OSE Immunotherapeutics — Pipeline momentum builds into FY24

OSE Immunotherapeutics (PAR: OSE)

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OSE Immunotherapeutics — Pipeline momentum builds into FY24

OSE Immunotherapeutics’ (OSE’s) FY23 update summarised an active period for its clinical pipeline that was capped by the post-period $713m deal with AbbVie for preclinical asset OSE-230. The company is anticipated to hit meaningful milestones in 2024 with its lead immuno-oncology asset, Tedopi, gearing up for the confirmatory pivotal Phase III trial in Q224 and lead immuno-inflammation programme, Lusvertikimab, set to report Phase II top-line results in mid-2024. OSE-230 (being developed as a treatment for chronic inflammation) is also anticipated to enter the clinic this year, potentially tiggering another milestone payment for OSE. Gross cash of €18.7m at end-FY23 was fortified by the AbbVie $48m upfront payment and expected €5.8m in research tax credit, extending the cash runway into 2026, past several key milestones. We update our estimates for the FY23 results and adjust the launch timelines for the partnered programmes (from 2028 to 2029). Our valuation adjusts to €317.1m or €14.6 per share (from €311.3m or €14.4/share previously).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

OSE Immunotherapeutics

Pipeline momentum builds into FY24

FY23 update

Pharma and biotech

2 April 2024

Price

€4.86

Market cap

€106m

€0.93/US$

Net debt (€m) at 31 December 2023 (excluding $48m in upfront payment from AbbVie in February 2024)

23.2

Shares in issue

21.7m

Free float

65%

Code

OSE

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.8)

13.6

(4.0)

Rel (local)

(6.1)

4.9

(13.3)

52-week high/low

€6.24

€2.73

Business description

OSE Immunotherapeutics is based in Nantes and Paris in France and is listed on the Euronext Paris exchange. It is developing immunotherapies for the treatment of solid tumours and autoimmune diseases and has established several partnerships with large pharma companies.

Next events

Tedopi Phase III trial commencement

Q224

Lusvertikimab UC Phase II readout

Mid-2024

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

OSE Immunotherapeutics is a research client of Edison Investment Research Limited

OSE Immunotherapeutics’ (OSE’s) FY23 update summarised an active period for its clinical pipeline that was capped by the post-period $713m deal with AbbVie for preclinical asset OSE-230. The company is anticipated to hit meaningful milestones in 2024 with its lead immuno-oncology asset, Tedopi, gearing up for the confirmatory pivotal Phase III trial in Q224 and lead immuno-inflammation programme, Lusvertikimab, set to report Phase II top-line results in mid-2024. OSE-230 (being developed as a treatment for chronic inflammation) is also anticipated to enter the clinic this year, potentially tiggering another milestone payment for OSE. Gross cash of €18.7m at end-FY23 was fortified by the AbbVie $48m upfront payment and expected €5.8m in research tax credit, extending the cash runway into 2026, past several key milestones. We update our estimates for the FY23 results and adjust the launch timelines for the partnered programmes (from 2028 to 2029). Our valuation adjusts to €317.1m or €14.6 per share (from €311.3m or €14.4/share previously).

Year
end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

18.3

(18.0)

(0.96)

0.0

N/A

N/A

12/23

2.2

(23.2)

(1.18)

0.0

N/A

N/A

12/24e

56.9

25.3

1.15

0.0

N/A

N/A

12/25e

65.5

33.7

1.49

0.0

N/A

N/A

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

Confirmatory pivotal Tedopi trial in focus

OSE’s current strategic priority is the confirmatory pivotal Phase III trial for Tedopi in advanced/metastatic non-small cell lung cancer (NSCLC). We expect this trial to build on the positive results from ATALANTE-1, but in a larger patient population (n=350), and with a focus on Tedopi as a potential second-line monotherapy, rather than a second- or third-line treatment. The trial is likely to commence in Q224 in the US with extension to European sites in H224, and we expect a conclusion in 2027. In our view, the results from this trial could be a significant catalyst for OSE and, provided the data continue to be supportive, we anticipate a launch in 2028.

Next up: Phase II readouts in ulcerative colitis

OSE’s most significant near-term catalyst will be the Phase II CoTikiS results for Lusvertikimab. The multi-centre, randomised, double-blind, placebo-controlled trial is assessing the anti-IL-7R antibody in patients with moderate to severe ulcerative colitis. Patient enrolment was completed in March 2024 and results (from induction to week 10 and after six months of maintenance) are anticipated in mid-2024.

Valuation: €317.1m or €14.6 per share

We have updated our model for the FY23 results and have made minor tweaks to our near-term estimates (including adjusting for the $48m upfront payment from AbbVie). In the longer term, while we keep our underlying assumptions broadly unchanged, we have adjusted the launch timelines for the partnered programmes, BI 765063 (with Boehringer Ingelheim) and FR-104 (with Veloxis), to 2029 (2028 previously). Our valuation adjusts slightly to €14.6/share from €14.4/share previously.

Active pipeline in immuno-oncology and -inflammation

Proprietary programmes

OSE Immunotherapeutics has an active clinical development pipeline focused on immuno-oncology and immuno-inflammation (Exhibit 1). Anticipation is building for its lead asset, Tedopi, with the upcoming confirmatory pivotal trial due to commence in Q224, where the cancer vaccine will be evaluated as a monotherapy in second-line NSCLC for patients with secondary resistance to immune checkpoint inhibitors (ICIs). Tedopi is also being explored in three partnered Phase II combination trials: pancreatic cancer (with chemotherapy; patient enrolment recently completed; results expected in 2024), ovarian cancer (with pembrolizumab; results anticipated in 2025) and lung cancer (with nivolumab; results expected in 2025). If the clinical data are supportive, the company could potentially address earlier lines of treatment, representing a greater commercial opportunity. Momentum is expected to build through 2024 with the Phase II Lusvertikimab readouts expected in mid-2024, which could potentially represent the next major catalyst for the company’s immuno-inflammation portfolio. OSE-279, an anti-PD1 ICI, made good progress throughout 2023 and early-2024, having demonstrated indicators of both efficacy and safety in a Phase I/II trial in patients with advanced solid tumours. Provided the data continue to be supportive for OSE-279, management may look to maximise its clinical potential with various combination approaches, including with Tedopi.

Exhibit 1: OSE Immunotherapeutics’ clinical development pipeline

Source: OSE Immunotherapeutics corporate presentation (March 2024)

Tedopi set for confirmatory pivotal Phase III trial

Asset overview

Tedopi is an off-the-shelf cancer vaccine comprising a unique combination of neoepitopes (small peptides derived from tumour-specific antigens expressed by various cancer cells) and is likely the most advanced neoepitopes vaccine in the clinic. It is being developed for NSCLC patients with secondary resistance to ICIs (patients experiencing disease progression after 12 weeks of ICI treatment) and the treatment is designed to directly activate tumour-specific T-cells that then bind tumour-associated antigens presented on the surface of cancer cells by the HLA-A2 receptor (c 45% of NSCLC patients are HLA-A2 positive).

The latest from the clinic: ATALANTE-1

OSE has already demonstrated the potential efficacy of Tedopi in the ATALANTE-1 trial, which was a randomised Phase III study to evaluate the cancer vaccine in the second- or third-line treatment setting after ICI failure in patients with locally advanced (stage IIIb) or metastatic (stage IV) NSCLC and who are HLA-A2 positive. As with all trials during the pandemic, recruitment was adversely affected, and 219 of the planned 363 patients were enrolled. These 219 patients were randomised to receive either Tedopi (n=139) or standard-of-care (SoC) chemotherapy (docetaxel or pemetrexed, n=80). Of these patients, 118 (54%) met the definition of the population of interest (secondary resistance) and were used for the main analysis. The primary endpoint for ATALANTE-1 was met, with significantly improved overall survival (OS) rates, and the results showed positive patient-reported outcomes, quality of life and safety (Exhibit 2). Key highlights included:

Risk of death reduced by 41% in the Tedopi arm.

Median OS of 11.1 months with Tedopi (vs 7.5 months with SoC) (Exhibit 3).

OS rate at 12 months was 44.4% with Tedopi (vs 27.5 with SoC).

Median post-progression survival of 7.7 months with Tedopi (vs 4.6 months with SoC).

Rate of severe adverse events was just 11% with Tedopi (vs 35% with SoC).

Exhibit 2: ATALANTE-1 quality of life results

Exhibit 3: ATALANTE-1 OS data

Source: OSE Immunotherapeutics corporate presentation (March 2024)

Source: OSE Immunotherapeutics corporate presentation (March 2024)

Exhibit 2: ATALANTE-1 quality of life results

Source: OSE Immunotherapeutics corporate presentation (March 2024)

Exhibit 3: ATALANTE-1 OS data

Source: OSE Immunotherapeutics corporate presentation (March 2024)

Confirmatory pivotal Phase III trial in focus

Following the results of ATALANTE-1, OSE received positive recommendations to conduct a follow-on confirmatory pivotal Phase III trial based on scientific advice from both the FDA and European Medicines Agency (EMA). This will evaluate Tedopi as a monotherapy specifically in the second-line setting (versus second- or third-line in ATALANTE-1), and will involve a larger NSCLC patient population (expected n=350 vs 139 evaluable patients in ATALANTE-1). As part of this confirmatory pivotal trial, OSE will utilise a companion diagnostic screening test to efficiently identify HLA-A2 positive NSCLC patients, which should facilitate the enrolment process by efficiently identifying patients who are more likely to respond to Tedopi epitopes. OSE expects to launch clinical trials in the US in Q224 followed by Europe in H224. The NSCLC treatment market, currently dominated by ICIs, was valued at c $16bn in 2021 by Spherical Insights and is projected to reach a sizeable c $39bn by 2030 (CAGR of 10.4%). Assuming positive clinical data, OSE has the potential to garner notable market share by targeting the second-line post-ICI failure (market value >$5bn per year, according to management). We anticipate the confirmatory pivotal Phase III trial is likely to conclude in 2027 and would be a significant catalyst for the company.

Upcoming Lusvertikimab Phase II results in UC

OSE’s lead immune-inflammation asset is Lusvertikimab (formerly OSE-127), an IL-7R antagonist targeting CD127 (a cytokine that modulates the proliferation, apoptosis and activation of CD4 and CD8 T-cells); to our knowledge this is a novel and differentiated mechanism of action within this treatment space (Exhibits 4 and 5).

Exhibit 4: Role of IL-7 in fuelling chronic inflammation in tissues

Exhibit 5: Lusvertikimab mechanism of action

Source: OSE Immunotherapeutics corporate presentation (March 2024).

Source: OSE Immunotherapeutics corporate presentation (March 2024).

Exhibit 4: Role of IL-7 in fuelling chronic inflammation in tissues

Source: OSE Immunotherapeutics corporate presentation (March 2024).

Exhibit 5: Lusvertikimab mechanism of action

Source: OSE Immunotherapeutics corporate presentation (March 2024).

The Phase II CoTikiS trial is a multi-centre, randomised, double-blind, placebo-controlled study to assess Lusvertikimab in patients with moderate to severe ulcerative colitis (UC) (Exhibit 6). In July 2023, OSE announced an encouraging interim review from the independent drug safety monitoring board, which recommended that the trial should proceed without any modifications to the design. In March 2024, patient enrolment was announced to be complete (n=150), after a minor delay relating to a recommendation to include patients naïve of biological treatments (in addition to those post failure of, or intolerant to, previous biological treatments) and include trial sites in Eastern Europe, where there is a greater population of such patients. The top-line results after induction (primary endpoint at week 10) are expected in mid-2024, which we believe may represent the next most significant catalyst for investor attention.

Exhibit 6: CoTikiS trial design for Lusvertikimab in UC

Source: OSE Immunotherapeutics corporate presentation (March 2024)

Potential to expand into acute lymphoblastic leukaemia

Beyond UC, OSE has also announced plans to expand Lusvertikimab to acute lymphoblastic leukaemia (ALL), backed by a positive opinion from the EMA for Orphan Drug designation in this indication. Preliminary research has demonstrated the therapeutic potential of Lusvertikimab in targeting and blocking the high and dysregulated expression of IL-7R, which, according to management, is observed in 84% of B- or T-cell ALL patients. Notably, the antibody was found to have significant activity in models involving leukemic samples from refractory and relapsed ALL patients. While these data were first reported in December 2022, we believe that the positive opinion from the EMA is encouraging for a potential clinical programme for Lusvertikimab in ALL. We expect OSE to provide an update on this front within 2024 and note this will most likely include plans for a Phase I/II trial. With the ALL treatment market projected to be worth c $4.5bn in 2031, we believe this could represent a potentially sizeable opportunity for OSE.

OSE-279: Up-and-coming checkpoint inhibitor

Targeting the lucrative ICI market, OSE-279 (an anti-PD1 monoclonal antibody) is currently in a Phase I/II clinical trial for the treatment of advanced solid tumours. This is a first-in-human, multi-centre, dose-escalation/expansion study aiming to determine the maximum tolerated dose and/or recommended Phase II dose (RP2D) of the ICI as a monotherapy. Secondary objectives include the assessment of anti-tumour activity, safety, investigating the pharmacokinetic/pharmacodynamic profile of the treatment and measuring receptor occupancy.

In February 2024, OSE shared an encouraging clinical update corresponding to the first 20 patients, representing 13 different tumour types. There were four confirmed partial responses (PR) from patients receiving 600mg every six weeks (q6w), with a 36% response rate in patients with: anal squamous cell carcinoma, undifferentiated pleomorphic sarcoma, oncocytic thyroid cancer and alveolar soft part sarcoma, potentially showing a competitive edge over current approved anti-PD1 ICIs (though we caution that there may be limitations in comparing clinical trial data to historical data due to differences in trial designs and control) (see Exhibit 7). One ongoing PR (81% reduction of target lesions) was reported for a hepatocellular carcinoma patient after a single dose (300mg). Stable disease was reported in five patients (multiple dose levels) and treatment is ongoing in seven patients. The pharmacokinetic analysis showed dose-proportionality and favourable exposure. It was also noted that receptor occupancy was maintained. Importantly, at 600mg q6w, there were no dose-limiting toxicities (n=10) and, therefore, in addition to the RP2D of 300mg every three weeks, 600mg q6w has been selected as the second RP2D. Management is also exploring the possibility of combination approaches, such as with its lead cancer vaccine Tedopi, which we believe could maximise the potential of its proprietary therapies.

Exhibit 7: Clinical responses in anti-PD1 ICIs in early Phase I studies

Source: OSE Immunotherapeutics corporate presentation (March 2024). Note: *Patnaik et al. Cancer Chem & Pharm 2021; Brahmer et al. JCO 2010; Patnaik et al. Clin Cancer Res 2015; Papadopoulos et al. Clin Cancer Res 2020.

ICIs currently dominate the immunotherapy treatment landscape and as a result it is a highly competitive area. The FDA has approved four different categories of ICIs, including inhibitors of: PD1; the ligand PD-L1; the cytotoxic T-lymphocyte associated protein 4 (CTLA-4); and lymphocyte activation gene 3 (LAG3 –Opdualag, a combination of nivolumab and relatlimab targets PD1 and LAG3, respectively, and is approved for the treatment of melanoma) (Exhibit 8). OSE will likely aim to differentiate by targeting orphan indications with high unmet medical needs, as well as by assessing OSE-279 in combination with its proprietary assets. Management anticipates that such combinations could overcome some of the challenges associated with cancer resistance mechanisms.

Exhibit 8: FDA approved ICIs

Drug

Company

Target

Launch year

Number of marketed indications

Estimated sales 2028 (US$)*

Nivolumab (Opdivo)

Bristol Myers Squibb

PD1

2014

12

12.8bn

Pembrolizumab (Keytruda)

Merck

PD1

2014

19

31.0bn

Cemiplimab (Libtayo)

Regeneron/Sanofi

PD1

2018

5

1.7bn

Dostarlimab (Jemperli)

GSK

PD1

2021

2

474m

Atezolizumab (Tecentriq)

Roche

PD-L1

2016

8

5.2bn

Avelumab (Bavencio)

EMD Serono/Merck

PD-L1

2017

3

773m

Durvalumab (Imfinzi)

AstraZeneca

PD-L1

2017

5

7.1bn

Ipilimumab (Yervoy)

Bristol Myers Squibb

CTLA-4

2011

6

1.3bn

Nivolumab/relatlimab (Opdualag)

Bristol Myers Squibb

PD1/LAG3

2022

1

2.0bn

Source: Edison Investment Research. Note: *According to EvaluatePharma.

In addition to the above, we note that BeiGene received FDA approval for tislelizumab (Tevimbra), a PD-1 inhibitor, in March 2024 for the treatment of advanced or metastatic esophageal squamous cell carcinoma, and it is expected to be available in the US from H224.

Last but not least, partnered programmes

Exacerbated by the biotech funding challenges, large pharma partnerships and acquisitions continue to garner the most mindshare in the sector. Fortunately, OSE remains engaged in multiple partnered programmes, reflected in the company’s proprietary programmes presented below:

FR-104/VEL-101 is an anti-CD28 monoclonal antibody fragment designed to deliver stimulatory signals from antigen-presenting cells to T-cells, and is being developed in partnership with Veloxis. As of March 2024, OSE has already received €13.9m from Veloxis from up to €315m in total (plus tiered royalties on global sales). In December 2023, OSE shared an encouraging update from the Phase I/II FIRsT trial, which is assessing FR-104/VEL-101 as a maintenance therapy for patients following kidney transplants. These interim results showed desirable safety for the treatment with no cases of acute rejection in the eight evaluable patients. As long-term maintenance therapy for kidney transplantations is a relatively stagnant field, we believe there is a sizable opportunity for OSE and Veloxis in this space. While we expect full results from the FIRsT study after all patients have completed the 12-month treatment protocol (expected in H224), we note that Veloxis is already preparing for a subsequent Phase II trial involving a larger patient population.

BI 765063 and BI 770371 are anti-SIRPα antibodies that operate by a similar mechanism to T-cell ICIs in the tumour microenvironment, and are designed to inhibit the checkpoints between tumour cells and myeloid cells rather than T-cells. BI 765063 is being explored in a Phase Ib study in various combinations for the treatment of head and neck squamous cell carcinoma (HNHCC) and hepatocellular carcinoma (HCC). For BI 7770371, the first clinical results were presented in October 2023 for the ongoing open-label, dose escalation/dose expansion Phase I study in patients with solid tumours. We expect updates on this programme (including plans for a potential Phase II programme) in 2024. As of March 2024, OSE has received €65m from a possible €1.1bn (plus tier royalties on global sales).

More recently (February 2024), OSE announced a global licence and collaboration agreement with AbbVie to develop OSE-230, a novel monoclonal antibody, for the treatment of chronic inflammation. OSE-230 was designed (via the company’s myeloid platform) to activate ChemR23, a G-Protein Coupled Receptor target. ChemR23 activation is believed to offer a novel mechanism of action for the treatment of inflammation by modulating the function of macrophages and neutrophils (Exhibit 9). Previously (October 2020), OSE presented encouraging preclinical data showing that OSE-230 successfully targeted receptors associated with homeostasis. The antibody therapy demonstrated inflammation resolution in vivo in models for: acute inflammation, chronic colitis, type 1 diabetes and multiple sclerosis. Now, AbbVie will assume full development of the asset in exchange for a $48m upfront payment to OSE, and up to $665m in additional milestone payments. Given the challenging macroeconomic environment, this transaction provides further external recognition of OSE’s capabilities. Management will likely employ these funds to support the progress of its more advanced assets, such as Tedopi, to the market.

Exhibit 9: OSE-230 novel mechanism of action

Source: OSE Immunotherapeutics corporate presentation (March 2024)

Financials

OSE is a clinical-stage company and therefore all reported revenues comprise either licensing, upfront, milestone or servicing-related revenues from partners. In FY23, OSE reported revenues of €2.2m (we had estimated €2.7m), which we believe can be attributed to direct-cost invoicing to partner Boehringer Ingelheim (BI). The corresponding figure for FY22 was €18.3m, which included a €9.8m milestone payment from BI and €5m in upfront payment from Veloxis. The FY23 operating expenses were down 31.3% to €25.2m (€36.7m in FY22; lower than our estimate of €29.3) benefiting from a combination of lower R&D expenses (completion of the Phase III ATALANTE-1 study) and tighter control over overheads by management. R&D expenses, which made up 68% of the operating expenses in FY23, declined 36% y-o-y to €17.2m, from €26.9m in FY22. Overhead expenses improved too (€6.0m vs €6.7m in FY22), resulting in a reported operating loss of €23.0m (loss of €18.5m in FY22), lower than our estimate of €26.5m. Cah outflow from operating activities was €19.8m, slightly higher than the €18.3m recorded in FY22.

Based on the FY23 results, subsequent post-period events and updated visibility on the company’s clinical pipeline, we have adjusted our FY24 estimates and have also incorporated FY25 estimates as we roll forward our model. For FY24, we now incorporate the $48m (c €45m) licensing income received from AbbVie in February 2024 as part of the FY24 revenue. We have also assumed a €10m milestone payment from BI based on the assumption that the ongoing Phase I study completes in 2024 and another c €2.5m in servicing-related fees (these are subject to revision). In total, we now estimate c €57m in revenues in FY24, versus €15m previously. For FY25, we estimate revenues of €65.5m, assuming inflows from a partnering deal for Lusvertikimab (management has indicated that it would seek a partner to undertake Phase III studies and subsequent commercialisation of Lusvertikimab). With the anticipated initiation of the confirmatory Phase III trial for Tedopi in Q224 (partially offset by the completion of the Phase II study, CoTikiS, for Lusvertikimab in UC), we expect R&D expenses to rise. In the near term we have adjusted our R&D expectations to €23.2m in FY24 (from our previous estimate of €27.7m) and estimate a similar level to be maintained in FY25 (€23.3m). Overall, we now estimate an operating profit of €27.4m in FY24 (operating loss of €19.8m previously) and €35.7m in FY25.

OSE exited FY23 with a gross cash position of €18.7m and a net debt position of €23.2m. The company had total financial liabilities of €41.9m at the end of FY23, which includes both debt from government agencies as well as repayable advances (€5.3m of this was raised in 2023 with a maturing period of three to five years). Of the total indebtedness, about half (c €20m) of this is made up of loans from the European Investment Bank (EIB), drawn down in two equal tranches in July 2021 and December 2022, respectively. The loan is repayable in 2026, with only minor debt servicing required prior to that. The EIB loan bears an interest rate of 5% and required the company to issue 1.4m warrants (850k for tranche 1 and 550k against tranche 2) to be exercised after July 2026 and December 2027, respectively. If fully converted (assuming no further equity issues from the company), this would dilute existing shareholders by c 6%. In April 2023, OSE entered into an equity financing agreement with Vester Finance, which held the option to subscribe to a maximum of 2.8m shares (15.1% of the share capital) of the company over a maximum period of 24 months. As of September 2023, 2.74m warrants have been exercised (c 12.5% dilution) at a weighted average exercise price of €4.31, netting OSE €11.6m in equity financing. Subsequent to this, the company signed an extension to this facility, against issue of a maximum 900k shares. As per the latest available information, no further warrant exercises have been made under this facility but if exercised, this would lead to a further dilution of c 4%.

Based on the year-end gross cash position of €18.7m along with the $48m upfront payment from AbbVie and expected €5.8m in R&D tax credit (projected to be received in 2024), we estimate the company has operating headroom into 2026 (in line with management guidance), even if there are no further licensing or milestone-related inflows. Our model assumes that the company will continue to receive further inflows across its various assets from existing/new partnership deals and therefore we do not foresee the need for a new fund raise. In case the company does not receive any non-dilutive funding in the form of licensing income, we estimate that the company would be required to raise a total of c €70m across FY26 and FY27 before becoming self-sustaining in FY28, following the launch of Tedopi in the US. If this requirement is met through equity funding, we estimate the need to issue c 14.4 million shares (at the current share price of €4.87), resulting in our per share valuation coming down to €10.7 from €14.6 currently (shares outstanding would increase from 21.7m to 36.0m).

Valuation

We continue to value OSE using a risk-adjusted net present value (NPV) approach, valuing the different assets (both in-house and partnered) separately, adjusted for the associated risk (based on the phase of clinical development) (Exhibit 10). We use a flat discount rate of 12.5% across all clinical programmes. For the in-house, self-developed programmes Tedopi in NSCLC, OSE-127 in UC and OSE-279 in solid tumours), we keep our underlying assumptions (target market, product pricing, trial timelines, licensing deals and probability of success) unchanged. For the partnered assets (OSE-172/BI 765063, FR-104/VEL-101), based on the current stage of development, we have conservatively extended the launch timeline to 2029, from 2028 previously. The impact of this has been offset by the benefits of rolling forwards our model. Our valuation for OSE adjusts slightly to €317.1m or €14.6 per share (from €311.3m or €14.4/share previously).

Note that our valuation currently does not reflect the potential from OSE-230 (despite the recent deal with AbbVie) as it is currently in the pre-clinical stage of development. Based on recent management communication, we expect the company to file an investigational new drug (IND) application for the asset in 2024, followed by the Phase I study initiation, at which time we will incorporate it in our model and valuation. This should lead to further upside in our valuation.

Exhibit 10: Sum-of-the-parts OSE valuation

Product

Launch

Peak sales (€m)

NPV
(€m)

NPV/share (€)

Probability

rNPV
(€m)

rNPV/share (€)

Tedopi – NSCLC

2028

551

416.1

19.2

48%

188.2

8.7

OSE-127 – ulcerative colitis

2028

838

301.5

13.9

17%

54.4

2.5

BI 765063 – multiple cancer indications (MSS CRC)

2029

523

187.9

8.7

14%

37.6

1.7

FR-104 – Veloxis deal milestones (kidney transplantation)

2029

94

139.0

6.4

17%

25.7

1.2

OSE-279 solid tumours (SCLC)

2029

424

196.4

9.1

14%

34.4

1.6

Net cash/(debt) at 31 December 2023

(23.2)

(1.1)

100%

(23.2)

(1.1)

Valuation

 

 

1,217.8

56.2

 

317.1

14.6

Source: Edison Investment Research

Exhibit 11: Financial summary

€000s

2021

2022

2023

2024e

2025e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

26,306

18,302

2,227

56,894

65,472

Cost of Sales

0

0

0

0

0

Gross Profit

26,306

18,302

2,227

56,894

65,472

Research and development

(30,550)

(26,893)

(17,158)

(23,177)

(23,291)

Overhead expenses

(8,608)

(6,673)

(6,015)

(6,316)

(6,505)

EBITDA

 

(13,601)

(14,992)

(19,566)

28,557

36,880

Operating Profit (before amort. and excepts.)

 

(16,625)

(18,478)

(22,986)

27,401

35,677

Intangible Amortisation

0

0

0

0

0

Exceptionals

0

0

0

0

0

Other

0

0

0

0

0

Operating Profit

(16,625)

(18,478)

(22,986)

27,401

35,677

Net Interest

(589)

455

(235)

(2,052)

(1,982)

Profit Before Tax (norm)

 

(17,214)

(18,023)

(23,221)

25,349

33,695

Profit Before Tax (reported)

 

(17,214)

(18,023)

(23,221)

25,349

33,695

Tax

364

263

218

0

0

Profit After Tax (norm)

(17,214)

(18,023)

(23,221)

25,349

33,695

Profit After Tax (reported)

(16,850)

(17,760)

(23,003)

25,349

33,695

Average Number of Shares Outstanding (m)

18.2

18.5

19.6

22.1

22.6

EPS - normalised (c)

 

(94.82)

(97.28)

(118.70)

114.54

149.02

EPS - reported (€)

 

(0.93)

(0.96)

(1.18)

1.15

1.49

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

N/A

N/A

N/A

50.2

56.3

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

48.2

54.5

BALANCE SHEET

Fixed Assets

 

57,670

54,580

51,576

50,771

50,017

Intangible Assets

51,122

48,784

46,401

45,591

44,780

Tangible Assets

926

743

464

469

526

Investments

5,622

5,053

4,711

4,711

4,711

Current Assets

 

44,205

37,200

30,478

56,334

87,025

Stocks

0

0

0

1

1

Debtors

772

403

982

1,031

1,083

Cash

33,579

25,620

18,672

44,479

75,118

Other

9,854

11,177

10,824

10,824

10,824

Current Liabilities

 

16,762

16,268

18,799

19,264

19,752

Creditors

9,607

8,539

9,299

9,764

10,252

Short term borrowings

1,611

3,093

6,403

6,403

6,403

Other

5,544

4,636

3,097

3,097

3,097

Long Term Liabilities

 

37,224

42,855

40,280

36,874

32,628

Long term borrowings

30,801

37,231

35,508

32,647

28,924

Deferred tax liabilities

1,748

1,514

1,311

1,311

1,311

Other long term liabilities

4,675

4,110

3,461

2,916

2,393

Net Assets

 

47,889

32,657

22,975

50,967

84,662

CASH FLOW

Net income

 

(16,850)

(17,760)

(23,003)

25,349

33,695

Movements in working capital

 

1,025

(3,142)

(835)

416

437

Depreciation and other

3,024

3,486

3,420

1,155

1,203

Net Interest

634

(3,066)

(657)

0

0

Tax

(696)

(499)

(435)

0

0

Others

2,944

2,728

1,746

0

0

Net Cash Flows from Operations

 

(9,919)

(18,253)

(19,764)

26,920

35,335

Capex

(472)

(274)

(232)

(350)

(450)

Acquisitions/disposals

0

0

0

0

0

Others

(355)

300

(275)

0

0

Net Cash Flow from Investing Activities

 

(827)

26

(507)

(350)

(450)

Equity Financing

265

6

11,357

2,643

0

Debt financing

15,241

11,046

2,304

(2,861)

(3,723)

Other

(549)

(785)

(337)

(545)

(523)

Dividends

0

0

0

0

0

Net Cash Flow from Financing Activities

 

14,957

10,267

13,324

(763)

(4,246)

Effect of FX

0

0

0

0

0

Net Cash Flow

 

4,211

(7,960)

(6,947)

25,807

30,639

Opening net debt/(cash)

 

(12,766)

(1,167)

14,704

23,239

(5,429)

Change in debt

15,810

7,912

1,587

(2,861)

(3,723)

Change in cash

4,211

(7,960)

(6,947)

25,807

30,639

Closing net debt/(cash)

 

(1,167)

14,704

23,239

(5,429)

(39,791)

Source: company reports, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by OSE Immunotherapeutics and prepared and issued by Edison, in consideration of a fee payable by OSE Immunotherapeutics. Edison Investment Research standard fees are £60,000 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.

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Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

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

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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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by OSE Immunotherapeutics and prepared and issued by Edison, in consideration of a fee payable by OSE Immunotherapeutics. Edison Investment Research standard fees are £60,000 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 2024 Edison Investment Research Limited (Edison).

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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