|
4SC |
|
Yakult starts Phase II trial; fresh 4SC-202 data |
|
Q118 company update |
|
Pharma & biotech |
|
3 May 2018 |
Share price performance
Business description
Next events
Analysts
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.
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.
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).
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 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 |
■
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
■
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
■
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
■
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
|
|
