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Last close As at 09/06/2023
USD1.31
▲ −0.09 (−6.43%)
Market capitalisation
USD21m
Research: Healthcare
Context Therapeutics’ FY21 results echoed previously highlighted progress on its novel women’s oncology franchise. With all four clinical programs expected to have initial read-outs in 2022, the next few months could be instrumental in shaping the outlook for the company. The share price, which has remained range bound in recent months, could potentially see an uplift on positive data readouts. Importantly, the cash position remains robust with the year-end cash balance of $50m sufficient to extend the runway into 2024. In the nearer term, we expect the upcoming presentations at the AACR (April 2022) to likely catalyze a momentum shift, contingent on the quality of the data. Pending upcoming read-outs, our valuation remains largely unchanged at $134.1m or $8.40/share.
Context Therapeutics |
A catalyst-rich year ahead |
Earnings update |
Pharma & biotech |
8 April 2022 |
Share price performance
Business description
Next events
Analyst
Context Therapeutics is a research client of Edison Investment Research Limited |
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Context Therapeutics’ FY21 results echoed previously highlighted progress on its novel women’s oncology franchise. With all four clinical programs expected to have initial read-outs in 2022, the next few months could be instrumental in shaping the outlook for the company. The share price, which has remained range bound in recent months, could potentially see an uplift on positive data readouts. Importantly, the cash position remains robust with the year-end cash balance of $50m sufficient to extend the runway into 2024. In the nearer term, we expect the upcoming presentations at the AACR (April 2022) to likely catalyze a momentum shift, contingent on the quality of the data. Pending upcoming read-outs, our valuation remains largely unchanged at $134.1m or $8.40/share.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
0.0 |
(3.2) |
(9.28) |
0.0 |
N/A |
N/A |
12/21 |
0.0 |
(10.6) |
(3.74) |
0.0 |
N/A |
N/A |
12/22e |
0.0 |
(16.1) |
(1.01) |
0.0 |
N/A |
N/A |
12/23e |
0.0 |
(22.3) |
(1.40) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalized, excluding exceptional items.
The pipeline is approaching key inflection points
Enrollment remains on track across all clinical programs (three Phase II and one Phase Ib/II trials evaluating lead asset ONA-XR in multiple hormone-driven cancers). With preliminary data expected from two studies (first line HR+/HER2- mBC and recurrent endometrial cancers) by mid-2022 (and in H222 for the other two), investors have plenty to look out for in the near term. Positive data from any one study could potentially trigger an upswing in the stock price, in our view. For the second asset, CLDN6xCD3, the company anticipates the selection of a candidate in 2022.
Upcoming AACR data a potential near-term catalyst
In March 2022, Context announced plans to present five abstracts highlighting new preclinical data on the ONA-XR and CLDN6xCD3 programs at the upcoming American Association for Cancer Research Annual Meeting (AACR) in April 2022. We look forward to these data-readouts and believe that the quality and strength of this data could underpin near-term momentum for the company.
Cash balance offers headroom to 2024
Context reported $49.7m cash at year-end 2021, and we estimate these funds should extend the company’s operating runway into 2024. Nevertheless, in the absence of ensuing partnerships/out-licensing deals, we continue to estimate the need to raise a further $110m (modelled as illustrative debt) between FY24 and FY26, as discussed in our recent initiation report dated 24 February 2022.
Valuation: $134.1m or $8.40 per basic share
We have incorporated the reported FY21 results and have added another year to our estimates (FY24). After adjusting for the estimated (end Q122e) cash balance of $46.4m, our valuation remains largely unchanged at $134.1m (or $8.40 per basic share), from $134.9m (or $8.45 per basic share) previously.
Pipeline momentum building
ONA-XR is poised to report preliminary data across programs
Context’s clinical programs continue to progress towards their respective deadlines for preliminary data readouts and we expect the results to dictate investor sentiment in the near to medium term, provided there are no material delays in reporting the observations (a common concern with investigator-sponsored trials given that the company does not have full control of the study).
All clinical studies are evaluating the company’s lead asset ONA-XR across a range of hormone-driven cancers (breast, ovarian and endometrial cancer). As a quick refresher, ONA-XR is an extended-release version of the progesterone receptor (PR) antagonist onapristone, the only ‘full’ PR antagonist (no agonist activity) to be tested in humans to date, to our knowledge. The drug is being evaluated as a combination therapy in hormone-driven cancers affecting women, including hormone receptor-positive (HR+)/human epidermal growth factor receptor 2 negative (HER2-) metastatic breast cancer (mBC) (Phase II trials in second-/third-line treatment and Phase Ib/II trials as first-line escalation therapy for a subset of patients), recurrent endometrial (uterine) cancer (Phase II) and a rare form of ovarian cancer termed granulosa cell tumor (GCT) of the ovary (Phase II). The company’s pipeline is presented in Exhibit 1 below and discussed in greater detail in our recent initiation report.
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Exhibit 1: Context Therapeutics pipeline |
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|
Source: Context Therapeutics |
Although two of the four clinical programs are expected to report preliminary data by mid-2022 (first line HR+/HER2- mBC – Phase Ib and recurrent endometrial – Phase II cancers), we continue to expect the second-/third-line HR+/HER2- mBC opportunity to be the lynchpin for driving future value for Context. Results for this study are expected in H222. In our last note, we also highlighted potential competition from the newer-generation oral selective estrogen receptor degraders (SERDs), four of which were in advanced-stage clinical development at that time. We note that since we last wrote, Sanofi’s oral SERD amcenestrant has failed its Phase II Ameera-3 clinical trial and the fate of Roche’s Giredestrant (results expected in Q222) remains uncertain given its similarity in study design and endpoints to amcenestrant. While this may make for a clearer path for Context, it also highlights the risks inherent in the space.
Upcoming AACR presentations could be a potential catalyst
In March 2022, the company announced that it will be presenting five separate abstracts highlighting new preclinical data on its assets ONA-XR and CLDN6xCD3 at the upcoming AACR scheduled for the second week of April 2022, followed by an R&D webinar. AACR is a leading global academic conference for oncology research, and we expect that these presentations, if compelling, could swing the momentum in the company’s favor. We will be covering the results from the AACR and subsequent R&D meet in a note following the event on 13 April.
CLDN6xCD33 inching closer to the clinic
Looking beyond ONA-XR, for the second asset, the bispecific monoclonal antibody (BsAb) CLDN6xCD3, the company expects to select a clinical candidate in the second half of 2022 to support IND-enabling studies. CLDN6, a protein coding gene, part of the claudin family of tight junction proteins, is enriched in several cancer cells (rarely in healthy tissue), but accurate selectivity remains a challenge. While several pharmaceutical companies are developing CLDN6 targeting antibodies, Context claims best in-class potential with a 10x selectivity over competitors and potentially improved efficacy through CD3 facilitated T-cell recruitment. The asset is currently not included in our valuation, with potential to add upside on clinical progression.
Valuation
Since no material developments have taken place since our initiation note, our overall valuation remains largely unchanged at $134.1m or $8.40 per basic share (Exhibit 2), down marginally from $134.9m or $8.45 per basic share. The slight decrease is primarily due to updating the net cash figure to reflect our Q122 estimate of $46.4m. We will reassess our valuation following data read-outs from the four ONA-XR studies.
Exhibit 2: Context Therapeutics valuation (risk-adjusted NPV)
Program |
Indication |
Status |
Probability of success |
Launch year |
Peak sales ($m) |
Economics |
Risked NPV ($m) |
|||
ONA-XR |
Second-line HR+/HER2- mBC |
Phase II |
15% |
2026 |
498 |
US (fully owned) |
40.7 |
|||
First-line escalation therapy for HR+/HER2- mBC (ctDNA+) |
Phase Ib |
7.5% |
2027 |
222 |
US (fully owned) |
7.0 |
||||
Recurrent PR+ endometrial cancer |
Phase II |
10% |
2027 |
583 |
US (fully owned) |
28.5 |
||||
Advanced GCT of the ovary |
Phase II |
10% |
2027 |
292 |
US (fully owned) |
11.5 |
||||
Net cash (estimated at the end of Q122) $m |
46.4 |
|||||||||
Total firm value |
134.1 |
|||||||||
Total basic shares (m) |
16.0 |
|||||||||
Value per basic share ($) |
8.40 |
|||||||||
Total diluted shares (m) |
1.6 |
|||||||||
Value per diluted share ($) |
7.65 |
|||||||||
Source: Edison Investment Research
Financials
Context’s FY21 results were broadly in line with our expectations. While R&D expenses ($3.8m, excluding the one-time costs of $3.1m associated with the acquisition of the CLDN6 asset) were slightly lower than our estimated figure of $4.6m, the G&A expenses were higher ($3.6m vs our estimate of $2.8m), resulting in the reported operating loss figure of $10.5m matching our forecast for the year. For FY22–24, we have tweaked our R&D and G&A expectations based on the FY21 trend, resulting in revised net loss figures that are slightly lower than our previous estimates. Our cash burn projections have been marginally modified ($13.2m and $22.3m in FY22 and FY23, respectively, versus $10.9m and $24.8m), with the current cash balance ($49.7m at the end of December 2021) adequate to extend the runway into 2024. We continue to estimate another $110m capital raise before Context reaches profitability in 2027. We have modelled the required fund-raising as illustrative debt, according to Edison policy ($40m each in FY24 and FY25 and an additional $30m in FY26).
Exhibit 3: Financial summary
$000s |
2020 |
2021 |
2022e |
2023e |
2024e |
||
Year end 31 December |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
0 |
||
Research and Development Expenses |
(1,642) |
(6,893) |
(12,336) |
(16,904) |
(30,786) |
||
Sales, General and Administrative Expenses |
(931) |
(3,633) |
(4,723) |
(6,140) |
(7,982) |
||
EBITDA |
|
|
(2,572) |
(10,526) |
(17,059) |
(23,044) |
(38,768) |
Operating profit (before amort. and excepts.) |
|
(2,572) |
(10,526) |
(17,059) |
(23,044) |
(38,768) |
|
Amortization of acquired intangibles |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
0 |
||
Share-based payments |
0 |
0 |
0 |
0 |
0 |
||
Reported operating profit |
(2,572) |
(10,526) |
(17,059) |
(23,044) |
(38,768) |
||
Net Interest |
(661) |
(64) |
994 |
730 |
283 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
9,878 |
133 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(3,233) |
(10,590) |
(16,065) |
(22,314) |
(38,485) |
Profit Before Tax (reported) |
|
|
6,644 |
(10,457) |
(16,065) |
(22,314) |
(38,485) |
Reported tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(3,233) |
(10,590) |
(16,065) |
(22,314) |
(38,485) |
||
Profit After Tax (reported) |
6,644 |
(10,457) |
(16,065) |
(22,314) |
(38,485) |
||
Minority interests |
0 |
0 |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
0 |
||
Net income (normalized) |
(3,233) |
(10,590) |
(16,065) |
(22,314) |
(38,485) |
||
Net income (reported) |
6,644 |
(10,457) |
(16,065) |
(22,314) |
(38,485) |
||
Average Number of Shares Outstanding (m) |
0 |
3 |
16 |
16 |
16 |
||
EPS - basic normalized ($) |
|
|
(9.28) |
(3.74) |
(1.01) |
(1.40) |
(2.41) |
EPS - normalized fully diluted ($) |
|
|
(9.28) |
(3.74) |
(1.01) |
(1.40) |
(2.41) |
EPS - basic reported ($) |
|
|
3.07 |
(3.69) |
(1.01) |
(1.40) |
(2.41) |
Dividend ($) |
0 |
0 |
0 |
0 |
0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
118 |
0 |
0 |
0 |
0 |
Intangible Assets |
0 |
0 |
0 |
0 |
0 |
||
Tangible Assets |
0 |
0 |
0 |
0 |
0 |
||
Investments & other |
118 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
350 |
51,306 |
37,123 |
14,806 |
17,549 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
0 |
0 |
0 |
0 |
0 |
||
Cash & cash equivalents |
341 |
49,686 |
36,475 |
14,157 |
16,901 |
||
Other |
9 |
1,620 |
648 |
648 |
648 |
||
Current Liabilities |
|
|
(9,548) |
(3,033) |
(4,916) |
(4,913) |
(6,141) |
Creditors |
(2,708) |
(1,826) |
(2,960) |
(2,799) |
(3,296) |
||
Tax and social security |
0 |
0 |
0 |
0 |
0 |
||
Short term borrowings |
(5,884) |
0 |
0 |
0 |
0 |
||
Other |
(956) |
(1,207) |
(1,956) |
(2,114) |
(2,845) |
||
Long Term Liabilities |
|
|
(69) |
0 |
0 |
0 |
(40,000) |
Long term borrowings |
(69) |
0 |
0 |
0 |
(40,000) |
||
Other long-term liabilities |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
(9,150) |
48,272 |
32,207 |
9,893 |
(28,592) |
Convertible preferred stock |
(7,771) |
0 |
0 |
0 |
0 |
||
Minority interests |
0 |
0 |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
(16,921) |
48,272 |
32,207 |
9,893 |
(28,592) |
CASH FLOW |
|||||||
Op Cash Flow before WC and tax |
(2,572) |
(10,526) |
(17,059) |
(23,044) |
(38,768) |
||
Working capital |
1,318 |
(2,225) |
2,855 |
(3) |
1,228 |
||
Exceptional & other |
219 |
3,951 |
994 |
730 |
283 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Operating Cash Flow |
|
|
(1,035) |
(8,799) |
(13,210) |
(22,318) |
(37,256) |
Capex |
0 |
(250) |
0 |
0 |
0 |
||
Equity financing |
0 |
58,394 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(1,035) |
49,345 |
(13,210) |
(22,318) |
(37,256) |
||
Opening net debt/(cash) |
|
|
21,742 |
13,384 |
(49,686) |
(36,475) |
(14,157) |
FX |
0 |
0 |
0 |
0 |
0 |
||
Other non-cash movements |
9,393 |
13,725 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
13,384 |
(49,686) |
(36,475) |
(14,157) |
23,099 |
Source: Context Therapeutics reports, Edison Investment Research
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Research: Investment Companies
Lowland Investment Company’s (LWI’s) managers, James Henderson and Laura Foll, run this UK equity income portfolio with a ‘growth first’ mentality, believing that companies with strong market positions and pricing power are best placed to grow their earnings, and consequently their dividends, over time. They cast their net across the market cap spectrum, aiming to own a diversified set of attractively valued – mainly UK – stocks spread across six ‘buckets’, from small-cap income to large-cap growth. Currently, the portfolio is tilted towards financial and industrial stocks, so the recent performance has somewhat lagged a volatile market where gains have been driven in large part by commodity producers. However, the managers are confident in the longer-term prospects of the 100+ companies they own, and with a c 4.8% dividend yield, investors in LWI are arguably being ‘paid to wait’ for value to be realised.
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