Novartis has taken a non-exclusive license to Celyad’s granted allogeneic US patent for $96m (an upfront fee, we assume $12m, and milestones) plus single-digit royalties. Novartis, a leading player in the hematological CAR T-cell cancer area, presumably aims to expand out of the limited autologous ALL indication where it has a filed BLA. The $96m deal sends a clear signal to other CAR T-cell companies to license quickly or risk being locked out of any allogeneic mass market until 2031. Celyad already has an allogeneic deal with ONO in Japan and Asia. Our indicative value has moved to $58.0 per share, formerly $50.
Written by
Celyad |
THINK, SHRINK and LINK |
FY16 results and trial plans |
Pharma & biotech |
03 April 2017 |
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Celyad is a research client of Edison Investment Research Limited |
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Celyad has provided an update on its trial plans and announced 2016 preliminary results. The THINK Phase Ib trial is a major expansion of CAR therapy with five solid tumors plus AML and MM being explored. The THINK dose escalation results are expected in Q417 with six-month efficacy results possible from H218. The colorectal, SHRINK trial starting in Q2 will explore combining NKR-2 therapy with chemotherapy. The Q3 LINK trial will explore direct delivery of NKR-2 cells to metastatic liver tumors. The move into solid tumors puts Celyad in a leading position. Our interim indicative value remains at $50 per share. Cash remains strong at $91.7m.
Year end |
Revenue ($m) |
PTP* |
EPADR |
DPADR |
P/E |
Yield |
12/15 |
0.0 |
(30.9) |
(3.55) |
0.0 |
N/A |
N/A |
12/16 |
9.5 |
(25.3) |
(2.32) |
0.0 |
N/A |
N/A |
12/17e |
0.0 |
(39.4) |
(4.14) |
0.0 |
N/A |
N/A |
12/18e |
10.0 |
(28.0) |
(2.94) |
0.0 |
N/A |
N/A |
Note: Converted at €0.89/US$1.*PBT and EPS are normalized, excluding amortization of acquired intangibles, exceptional items and share-based payments.
NKR-2 moving through dose escalation
Celyad is now running both Belgian and US arms of the immuno-oncology autologous NKR-2 trials (THINK). The first dose cohorts have been recruited. Data on the final dose (up to 3bn (3 x 109) cells is expected in Q417. One arm has two hematological cancers: AML and MM. The other has five solid tumors: colorectal, triple negative breast, pancreatic, bladder and ovarian. At the highest dose, each tumor type then moves into a 14-patient efficacy phase. Data (six-month) are possible from H218. Tumor types showing efficacy could then move directly into expanded studies allowing BLA filings, perhaps from 2019-20. Other CAR companies are in the congested CD19 area with few trials in solid tumors.
Shrinking and linking with two new programmes
Two new NKR-2 projects are being planned. SHRINK will take colorectal patients receiving a standard chemotherapy regime (FOLFOX) given every two weeks and administer a few days after each chemotherapy course. The chemotherapy should generate more tumor cell NKR-2 target ligands, which may improve efficacy by better targeting; there is a possible risk of increased side effects on normal cells. LINK will recruit colorectal cancer patients with metastatic liver tumors. The NKR-2 cells will be infused using a catheter into the liver near to the metastases. This should give more NKR-2 cells in the tumor sites.
Valuation: Unchanged at $50 per share
Our valuation focuses on NKR-2 indications and includes five solid tumors plus the AML and multiple myeloma (MM). Celyad is planning to spend between $39m and $44m in 2017 and 2018, which gives cash into 2019. We assume a possible ONO allogeneic deal milestone of $13m (less 25% royalty) in 2018. The indicative value is unchanged at $50 per share. The C-Cure cardiac project is being outsourced to a partner; this process is ongoing.
Exhibit 1: Financial summary
US$'000s |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
9,461 |
0 |
9,990 |
Cost of Sales |
(1) |
(59) |
0 |
0 |
||
Gross Profit |
(1) |
9,402 |
0 |
9,990 |
||
EBITDA |
|
|
(31,179) |
(26,712) |
(38,850) |
(27,417) |
Operating Profit (before amort and except) |
|
|
(31,482) |
(27,556) |
(39,694) |
(28,261) |
Intangible Amortisation |
(844) |
(839) |
(839) |
(839) |
||
Other income and charges |
0 |
(578) |
0 |
0 |
||
Share-based payments |
(882) |
547 |
0 |
0 |
||
Operating Profit |
(33,208) |
(28,426) |
(40,533) |
(29,100) |
||
Net Interest |
619 |
2,217 |
278 |
278 |
||
PTP (norm) |
|
|
(30,863) |
(25,339) |
(39,416) |
(27,983) |
PTP (FRS 3) |
|
|
(32,589) |
(26,209) |
(40,255) |
(28,822) |
Tax |
0 |
7 |
0 |
0 |
||
PAT (norm) |
(30,863) |
(21,625) |
(39,416) |
(27,983) |
||
PAT (FRS 3) |
(32,589) |
(26,203) |
(40,255) |
(28,822) |
||
Average number of ADRs outstanding (m) |
8.7 |
9.3 |
9.5 |
9.5 |
||
EPADR - normalised ($) |
|
|
(3.55) |
(2.32) |
(4.14) |
(2.94) |
EPADR - (IFRS) ($) |
|
|
(3.75) |
(2.82) |
(4.23) |
(3.03) |
Dividend per ADR ($) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
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 |
|
|
55,617 |
59,318 |
57,802 |
56,286 |
Intangible Assets |
54,156 |
55,018 |
54,179 |
53,340 |
||
Tangible Assets |
1,261 |
3,955 |
3,278 |
2,601 |
||
Investments |
200 |
345 |
345 |
345 |
||
Current Assets |
|
|
121,456 |
94,756 |
54,785 |
26,243 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
609 |
1,508 |
1,508 |
1,508 |
||
Cash |
119,339 |
91,672 |
51,700 |
23,159 |
||
Other |
1,507 |
1,576 |
1,576 |
1,576 |
||
Current Liabilities |
|
|
(12,754) |
(12,515) |
(12,229) |
(11,640) |
Creditors |
(11,757) |
(11,056) |
(11,056) |
(11,056) |
||
Deferred revenue |
0 |
0 |
0 |
0 |
||
Walloon loans for cash payment |
(997) |
(1,460) |
(1,173) |
(585) |
||
Long Term Liabilities |
|
|
(40,583) |
(40,677) |
(39,734) |
(38,790) |
Walloon loans (non-current) |
(11,637) |
(8,731) |
(7,788) |
(6,844) |
||
Other long term liabilities |
(28,945) |
(31,946) |
(31,946) |
(31,946) |
||
Net Assets |
|
|
123,736 |
100,882 |
60,625 |
32,099 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(30,927) |
(29,625) |
(39,374) |
(27,282) |
Net Interest |
619 |
2,217 |
956 |
293 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(930) |
(1,978) |
(167) |
(167) |
||
Acquisitions/disposals |
(5,756) |
(1,733) |
0 |
0 |
||
Financing |
121,162 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(3,649) |
3,451 |
(1,386) |
(1,386) |
||
Net Cash Flow |
80,519 |
(27,668) |
(39,971) |
(28,541) |
||
Opening net debt/(cash) |
|
|
(17,847) |
(106,705) |
(81,481) |
(42,739) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Walloon loan recognition (non-cash) |
8,339 |
2,443 |
1,230 |
1,532 |
||
Closing net debt/(cash) |
|
|
(106,705) |
(81,481) |
(42,739) |
(15,730) |
Source: Edison Investment Research estimates, Celyad reports and announcements
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National Grid’s high visibility revenues, underwritten by regulatory returns across the UK and US, offer equity holders an attractive combination of asset growth and a 4.3% dividend yield. Both the UK and US businesses are well run. The UK business has predictability of revenues until the end of the current regulatory period in 2021 and is delivering returns ahead of OFGEM’s expected ‘base returns’. In the US, a rate filing programme is underway, which will result in enhanced returns in the years ahead. Now that the sale of the UK Gas Distribution is complete, management can continue to focus on delivering shareholder returns across its business units. Management targets 5-7% asset growth, and our fair value per share of 1,120p offers 11.2% upside versus current prices.