Yakult starts Phase II trial; fresh 4SC-202 data

4SC 3 May 2018 Update (1-4pgs)
Download PDF

4SC

Yakult starts Phase II trial; fresh 4SC-202 data

Q118 company update

Pharma & biotech

 

3 May 2018

Price

€6.10

Market cap

€187m

Net cash (€m) at 31 March 2018

35.9

Shares in issue

30.6m

Free float

35%

Code

VSC

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(13.2)

(11.1)

162.7

Rel (local)

(18.0)

(11.2)

156.7

52-week high/low

€8.5

€2.3

Business description

4SC is a Munich-based cancer biopharmaceutical company. Resminostat (HDAC inhibitor) is the lead candidate for cutaneous T-cell lymphoma (CTCL, pivotal study started in Q416). It has a second compound, 4SC-202 (Phase Ib/II started in Q317) and a preclinical asset, 4SC-208. 4SC also has several partners including Yakult Honsha for resminostat in Japan in various indications.

Next events

Initiation of EMERGE study

H118

Top-line data from SENSITIZE study

H218

Top-line data from RESMAIN study

H119

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Alice Nettleton

+44 (0)20 3681 2527

4SC is a research client of Edison Investment Research Limited

Yakult, 4SC’s development partner for resminostat in Japan, has reached two clinical development milestones. First, just two weeks after it joined 4SC’s pivotal RESMAIN study (n=150) in CTCL, the company recruited the first patient in Japan. Top-line results from the RESMAIN trial are expected in mid-2019. In addition, Yakult initiated its own Phase II study in biliary tract cancer (n=100) in combination with S-1 chemotherapy. S-1 is widely used in Japan and other Asian countries to treat patients following relapse after a 1st line chemotherapy regimen. The final data readout is expected in mid-2020. Meanwhile, at the AACR Annual Meeting in April, 4SC presented new preclinical data supporting the use of its second lead product, 4SC-202 in combination with various immunotherapy agents. Our valuation is virtually unchanged at €348 or €11.4/share.

Year end

Revenue (€m)

PBT* (€m)

EPS* (€)

DPS (€)

P/E (x)

Yield (%)

12/16

2.1

(10.9)

(0.54)

0.0

N/A

N/A

12/17

4.2

(10.0)

(0.41)

0.0

N/A

N/A

12/18e

4.7

(17.6)

(0.57)

0.0

N/A

N/A

12/19e

3.1

(19.2)

(0.63)

0.0

N/A

N/A

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

New preclinical data with second lead asset 4SC-202

4SC has recently presented fresh preclinical data with 4SC-202 at the AACR Annual Meeting in Chicago, US on 14-18 April 2018. The findings show 4SC-202’s synergistic effect in combinations (double and triple) with various immunotherapy agents in animal cancer model. This backs the company’s previously announced intention to carry out a broad clinical programme for 4SC-202 involving combination studies with checkpoint inhibitors (CPI) to tackle the high non-responder issue. Currently, 4SC-202 (HDAC class I specific inhibitor) is being studied in a Phase Ib/II trial SENSITIZE in unresectable melanoma in combination with pembrolizumab (Keytruda). The study is expected to be completed in H119 with top-line results from the first patient cohorts available in H218. Another investigator-led Phase II EMERGE study will test 4SC-202 in combination with the anti-PD-L1 antibody avelumab for treating GI tumours.

On track to reach significant clinical milestones

4SC’s brief financial update indicated that the average cash burn in Q118 was €1.8m/month, in line with management’s previous guidance for FY18 (€1.8-2.0m/month) and our model. This was up from €1.3m in Q117 due to increased clinical R&D. 4SC continues to guide cash reach into 2020 and should deliver a number of R&D catalysts until then (see below).

Valuation: Unchanged at €11.4/share (€348m)

Our rNPV-based valuation is virtually unchanged at €348m or €11.4/share versus €349m (€11.4/share) previously, due to slightly lower cash which was offset by rolling our model forward. We keep all our R&D assumptions for the assets unchanged. First interim data from the SENSITIZE study are expected later this year.

4SC-202 as immune primer in CPI combinations

4SC has already demonstrated in previous preclinical studies that 4SC-202 increases the immunogenicity of tumour cells and also increases the tumour response to CPIs when used in combination. The new study tested 4SC-202 in a C38 mouse tumour model and demonstrated increased tumour response to 4SC-202 with three different immuno-therapies: 4-1BB antibody (4-1BB is a potential novel immunotherapy target, Exhibit 1, A), anti-PD-1 antibody (RMP1-14, a CPI) and anti-LAG3 (C9B7W, a CPI) (Exhibit 1, B). The triple combination of 4SC-202 + anti-PD-1 antibody + anti-LAG3 showed the best response (Exhibit 1, B) and led to tumor regression in nearly all animals. The researchers concluded that the treatment with 4SC-202 enhanced inflammatory signature and infiltration of tumours with cytotoxic T-cells and, when used in combination with immunotherapies, the drug increased durable responses and animal survival.

In our view, the new data support 4SC-202’s positioning as an immune primer in combinations with novel immunotherapies hoping to increase patient response. While this was an early animal study, the two aforementioned clinical trials, SENSITIZE and EMERGE, will deliver the first human proof-of-concept data in this setting. Building on that 4SC may initiate further combination studies in various indications and seek partners. Ultimately, 4SC plans to run its own pivotal trial with 4SC-202 in an orphan indication Merkel-cell carcinoma, as discussed in our previous report.

Exhibit 1: 4SC-202 increases efficacy of 4-1BB antibody (A) and checkpoint inhibitors (B) in a C38 mouse tumour model

Source: Hamm et al. 4SC-202 primes tumor microenvironment for treatment with cancer immunotherapy. Poster presentation at AACR, 14-18 April 2018

Upcoming newsflow
2018

First data read-out from Phase Ib/II SENSITIZE study in melanoma (4SC-202 with pembrolizumab) in H218 (first patient in Q417)

Completion of recruitment to resminostat pivotal RESMAIN CTCL study

Initiation of Phase II EMERGE study (4SC-202 with avelumab) in H118, with safety data expected H218

Data from preclinical studies with 4SC-202 in combination with CPIs published at oncological conferences in 2018

Expected initiation of additional 4SC-202 CPI combination studies, including the first triple combination therapy study in collaboration with a new partner

At least one new non-core asset licensing/partnering deal

2019

CTCL pivotal RESMAIN study with resminostat top-line data read-out in H119

Final data read-out from Phase Ib/II SENSITIZE study

Interim data from Phase II EMERGE study in H219

2020

4SC-208 could enter the clinic in Q119, data read-out in Q419/Q120

Final data read-out from resminostat Phase II trial in biliary tract cancer by Yakult mid-2020

2021

Pivotal study with 4SC-202 following on from melanoma and GI cancer studies in MCC in Q119, data readout 2021

Exhibit 2: Financial summary

€'000s

2016

2017

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,060

4,197

4,724

3,133

Cost of sales

(76)

(574)

(574)

(574)

Gross profit

1,984

3,623

4,150

2,559

R&D expenditure

(10,601)

(11,475)

(19,555)

(19,461)

Administrative, distribution and other

(3,175)

(3,084)

(3,195)

(3,289)

Operating profit

(11,792)

(10,936)

(18,600)

(20,191)

Intangible amortisation

(892)

(892)

(892)

(892)

Exceptionals (impairment / restructuring costs)

0

0

0

0

Share-based payments

0

0

(20)

(20)

EBITDA

 

 

(10,900)

(9,819)

(17,463)

(19,054)

Operating Profit (before amort and except.)

 

(10,900)

(10,044)

(17,688)

(19,279)

Net interest

(14)

9

100

100

Other (profit/loss from associates)

711

0

0

0

Profit before tax (norm)

 

 

(10,914)

(10,035)

(17,588)

(19,179)

Profit before tax (FRS 3)

 

 

(11,095)

(10,927)

(18,500)

(20,091)

Tax

(71)

(33)

0

0

Profit after tax (norm)

(10,274)

(10,068)

(17,588)

(19,179)

Profit after tax (FRS 3)

(11,166)

(10,960)

(18,500)

(20,091)

Average Number of Shares Outstanding (m)

19.0

24.8

30.6

30.6

EPS - normalised (€)

 

 

(0.54)

(0.41)

(0.57)

(0.63)

EPS - FRS 3 (€)

 

 

(0.59)

(0.44)

(0.60)

(0.66)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed assets

 

 

7,096

6,365

5,452

4,539

Intangible assets

6,499

5,694

4,806

3,918

Tangible assets

497

570

545

520

Investments and other

100

101

101

101

Current assets

 

 

11,959

41,548

22,957

4,522

Stocks

0

0

0

0

Debtors

95

30

30

30

Cash

10,048

41,327

22,736

4,301

Other current assets

1,816

191

191

191

Current liabilities

 

 

(3,257)

(2,759)

(3,636)

(2,840)

Creditors

(834)

(1,175)

(1,175)

(1,175)

Short-term borrowings

0

0

0

0

Deferred revenue (short term)

(1,431)

(1,485)

(2,362)

(1,566)

Other current liabilities

(992)

(99)

(99)

(99)

Long-term liabilities

 

 

(525)

(461)

(511)

(486)

Long-term borrowings

0

0

0

0

Deferred revenue (long term)

(493)

(394)

(444)

(419)

Other long-term liabilities

(32)

(67)

(67)

(67)

Net assets

 

 

15,273

44,693

24,263

5,735

CASH FLOW

Operating cash flow

 

 

(12,320)

(8,508)

(18,390)

(18,234)

Net interest

(531)

0

3

3

Tax

(71)

(33)

0

0

Capex

(404)

(168)

(200)

(200)

Expenditure on intangibles

(60)

(4)

(4)

(4)

Acquisitions/disposals

2,808

39

0

0

Financing

0

39,953

0

0

Other

650

0

0

0

Net cash flow

(9,928)

31,279

(18,591)

(18,435)

Opening net debt/(cash)

 

 

(19,514)

(10,048)

(41,327)

(22,736)

HP finance leases initiated

0

0

0

0

Other

462

0

0

0

Closing net debt/(cash)

 

 

(10,048)

(41,327)

(22,736)

(4,301)

Source: Company accounts, Edison Investment Research

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. 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 4SC 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 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 4SC 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

Share this with friends and colleagues