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Research: Healthcare
Yesterday, Ultimovacs reported the first results from a Phase I trial of UV1 in advanced melanoma in combination with Keytruda. After the minimum 18-month follow-up period (median of 21 months), complete responses (CRs) were achieved in 30% (n=6 out of 20) of patients and partial responses were seen in another 30% of patients resulting in 60% of overall response rate (ORR; 12 out of 20). In Phase III trials of Keytruda in advanced melanoma and post-hoc analyses after the approval the ORR was 33–37% and CR 5–12%. Although this is a comparison against historical data, we find the large difference reassuring. So, although early, these new data give confidence in the existing R&D strategy (UV1 in combination with checkpoint inhibitor (CPIs) in four different Phase II trials). Our valuation is increased to NOK3.65bn or NOK114 per share (vs NOK99.4 per share previously).
Written by
Ultimovacs |
ORR impressive in Phase I UV1 plus Keytruda |
Clinical data |
Pharma & biotech |
21 May 2021 |
Share price performance
Business description
Next events
Analysts
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Yesterday, Ultimovacs reported the first results from a Phase I trial of UV1 in advanced melanoma in combination with Keytruda. After the minimum 18-month follow-up period (median of 21 months), complete responses (CRs) were achieved in 30% (n=6 out of 20) of patients and partial responses were seen in another 30% of patients resulting in 60% of overall response rate (ORR; 12 out of 20). In Phase III trials of Keytruda in advanced melanoma and post-hoc analyses after the approval the ORR was 33–37% and CR 5–12%. Although this is a comparison against historical data, we find the large difference reassuring. So, although early, these new data give confidence in the existing R&D strategy (UV1 in combination with checkpoint inhibitor (CPIs) in four different Phase II trials). Our valuation is increased to NOK3.65bn or NOK114 per share (vs NOK99.4 per share previously).
Year end |
Revenue (NOKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
0.0 |
(61.2) |
(2.67) |
0.0 |
N/A |
N/A |
12/20 |
0.0 |
(120.6) |
(3.98) |
0.0 |
N/A |
N/A |
12/21e |
0.0 |
(152.5) |
(4.77) |
0.0 |
N/A |
N/A |
12/22e |
0.0 |
(159.0) |
(4.97) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Additional data
There were no new safety and tolerability issues. The median progression-free survival (mPFS) was 18.9 months compared with 5.5–11.6 months in the Keytruda studies. The median overall survival is yet to be reached. We note the scientific rationale for cancer vaccines is to increase the durability of response, so there is potential for overall survival data to surprise again. More details will be presented as an online poster at the American Society of Clinical Oncology 2021 Annual Meeting on 4–8 June.
Next steps
In next step, the trial is expected to enrol 30 patients in total. There are two arms with different levels of adjuvant 37.5µg (cohort 1, 20 patients, reported yesterday) and 75µg (cohort 2, 10 patients). The 24-month follow-up from the cohort 1 should be provided in Q421, while the first 12-month follow-up data from the cohort 2 should also be released in Q421.
Valuation: NOK3.65bn or NOK114 per share
This was the first time Ultimovacs’ vaccine was combined with PD-1/PD-L1 CPI and various CPI combinations with UV1 are being evaluated in all four Ultimovacs’ Phase II trials. The results provide comfort that the company has chosen the right combinations. One of the four Phase II trials is INITIUM, evaluating UV1 in combination with nivolumab and ipilimumab in melanoma as well. We increase the probability of success in our model to 25% from 20% in all indications, as we believe there is read across as long as tumours express telomerase and are known to respond to CPI treatment. Our updated valuation is NOK3.65bn or NOK114 per share (vs NOK3.18bn or NOK99.4 per share).
Ultimovacs is a research client of Edison Investment Research Limited
Valuation
Our valuation is based on risk-adjusted NPV analysis using a 12.5% discount rate, including net cash of NOK409m at end-Q121. Our model includes four rNPV projects, with UV1 being evaluated in the Phase II trials in all four indications. We use a bottom-up approach to calculate the market sizes and industry average data for the basis of our other assumptions. More details can be found in our recent initiation report.
Exhibit 1: Valuation of Ultimovacs
Product |
Launch |
Peak sales* ($m) |
NPV (NOKm) |
NPV/share (NOK/share) |
Probability |
rNPV (NOKm) |
rNPV/share (NOK/share) |
UV1 – malignant melanoma |
2028 |
1,010 |
2,979.5 |
93.2 |
25.0% |
932.2 |
29.2 |
UV1 – mesothelioma |
2028 |
460 |
1,428.6 |
44.7 |
25.0% |
464.9 |
14.5 |
UV1 – ovarian cancer |
2028 |
625 |
1,919.2 |
60.0 |
25.0% |
643.2 |
20.1 |
UV1 – H&N cancer |
2028 |
1,090 |
3,492.7 |
109.2 |
25.0% |
1,199.7 |
37.5 |
Net cash, last reported |
|
|
409.3 |
12.8 |
100.0% |
409.3 |
12.8 |
Valuation |
|
|
10,229.2 |
319.9 |
3,649.4 |
114.1 |
Source: Edison Investment Research. Note: Peak sales rounded to the nearest $10m.
Exhibit 2: Financial summary
Year end 31 December |
NOK'000s |
2018 |
2019 |
2020 |
2021e |
2022e |
IFRS |
IFRS |
IFRS |
IFRS |
|||
PROFIT & LOSS |
||||||
Total revenues |
0 |
0 |
0 |
0 |
0 |
|
Cost of sales |
0 |
0 |
0 |
0 |
0 |
|
Gross profit |
0 |
0 |
0 |
0 |
0 |
|
SG&A (expenses) |
(27,078) |
(20,160) |
(50,989) |
(58,637) |
(60,103) |
|
R&D costs |
(28,844) |
(43,995) |
(70,438) |
(95,091) |
(99,846) |
|
Other income/(expense) |
0 |
0 |
0 |
0 |
0 |
|
Exceptionals and adjustments |
|
0 |
0 |
0 |
0 |
0 |
Reported EBITDA |
|
(55,922) |
(64,155) |
(121,427) |
(153,729) |
(159,949) |
Depreciation and amortisation |
(601) |
(2,063) |
(2,720) |
(3,114) |
(2,991) |
|
Reported Operating Profit/(loss) |
(56,523) |
(66,218) |
(124,147) |
(156,842) |
(162,940) |
|
Finance income/(expense) |
1,242 |
5,051 |
3,593 |
4,322 |
3,958 |
|
Other income/(expense) |
0 |
0 |
0 |
0 |
0 |
|
Exceptionals and adjustments |
0 |
0 |
0 |
0 |
0 |
|
Reported PBT |
(55,281) |
(61,167) |
(120,554) |
(152,520) |
(158,983) |
|
Income tax expense |
0 |
0 |
0 |
0 |
0 |
|
Reported net income |
|
(55,281) |
(61,167) |
(120,554) |
(152,520) |
(158,983) |
Basic average number of shares, m |
15.6 |
22.9 |
30.3 |
32.0 |
32.0 |
|
Basic EPS (NOK) |
|
(3.55) |
(2.67) |
(3.98) |
(4.77) |
(4.97) |
Diluted EPS, (NOK) |
(3.55) |
(2.67) |
(3.98) |
(4.77) |
(4.97) |
|
BALANCE SHEET |
||||||
Property, plant and equipment |
|
736 |
536 |
377 |
359 |
341 |
Intangible assets |
56,418 |
55,519 |
64,551 |
61,737 |
59,046 |
|
Other non-current assets |
0 |
3,523 |
3,630 |
3,630 |
3,630 |
|
Total non-current assets |
68,135 |
70,429 |
80,353 |
77,521 |
74,812 |
|
Cash and equivalents |
|
115,540 |
399,607 |
440,925 |
299,590 |
149,304 |
Trade and other receivables |
0 |
0 |
0 |
0 |
0 |
|
Other current assets |
6,184 |
8,004 |
8,438 |
8,438 |
8,438 |
|
Total current assets |
121,724 |
407,611 |
449,363 |
308,028 |
157,742 |
|
Non-current loans and borrowings* |
0 |
0 |
0 |
0 |
0 |
|
Total non-current liabilities |
|
10,981 |
13,152 |
13,870 |
13,870 |
13,870 |
Trade and other payables |
|
2,978 |
11,768 |
8,611 |
10,190 |
9,400 |
Other current liabilities |
15,996 |
7,164 |
17,149 |
17,149 |
17,149 |
|
Total current liabilities |
18,974 |
20,257 |
27,467 |
29,046 |
28,256 |
|
Equity attributable to company* |
159,904 |
444,632 |
488,380 |
342,637 |
190,431 |
|
CASH FLOW |
||||||
Operating Profit/(loss) |
|
(56,523) |
(66,218) |
(124,147) |
(156,842) |
(162,940) |
Depreciation and amortisation |
601 |
2,063 |
2,720 |
3,114 |
2,991 |
|
Other adjustments |
0 |
0 |
0 |
0 |
0 |
|
Movements in working capital |
5,528 |
(1,862) |
6,395 |
1,579 |
(789) |
|
Interest paid / received |
0 |
0 |
0 |
0 |
0 |
|
Income taxes paid |
0 |
0 |
0 |
0 |
0 |
|
Cash from operations (CFO) |
(50,389) |
(62,989) |
(108,224) |
(141,051) |
(150,004) |
|
Capex |
(513) |
(172) |
(282) |
(282) |
(282) |
|
Acquisitions & disposals net |
|
0 |
0 |
0 |
0 |
0 |
Other investing activities |
1,247 |
4,490 |
(455) |
0 |
0 |
|
Cash used in investing activities (CFIA) |
(3,852) |
4,318 |
(737) |
(282) |
(282) |
|
Net proceeds from issue of shares |
0 |
344,582 |
152,933 |
0 |
0 |
|
Movements in debt |
0 |
0 |
0 |
0 |
0 |
|
Other financing activities |
0 |
(1,579) |
(1,916) |
0 |
0 |
|
Cash from financing activities (CFF) |
0 |
343,003 |
151,017 |
0 |
0 |
|
Increase/(decrease) in cash and equivalents |
(54,269) |
284,067 |
41,317 |
(141,333) |
(150,286) |
|
Cash and equivalents at beginning of period |
169,808 |
115,539 |
399,606 |
440,923 |
299,590 |
|
Cash and equivalents at end of period |
115,539 |
399,606 |
440,923 |
299,590 |
149,304 |
|
Net (debt) cash |
115,540 |
399,607 |
440,925 |
299,590 |
149,304 |
Source: Ultimovacs accounts, Edison Investment Research. Note: *Long-term debt used instead of equity issue.
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Research: Metals & Mining
Return on invested capital (ROIC) is a calculation used increasingly by investors to assess a company’s efficiency at allocating the capital under its control. In general, a comparison between a company’s ROIC and its weighted average cost of capital (WACC) may be said to reveal whether invested capital is being used effectively and, as a result, many companies are being tempted to quote specific targets for returns. Like many financial ratios, however, ROIC must be applied thoughtfully. Used as a relative measure of a company’s performance, we believe that it poses few risks to investors. However, as an absolute measure of capital efficiency, we believe that ROIC has certain very definite (and material) deficiencies when applied to streaming companies in general and Wheaton in particular. This note explains why.