Ultimovacs — Gearing up for UV1 Phase II trial readouts

Ultimovacs (OSE: ULTI)

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Research: Healthcare

Ultimovacs — Gearing up for UV1 Phase II trial readouts

As part of Ultimovacs’ Q223 results, management recapped recent clinical activities. This included the topline readout for NIPU (metastatic pleural mesothelioma), completion of patient enrolment for FOCUS (head and neck cancer) and updated positive data from the UV1-103 Phase I trial (malignant melanoma). We believe the upcoming readouts from the Phase II trials represent major catalysts for the company, and the immunotherapy field in general. Particular focus should be paid to the full NIPU data set (especially OS data) expected in Q423. Additionally, INITIUM (malignant melanoma) topline results are now expected in H124. Net cash as of Q2 of NOK344.1m is anticipated to fund operations into H224 and through key readouts for three (of the five ongoing clinical trials) UV1 Phase II trials. We value Ultimovacs at NOK7.5bn or NOK219 per share.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Ultimovacs

Gearing up for UV1 Phase II trial readouts

Q223 update

Pharma and biotech

24 August 2023

Price

NOK77.4

Market cap

NOK2,663m

NOK10.58/US$

Net cash (NOKm) at end-June 2023 (excluding leases)

344.1

Shares in issue

34.4m

Free float

53%

Code

ULTI

Primary exchange

Oslo Stock Exchange

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.6)

(38.3)

5.9

Rel (local)

(2.5)

(39.1)

15.8

52-week high/low

NOK136

NOK60

Business description

Ultimovacs is developing novel immunotherapies against cancer. Its lead product candidate, UV1, is a peptide-based vaccine against the universal cancer antigen telomerase (hTERT), which is expressed in c 85–90% of all cancer types. UV1 therefore has broad potential in a variety of different settings and combinations.

Next events

Phase I TENDU initial data

H223

Phase II INITIUM top-line data

H124

Phase II FOCUS top-line data

H224

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Ultimovacs is a research client of Edison Investment Research Limited

As part of Ultimovacs’ Q223 results, management recapped recent clinical activities. This included the topline readout for NIPU (metastatic pleural mesothelioma), completion of patient enrolment for FOCUS (head and neck cancer) and updated positive data from the UV1-103 Phase I trial (malignant melanoma). We believe the upcoming readouts from the Phase II trials represent major catalysts for the company, and the immunotherapy field in general. Particular focus should be paid to the full NIPU data set (especially OS data) expected in Q423. Additionally, INITIUM (malignant melanoma) topline results are now expected in H124. Net cash as of Q2 of NOK344.1m is anticipated to fund operations into H224 and through key readouts for three (of the five ongoing clinical trials) UV1 Phase II trials. We value Ultimovacs at NOK7.5bn or NOK219 per share.

Year
end

Revenue
(NOKm)

PBT*
(NOKm)

EPS**
(NOK)

DPS
(NOK)

P/E
(x)

Yield
(%)

12/21

0.0

(164.7)

(5.09)

0.0

N/A

N/A

12/22

0.0

(167.8)

(4.89)

0.0

N/A

N/A

12/23e

0.0

(214.8)

(6.24)

0.0

N/A

N/A

12/24e

0.0

(277.9)

(8.08)

0.0

N/A

N/A

Note: *PBT is reported. **EPS is fully diluted.

Focus on INITIUM and OS for UV1 progression

Ultimovacs’ topline results for NIPU (mesothelioma; n=118) in June were initially received negatively. However, the NIPU readouts should not detract from upcoming readouts across five indications, as mesothelioma is considered a challenging indication for immunotherapy with distinct cancer biology to the targets of the other ongoing Phase II trials and it is not a strategic priority. Nonetheless, the complete and updated data set (especially OS data) for NIPU are expected in Q423 and may provide the opportunity for a positive re-rating if results are favourable. Looking ahead, INITIUM (malignant melanoma) results are now anticipated in H124 (from H223) given the slower progression of disease in patients.

In June 2023, Ultimovacs reported three-year data from the UV1-103 Phase I trial assessing UV1 in combination with pembrolizumab for malignant melanoma. While we caution against direct read across, and acknowledge differences in study designs, we highlight that the combination had an OS rate of 67% (18/27) and compares favourably to the pembrolizumab OS rate of 51% at three years in the registrational KEYNOTE-006 study. UV1-103 is treating the same patient population as INITIUM, and we view this as a positive development. Ultimovacs also completed patient enrolment for FOCUS (n=75; August) with topline results expected in H224.

No surprises in Q2; valuation adjusts with model roll

Ultimovacs ended H123 with a net cash position of NOK344.1m, which should see operations to H224. As we roll forward our model and update for H123 net cash of NOK344.1m, our valuation adjusts to NOK7.5bn or NOK219 per share (from NOK7.4bn or NOK216 per share previously). Based on the H123 results, we have made minor adjustments to FY23 forecasts; however, our long-term assumptions remain unchanged. With clinical activities across the indications in full swing, we estimate the company has a cash runway into H224.

Active pipeline focused on a universal cancer vaccine

We anticipate Ultimovacs to make numerous advances in the clinical development of its lead cancer vaccine over the next couple of years. UV1, a peptide-based vaccine with universal application, is designed to trigger immune responses through the recognition of human telomerase reverse transcriptase (hTERT), which has been consistently observed with cancer growth. It is estimated that this protein is detectable in up to 90% of human cancers, but not in healthy tissues, making it an attractive immunotherapy target. Across its active clinical pipeline, Ultimovacs is taking a practical approach to elevate natural immune response, which complements progress made by well-known immune checkpoint inhibitors (ICIs) for the treatment of various cancer indications (Exhibit 1).

Exhibit 1: Ultimovacs’ clinical development pipeline

Source: Ultimovacs second quarter 2023 results presentation.

In addition to UV1, Ultimovacs is investigating the safety and tolerability of the first candidate from its TET (tetanus-epitope targeting) technology platform. Patient enrolment for the Phase I TENDU trial (prostate cancer, n=12), studying TET, was completed in December 2022, and we expect results to be shared in Q423, along with an update on the TET platform.

Universal off-the-shelf approach is key for mass production

While recent personalised therapies, such as Merck and Moderna’s mRNA-4157/V940 vaccine, continue to evolve and dominate mind share, patient-specific vaccines and manufacturing challenges continue to drive up costs, which prohibits accessibility, similar to that of patient-specific cell therapies. Such therapies struggle with production bottlenecks and the timely supply of treatments, which is a serious implication for patients struggling with aggressive cancers. Operational infrastructure is insufficiently equipped for the mass production of personalised treatments, in our view. Conversely, Ultimovacs’ UV1 is a universal ‘off-the-shelf’ treatment option that is simpler to manufacture and offers notable differentiation by addressing key considerations in accessibility and patient access need in this competitive space.

Key upcoming catalysts: Readouts from UV1 in Phase II trials

The anticipated readouts throughout 2023–25 from the Phase II trials assessing UV1 with different ICIs across various cancer indications will be the next key catalysts (Exhibit 2).

INITIUM: Topline results from INITIUM are expected in H124. This Phase II trial is assessing the efficacy and safety of UV1 in combination with nivolumab and ipilimumab as a potential first-line treatment for patients with malignant melanoma. Patient enrolment for INITIUM (n=156) was completed in July 2022. Topline results were initially expected in H123, but timelines have been pushed back twice to H223 and, more recently, to H124 as it was taking enrolled patients longer than anticipated to experience disease progression. While this may be considered an encouraging sign for patients and the outcome of the trial, this is not assured as the observation may be driven by the control arm performing better than anticipated. Patient follow-ups are required until disease progression is observed in 70 patients, but the progression has not occurred in the desired number of patients as of 21 August 2023. In case of continued slow progression in multiple endpoint events, management might consider alternative approaches for data readouts for the study, acceptable to regulatory authorities. As melanoma is considered one of the most immunogenic tumour types and since UV1 has demonstrated proof-of-concept in this indication in the UV1-103 trial, the topline readouts from INITIUM represent the most significant upcoming catalyst for Ultimovacs, in our view.

NIPU: Ultimovacs plans to share updated OS data from the investigator-initiated NIPU study with the market in Q423, and is preparing for discussions with regulatory authorities on the clinical path for UV1 in this indication (metastatic pleural mesothelioma). These results will also be presented by the principal investigator at a medical conference. Particular focus should be paid to the complete and updated full data set (especially OS data) for NIPU as it may be pivotal for the company. NIPU is a randomised, multi-centre Phase II trial investigating UV1 in combination with ipilimumab and nivolumab as a potential second-line treatment for relapsed/refractory (r/r) malignant pleural mesothelioma. Despite the initial negative perception of Ultimovacs’ clinical data announcement from the NIPU study in June 2023 (the study did not meet its primary endpoint of progression-free survival (PFS) based on an assessment conducted by a central independent review committee), the study remains ongoing and supported by measures of improvements in PFS (local assessment at the hospital study conducted by a specialist radiographers measured a significant improvement in PFS). They also noted that they were encouraged by the observed trend in overall survival (OS) benefit in the UV1 arm compared to the control arm. NIPU is an investigator-sponsored clinical trial so Ultimovacs does not have much control on how the study is conducted. To reiterate, the PFS primary endpoint was not met according to the independent review committee; this measure of PFS is likely perceived as a more objective reading than the local assessment of PFS conducted by hospital specialists. The NIPU readouts should not detract from upcoming readouts in additional indications, as mesothelioma is considered a challenging indication for immunotherapy with distinct cancer biology to the targets of the other ongoing Phase II trials.

FOCUS: the third of the key UV1 Phase II trials is FOCUS, which is assessing the cancer vaccine in combination with pembrolizumab for the treatment of head and neck cancer compared to pembrolizumab alone. In August 2023, Ultimovacs announced that patient enrolment for this study (n=75) had been completed and that the last patient had been dosed. Topline results, including OS with a minimum follow-up of 12 months and PFS (PFS will be analysed after six months and also at 12 months), are expected in H224, according to the last reported guidance. We note that management believes that its current cash resources should provide a runway through this readout.

DOVACC and LUNGVAC: further on the horizon are readouts from the DOVACC (ovarian cancer) and LUNGVAC (non-small cell lung cancer) studies, for which patient enrolment is at 37/184, and 11/138, respectively. The guided timelines for readouts from these trials were previously H224 for DOVACC and H225 for LUNGVAC, but management plans to update this guidance in its Q423 report.

Exhibit 2: Key newsflow expected throughout the period 2023–25

Source: Ultimovacs second quarter 2023 results presentation

Patent portfolio: Strengthened in Europe and Japan

In April 2023, Ultimovacs reported that it received an Intention to Grant from the European patent office, and in July 2023, a Decision to Grant from the Japanese patent office. These patents will form the counterpart of the US patent granted in August 2023, and protect the use of UV1 in combination with ICIs until at least 2037. Specifically, this covers UV1 combined with CTLA-4, PD1 or PD-L1 ICIs. Management will continue to file extensions as it continues to focus on synergistic cancer treatments including UV1.

Financials

Total operating expenses stood at NOK50.6m in Q223, up 43.0% y-o-y from NOK35.4m in Q222. The increase in operating expenses was largely driven by higher R&D expenses of NOK40.7m in Q223 (versus NOK15.6m in Q222), resulting from clinical activities associated with the NIPU and INITIUM trials. Total payroll expenses declined to NOK4.4m in Q223 (from NOK14.3m in Q222) as positive inflows from social security tax related to options more than offset higher salaries during the quarter. Operating losses equalled these expenses in both years as revenue was zero in both periods. Net cash outflow from operating activities stood at NOK71.0m in Q223 (versus NOK33.0m in Q222).

To reflect the anticipated pushed out timeline for the INITIUM topline results in H124 (H223 previously), we have increased our FY23 R&D expenses to NOK120.0m, from NOK109.5m previously. FY23 operating losses are now expected at NOK238.2m versus NOK225.1m previously. To align our full year estimates with year-to-date results, we have also adjusted net financial items to NOK23.4m in FY23 (NOK14.3m previously). As a result, our net loss forecast for FY23 increases to NOK214.8m, from NOK210.8m previously. Our FY24 estimates are essentially unchanged. Ultimovacs ended H123 with a net cash position of NOK344.1m, which management expects to be sufficient to fund operations to H224, which is also in line with our operating cash burn estimates.

Valuation: NOK7.5bn or NOK219 per share

Our valuation for Ultimovacs adjusts to NOK7.5bn or NOK219 per share (from NOK7.4bn or NOK216 per share) as we roll forward our model and update the net cash figure to NOK344.1m at end-Q223. Our long-term assumptions for the company remain unchanged for now; however, we might consider revising the launch timelines for respective indications if there are any further delays in clinical results.

Exhibit 3: Valuation of Ultimovacs

Product

Launch

Peak sales
($m)

NPV
(NOKm)

NPV/share (NOK)

Probability of success

rNPV
(NOKm)

rNPV/share
(NOK/share)

UV1 – Malignant melanoma

2028

1,270

6,202.7

180.3

25.0%

1,690.0

49.1

UV1 – Mesothelioma

2028

570

2,905.3

84.5

10.0%

372.7

10.8

UV1 – Ovarian cancer

2029

787

3,312.5

96.3

15.0%

616.9

17.9

UV1 – H&N cancer

2029

1,370

6,006.1

174.6

25.0%

1,650.1

48.0

UV1 – NSCLC

2030

2,683

10,590.4

307.9

25.0%

2,871.7

83.5

Net cash

344.1

10.0

100.0%

344.1

10.0

Valuation

 

 

29,361.1

853.6

 

7,545.6

219.4

Source: Edison Investment Research

Exhibit 4: Financial summary

Accounts: IFRS; year end 31 December; NOKm

 

2021

2022

2023e

2024e

Income statement

 

 

 

 

 

Total revenues

 

0.00

0.00

0.00

0.00

Cost of sales

 

0.00

0.00

0.00

0.00

Gross profit

 

0.00

0.00

0.00

0.00

SG&A (expenses)

 

(61.92)

(71.47)

(85.76)

(102.91)

R&D costs

 

(96.74)

(95.18)

(120.03)

(136.88)

Other income/(expense)

 

(2.48)

(14.34)

(30.01)

(34.22)

Exceptionals and adjustments

 

0.00

0.00

0.00

0.00

Reported EBITDA

 

(161.13)

(180.98)

(235.80)

(274.01)

Depreciation and amortisation

 

(2.70)

(2.65)

(2.44)

(2.38)

Reported Operating Profit/(loss)

 

(163.83)

(183.63)

(238.23)

(276.39)

Finance income/(expense)

 

(0.89)

15.84

23.44

(1.48)

Other income/(expense)

 

0.00

0.00

0.00

0.00

Exceptionals and adjustments

 

0.00

0.00

0.00

0.00

Reported PBT

 

(164.72)

(167.79)

(214.79)

(277.87)

Income tax expense

 

0.00

0.00

0.00

0.00

Reported net income

 

(164.72)

(167.79)

(214.79)

(277.87)

 

 

 

 

 

 

Basic average number of shares, m

 

32.37

34.31

34.40

34.40

Basic EPS (NOK)

 

(5.09)

(4.89)

(6.24)

(8.08)

Diluted EPS (NOK)

 

(5.09)

(4.89)

(6.24)

(8.08)

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

Property, plant and equipment

 

0.21

0.22

0.13

0.01

Intangible assets

 

71.12

68.43

66.28

64.21

Other non-current assets

 

1.95

5.44

5.44

5.44

Total non-current assets

 

73.28

74.09

71.85

69.66

Cash and equivalents

 

574.17

425.31

217.35

101.68

Trade and other receivables

 

0.00

0.00

0.00

0.00

Other current assets

 

8.09

10.27

16.38

16.38

Total current assets

 

582.26

435.58

233.73

118.05

Non-current loans and borrowings

 

0.46

3.71

3.71

153.71

Deferred tax liabilities

 

11.03

10.70

10.70

10.70

Total non-current liabilities

 

11.49

14.41

14.41

164.41

Trade and other payables

 

22.56

7.66

9.93

11.52

Other current liabilities

 

28.34

38.25

38.25

38.25

Total current liabilities

 

50.90

45.91

48.18

49.77

Equity attributable to company

 

593.15

449.35

242.98

(26.47)

Cashflow statement

 

 

 

 

 

Operating Profit/(loss)

 

(163.83)

(183.63)

(238.23)

(276.39)

Depreciation and amortisation

 

2.70

2.65

2.44

2.38

Other adjustments

 

12.33

4.44

(17.09)

2.72

Movements in working capital

 

23.86

(6.99)

(3.83)

1.59

Interest paid / received

 

0.00

0.00

0.00

0.00

Income taxes paid

 

0.00

0.00

0.00

0.00

Cash from operations (CFO)

 

(125.83)

(167.69)

(233.28)

(271.18)

Capex

 

(0.09)

(0.20)

(0.20)

(0.20)

Acquisitions & disposals net

 

0.00

0.00

0.00

0.00

Other investing activities

 

3.06

8.89

25.51

5.70

Cash used in investing activities (CFIA)

 

2.98

8.69

25.32

5.51

Net proceeds from issue of shares

 

261.85

5.48

0.00

0.00

Movements in debt

 

0.00

0.00

0.00

150.00

Other financing activities

 

(1.90)

(1.91)

0.00

0.00

Cash flow from financing activities

 

259.96

3.58

0.00

150.00

Increase/(decrease) in cash and equivalents

 

137.11

(155.43)

(207.96)

(115.67)

Cash and equivalents at beginning of period

 

440.93

574.17

425.31

217.35

Cash and equivalents at end of period

 

574.17

425.31

217.35

101.68

Net (debt) cash (including lease liabilities)

 

572.08

419.83

211.87

(53.80)

Source: Company reports, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Ultimovacs and prepared and issued by Edison, in consideration of a fee payable by Ultimovacs. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

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General disclaimer and copyright

This report has been commissioned by Ultimovacs and prepared and issued by Edison, in consideration of a fee payable by Ultimovacs. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

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United Kingdom

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Deutsche Beteiligungs — On track to meet the FY23 guidance

Deutsche Beteiligungs (DBAG) posted a 20% NAV total return in the nine months to end-June 2023, thereby recouping the valuation loss in FY22. The uplift to last carrying value from its recently agreed sale of R+S (implying a healthy internal rate of return of over 40%) contributed €14m to its net income in Q323. As a result, management now expects FY23 results to be at the upper half of its guidance of net income at €85–115m and NAV of €610–715m. DBAG’s asset management business delivered a profit of €11.3m in 9M23, on track to meet management’s FY23 guidance of €13–15m. DBAG’s shares currently trade at a c 15% discount to last reported NAV (with the latter not capturing the value of the asset management business).

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