’s confidence in immediately going for as broad label as possible, in our view. The completion of these trials is estimated in 2021-22.

Financials and valuation

Cantargia’s results were largely in line with our expectations. The company reported an operating loss of SEK43.8m in H218, compared to SEK34.3m in H117. The increase was mainly due to higher R&D activities as the CANFOUR trial accelerates, but also due to higher other external expenses (SEK8.6m vs SEK3.2m a year ago). The latter was a consequence of the uplisting process (in July Cantargia was approved to uplist to Nasdaq Stockholm First North Premier). We already expected increasing R&D costs as the trial progresses to Phase IIa, therefore we make no changes to our R&D estimate and we treat the uplisting costs as a one off. Our operating loss estimates for 2018 and 2019 are SEK85.9m (vs SEK80.9m) and SEK93.8m (unchanged) respectively. Cantargia had cash and short-term investments of SEK213m at the end of Q218. According to the company, the operations are now financed until 2020, which is in line with our model.

We value Cantargia based on a risk-adjusted NPV using a 12.5% discount rate, including net cash at end-Q218, which results in a value of SEK1.79bn or SEK27.1/share, slightly higher compared to SEK1.64bn or SEK24.8/share previously, mainly due to rolling our model forward and positive forex effect. We make no changes to our assumptions, which were described in detail in our recent initiation report.

Exhibit 3: Sum-of-the-parts Cantargia valuation

Product

Launch

Peak sales ($m)

Unrisked NPV (SEKm)

Unrisked NPV/share (SEK)

Technology probability (%)

rNPV (SEKm)

rNPV/share (SEK)

CAN04 - NSCLC

2026

3,144

5,689.1

86.0

10%

647.4

9.8

CAN04 - pancreatic cancer

2024

2,132

5,753.5

86.9

10%

930.5

14.1

Net cash at end-Q218

212.8

3.2

100%

212.8

3.2

Valuation

11,655.4

176.1

 

1,790.7

27.1

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

Exhibit 4: Financial summary

SEK'000s

2016

2017

2018e

2019e

December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

0

0

0

Cost of Sales

0

0

0

0

Gross Profit

0

0

0

0

Research and development

(35,493)

(44,819)

(65,219)

(77,699)

EBITDA

 

 

(47,557)

(60,010)

(85,845)

(93,815)

Operating Profit (before amort. and except.)

 

 

(47,557)

(60,010)

(85,845)

(93,815)

Intangible Amortisation

0

0

0

0

Exceptionals

0

0

0

0

Other

0

0

0

0

Operating Profit

(47,557)

(60,010)

(85,845)

(93,815)

Net Interest

67

(243)

2,500

360

Profit Before Tax (norm)

 

 

(47,490)

(60,253)

(83,345)

(93,455)

Profit Before Tax (reported)

 

 

(47,490)

(60,253)

(83,345)

(93,455)

Tax

0

0

0

0

Profit After Tax (norm)

(47,490)

(60,253)

(83,345)

(93,455)

Profit After Tax (reported)

(47,490)

(60,253)

(83,345)

(93,455)

Average Number of Shares Outstanding (m)

17.5

32.4

56.6

66.2

EPS - normalised (SEK)

 

 

(2.72)

(1.86)

(1.47)

(1.41)

EPS - normalised fully diluted (SEK)

 

 

(2.72)

(1.86)

(1.47)

(1.41)

EPS - reported (SEK)

 

 

(2.72)

(1.86)

(1.47)

(1.41)

Dividend per share (SEK)

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

N/A

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

 

 

2,662

2,957

2,957

2,957

Intangible Assets

0

0

0

0

Tangible Assets

0

0

0

0

Investments

2,662

2,957

2,957

2,957

Current Assets

 

 

35,636

271,126

173,196

79,741

Stocks

0

0

0

0

Debtors

0

0

0

0

Cash

25,904

149,781

61,496

78,041

Other

9,732

121,345*

111,700*

1,700

Current Liabilities

 

 

(9,494)

(27,957)

(14,600)

(14,600)

Creditors

(9,494)

(27,957)

(14,600)

(14,600)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

0

0

0

0

Long term borrowings

0

0

0

0

Other long term liabilities

0

0

0

0

Net Assets

 

 

28,804

246,126

161,553

68,098

CASH FLOW

Operating Cash Flow

 

 

(42,405)

(40,860)

(100,787)

(93,815)

Net Interest

67

(243)

2,500

360

Tax

0

0

0

0

Capex

0

0

0

0

Acquisitions/disposals

0

0

0

0

Financing

56,225

304,479

0

0

Other

2,376

(139,499)

10,002

110,000

Dividends

0

0

0

0

Net Cash Flow

16,263

123,877

(88,285)

16,545

Opening net debt/(cash)

 

 

(9,641)

(25,904)

(149,781)

(61,496)

HP finance leases initiated

0

0

0

0

Other

0

0

0

(0)

Closing net debt/(cash)

 

 

(25,904)

(149,781)

(61,496)

(78,041)

Source: Cantargia’s accounts, Edison Investment Research. Note: *Mainly short-term investments.

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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Cantargia 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 Investment Research 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 2018. “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 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Cantargia 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 Investment Research 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 2018. “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 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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