Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: Healthcare
Both lead clinical trials with ONCOS-102 are expected to deliver results over the next few months, which will make H120 one the most eventful periods in Targovax’s history. Data from Phase I/II trial in mesothelioma are expected in January 2020, whereas data from the Phase I melanoma study are expected in H120 or ‘before summer’, according to Targovax. Clinical data readouts should be supplemented by preclinical studies with the second-generation oncolytic viruses, which Targovax introduced for the first time in the Q319 results presentation. Our valuation is almost unchanged at NOK1.18bn or NOK18.7/share (vs NOK18.6/share previously).
Written by
Targovax |
Data from both lead trials due H120 |
Company update |
Pharma & biotech |
3 December 2019 |
Share price performance
Business description
Next events
Analyst
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Both lead clinical trials with ONCOS-102 are expected to deliver results over the next few months, which will make H120 one the most eventful periods in Targovax’s history. Data from Phase I/II trial in mesothelioma are expected in January 2020, whereas data from the Phase I melanoma study are expected in H120 or ‘before summer’, according to Targovax. Clinical data readouts should be supplemented by preclinical studies with the second-generation oncolytic viruses, which Targovax introduced for the first time in the Q319 results presentation. Our valuation is almost unchanged at NOK1.18bn or NOK18.7/share (vs NOK18.6/share previously).
Year end |
Revenue (NOKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.0 |
(122.3) |
(2.6) |
0.0 |
N/A |
N/A |
12/18 |
0.0 |
(147.3) |
(2.8) |
0.0 |
N/A |
N/A |
12/19e |
0.0 |
(136.2) |
(2.4) |
0.0 |
N/A |
N/A |
12/20e |
0.0 |
(120.7) |
(1.9) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
More intensive dosing in Part 2 of melanoma trial
Interim results released in July 2019 from Part 1 of the Phase I trial with ONCOS-102 in melanoma were the hallmark event in Q319 (detailed analysis in our previous reports). The patients, who were previously treated with checkpoint inhibitors (CPIs) and then relapsed, were given three intratumoural injections of ONCOS-102 then received up to eight infusions of Keytruda. The key finding was that 3/9 patients demonstrated a clinical response, ie a 33% overall response rate, which compares well with similar studies. Such results were achieved after dosing with ONCOS-102 only three times before administering Keytruda. In Part 2 patients will continue to receive ONCOS-102 throughout treatment with Keytruda, which means they will receive a total of 12 ONCOS-102 injections rather than three. According to Targovax, results should be available ‘before summer’ 2020.
Data from Phase I/II mesothelioma trial due January
The randomised data from the Phase I/II study (n=31) in unresectable malignant pleural mesothelioma represent the nearest significant catalyst for the share price. According to the latest update, enrolment has completed and Targovax is on track to report data in January 2020. There is a clear unmet need in this indication, given the aggressive nature of the cancer and a lack of innovative treatment options. If the data are positive data, ONCOS-102 could be positioned as a front-line treatment with the potential for accelerated approval.
Valuation: NOK1.18bn or NOK18.7/share
Our Targovax valuation is virtually unchanged at NOK1.18bn or NOK18.7/share due to rolling our model forward, which is offset by a lower net cash position. All other assumptions in our rNPV model are unchanged. Both Phase I/II mesothelioma and Phase I melanoma trials are key catalysts in H120.
R&D update
Randomised data from Phase I/II mesothelioma trial expected in January 2020
The trial compares ONCOS-102 plus standard of care (pemetrexed/cisplatin) versus standard of care treatment in first- and second-line settings. The primary goal of the study is to evaluate the safety and tolerability of ONCOS-102, which is typical for this stage. Secondary endpoints will evaluate the initial efficacy of the treatment as well as overall response rate at six months, immune activation, progression-free survival and overall survival. According to the latest update, enrolment has completed and Targovax is on track to report data in January 2020. During the Q319 results presentation, management indicated (in the Q&A session) that an accelerated approval pathway is a possibility, although it is too early to confirm this.
|
Exhibit 1: Phase I/II mesothelioma study design |
|
|
Source: Targovax |
In February 2018, Targovax announced results from the safety lead-in (n=6) part of the study. No concerns were raised over safety. Where available, the data demonstrated an increase in systemic cytokines (in 3/3 analysed patients), which indicates activation of innate immune response. There was also an increase in the relative level of tumour infiltrating CD8+ T-cells (in 2/2 patients analysed), which indicates activation of the adaptive immune system. The activation of both the innate and adaptive immune response is consistent with the goal to make the cancer ‘visible’ to the immune system.
Targovax chose mesothelioma as one of the lead indications for its oncolytic virus treatment due to a combination of positive preclinical findings in in vivo models (Kuryk et al., 2018) and because treatment of mesothelioma remains one the largest unmet needs.
It is a rare cancer with c 3,000 cases diagnosed in the US annually. Most often the location of mesothelioma is the pleural mesothelium, a double-layer sheet that covers the lungs and the inside of the pleural cavity, forming a pleural space. Incidence of mesothelioma ranges from about seven to 40 per 1,000,000 in industrialised Western countries, depending on the amount of asbestos exposure in the past, which is a major risk factor. The five-year survival rate is only around 8%. Surgery, radiation therapy and chemotherapy with cisplatin and pemetrexed are the main treatment options, as there are no novel drugs proven to be efficacious.
Pemetrexed (Alimta, Eli Lilly; folate antimetabolite) was approved by the FDA for the treatment of malignant pleural mesothelioma in 2004, with patents starting to expire in 2022 (although they are challenged). In 2018, Alimta brought in $237m in sales in the mesothelioma indication (it is also approved for non-small cell lung cancer). There is a clear unmet need in this indication, given the aggressive nature of the cancer and lack of innovative treatment options.
New oncolytic viruses
With its Q319 results Targovax released new preclinical data for the first time, revealing details about its next-generation oncolytic viruses. The lead, ONCOS-102, is based on the common cold adenovirus serotype 5, which was genetically engineered in three ways:
■
To increase the virus’s ability to infect cancer cells, a knob domain from the surface of adenovirus 3 has been added, which improves viral adhesion to cancer cell surface.
■
A 24bp deletion in the E1A region enhances selective viral replication in actively dividing cells.
■
A transgene encoding a well-known immune stimulator granulocyte macrophage colony stimulating factor (GM-CSF) was also added. Once the virus starts replicating in the cancer cells, the GM-CSF is released, which stimulates tumour antigen processing by antigen presenting cells.
In the second-generation ONCOS viruses, Targovax was able to add a second transgene. The company has released in vitro and in vitro data from three new viruses. Depending on the second transgene, these viruses have different properties (Exhibit 2).
Targovax also presented some in vivo data from its studies with the ONCOS-210 and 212 viruses. The results indicate that two transgenes seem more potent than one and have synergistic activity in various cancer mouse models. We expect much more data from studies with all second-generation oncolytic viruses, including more details about positioning in the clinic and which indications will be prioritised.
Exhibit 2: Next generation of ONCOS viruses with double transgenes
Mode of action |
Target cancers types |
|
ONCOS 210 and 212 Inhibition of tumour growth and vascularisation |
■ Interfere with tumour’s ability to break down surrounding tissue ■ Induce cell cycle arrest ■ Inhibit angiogenesis |
Highly invasive or metabolic tumours |
ONCOS 211 Counteract immune suppressive tumour microenvironment |
■ Decrease inhibitory factors from tumour microenvironment ■ Activate T-cells |
‘Cold’ tumours |
ONCOS 214 Enhanced cell-killing properties |
■ Induce immunogenic cell death ■ Extend cell killing ability to neighbouring non-infected cells |
High stroma tumours (eg, epithelial malignant tumours with poor prognosis) |
Source: Targovax
Financials and valuation
Targovax reported immaterial revenues and an operating loss of NOK26.7m in Q319, which was substantially lower than NOK33.7m in Q318 and NOK44.6m in Q219. It implemented a cost-cutting programme this summer, which was the main reason behind lower spending (number of full-time employees reduced by one-third). Targovax had cash and cash equivalents of NOK104m at the end of Q319. We fine-tuned our estimates, with 2019 operating expenses now totalling NOK136m (from NOK140m previously). As before, our model suggests a cash reach well into 2020.
Our valuation is virtually unchanged at NOK1.18bn or NOK18.7/share (versus NOK18.6/share previously), which is based on a risk-adjusted NPV analysis using a 12.5% discount rate, including NOK104m net cash. We continue to exclude other long-term debt of NOK55.6m in Finnish government grants from our valuation, as repayment is only required if the products are sold or launched. Our financial forecasts are unchanged.
Exhibit 3: Sum-of-the-parts Targovax valuation
Product |
Launch |
Peak sales |
Unrisked NPV (NOKm) |
Unrisked NPV/share (NOK) |
Probability (%) |
rNPV |
rNPV/share (NOK) |
|||
ONCOS-102 – advanced melanoma |
2025 |
590 |
2,704.3 |
42.7 |
15% |
669.5 |
10.6 |
|||
ONCOS-102 – mesothelioma |
2026 |
424 |
2,149.4 |
33.9 |
10% |
409.0 |
6.5 |
|||
Net cash, last reported |
104.0 |
1.6 |
100% |
104.0 |
1.6 |
|||||
Valuation |
4,957.8 |
78.2 |
1,182.6 |
18.7 |
||||||
Source: Edison Investment Research. Note: WACC = 12.5% for product valuations. Excludes conditional government long-term loans.
|
Exhibit 4: Targovax R&D pipeline and expected newsflow |
|
|
Source: Targovax |
Exhibit 5: Financial summary
NOK'000s |
2017 |
2018 |
2019e |
2020e |
||
December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
37 |
27 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
37 |
27 |
0 |
0 |
||
Research and development |
(45,571) |
(64,006) |
(67,567) |
(50,103) |
||
EBITDA |
|
|
(119,630) |
(145,804) |
(135,856) |
(120,449) |
Operating Profit (before amort. and except.) |
|
|
(119,926) |
(146,100) |
(136,152) |
(120,745) |
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Operating Profit |
(119,926) |
(146,100) |
(136,152) |
(120,745) |
||
Net Interest |
(2,347) |
(1,249) |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(122,273) |
(147,349) |
(136,152) |
(120,745) |
Profit Before Tax (reported) |
|
|
(122,273) |
(147,349) |
(136,152) |
(120,745) |
Tax |
328 |
334 |
0 |
0 |
||
Profit After Tax (norm) |
(121,945) |
(147,015) |
(136,152) |
(120,745) |
||
Profit After Tax (reported) |
(121,945) |
(147,015) |
(136,152) |
(120,745) |
||
Average Number of Shares Outstanding (m) |
47.3 |
52.6 |
58.0 |
63.3 |
||
EPS - normalised (NOK) |
|
|
(2.58) |
(2.79) |
(2.35) |
(1.91) |
EPS - normalised fully diluted (NOK) |
|
|
(2.58) |
(2.79) |
(2.35) |
(1.91) |
EPS - reported (NOK) |
|
|
(2.58) |
(2.79) |
(2.35) |
(1.91) |
Dividend per share (NOK) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
100.0 |
100.0 |
N/A |
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 |
|
|
367,415 |
371,129 |
376,788 |
376,521 |
Intangible Assets |
366,250 |
370,240 |
370,240 |
370,240 |
||
Tangible Assets |
1,165 |
889 |
604 |
337 |
||
Investments |
0 |
0 |
5,944 |
5,944 |
||
Current Assets |
|
|
276,193 |
166,509 |
93,224 |
16,320 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
0 |
0 |
0 |
0 |
||
Cash |
261,573 |
151,189 |
77,904 |
1,000 |
||
Other |
14,620 |
15,320 |
15,320 |
15,320 |
||
Current Liabilities |
|
|
(28,295) |
(59,377) |
(45,913) |
(46,371) |
Creditors |
(28,295) |
(50,250) |
(33,024) |
(33,482) |
||
Short term borrowings |
0 |
(9,127) |
(12,889) |
(12,889) |
||
Long Term Liabilities |
|
|
(108,156) |
(103,565) |
(105,805) |
(136,958) |
Long term borrowings |
(48,806) |
(43,933) |
(46,173) |
(77,326) |
||
Other long term liabilities |
(59,350) |
(59,632) |
(59,632) |
(59,632) |
||
Net Assets |
|
|
507,157 |
374,696 |
318,294 |
209,512 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(111,093) |
(112,816) |
(141,041) |
(108,028) |
Net Interest |
2,347 |
1,249 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(56) |
0 |
(31) |
(29) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
194,407 |
(30) |
67,785 |
0 |
||
Other |
(4,753) |
(3,041) |
1 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
80,852 |
(114,638) |
(73,285) |
(108,057) |
||
Opening net debt/(cash) |
|
|
(131,915) |
(212,767) |
(98,129) |
(18,842) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
(6,002) |
0 |
||
Closing net debt/(cash) |
|
|
(212,767) |
(98,129) |
(18,842) |
89,215 |
Source: Targovax accounts, Edison Investment Research
|
|
Research: Industrials
China Water Affairs (CWA) continues to offer the prospect of attractive growth in EPS despite the fall in environmental protection construction revenue. The requirement for expenditure on the water sector in China remains intact and the current rating of the shares appears undemanding.