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Research: Healthcare
Scandion’s Q322 results provided an update on management’s continued commitment to execute on SCO-101’s clinical development strategy. Q322 operating losses amounted to DKK23.6m, largely driven by R&D expenses of DKK18.9m, with a net cash outflow from operations of DKK34.4m. With the initiation of CORIST part 3 in October, we now expect FY22 operating losses to increase to DKK86.5m (DKK65.2m previously). The net cash balance at end-Q322 stood at DKK91.4m (no debt) which, given current cash burn rates and our projections, should fund operations into Q124, beyond key anticipated clinical readouts in FY23. Based on our revised operating expenses and lower net cash position we value Scandion at SEK241.1m or SEK5.9/share (SEK279.0m or SEK6.9/share previously).
Written by
Scandion Oncology |
SCO-101 clinical progression continues |
Q322 update |
Pharma and biotech |
18 November 2022 |
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Scandion Oncology is a research client of Edison Investment Research Limited |
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Scandion’s Q322 results provided an update on management’s continued commitment to execute on SCO-101’s clinical development strategy. Q322 operating losses amounted to DKK23.6m, largely driven by R&D expenses of DKK18.9m, with a net cash outflow from operations of DKK34.4m. With the initiation of CORIST part 3 in October, we now expect FY22 operating losses to increase to DKK86.5m (DKK65.2m previously). The net cash balance at end-Q322 stood at DKK91.4m (no debt) which, given current cash burn rates and our projections, should fund operations into Q124, beyond key anticipated clinical readouts in FY23. Based on our revised operating expenses and lower net cash position we value Scandion at SEK241.1m or SEK5.9/share (SEK279.0m or SEK6.9/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 |
0.6 |
(87.7) |
(2.25) |
0.0 |
N/A |
N/A |
12/23e |
0.6 |
(75.8) |
(1.73) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
CORIST and PANTAX on track
SCO-101’s clinical plans continue to make headway in both the Phase II CORIST (colorectal cancer) and Phase Ib PANTAX (pancreatic cancer) trials. Part 3 of the CORIST study initiated patient dosing in October 2022 with recruitment of the first cohort (n = 3) now complete. CORIST part 2 demonstrated safety and tolerability of SCO-101 and the company believes that part 3’s optimised dosing schedule may better support SCO-101 achieving the primary endpoint, missed in part 2. The dose-escalation in PANTAX also provides further support for SCO-101’s tolerability and encouraging signs for the trial meeting its safety endpoints, in our view.
Cash runway into FY24
The July 2022 rights issue raised c DKK52m in gross proceeds (DKK42m net) taking Scandion’s net cash position to DKK91.4m at end Q322. Given the current clinical plan for the two assets and funds on hand, we have revised our R&D estimates for FY22-24 (raising the FY22 estimate based on the 9M run-rate and reducing the FY23 figure on the expectation that Scandion will defer the Pantex next Phase to 2024 following the H123 readout from the ongoing study). Our revised cash-burn projections see the company past anticipated readouts in FY23.
Valuation: SEK241.1m or SEK5.9 per share
We revise our valuation down to SEK241.1m or SEK5.9/share (SEK279.0m or SEK6.9/share previously) based on a lower net cash position (SEK132.4m versus SEK167.1m previously) and minor adjustments in our timing forecasts and cost estimates. However, our underlying long-term assumptions are unchanged.
Financials
As a result of Scandion’s continued clinical development activities with the ongoing part 2 CORIST study, initiation of CORIST part 3 and dose escalation of PANTAX, it reported research and development (R&D) expenses for Q322 of DKK18.9m, above our expectations, bringing total R&D expenses for the first nine months of the year (9M22) to DKK51.9m. In light of the quarterly update and 9M performance, we have updated our FY22 estimates and now forecast total operating expenses to amount to DKK86.5m (previously DKK65.2m), with R&D expenses totalling DKK69.2m (previously DKK52.5m).
CORIST part 2 completed patient recruitment in FY22 and part 3 of CORIST, initiated in October 2022, will continue to enrol patients in FY23, with top-line data expected in Q323. Due to the timely initiation of CORIST part 3, we expect part of the R&D expenses associated with the study to be brought forward into FY22 (we previously expected initiation and hence a larger portion to be realized in FY23). Additionally, with the expected wind down of the Phase Ib PANTAX trial we anticipate no material costs associated with the study after H123 and that management may wait for results from CORIST before pursuing follow-on Phase II studies in pancreatic cancer in FY24. As a result, we reduce our estimates for FY23 total operating expenses to DKK77m (previously DKK83.2m), with R&D expenses of DKK60m (previously DKK70.5m), reflecting a previously estimated portion now deferred to FY24 in our model.
We estimate free cash outflows of c DKK87.3m in FY22 and DKK70.1m in FY23. On completion of the rights issue, Scandion had raised DKK52m and reported a net cash position of DKK91.4m at end-Q322. Based on our cash burn projections and in line with management’s guidance, we expect this to be sufficient to fund operations into Q124. However, we estimate that Scandion will be required to raise a further c DKK200m in FY24–25 to fund operations into FY26, at which point we have assumed in our model that the company will secure a licensing deal.
Exhibit 1: Financial summary
Accounts: IFRS, year-end: 31 December, DKK’000s |
|
|
2020 |
2021 |
2022e |
2023e |
PROFIT & LOSS |
|
|
|
|
|
|
Total revenues |
|
|
1,003 |
797 |
590 |
600 |
Cost of sales |
|
|
0 |
0 |
0 |
0 |
Gross profit |
|
|
1,003 |
797 |
590 |
600 |
Total operating expenses |
|
|
(24,758) |
(56,164) |
(86,492) |
(76,946) |
Research and development expenses |
|
|
(21,672) |
(47,711) |
(69,200) |
(60,000) |
SG&A |
|
|
(3,086) |
(8,453) |
(17,292) |
(16,946) |
EBITDA (normalized) |
|
|
(23,474) |
(54,763) |
(85,060) |
(76,030) |
Operating income (reported) |
|
|
(23,755) |
(55,367) |
(85,902) |
(76,346) |
Operating margin % |
|
|
N/A |
N/A |
N/A |
N/A |
Finance income/(expense) |
|
|
2,233 |
(1,846) |
(1,778) |
532 |
Exceptionals and adjustments |
|
|
0 |
0 |
0 |
0 |
Profit before tax (reported) |
|
|
(21,522) |
(57,213) |
(87,680) |
(75,814) |
Profit before tax (normalised) |
|
|
(21,522) |
(57,213) |
(87,680) |
(75,814) |
Income tax expense (includes exceptionals) |
|
|
4,384 |
5,508 |
5,500 |
5,500 |
Net income (reported) |
|
|
(17,138) |
(51,705) |
(82,180) |
(70,314) |
Net income (normalised) |
|
|
(17,138) |
(51,705) |
(82,180) |
(70,314) |
Basic average number of shares, m |
|
|
32.1 |
32.1 |
36.5 |
40.7 |
Basic EPS (DKK) |
|
|
(0.53) |
(1.61) |
(2.25) |
(1.73) |
Adjusted EPS (DKK) |
|
|
(0.53) |
(1.61) |
(2.25) |
(1.73) |
Dividend per share (DKK) |
|
|
0.00 |
0.00 |
0.00 |
0.00 |
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
Tangible assets |
|
|
136 |
386 |
494 |
553 |
Intangible assets |
|
|
0 |
0 |
0 |
0 |
Right-of-use assets |
|
|
312 |
1,215 |
499 |
341 |
Other non-current assets |
|
|
148 |
314 |
272 |
256 |
Non-current tax receivables |
|
|
0 |
0 |
5,500 |
5,500 |
Total non-current assets |
|
|
596 |
1,915 |
6,765 |
6,650 |
Cash and equivalents |
|
|
5,814 |
105,710 |
71,326 |
1,270 |
Current tax receivables |
|
|
4,384 |
5,500 |
5,500 |
5,500 |
Trade and other receivables |
|
|
1,414 |
2,018 |
1,815 |
1,815 |
Other current assets |
|
|
174,513 |
1,076 |
795 |
795 |
Total current assets |
|
|
186,125 |
114,304 |
79,436 |
9,380 |
Non-current loans and borrowings |
|
|
8 |
0 |
0 |
0 |
Non-current lease liabilities |
|
|
0 |
500 |
249 |
249 |
Other non-current liabilities |
|
|
504 |
84 |
905 |
905 |
Total non-current liabilities |
|
|
512 |
584 |
1,154 |
1,154 |
Accounts payable |
|
|
26,064 |
4,580 |
4,931 |
4,931 |
Illustrative debt |
|
|
0 |
0 |
0 |
0 |
Current lease obligations |
|
|
316 |
723 |
374 |
374 |
Other current liabilities |
|
|
3,962 |
5,791 |
6,810 |
6,810 |
Total current liabilities |
|
|
30,342 |
11,094 |
12,115 |
12,115 |
Equity attributable to company |
|
|
155,867 |
104,541 |
72,932 |
2,761 |
|
|
|
|
|
|
|
CASH FLOW STATEMENT |
|
|
|
|
|
|
Operating income |
|
|
(23,755) |
(55,367) |
(85,902) |
(76,346) |
Depreciation and amortisation |
|
|
281 |
604 |
842 |
316 |
Share based payments |
|
|
0 |
0 |
0 |
0 |
Other adjustments |
|
|
4,223 |
2,899 |
(2,158) |
152 |
Movements in working capital |
|
|
2,024 |
2,066 |
133 |
6,023 |
Cash from operations (CFO) |
|
|
(17,227) |
(49,798) |
(87,085) |
(69,854) |
Capex |
|
|
(46) |
(318) |
(192) |
(202) |
Acquisitions & disposals net |
|
|
0 |
(167) |
25 |
0 |
Other investing activities |
|
|
0 |
0 |
0 |
0 |
Cash used in investing activities (CFIA) |
|
|
(46) |
(485) |
(167) |
(202) |
Capital changes |
|
|
7,892 |
150,690 |
53,486 |
0 |
Debt Changes |
|
|
0 |
0 |
0 |
0 |
Other financing activities |
|
|
(226) |
(511) |
(618) |
0 |
Cash from financing activities (CFF) |
|
|
7,666 |
150,179 |
52,868 |
0 |
Cash and equivalents at beginning of period |
|
|
15,421 |
5,814 |
105,710 |
71,326 |
Increase/(decrease) in cash and equivalents |
|
|
(9,607) |
99,896 |
(34,384) |
(70,056) |
Effect of FX on cash and equivalents |
|
|
0 |
0 |
0 |
0 |
Cash and equivalents at end of period |
|
|
5,814 |
105,710 |
71,326 |
1,270 |
Net (debt)/cash |
|
|
5,806 |
105,710 |
71,326 |
1,270 |
Source: Scandion oncology, Edison Investment Research
|
|
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