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Tedopi remains focus in FY22

OSE Immunotherapeutics 23 September 2022 Update
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OSE Immunotherapeutics

Tedopi remains focus in FY22

H122 results

Pharma and biotech

23 September 2022

Price

€6.47

Market cap

€120m

Net cash (€m) at 30 June 2022

0.3

Shares in issue

18.5m

Free float

65%

Code

OSE

Primary exchange

EuroNext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(16.4)

(4.6)

(45.2)

Rel (local)

(9.6)

(3.9)

(37.5)

52-week high/low

11.4

4.9

Business description

OSE Immunotherapeutics is based in Nantes and Paris in France and is listed on the Euronext Paris exchange. It is developing immunotherapies for the treatment of solid tumours and autoimmune diseases and has established several partnerships with large pharma companies.

Next events

Tedopi Phase III trial commencement

FY23

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Harry Shrives

+44 (0)20 3077 5700

OSE Immunotherapeutics is a research client of Edison Investment Research Limited

The pathway to regulatory approval for OSE’s neoepitope cancer vaccine, Tedopi, continues to be a key point of focus for the company. Following the presentation of positive data from the Phase III ATALANTE-1 trial over H122, OSE is discussing potential pathways to approval of Tedopi in non-small cell lung cancer (NSCLC) with the regulators. We expect an update on this in H222, with the possibility of inclusion in the FDA early access programme still on the table. Concomitantly, the company is preparing for further Phase III trials with Tedopi. In its H122 report, the company reported results that are largely in line with our estimates (excluding a €10m milestone payment from Boehringer Ingelheim). At end-June 2022, OSE reported a cash position of €31.2m, which, at our estimated FY22 burn rate of €20.4m, we forecast will fund the company to Q323.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/20

10.4

(18.5)

(1.02)

0.0

N/A

N/A

12/21

26.3

(16.5)

(0.89)

0.0

N/A

N/A

12/22e

16.0

(27.8)

(1.28)

0.0

N/A

N/A

12/23e

0.0

(44.2)

(2.42)

0.0

N/A

N/A

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

Tedopi clinical programme holds potential

The company continued to invest significantly in the development of Tedopi over the period. As such and in addition to the ATALANTE-1 trial, OSE has three Phase II trials, being led by clinical oncology groups, aiming to expand the clinical utility of Tedopi in combination with Opdivo (NSCLC), Keytruda (ovarian cancer) and chemotherapy (pancreatic cancer). If Tedopi can demonstrate similar or increased survival as a combination regimen compared to the monotherapy in these indications, we expect this could significantly increase the commercial impact of the neoepitope cancer vaccine.

Company funded to Q323

In H122, OSE recorded €15m in milestone payments from Boehringer Ingelheim for BI 765063 (€10m) and Veloxis for VEL-101/FR104 (€5m). Operating expenses remained largely stable excluding the R&D tax credit and the H122 net loss was €2m. With €31.2m cash-in-hand and our forecast cash burn of €20.4m in FY22 and €41.2m in FY23, we estimate an operating cash runway to Q323, versus our previous estimate of Q123, in line with management guidance.

Valuation: €398.4m or €21.5 per share

We value OSE at €398.4m or €21.5 per share (previously €319.4 or €17.5 per share). Our increased valuation reflects raising the probability of success (PoS) for Tedopi in NSCLC to 50% from 25% previously in addition to rolling our model forward and updating our FX forecasts. These factors are partially offset by removing FR104 in autoimmune diseases from our valuation and updating our base indication for BI 765063 to MSS CRC (previously TNBC). Our valuation includes a net cash position of €0.3m at end-June 2022.

Valuation

Our updated valuation of OSE is €398.4m or €21.5 per share (previously €319.4m or €17.5 per share), based on a sum-of-the-parts (SOTP) calculation, including risk-adjusted NPV calculations for Tedopi in NSCLC, OSE-127 in ulcerative colitis, BI 765063 in multiple cancer indications and deal milestones from the out-licensing of FR104 to Veloxis. We apply an unchanged discount rate of 12.5% to our NPV calculations. In addition, our valuation reflects a net cash position of €0.3m at end-June 2022. A breakdown of our valuation is shown in Exhibit 1.

Considering recent data from the completed Phase III ATALANTE-1 trial, we have increased the PoS for the neoepitope cancer vaccine Tedopi in NSCLC to 50%, from 25% previously. We now value Tedopi in NSCLC at €220.7m or €11.9 per share, an increase from €90.2 or €4.9 per share previously. We will revisit our PoS assumptions for Tedopi when results from the company’s discussions with the regulators are made public, which we expect in H222.

Further value uplift is realised as we roll our model forward and update our FX rate estimates. These factors are partially offset as we have removed our risk-adjusted NPV calculation for FR104 in rheumatoid arthritis (previously €59.4m or €3.2 per share), as OSE is no longer focusing on developing the drug in this area. Additionally, we have updated our valuation of BI 765063 in multiple cancer indications to be based on micro-satellite stable (MSS) colorectal cancer (previously triple negative breast cancer), as this is the largest patient population in which the drug is being investigated and has significant unmet medical needs. In our updated valuation of BI 765063 we assume:

c 150k patients are diagnosed with CRC in 2022 of which 85% are classified as MSS. This population remains stable over the valuation period.

BI 765063 is initially investigated in third-line treatment of MSS CRC with 30% of patients progressing to this stage of treatment.

A peak market penetration of 10% (previously 30%), as the busy development pipeline for CRC is expected to fragment the market by 2028.

We now value BI 765063 at 57.9m or €3.1 per share, previously €70.4m or €3.8 per share. Our remaining valuation assumptions for OSE are unchanged (details can be found in our previous reports).

Exhibit 1: SOTP OSE valuation

Product

Launch

Peak Sales

(€m)

NPV

(€m)

NPV/share (€)

Probability

rNPV

(€m)

rNPV/Share

(€)

Tedopi - NSCLC

2023

722

441.5

23.8

50%

220.7

11.9

OSE-127 - ulcerative colitis

2027

952

271.2

14.6

15%

66.6

3.6

BI 765063 - multiple cancer indications (MSS CRC)

2027

608

231.0

12.5

15%

57.9

3.1

FR104 - Veloxis deal milestones

133.2

7.2

15%

53.0

2.9

Net Cash/(Debt)

0.3

0.0

100%

0.3

0.0

Valuation

 

 

1,077.1

58.1

 

398.4

21.5

Source: Edison Investment Research

Financials

In H122, OSE recorded €16m of turnover primarily due to milestone payments received: Boehringer Ingelheim for BI 765063 (€10m) and Veloxis for VEL-101/FR104 (€5m). In May 2022, Boehringer Ingelheim began a Phase I clinical expansion trial for BI 765063 (SIRPα antagonist monoclonal antibody) in advanced hepatocellular carcinoma and head and neck cancer patients, prompting a milestone payment to OSE of €10m. Furthermore, a €5m milestone payment was received from Veloxis Pharmaceuticals during H122 for FR104 (CD28 antagonist), post acceptance of NDA application for kidney transplant immunosuppression. Operating expenses stood at €19.4m in H122, marginally lower than €20.6m in H121 due to an R&D tax credit impact; excluding this expenses remained stable as per management guidance. We note that 78% of the operating expenses (€14.4m) related to R&D in H122.

As at end-H122, OSE had cash and cash equivalents of €31.2m, which is sufficient to fund operations until Q323, according to the company and to our updated model. The balance sheet also includes long-term debt of €28.1m and a short-term financial liability of €2.8, of which €7.9m is a loan from the European Investment Bank and the rest is government loans or debt guaranteed by the government. Thus net cash at 30 June 2022 was €0.3m, excluding total lease liabilities of €4.8m, which are virtually unchanged from H121 and correspond largely to the leasing of new real estate in France in FY21.

Exhibit 2: Financial summary

EUR'000s

2020

2021

2022e

2023e

December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

10,431

26,306

16,047

0

Cost of Sales

0

0

0

0

Gross Profit

10,431

26,306

16,047

0

Research and development

(22,355)

(30,550)

(30,550)

(30,550)

EBITDA

 

 

(18,109)

(13,601)

(25,343)

(42,346)

Operating Profit (before amort. and excepts.)

 

 

(18,533)

(15,938)

(27,255)

(43,685)

Intangible Amortisation

(457)

(687)

0

0

Exceptionals

0

0

0

0

Other

0

0

0

0

Operating Profit

(18,990)

(16,625)

(27,255)

(43,685)

Net Interest

0

(589)

(500)

(500)

Profit Before Tax (norm)

 

 

(18,533)

(16,527)

(27,755)

(44,185)

Profit Before Tax (reported)

 

 

(18,990)

(17,214)

(27,755)

(44,185)

Tax

2,692

364

4,300

0

Profit After Tax (norm)

(15,841)

(16,163)

(23,455)

(44,185)

Profit After Tax (reported)

(16,298)

(16,850)

(23,455)

(44,185)

Average Number of Shares Outstanding (m)

15.6

18.2

18.3

18.3

EPS - normalised (€)

 

 

(1.02)

(0.89)

(1.28)

(2.42)

EPS - reported (€)

 

 

(1.05)

(0.93)

(1.28)

(2.42)

Dividend per share (€)

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

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

 

 

57,141

57,670

55,758

54,419

Intangible Assets

52,600

51,122

51,122

51,122

Tangible Assets

947

926

926

926

Investments

3,594

5,622

3,710

2,371

Current Assets

 

 

30,442

34,351

16,233

2,851

Stocks

0

0

0

0

Debtors

1,074

772

811

851

Cash

29,368

33,579

15,423

2,000

Other

0

0

0

0

Current Liabilities

 

 

(14,128)

(16,762)

(17,242)

(17,747)

Creditors

(14,078)

(15,151)

(15,631)

(16,136)

Short term borrowings

(50)

(1,611)

(1,611)

(1,611)

Long Term Liabilities

 

 

(21,481)

(37,224)

(37,224)

(63,240)

Long term borrowings

(16,552)

(30,801)

(30,801)

(56,817)

Other long term liabilities

(4,929)

(6,423)

(6,423)

(6,423)

Net Assets

 

 

51,974

38,035

17,525

(23,716)

CASH FLOW

Operating Cash Flow

 

 

(16,807)

(9,857)

(21,957)

(38,938)

Net Interest

273

634

(500)

(500)

Tax

(2,742)

(696)

4,300

0

Capex

(210)

(472)

0

0

Acquisitions/disposals

0

0

0

0

Financing

17,427

265

0

0

Other

(1,258)

(1,473)

1

0

Dividends

0

0

0

0

Net Cash Flow

(3,317)

(11,599)

(18,156)

(39,438)

Opening net debt/(cash)

 

 

(16,083)

(12,766)

(1,167)

16,989

HP finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

(12,766)

(1,167)

16,989

56,428

Source: OSE Immunotherapeutics, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by OSE Immunotherapeutics and prepared and issued by Edison, in consideration of a fee payable by OSE Immunotherapeutics. Edison Investment Research standard fees are £60,000 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 2022 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 OSE Immunotherapeutics and prepared and issued by Edison, in consideration of a fee payable by OSE Immunotherapeutics. Edison Investment Research standard fees are £60,000 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 2022 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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