Currency in SEK
Last close As at 02/06/2023
SEK1.49
▲ 0.04 (2.76%)
Market capitalisation
SEK59m
Research: Healthcare
Top-line results from part 2 of the Phase II CORIST trial in metastatic colorectal cancer (mCRC) were disappointing for Scandion, as the SCO-101/FOLFIRI combination failed to reach the 30% tumour reduction threshold. Despite this, SCO-101 did show indications of efficacy and the company intends to begin enrolment for CORIST part 3 in Q322, which will investigate a new dosing regimen in a larger patient population to fully evaluate SCO-101’s utility. We continue to estimate a cash runway for the company into FY24; however, as proof-of-concept data have been elusive so far, we expect the company will need to raise capital by end-2023/early FY24 to continue clinical development. Considering CORIST part 2 results, we have reduced our valuation of Scandion Oncology to SEK279.0m or SEK6.9 per share, from SEK609.5m or SEK15.0 per share previously.
Scandion Oncology |
Proof-of-concept data elusive |
Clinical trial update |
Pharma and biotech |
5 October 2022 |
Share price performance
Business description
Next events
Analysts
Scandion Oncology is a research client of Edison Investment Research Limited |
Top-line results from part 2 of the Phase II CORIST trial in metastatic colorectal cancer (mCRC) were disappointing for Scandion, as the SCO-101/FOLFIRI combination failed to reach the 30% tumour reduction threshold. Despite this, SCO-101 did show indications of efficacy and the company intends to begin enrolment for CORIST part 3 in Q322, which will investigate a new dosing regimen in a larger patient population to fully evaluate SCO-101’s utility. We continue to estimate a cash runway for the company into FY24; however, as proof-of-concept data have been elusive so far, we expect the company will need to raise capital by end-2023/early FY24 to continue clinical development. Considering CORIST part 2 results, we have reduced our valuation of Scandion Oncology to SEK279.0m or SEK6.9 per share, from SEK609.5m or SEK15.0 per share previously.
Year end |
Revenue (DKKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
1.0 |
(21.5) |
(0.53) |
0.0 |
N/A |
N/A |
12/21 |
0.8 |
(57.2) |
(1.61) |
0.0 |
N/A |
N/A |
12/22e |
0.8 |
(64.9) |
(1.66) |
0.0 |
N/A |
N/A |
12/23e |
0.8 |
(82.4) |
(1.89) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
SCO-101 development continues
While clinical proof-of-concept has not yet been demonstrated for SCO-101, management is continuing with its planned clinical development programme. CORIST part 3 will investigate an optimised dosing protocol, which, in our view, may have potential for increased efficacy (to be assessed in part 4). Additionally, we see the continued demonstration of SCO-101’s safety and tolerability as encouraging support for higher dosing regimens.
Funding sufficient for part 3, PANTAX
Our estimates for FY22 and FY23 and cash runway to FY24 are unchanged. Our estimated runway will see the company past key readouts from the PANTAX and CORIST (part 3) trials. However, we now expect final CORIST results in mid- to late FY24. We estimate a licensing deal will be found for SCO-101 in 2026 (previously 2024), assuming future clinical results are positive. We estimate the company will need to raise funds (c DKK200m, SEK288m) by end-FY23/early-FY24 to fund development to FY26.
Valuation: SEK279.0m or SEK6.9 per share
We value Scandion Oncology at SEK279.0m or SEK6.9 per share (previously SEK609.5m or SEK15.0 per share). The reduction in our valuation comes as we reduce the probability of success for SCO-101 in mCRC to 10% from 20% and in pancreatic cancer (PC) to 10% from 15%, following CORIST part 2 data. Furthermore, we have adjusted our timeline assumptions and our mCRC patient population estimates to include mutant RAS patients, which is offset by a decreased peak penetration estimate.
CORIST part 2 results
As a reminder, CORIST part 2 was a Phase II trial investigating the efficacy of the SCO-101 in combination with FOLFIRI in mCRC patients harbouring wild-type RAS. The primary endpoint for the study was objective response rate (ORR), defined as complete response and partial response using RECIST v 1.1. Secondary endpoints included progression free survival (PFS), duration-of-response, overall survival (OS) and biomarker analysis. While management has reported that results from part 2 confirmed the safety and tolerability of the SCO-101/FOLFIRI combination in mCRC patients, the trial failed to reach the +30% tumour reduction threshold defined as its primary endpoint. The combination did, however, show evidence of tumour reduction, with prolonged PFS and stable disease.
With the CORIST part 2 results announced, the company will continue with its development timeline for SCO-101 in mCRC. Part 3 of the CORIST study will investigate the safety and tolerability of new, optimised dosing regimens and will inform Part 4, which will investigate the efficacy of the chosen dose. While the results of CORIST part 2 are disappointing for Scandion, we note that patients have continued treatment past the eight-week endpoint and longer-term results will be important in definitively assessing efficacy.
Part 3 to optimised dosing, part 4 to follow
Following top-line date from CORIST part 2, Scandion intends to begin enrolment for CORIST part 3, which will investigate use of the SCO-101/FOLFIRI combination in both mutant and wild-type RAS mCRC patients. As discussed in a brief company update, the trial will enrol up to 36 patients and aims to identify a new dosing schedule (based on pharmacokinetic and pharmacodynamic data from CORIST part 1 and 2), using a dose-escalation [3+3] design. SCO-101 in combination with FOLFIRI will be administered once daily on days one to six and FOLFIRI administered on days two to four of each treatment cycle. The company expects this protocol could be more efficacious than previous regimens. We expect top-line results from part 3 to be reported in Q323. However, this may vary as patient enrolment depends on the observed safety profiles of the new dosing protocols. CORIST part 4, which we expect could begin as soon as Q323 (subject to part 3 enrolment), will then assess the efficacy of the optimised SCO-101/FOLFIRI dosing protocol (n=24) identified in part 3. We expect part 4 will use a similar trial design to that used in part 2 and will run for six months, bringing the earliest potential top-line readout to Q224. Management will provide an update on clinical timelines in Q123.
As evidence of efficacy was observed in CORIST part 2, exploring new dosing regimens of SCO-101/FOLFIRI is an attractive strategy for Scandion, in our view. Additionally, the drug has consistently demonstrated a good safety profile, suggesting higher doses and potentially better efficacy may be tolerated. However, we note that higher doses do not always correlate with increased efficacy and may result in undesirable side effects.
Next catalyst: PANTAX top-line data
We see Phase Ib PANTAX data in PC (expected in H123) as the next key catalyst for Scandion. If the SCO-101/gemcitabine/paclitaxel combination being studied can show signs of efficacy in the PANTAX trial, we expect this will increase confidence in management’s development plans in mCRC. We note, however, that as SCO-101’s proposed mechanism of action in mCRC and PC are the same, there could be potential read-across between the two indications. The trial will primarily assess the safety and tolerability of the SCO-101/gemcitabine/paclitaxel combination; however, secondary endpoints, including ORR, PFS, OS and pharmacokinetic profile, will be a crucial focus, in our view, following the CORIST part 2 data.
Preclinical platform to bolster clinical pipeline
In addition to its clinical development programme, Scandion is conducting preclinical studies for the use of SCO-101 in double combination with chemotherapy and immunotherapy. In a setting (oncology) where many higher lines of treatment are dominated by immune checkpoint inhibitors, we see this as a natural progression for the company. In addition, a second oral efflux pump inhibitor, known as SCO-201, is being evaluated in preclinical studies for the treatment of solid tumours. We anticipate the company will continue to progress assets towards clinical development, thus demonstrating its ability to create value from its drug discovery platform.
Valuation
Considering recent events, we have reduced our valuation of Scandion Oncology to SEK279.0m or SEK6.9 per share from SEK609.5m or SEK15.0 per share. Our valuation is based on a risk-adjusted NPV calculation for SCO-101 in mCRC and PC (applying a 12.5% discount rate) and reflects an estimated net cash position of DKK114m at 30 June 2022 (including estimated net proceeds of the July 2022 SEK75m gross rights issue). The company’s value is reduced as we lower the probability of success for SCO-101 in mCRC to 10% (previously 20%) and in PC to 10% (previously 15%). We believe the failure to reach proof-of-concept in CORIST part 2 could have read-across to potential efficacy readouts in the PANTAX trial, hence our lower probability of success in both indications. Scandion will continue developing SCO-101 in CORIST part 3 and 4, bringing the earliest potential end of the CORIST programme (and Phase II development) to Q224. Therefore, we have delayed our estimated potential launch date for SCO-101 in mCRC to 2028, from 2026 previously. We now assume a potential full licensing deal for SCO-101 is signed in 2026 (previously 2024).
As part 3 and 4 will investigate SCO-101 in both mutant and wild-type RAS patients, we have incorporated this new patient population into our model (previously we only included wild-type patients). However, considering this large increase in patient population (c 50% of mCRC patients harbour mutant RAS) and in light of the recent CORIST part 2 data, we have lowered our peak penetration estimate for SCO-101 to 10% (20% previously) in mCRC and to 10% from 15% in PC. Our remaining valuation assumptions are detailed in our initiation report. A breakdown of our valuation is shown in Exhibit 1.
Exhibit 1: Scandion Oncology valuation
Product |
Indication |
Launch |
Peak |
Peak sales ($m) |
Value (SEKm) |
Probability |
rNPV (SEKm) |
rNPV/ |
SCO-101 |
mCRC |
2028 |
2032 |
297.3 |
1,114.8 |
10% |
51.3 |
1.3 |
SCO-101 |
PC |
2029 |
2033 |
456.7 |
1,113.3 |
10% |
60.5 |
1.5 |
Pro-forma net cash at 30 June 2022 (estimated after July 2022 raise) |
|
|
|
167.1 |
100% |
167.1 |
4.1 |
|
Valuation |
|
|
|
2,395.2 |
279.0 |
6.9 |
Source: Edison Investment Research
Financials
As management’s near-term clinical development plan for SCO-101 is largely unchanged by the recent CORIST part 2 data, our FY22 and FY23 financial estimates are unchanged and we continue to estimate that Scandion is sufficiently funded into FY24. As described in our prior note, Scandion had an H122 net cash position of DKK72.7m and in July 2022 it completed a rights issue, raising gross proceeds of c SEK75m. Based on estimated transaction costs of SEK17m (DKK12m), we estimate it resulted in a net cash injection of c SEK58m (DKK41m).
However, we now assume a licensing deal for SCO-101 will be delayed to 2026 (previously 2024), as we expect the company will still need to generate positive randomised data in a Phase II/III trial before a licensing deal is viable. We now estimate the company will need to raise capital by end-2023/early-2024 to fund the longer-term development of SCO-101. Our model suggests c DKK200m (SEK288m) would be sufficient to fund the company’s operations to into FY26 where we anticipate a licensing deal for SCO-101 is agreed.
Our cash runway estimate will see the company past key top-line data readouts from the Phase Ib PANTAX trial (expected H123) and the newly initiated Phase II CORIST part 3. If enrolment for Part 3 is started quickly, then current funds may see the company past part 4. However, if part 3 enrolment is delayed, our estimates indicate Scandion will need additional funds to complete part 4 of the CORIST study and SCO-101’s Phase II development. If timelines are delayed, or clinical data prove positive, this may lead us to revise our cash runway estimate. Our model assumes illustrative debt funding of c DKK200m in early FY24.
Exhibit 2: Financial summary
Accounts: IFRS, year-end: 31 December, DKK’000s |
|
|
2020 |
2021 |
2022e |
2023e |
PROFIT & LOSS |
|
|
|
|
|
|
Total revenues |
|
|
1,003 |
797 |
797 |
797 |
Cost of sales |
|
|
0 |
0 |
0 |
0 |
Gross profit |
|
|
1,003 |
797 |
797 |
797 |
Total operating expenses |
|
|
(24,758) |
(56,164) |
(65,160) |
(83,165) |
Research and development expenses |
|
|
(21,672) |
(47,711) |
(52,480) |
(70,485) |
SG&A |
|
|
(3,086) |
(8,453) |
(12,680) |
(12,680) |
EBITDA (normalized) |
|
|
(23,474) |
(54,763) |
(63,980) |
(82,098) |
Operating income (reported) |
|
|
(23,755) |
(55,367) |
(64,363) |
(82,368) |
Operating margin % |
|
|
N/A |
N/A |
N/A |
N/A |
Finance income/(expense) |
|
|
2,233 |
(1,846) |
(576) |
0 |
Exceptionals and adjustments |
|
|
0 |
0 |
0 |
0 |
Profit before tax (reported) |
|
|
(21,522) |
(57,213) |
(64,939) |
(82,368) |
Profit before tax (normalised) |
|
|
(21,522) |
(57,213) |
(64,939) |
(82,368) |
Income tax expense (includes exceptionals) |
|
|
4,384 |
5,508 |
5,500 |
5,500 |
Net income (reported) |
|
|
(17,138) |
(51,705) |
(59,439) |
(76,868) |
Net income (normalised) |
|
|
(17,138) |
(51,705) |
(59,439) |
(76,868) |
Basic average number of shares, m |
|
|
32.1 |
32.1 |
35.9 |
40.7 |
Basic EPS (DKK) |
|
|
(0.53) |
(1.61) |
(1.66) |
(1.89) |
Adjusted EPS (DKK) |
|
|
(0.53) |
(1.61) |
(1.66) |
(1.89) |
Dividend per share (DKK) |
|
|
0.00 |
0.00 |
0.00 |
0.00 |
BALANCE SHEET |
|
|
|
|
|
|
Tangible assets |
|
|
136 |
386 |
338 |
418 |
Intangible assets |
|
|
0 |
0 |
0 |
0 |
Right-of-use assets |
|
|
312 |
1,215 |
789 |
789 |
Other non-current assets |
|
|
148 |
314 |
290 |
290 |
Non-current tax receivables |
|
|
0 |
0 |
5,500 |
5,500 |
Total non-current assets |
|
|
596 |
1,915 |
6,917 |
6,997 |
Cash and equivalents |
|
|
5,814 |
105,710 |
81,529 |
3,095 |
Current tax receivables |
|
|
4,384 |
5,500 |
5,500 |
5,500 |
Trade and other receivables |
|
|
1,414 |
2,018 |
1,748 |
1,748 |
Other current assets |
|
|
174,513 |
1,076 |
787 |
787 |
Total current assets |
|
|
186,125 |
114,304 |
89,564 |
11,130 |
Non-current loans and borrowings |
|
|
8 |
0 |
0 |
0 |
Non-current lease liabilities |
|
|
0 |
500 |
500 |
500 |
Other non-current liabilities |
|
|
504 |
84 |
1,390 |
1,390 |
Total non-current liabilities |
|
|
512 |
584 |
1,890 |
1,890 |
Accounts payable |
|
|
26,064 |
4,580 |
10,954 |
10,954 |
Illustrative debt |
|
|
0 |
0 |
0 |
0 |
Current lease obligations |
|
|
316 |
723 |
305 |
305 |
Other current liabilities |
|
|
3,962 |
5,791 |
6,810 |
6,810 |
Total current liabilities |
|
|
30,342 |
11,094 |
18,069 |
18,069 |
Equity attributable to company |
|
|
155,867 |
104,541 |
76,522 |
(1,831) |
CASH FLOW STATEMENT |
|
|
|
|
|
|
Operating income |
|
|
(23,755) |
(55,367) |
(64,363) |
(82,368) |
Depreciation and amortisation |
|
|
281 |
604 |
382 |
270 |
Share based payments |
|
|
0 |
0 |
0 |
0 |
Other adjustments |
|
|
4,223 |
2,899 |
5,303 |
4,015 |
Movements in working capital |
|
|
2,024 |
2,066 |
(5,815) |
0 |
Cash from operations (CFO) |
|
|
(17,227) |
(49,798) |
(64,492) |
(78,083) |
Capex |
|
|
(46) |
(318) |
(334) |
(351) |
Acquisitions & disposals net |
|
|
0 |
(167) |
25 |
0 |
Other investing activities |
|
|
0 |
0 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(46) |
(485) |
(309) |
(351) |
Capital changes |
|
|
7,892 |
150,690 |
41,000 |
0 |
Debt Changes |
|
|
0 |
0 |
0 |
0 |
Other financing activities |
|
|
(226) |
(511) |
(380) |
0 |
Cash from financing activities (CFF) |
|
|
7,666 |
150,179 |
40,620 |
0 |
Cash and equivalents at beginning of period |
|
|
15,421 |
5,814 |
105,710 |
81,529 |
Increase/(decrease) in cash and equivalents |
|
|
(9,607) |
99,896 |
(24,181) |
(78,434) |
Effect of FX on cash and equivalents |
|
|
0 |
0 |
0 |
0 |
Cash and equivalents at end of period |
|
|
5,814 |
105,710 |
81,529 |
3,095 |
Net (debt)/cash |
|
|
5,806 |
105,710 |
81,529 |
3,095 |
Source: Scandion Oncology, Edison Investment Research
|
|
Research: Healthcare
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