Viralytics will present updates on three Phase Ib trials of Cavatak in combination with marketed immune checkpoint inhibitor (ICI) drugs at the AACR conference in the first week of April, including two prestigious podium presentations. The presentations will include preliminary data from the MITCI and CAPRA intralesional injection trials and an update on the Keynote 200 (STORM) IV Cavatak trial. We leave our valuation unchanged at A$385m or A$1.60/share as we await the updates.
Written by
Viralytics |
Cavatak combo data at AACR next month |
AACR preview |
Pharma & biotech |
9 March 2017 |
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Business description
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Viralytics is a research client of Edison Investment Research Limited |
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Viralytics will present updates on three Phase Ib trials of Cavatak in combination with marketed immune checkpoint inhibitor (ICI) drugs at the AACR conference in the first week of April, including two prestigious podium presentations. The presentations will include preliminary data from the MITCI and CAPRA intralesional injection trials and an update on the Keynote 200 (STORM) IV Cavatak trial. We leave our valuation unchanged at A$385m or A$1.60/share as we await the updates.
Year |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/15 |
2.5 |
(5.5) |
(3.0) |
0.0 |
N/A |
N/A |
06/16 |
4.7 |
(8.0) |
(3.8) |
0.0 |
N/A |
N/A |
06/17e |
4.4 |
(10.2) |
(4.3) |
0.0 |
N/A |
N/A |
06/18e |
3.2 |
(8.6) |
(3.6) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Preliminary data on Cavatak intralesional combos…
Viralytics will present updates on three Phase Ib trials that are testing its Cavatak oncolytic virus immunotherapy in combination with marketed ICI drugs at the American Association for Cancer Research (AACR) conference in Washington DC on 1-5 April. Updated preliminary results will be presented on two studies of Cavatak delivered by intratumoural injection in melanoma patients, in combination with IV doses of either Keytruda (in CAPRA) or Yervoy (in the MITCI study).
…plus an update on Keynote 200 IV Cavatak combo
There will also be a report at AACR on progress in the Keynote 200 (STORM Part B) study of IV Cavatak in combination with Keytruda. The trial has completed the first two cohorts, with no dose-limiting toxicities observed. The third and highest-dose expansion cohort commenced recruitment in January 2017; ~80 patients (~40 NSCLC and ~40 metastatic bladder cancer) will be treated at a higher dose (1x109 TCID50) in this cohort. If IV administration of Cavatak can be shown to increase responses to ICI drugs, this would expand the range of cancers that it could potentially be used to treat and would enhance its commercial value.
PsiOxus deal illustrates potential value
The December 2016 licence deal between Bristol-Myers Squibb and the unlisted British biotech PsiOxus for its preclinical oncolytic virus NG-348 highlights the potential value of oncolytic virotherapy products. Terms included US$50m upfront, and up to $886m in development, regulatory and sales-based milestones, as well as royalties on net sales. NG-348 is an oncolytic virus that has been armed with two membrane proteins that activate tumour-infiltrating T-cells; like Cavatak, it can be administered by the IV route.
Valuation: Unchanged at A$385m or A$1.60/share
Our valuation is unchanged at A$385m or A$1.60/share. The PsiOxus deal shows the attractive terms that can be achieved for oncolytic immunotherapies, which supports the increased deal metrics for Cavatak we adopted in our previous report.
Exhibit 1: Financial summary
A$'000s |
2014 |
2015 |
2016 |
2017e |
2018e |
||
30-June |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
2,508 |
2,454 |
4,655 |
4,400 |
3,200 |
R&D expenses |
(4,998) |
(5,925) |
(8,604) |
(11,000) |
(8,000) |
||
SG&A expenses |
(2,438) |
(2,568) |
(4,515) |
(4,515) |
(4,515) |
||
EBITDA |
|
|
(4,928) |
(6,040) |
(8,464) |
(11,115) |
(9,315) |
Operating Profit (before amort. and except.) |
|
|
(4,956) |
(6,074) |
(8,501) |
(11,170) |
(9,371) |
Intangible Amortisation |
(390) |
(390) |
(390) |
(390) |
(390) |
||
Exceptionals |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(5,346) |
(6,465) |
(8,891) |
(11,560) |
(9,761) |
||
Net Interest |
296 |
527 |
508 |
922 |
727 |
||
Profit Before Tax (norm) |
|
|
(4,660) |
(5,547) |
(7,993) |
(10,247) |
(8,645) |
Profit Before Tax (FRS 3) |
|
|
(5,050) |
(5,938) |
(8,383) |
(10,637) |
(9,035) |
Tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(4,660) |
(5,547) |
(7,993) |
(10,247) |
(8,645) |
||
Profit After Tax (FRS 3) |
(5,050) |
(5,938) |
(8,383) |
(10,637) |
(9,035) |
||
Average Number of Shares Outstanding (m) |
119.2 |
184.0 |
212.2 |
240.3 |
240.3 |
||
EPS - normalised (c) |
|
|
(3.9) |
(3.0) |
(3.8) |
(4.3) |
(3.6) |
EPS - normalised fully diluted (c) |
|
|
(3.9) |
(3.0) |
(3.8) |
(4.3) |
(3.6) |
EPS - (IFRS) (c) |
|
|
(4.2) |
(3.2) |
(3.9) |
(4.4) |
(3.8) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
2,523 |
2,116 |
1,722 |
1,310 |
896 |
Intangible Assets |
2,475 |
2,034 |
1,643 |
1,253 |
863 |
||
Tangible Assets |
48 |
82 |
79 |
57 |
33 |
||
Investments |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
27,120 |
24,441 |
50,970 |
41,175 |
32,554 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
2,784 |
2,875 |
4,849 |
4,849 |
4,849 |
||
Cash |
24,336 |
21,566 |
46,121 |
36,326 |
27,706 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(767) |
(1,685) |
(2,364) |
(2,364) |
(2,364) |
Creditors |
(767) |
(1,685) |
(2,364) |
(2,364) |
(2,364) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
28,877 |
24,872 |
50,328 |
40,120 |
31,086 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(5,486) |
(5,010) |
(8,050) |
(11,114) |
(9,314) |
Net Interest |
0 |
544 |
508 |
922 |
727 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(8) |
(69) |
(33) |
(33) |
(33) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Financing |
25,180 |
40 |
30,799 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
19,686 |
(4,495) |
23,224 |
(10,225) |
(8,621) |
||
Opening net debt/(cash) |
|
|
(5,079) |
(24,336) |
(21,566) |
(46,121) |
(36,326) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
(429) |
1,725 |
1,331 |
429 |
(0) |
||
Closing net debt/(cash) |
|
|
(24,336) |
(21,566) |
(46,121) |
(36,326) |
(27,706) |
Source: Company data, Edison Investment Research
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The domestic market remains challenging, and raw material prices are now increasing. FY16 revenues were slightly ahead of our forecast and FY17 seems to have got off to a good start. Centrale del Latte d’Italia (CLI) is due to increase its list prices as of 1 April, which should help it offset the cost inflation. The main event of FY16 – the merger between CLT and CLF which gave rise to the new entity CLI – is still being bedded in, and we expect the integration to continue to make progress.