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Last close As at 24/03/2023
NOK106.80
▲ 1.40 (1.33%)
Market capitalisation
NOK3,625m
Research: Healthcare
Readouts from Ultimovacs’ clinical pipeline inch closer as patients continue to enrol in the company’s busy clinical programme. UV1, Ultimovacs’ potential universal cancer vaccine, is being investigated in ongoing trials for malignant melanoma, mesothelioma, ovarian cancer, head and neck cancers and non-small cell lung cancer (NSCLC). We expect a collection of readouts from the UV1 programme to begin with top-line data from the Phase II INITIUM (malignant melanoma, plus nivolumab and ipilimumab) and NIPU (mesothelioma, plus nivolumab and ipilimumab) trials in H123. Ultimovacs retains a strong cash position at end-Q122 of NOK524m, which we see funding it to H124. We reintroduce our estimates and increase our valuation of Ultimovacs to NOK6.90bn, or NOK202/share, from NOK6.13bn, or NOK179/share.
Ultimovacs |
Patient enrolment continues; catalysts approach |
Q121 update |
Pharma and biotech |
15 June 2022 |
Share price performance
Business description
Next events
Analysts
UltimovacsUltimovacs is a research client of Edison Investment Research Limited |
Readouts from Ultimovacs’ clinical pipeline inch closer as patients continue to enrol in the company’s busy clinical programme. UV1, Ultimovacs’ potential universal cancer vaccine, is being investigated in ongoing trials for malignant melanoma, mesothelioma, ovarian cancer, head and neck cancers and non-small cell lung cancer (NSCLC). We expect a collection of readouts from the UV1 programme to begin with top-line data from the Phase II INITIUM (malignant melanoma, plus nivolumab and ipilimumab) and NIPU (mesothelioma, plus nivolumab and ipilimumab) trials in H123. Ultimovacs retains a strong cash position at end-Q122 of NOK524m, which we see funding it to H124. We reintroduce our estimates and increase our valuation of Ultimovacs to NOK6.90bn, or NOK202/share, from NOK6.13bn, or NOK179/share.
Year end |
Revenue (NOKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
0.0 |
(120.6) |
(3.98) |
0.0 |
N/A |
N/A |
12/21 |
0.0 |
(164.7) |
(5.09) |
0.0 |
N/A |
N/A |
12/22e |
0.0 |
(243.2) |
(7.11) |
0.0 |
N/A |
N/A |
12/23e |
0.0 |
(206.2) |
(6.02) |
0.0 |
N/A |
N/A |
Note: *PBT is reported, EPS is fully diluted
UV1 development progressing on all fronts
While the Phase II INITIUM and NIPU trials continue to spearhead the company’s development pipeline, further Phase II studies in ovarian cancer (DOVACC), head and neck cancer (FOCUS) and NSCLC (LUNGVAC) follow closely behind. With the exception of LUNGVAC, which the company expects to enrol first patients in Q222, all trials are on schedule, providing confidence in management’s proposed timelines. Phase II development is supported by good safety data and signals of efficacy from three Phase I/IIa trials.
Strong cash position in a turbulent market
Following the completion of a private placement of shares in October 2021, raising NOK270m in gross proceeds, Ultimovacs remains well funded. In a turbulent market environment (SPDR S&P Biotech ETF: XBI is down c 37% ytd), we continue to see Ultimovacs’ cash position as sufficient to fund UV1 development to H124 (consistent with prior estimates), past anticipated key Phase II readouts from the INITIUM, NIPU, DOVACC, FOCUS and LUNGVAC trials.
Valuation: NOK6.90bn or NOK202/share
We value Ultimovacs at NOK6.90bn or NOK202/share, based on a risk-adjusted net present value (rNPV) analysis for UV1 in malignant melanoma, mesothelioma, ovarian cancer, head and neck cancer and NSCLC, and net Q122 cash of NOK523.7m. We have rolled our model forward and updated our $/NOK assumption to $/NOK9.48 (from $/NOK8.99), which itself had a c 5% upside effect on our rNPV. We have revised our FY22e estimates but our underlying long-term assumptions remain unchanged (for details see our previous note).
Catalysts on the horizon
As a reminder, UV1 is a cancer vaccine that primes the patient’s immune system to recognise human telomerase reverse transcriptase (hTERT), a protein that is estimated to be over-expressed in up to 85–90%% of human cancers but not in healthy tissues. Recognising the potential universality of hTERT as a cancer vaccine target, Ultimovacs is pursuing the development of UV1, in combination with well-known immune checkpoint inhibitors (ICIs) such as ipilimumab, nivolumab, durvalumab and pembrolizumab, in multiple indications (Exhibit 1).
Exhibit 1: Ultimovacs’ clinical development schedule |
Source: Ultimovacs corporate presentation |
The most significant mid-term catalysts for Ultimovacs are top-line readouts from the Phase II INITIUM trial (in first-line advanced or metastatic malignant melanoma in combination with ipilimumab and nivolumab) and NIPU trial (in second-line malignant pleural mesothelioma, again in combination with ipilimumab and nivolumab) both of which are expected in H123. Management regularly reports enrolment figures for ongoing trials and, as of 11 May 2022, INITIUM was 89% enrolled (137 of 154 expected) and NIPU was 66% enrolled. In our view, this progress conforms to management’s expected readout timeline. The company also expects top-line results from the DOVACC and FOCUS Phase II trials in 2023 and we expect an update on this guidance with the Q422 report. Finally, the Phase II LUNGVAC study is anticipated to begin enrolling patients in H122, with top-line results expected by end-2024.
Development supported by three Phase I/IIa studies
Ultimovacs’ Phase II development programme for UV1 is supported by data from three Phase I/IIa studies covering malignant melanoma, NSCLC and prostate cancer. Recently published follow-up data showed that UV1 caused a long-term immune response in combination with ipilimumab in these patients. Overall, 78.4% of patients (n=52) had a vaccine-induced T-cell response, with several patients demonstrating an hTERT specific immune response up to 7.5 years after the first vaccination. The UV1/ipilimumab combination showed a significantly prolonged median overall survival (mOS) in immune responders compared to non-responders (54.8 months versus 23.4 months), providing encouraging support for the UV1/ipilimumab combination, in our view. Additionally, these data showed a median time to immune response of four, five and 10 weeks in melanoma, NSCLC and prostate cancer, respectively.
Valuation
We value Ultimovacs at NOK6.90bn or NOK202/share (previously NOK6.13bn or NOK179/share). Our underlying long-term assumptions remain unchanged and we roll our model forward in time. We have also updated our FX assumptions to $/NOK9.48 (from $/NOK8.99), which itself had a c 5% upside effect on our valuation. Our valuation is based on an rNPV analysis using a 12.5% discount rate and including net cash of NOK523.7m at end-Q122. Our model includes five rNPV projects (Exhibit 2), all of which are based on a similar bottom-up approach (for more details, see our initiation report).
Exhibit 2: Valuation of Ultimovacs
Platform |
Launch |
Peak sales |
NPV |
NPV/ |
Probability of success |
rNPV |
NPV/share |
UV1 - Malignant melanoma |
2028 |
1,230 |
3,746.7 |
109.5 |
25.0% |
1,038.8 |
30.4 |
UV1 - Mesothelioma |
2028 |
560 |
1,754.1 |
51.3 |
25.0% |
494.1 |
14.4 |
UV1 - Ovarian cancer |
2028 |
764 |
2,336.0 |
68.3 |
25.0% |
681.0 |
19.9 |
UV1 - H&N cancer |
2028 |
1,330 |
4,267.4 |
124.7 |
25.0% |
1,278.5 |
37.4 |
UV1 - NSCLC |
2029 |
2,683 |
9,116.3 |
266.4 |
25.0% |
2,883.0 |
84.2 |
Net cash at end-Q122 |
523.7 |
15.3 |
100.0% |
523.7 |
15.3 |
||
Valuation |
|
|
21,744.2 |
635.4 |
6,899.2 |
201.6 |
Source: Edison Investment Research. Note: Peak sales rounded to nearest $10m.
Financials
Total operating expenses for Q122 were NOK31.9m, in line with Q121 (NOK31.2m). On an annualised basis, operating costs were lower than our updated estimates for FY22e of NOK244m (previously NOK215m). We expect this difference to be accounted for by an increase in R&D costs during the year (NOK179m, previous estimate NOK149m), as patients are recruited into the relatively recent DOVACC, FOCUS and LUNGVAC (first patient enrolment expected in H122) Phase II trials. If management’s timelines prove accurate, we expect Ultimovacs to be simultaneously funding five separate Phase II trials during FY22. On a quarterly cost basis of c NOK10m per study (consistent with a Q122 and Q121 R&D expense of c NOK20m) and with the Phase II INITIUM and NIPU trials completing enrolment throughout H222, we believe our R&D expense estimate of NOK179m (FY21: NOK99m) for FY22 is justified. On the same basis, we anticipate R&D costs will decrease in FY23 (NOK139m), as the DOVACC and FOCUS studies are also expected to complete enrolment and report top-line results through the second half of the year. In FY22, we forecast a small increase in SG&A expenses of 2.5% to NOK63m and a further increase to NOK65m in FY23.
Net cash flow from operating activities for Q122 was NOK45m and on an annualised basis was below our updated estimate for FY22e of NOK236m. Again, we expect the cash burn rate to increase during 2022 as clinical development of UV1 progresses. Thus, with a cash position of NOK523.7m at end-Q122, we assume the company has sufficient cash to maintain operations into H124 (consistent with prior estimates).
Exhibit 3: Financial summary
Accounts: IFRS, year-end December, NOK’000s |
|
2019 |
2020 |
2021 |
2022e |
2023e |
INCOME STATEMENT |
|
|
|
|
|
|
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) |
|
(20,160) |
(50,989) |
(61,916) |
(63,464) |
(65,050) |
R&D costs |
|
(43,995) |
(70,438) |
(99,213) |
(178,583) |
(138,898) |
Other income/(expense) |
|
0 |
0 |
0 |
0 |
0 |
Exceptionals and adjustments |
|
0 |
0 |
0 |
0 |
0 |
Reported EBITDA |
|
(64,155) |
(121,427) |
(161,129) |
(242,047) |
(203,949) |
Depreciation and amortisation |
|
(2,063) |
(2,720) |
(2,703) |
(2,537) |
(2,454) |
Reported Operating Profit/(loss) |
|
(66,218) |
(124,147) |
(163,832) |
(244,584) |
(206,402) |
Finance income/(expense) |
|
5,051 |
3,593 |
(889) |
1,352 |
232 |
Other income/(expense) |
|
0 |
0 |
0 |
0 |
0 |
Exceptionals and adjustments |
|
0 |
0 |
0 |
0 |
0 |
Reported PBT |
|
(61,167) |
(120,554) |
(164,721) |
(243,232) |
(206,171) |
Income tax expense |
|
0 |
0 |
0 |
0 |
0 |
Reported net income |
|
(61,167) |
(120,554) |
(164,721) |
(243,232) |
(206,171) |
Basic average number of shares (m) |
|
22.9 |
30.3 |
32.4 |
34.2 |
34.2 |
Basic EPS (NOK) |
|
(2.67) |
(3.98) |
(5.09) |
(7.11) |
(6.02) |
Diluted EPS (NOK) |
|
(2.67) |
(3.98) |
(5.09) |
(7.11) |
(6.02) |
BALANCE SHEET |
|
|
|
|
|
|
Property, plant and equipment |
|
536 |
377 |
212 |
194 |
176 |
Intangible assets |
|
55,519 |
64,551 |
60,088 |
57,851 |
55,698 |
Other non-current assets |
|
3,523 |
3,630 |
1,951 |
1,951 |
1,951 |
Total non-current assets |
|
70,429 |
80,353 |
73,282 |
71,027 |
68,856 |
Cash and equivalents |
|
399,607 |
440,925 |
574,168 |
337,813 |
148,895 |
Trade and other receivables |
|
0 |
0 |
0 |
0 |
0 |
Other current assets |
|
8,004 |
8,438 |
8,087 |
8,087 |
8,087 |
Total current assets |
|
407,611 |
449,363 |
582,255 |
345,900 |
156,982 |
Non-current loans and borrowings* |
|
0 |
0 |
0 |
0 |
0 |
Total non-current liabilities |
|
13,152 |
13,870 |
11,488 |
11,488 |
11,488 |
Trade and other payables |
|
11,768 |
8,611 |
22,555 |
15,583 |
19,069 |
Other current liabilities |
|
7,164 |
17,149 |
26,714 |
26,714 |
26,714 |
Total current liabilities |
|
20,257 |
27,467 |
50,897 |
43,925 |
47,411 |
Equity attributable to company |
|
444,632 |
488,380 |
593,153 |
361,516 |
166,940 |
CASH FLOW STATEMENT |
|
|
|
|
|
|
Operating Profit/(loss) |
|
(66,218) |
(124,147) |
(163,832) |
(244,584) |
(206,402) |
Depreciation and amortisation |
|
2,063 |
2,720 |
2,703 |
2,537 |
2,454 |
Other adjustments |
|
0 |
0 |
0 |
0 |
0 |
Movements in working capital |
|
(1,862) |
6,395 |
23,860 |
(6,972) |
3,486 |
Interest paid / received |
|
0 |
0 |
0 |
0 |
0 |
Income taxes paid |
|
0 |
0 |
0 |
0 |
0 |
Cash from operations (CFO) |
|
(62,989) |
(108,224) |
(125,827) |
(236,072) |
(188,636) |
Capex |
|
(172) |
(282) |
(85) |
(282) |
(282) |
Acquisitions & disposals net |
|
0 |
0 |
0 |
0 |
0 |
Other investing activities |
|
4,490 |
(455) |
3,062 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
4,318 |
(737) |
2,977 |
(282) |
(282) |
Net proceeds from issue of shares |
|
344,582 |
152,933 |
261,852 |
0 |
0 |
Movements in debt |
|
0 |
0 |
0 |
0 |
0 |
Other financing activities |
|
(1,579) |
(1,916) |
(1,895) |
0 |
0 |
Cash flow from financing activities |
|
343,003 |
151,017 |
259,957 |
0 |
0 |
Increase/(decrease) in cash and equivalents |
|
284,067 |
41,317 |
133,244 |
(236,354) |
(188,918) |
Cash and equivalents at beginning of period |
|
115,539 |
399,606 |
440,923 |
574,167 |
337,813 |
Cash and equivalents at end of period |
|
399,606 |
440,923 |
574,167 |
337,813 |
148,895 |
Net (debt)/cash |
|
399,607 |
440,925 |
574,168 |
337,813 |
148,895 |
Source: Ultimovacs company accounts, Edison Investment Research. Note: *Long term debt used instead of equity issue.
|
|
Research: Industrials
Quadrise has signed a new material transfer and cooperation agreement with its client in Morocco. The signature clears the way for an industrial demonstration test at one of the client’s sites, potentially leading to commercial sales of MSAR and/or bioMSAR in calendar Q123.
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