RhoVac — Phase IIb study progressing to plan

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Research: Healthcare

RhoVac — Phase IIb study progressing to plan

The key takeaway from RhoVac’s Q419 results update released on 11 February 2020 was confirmation that the Phase IIb BRaVac study is progressing according to plan. All patient recruitment centres are expected to be up and running by May 2020. The trial should be fully enrolled (n=180) in September 2020 and key interim results, including primary endpoint assessment, are expected in H221. RhoVac has now received the first part (SEK12m) of the EU Horizon grant of €2.5m (c SEK27m). The existing and expected funding (further tax credits and Horizon 2020 payments) is more than sufficient to complete the ongoing Phase IIb study. Our valuation is largely unchanged at SEK889.5m or SEK46.7/share.

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Healthcare

RhoVac

Phase IIb study progressing to plan

FY19 results

Pharma & biotech

21 January 2020

Price

SEK13.9

Market cap

SEK265m

Net cash (SEKm) at end 2019

129.5

Shares in issue

19.0

Free float

85%

Code

RHOV

Primary exchange

Spotlight Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.1

(1.4)

(61.4)

Rel (local)

4.6

(3.3)

(61.7)

52-week high/low

SEK36.9

SEK12.5

Business description

RhoVac is an immunotherapy company listed on the Spotlight stock market in Sweden, with a 100%-owned subsidiary in Denmark. It is developing a peptide-based immunotherapy, RV001, which aims to train the immune system to specifically target cancer cells with metastatic potential. This is a novel approach that could have utility across a range of cancer settings.

Next events

Interim results from the Phase IIb study

H121

Start of exploratory clinical study in other cancer indications

2020

Updates on partnering process

2020/21

Analyst

Jonas Peciulis

+44 (0)20 3077 5728

RhoVac is a research client of Edison Investment Research Limited

The key takeaway from RhoVac’s Q419 results update released on 11 February 2020 was confirmation that the Phase IIb BRaVac study is progressing according to plan. All patient recruitment centres are expected to be up and running by May 2020. The trial should be fully enrolled (n=180) in September 2020 and key interim results, including primary endpoint assessment, are expected in H221. RhoVac has now received the first part (SEK12m) of the EU Horizon grant of €2.5m (c SEK27m). The existing and expected funding (further tax credits and Horizon 2020 payments) is more than sufficient to complete the ongoing Phase IIb study. Our valuation is largely unchanged at SEK889.5m or SEK46.7/share.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/18

0.0

(20.2)

(1.95)

0.0

N/A

N/A

12/19

6.0

(35.9)

(2.25)

0.0

N/A

N/A

12/20e

0.0

(59.4)

(2.71)

0.0

N/A

N/A

12/21e

0.0

(59.6)

(3.13)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Key Phase IIb data readout in H221

The study is testing RV001, a cancer immunotherapy targeting RhoC, for prostate cancer patients who have experienced biochemical failure after curative intent therapy. Most of the study centres are in Europe, but RhoVac has confirmed that it plans to open several US centres. The primary endpoint is time to PSA progression, defined as the time from randomization to doubling of PSA from baseline value. Key interim results are expected in H221, while follow-up data should be ready in H222.

Beyond prostate cancer

The therapy contains fragments of the protein RhoC, which is overexpressed in cells with metastatic potential across a range of cancers. In 2019, a comprehensive third party review article on this target was published – for the first time to our knowledge – which we reviewed in detail in our last report. RV001 offers a new approach by priming the immune system to recognise and kill tumour cells with metastatic potential. There are currently no drugs that can effectively prevent metastasis, therefore RV001 represents a differentiated approach and a potentially suitable partner drug in many anticancer combination therapies. RhoVac is looking at potential uses of RV001 beyond prostate cancer and, with the Q419 results, confirmed that it is exploring the best approach (preclinical and clinical).

Valuation: SEK889.5m or SEK46.7/share

We keep our RhoVac valuation virtually unchanged at SEK889.5m or SEK46.7/share. Near- to mid-term share price drivers are associated with the ongoing Phase IIb BRaVac study. Other significant R&D events include the start of an exploratory clinical study in other cancer indications (2020), and potential updates on the partnering process.

Financials and valuation

As we described in our previous report, RhoVac was awarded an EU Horizon 2020 grant of €2.5m (c SEK27m) to support the ongoing Phase IIb study. To date, the company has received SEK12m of that amount, which is already reflected in the balance sheet and will also be recognised in the P&L as income as the trial progresses (SEK6.0m booked in Q419). The remaining part of the grant SEK15m is yet to be received and is not yet recognised in the balance sheet.

RhoVac reported a positive amount of SEK827k in other external costs line (vs -SEK9.3m in Q319). This was a result of a pre-payment to CRO incorrectly booked as cost, rather than current asset. This has now been corrected. The grant income and cost accrual correction led to a positive Q419 EBIT of SEK5.6m vs -SEK10.6m in Q319.

The reported end-2019 cash position was SEK130m with no interest-bearing debt. However, RhoVac will also receive the remaining part of the grant of SEK15m and expects around SEK20m in tax credits during the duration of the Phase IIb trial. These expected amounts in addition to increased current assets after the cost accrual correction, mean that the total expected funding is around SEK172m, which is more than sufficient to complete the ongoing Phase IIb study. We maintain our financial estimates.

Our RhoVac valuation remains virtually unchanged at SEK889.5m or SEK46.7/share. We maintain the assumptions in our risk-adjusted NPV model. Our valuation is based on RV001 in prostate cancer only, specifically in patients with biochemical recurrence following radical prostatectomy or radiotherapy.

According to our model, a successful Phase IIb outcome would result in RhoVac’s rNPV increasing to SEK2.05bn or SEK107.1/share (not including the net cash estimate). This would include setting the probability of success at 40% as a Phase III-ready asset and changing the date of the valuation to the start of 2022, but leaving all other inputs unchanged.

Exhibit 1: Sum-of-the-parts RhoVac valuation

Product

Launch

Peak sales
(US$m)

Unrisked NPV (SEKm)

Technology probability (%)

rNPV
(SEKm)

rNPV/share (SEK)

RV001 – prostate cancer

2027

888

3,451.1

15%

759.5

39.9

Net cash at end-Q419

130.0

100%

130.0

6.8

Valuation

3,581.1

889.5

46.7

Source: Edison Investment Research. Note: WACC = 12.5% for product valuations.

Exhibit 2: Financial summary

SEK'000s

2018

2019

2020e

2021e

December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

5,979

0

0

Cost of Sales

0

0

0

0

Gross Profit

0

5,979

0

0

Research and development

(19,154)

(38,570)

(60,000)

(60,000)

EBITDA

 

 

(20,148)

(36,325)

(60,000)

(60,000)

Operating Profit (before amort. and except.)

 

 

(20,148)

(36,325)

(60,000)

(60,000)

Intangible Amortisation

0

0

0

0

Exceptionals

0

0

0

0

Other

0

0

0

0

Operating Profit

(20,148)

(36,325)

(60,000)

(60,000)

Net Interest

(64)

382

577

363

Profit Before Tax (norm)

 

 

(20,212)

(35,943)

(59,423)

(59,637)

Profit Before Tax (reported)

 

 

(20,212)

(35,943)

(59,423)

(59,637)

Tax

2,936

3,837

7,900

0

Profit After Tax (norm)

(17,276)

(32,106)

(51,523)

(59,637)

Profit After Tax (reported)

(17,276)

(32,106)

(51,523)

(59,637)

Average Number of Shares Outstanding (m)

8.9

14.3

19.0

19.0

EPS - normalised (SEK)

 

 

(1.95)

(2.25)

(2.71)

(3.13)

EPS - normalised and fully diluted (SEK)

 

 

(1.95)

(2.25)

(2.71)

(3.13)

EPS - (reported) (SEK)

 

 

(1.95)

(2.25)

(2.71)

(3.13)

Dividend per share (SEK)

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

100.0

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

 

 

2,848

3,021

3,021

3,021

Intangible Assets

2,848

3,021

3,021

3,021

Tangible Assets

0

0

0

0

Investments

0

0

0

0

Current Assets

 

 

20,372

149,928

98,028

38,228

Stocks

0

0

0

0

Debtors

240

14,391

14,391

14,391

Cash

16,060

129,543

77,643

17,843

Other

4,071

5,994

5,994

5,994

Current Liabilities

 

 

(4,380)

(12,574)

(12,574)

(12,574)

Creditors

(4,380)

(12,574)

(12,574)

(12,574)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(596)

(624)

(624)

(624)

Long term borrowings

0

0

0

0

Other long-term liabilities

(596)

(624)

(624)

(624)

Net Assets

 

 

18,245

139,751

87,851

28,051

CASH FLOW

Operating Cash Flow

 

 

(17,097)

(43,309)

(60,000)

(60,000)

Net Interest

(64)

(1,834)

200

200

Tax

2,229

2,986

7,900

0

Capex

0

0

0

0

Acquisitions/disposals

0

0

0

0

Financing

21,756

154,715

0

0

Other

(191)

925

0

0

Dividends

0

0

0

0

Net Cash Flow

6,632

113,483

(51,900)

(59,800)

Opening net debt/(cash)

 

 

(9,428)

(16,060)

(129,543)

(77,643)

HP finance leases initiated

0

0

0

0

Other

(0)

0

0

0

Closing net debt/(cash)

 

 

(16,060)

(129,543)

(77,643)

(17,843)

Source: RhoVac accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by RhoVac and prepared and issued by Edison, in consideration of a fee payable by RhoVac. Edison Investment Research standard fees are £49,500 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 2020 Edison Investment Research Limited (Edison). All rights reserved.

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.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by RhoVac and prepared and issued by Edison, in consideration of a fee payable by RhoVac. Edison Investment Research standard fees are £49,500 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 2020 Edison Investment Research Limited (Edison). All rights reserved.

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.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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