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Research: Healthcare
On 16 December 2017, Selvita announced that the FDA had lifted the clinical hold on the Phase I/II clinical trial with the company’s lead drug candidate SEL24 (dual PIM/FLT3 kinase inhibitor) for refractory/relapsed acute myeloid leukaemia (r/r AML). The asset is now out-licensed to Menarini Group, therefore the two companies worked together with the FDA to resolve the issues. The trial can now be restarted with some modifications to the design. While only few details have been disclosed, Selvita mentioned that the dose-finding scheme will be revised to the usual “3+3” design and the trial will resume.
Written by
Selvita |
Phase I/II with SEL24 to continue |
Clinical hold lifted |
Pharma & biotech |
21 December 2017 |
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Business description
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Selvita is a research client of Edison Investment Research Limited |
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On 16 December 2017, Selvita announced that the FDA had lifted the clinical hold on the Phase I/II clinical trial with the company’s lead drug candidate SEL24 (dual PIM/FLT3 kinase inhibitor) for refractory/relapsed acute myeloid leukaemia (r/r AML). The asset is now out-licensed to Menarini Group, therefore the two companies worked together with the FDA to resolve the issues. The trial can now be restarted with some modifications to the design. While only few details have been disclosed, Selvita mentioned that the dose-finding scheme will be revised to the usual “3+3” design and the trial will resume.
Year end |
Revenue (PLNm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
56.1 |
7.5 |
0.84 |
0.0 |
N/M |
N/A |
12/16 |
66.7 |
4.6 |
0.64 |
0.0 |
N/M |
N/A |
12/17e |
106.0 |
11.4 |
0.81 |
0.0 |
N/M |
N/A |
12/18e |
99.2 |
0.3 |
0.02 |
0.0 |
N/M |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Modification to dose escalation Part 1
As a reminder, the clinical hold was announced on 7 October 2017 after a fatal venous haemorrhagic stroke post thrombosis in one patient enrolled in the cohort 5 in Part 1 of the study. The stroke was classified as possibly related to the study treatment, which prompted the FDA to issue the clinical hold. The fatal stroke was associated with the treatment mainly because of the timing (the patient received four doses of SEL24); however, to actually prove it or disprove it is not straightforward, in our view, as AML patients already can have thrombosis risk factors. According to the original clinical trial design, the dose-finding Part 1 of the study had an accelerated dose escalation design, which will now be switched to the more comprehensive standard “3+3”, and restarted with a lower dose. According to Selvita, this could delay the study by around six months, which in oncology R&D is not very substantial, in our view. As previously stated, Menarini should take over the development as the study resumes. The study is expected to be completed by around end-2018.
Valuation: Upped to PLN1.09bn or PLN79.1/share
In our previous report we decreased the probability of success for SEL24 from 15% to 7.5% to reflect the uncertainty related to the clinical hold. We now increase it back to 15% and raise our valuation to PLN1.09bn or PLN79.1/share, from PLN1.04bn or PLN75/share. As a next step, Selvita should update on its fund-raise plans to fund the R&D expansion over 2018-21. This was introduced by the company in August 2017, but was put on hold due to the Phase I/II issues. Our forecasts and other valuation assumptions remain unchanged.
Exhibit 1: Financial summary
PLN000s |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
56,077 |
66,721 |
105,994 |
99,167 |
of which: Services (research outsourcing) |
23,052 |
32,404 |
43,746 |
54,682 |
||
Innovation platform |
15,416 |
18,353 |
38,638 |
20,189 |
||
Subsidies |
14,700 |
12,067 |
16,290 |
16,290 |
||
Bioinformatics |
2,561 |
3,431 |
6,855 |
7,541 |
||
EBITDA |
|
|
10,235 |
8,264 |
17,915 |
5,770 |
Operating Profit (before amort. and except.) |
6,802 |
4,646 |
13,212 |
1,067 |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals/Other* |
(4,729) |
(5,860) |
(583) |
0 |
||
Operating Profit |
2,073 |
(1,214) |
12,629 |
1,067 |
||
Net Interest |
748 |
947 |
(1,050) |
20 |
||
Share in profit/(loss) of associates and JVs** |
0 |
(1,016) |
(808) |
(808) |
||
Other |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
7,540 |
4,577 |
11,354 |
279 |
Profit Before Tax (reported) |
|
|
2,821 |
(1,283) |
10,771 |
279 |
Tax |
(5) |
0 |
(323) |
(14) |
||
Deferred tax |
3,417 |
3,968 |
0 |
0 |
||
Profit After Tax (norm) |
10,952 |
8,545 |
11,031 |
265 |
||
Profit After Tax (reported) |
6,233 |
2,685 |
10,448 |
265 |
||
Average Number of Shares Outstanding (m) |
13.1 |
13.4 |
13.6 |
13.6 |
||
EPS - normalised (gr) |
|
|
83.58 |
64.22 |
81.31 |
1.96 |
EPS - reported (gr) |
|
|
47.52 |
20.36 |
77.02 |
1.96 |
Dividend per share (gr) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
16,718 |
41,451 |
46,543 |
85,140 |
Intangible Assets |
2,274 |
6,640 |
435 |
435 |
||
Tangible Assets |
8,597 |
21,833 |
33,130 |
71,727 |
||
Other |
5,847 |
12,979 |
12,979 |
12,979 |
||
Current Assets |
|
|
48,524 |
47,669 |
60,692 |
49,882 |
Stocks |
1,174 |
1,403 |
1,384 |
1,365 |
||
Debtors |
17,961 |
16,320 |
16,320 |
16,320 |
||
Cash |
28,807 |
29,095 |
40,688 |
29,897 |
||
Other |
582 |
851 |
2,300 |
2,300 |
||
Current Liabilities |
|
|
(16,319) |
(18,933) |
(23,665) |
(23,355) |
Creditors |
(3,927) |
(7,883) |
(9,400) |
(9,400) |
||
Provisions |
(3,327) |
(3,600) |
(6,650) |
(6,650) |
||
Deferred revenues |
(7,384) |
(5,469) |
(5,069) |
(5,069) |
||
Short term borrowings |
(33) |
(859) |
(950) |
(950) |
||
Other |
(1,648) |
(1,122) |
(1,595) |
(1,286) |
||
Long Term Liabilities |
|
|
(2,043) |
(14,477) |
(13,728) |
(38,728) |
Long term borrowings |
0 |
(4,792) |
(4,200) |
(29,200) |
||
Deferred revenues |
(1,513) |
(6,382) |
(6,700) |
(6,700) |
||
Other long term liabilities |
(529) |
(3,303) |
(2,828) |
(2,828) |
||
Net Assets |
|
|
46,880 |
55,710 |
69,843 |
72,939 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(16,430) |
(6,280) |
12,176 |
(8,459) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
(323) |
||
Capex |
(5,190) |
(21,210) |
(16,000) |
(43,300) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
27,314 |
303 |
328 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other (incl. subsidies) |
18,354 |
21,859 |
15,590 |
16,290 |
||
Net Cash Flow |
24,049 |
(5,329) |
12,094 |
(35,791) |
||
Opening net debt/(cash) |
|
|
(4,787) |
(28,773) |
(23,445) |
(35,538) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
||
Other |
(63) |
1 |
(1) |
0 |
||
Closing net debt/(cash) |
|
|
(28,773) |
(23,445) |
(35,538) |
253 |
Source: Selvita accounts, Edison Investment Research. Note: *Non-cash cost related to the employee stock options programme. **Profit and loss from 2016 include share in Nodthera’s earnings according to an equity method valuation. Please note that the share changed in 2017 as a result of Nodthera's capital increase.
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Research: Healthcare
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