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Currency in SEK
Last close As at 02/06/2023
SEK4.68
▲ 0.06 (1.30%)
Market capitalisation
SEK782m
Research: Healthcare
In January 2019, the first patient was treated in the Phase IIa part of the Phase I/IIa CANFOUR study. Patient screening is ongoing in five out of 20 clinical centres and the trial is on track to read out in early 2020. Recent industry newsflow suggests growing interest in IL-1 for cancer treatment, which adds credibility to Cantargia’s approach: Novartis’s second IL-1β antibody, gevokizumab (in-licensed in 2017), entered Phase I for cancer indications, while canakinumab is now in seven cancer trials. In addition, a French group is studying a CAR-T therapy targeting IL1RAP in a Phase I trial. Our valuation is slightly higher at SEK2.47bn or SEK37.3/share.
Written by
Dr Jonas Peciulis
Cantargia |
Signs of growing interest in IL-1 pathway targets |
Q418 update |
Pharma & biotech |
8 March 2019 |
Share price performance
Business description
Next events
Analysts
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In January 2019, the first patient was treated in the Phase IIa part of the Phase I/IIa CANFOUR study. Patient screening is ongoing in five out of 20 clinical centres and the trial is on track to read out in early 2020. Recent industry newsflow suggests growing interest in IL-1 for cancer treatment, which adds credibility to Cantargia’s approach: Novartis’s second IL-1β antibody, gevokizumab (in-licensed in 2017), entered Phase I for cancer indications, while canakinumab is now in seven cancer trials. In addition, a French group is studying a CAR-T therapy targeting IL1RAP in a Phase I trial. Our valuation is slightly higher at SEK2.47bn or SEK37.3/share.
Year end |
Revenue (SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.0 |
(60.3) |
(1.86) |
0.0 |
N/A |
N/A |
12/18 |
0.0 |
(91.2) |
(1.38) |
0.0 |
N/A |
N/A |
12/19e |
0.0 |
(94.6) |
(1.43) |
0.0 |
N/A |
N/A |
12/20e |
0.0 |
(117.8) |
(1.78) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Novartis’ second IL-1β mAb studied in solid tumours
Novartis has recently started a Phase I study with its second IL-1β antibody gevokizumab in metastatic solid tumours (n=172). Novartis licensed gevokizumab from Xoma in 2017, with the rest of Xoma’s IL-1β IP portfolio. Prior to this, Xoma and Servier were developing the antibody for several immune indications, but these were not successful. In our view, this development confirms Novartis’s interest in the target for cancer. There are now eight Novartis-sponsored studies with IL-1β antibodies in cancer indications. Two canakinumab trials were mentioned in Novartis’s Q418 presentation, suggesting the antibody is a priority: the largest Phase III lung cancer study and a Phase II melanoma trial with PDR001.
Financials: Increasing R&D costs, cash reach to 2020
With its Q418 results, Cantargia reclassified its expenses. We revised our model to correspond with the company’s presentation, but the underling results were broadly in line with our expectations (Cantargia provided expenses in the old format in the note section). We made no major changes to our estimates. Cantargia reported an operating loss of SEK93.3m in 2018, vs SEK60.0m in 2017, only slightly higher than our expected SEK88.5m. This was due to R&D costs relating to the Phase IIa initiation and non-recurring administrative costs relating to the up-listing. Cantargia’s net cash position at Q418 was SEK166.8m (including short-term investments) which, according to our model, should fund operations into 2020.
Valuation: SEK2.47bn or SEK37.3/share
We value Cantargia at SEK2.47bn or SEK37.3/share compared to our previous valuation of SEK2.28bn or SEK34.5/share due to rolling our model forward and moving into a new calendar year, which in our model reduces the risk adjustment for the R&D costs (R&D costs are risk adjusted in a linear fashion). We leave all underlying valuation assumptions unchanged, as described in our initiation report.
Exhibit 1: Financial summary
SEK'000s |
2017 |
2018 |
2019e |
2020e |
||
December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
0 |
0 |
0 |
0 |
||
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
||
Research and development |
(52,419) |
(76,951) |
(86,951) |
(109,602) |
||
EBITDA |
(60,010) |
(93,306) |
(94,924) |
(117,815) |
||
Operating Profit (before amort. and except.) |
(60,010) |
(93,306) |
(94,924) |
(117,815) |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Operating Profit |
(60,010) |
(93,306) |
(94,924) |
(117,815) |
||
Net Interest |
(243) |
2,145 |
360 |
0 |
||
Profit Before Tax (norm) |
(60,253) |
(91,161) |
(94,565) |
(117,815) |
||
Profit Before Tax (reported) |
(60,253) |
(91,161) |
(94,565) |
(117,815) |
||
Tax |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(60,253) |
(91,161) |
(94,565) |
(117,815) |
||
Profit After Tax (reported) |
(60,253) |
(91,161) |
(94,565) |
(117,815) |
||
Average Number of Shares Outstanding (m) |
32.4 |
66.2 |
66.2 |
66.2 |
||
EPS - normalised (SEK) |
(1.86) |
(1.38) |
(1.43) |
(1.78) |
||
EPS - normalised fully diluted (SEK) |
(1.86) |
(1.38) |
(1.43) |
(1.78) |
||
EPS - reported (SEK) |
(1.86) |
(1.38) |
(1.43) |
(1.78) |
||
Dividend per share (SEK) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
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 |
2,957 |
2,957 |
2,957 |
2,957 |
||
Intangible Assets |
0 |
0 |
0 |
0 |
||
Tangible Assets |
0 |
0 |
0 |
0 |
||
Investments |
2,957 |
2,957 |
2,957 |
2,957 |
||
Current Assets |
271,496 |
168,486 |
73,923 |
1,639 |
||
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
0 |
0 |
0 |
0 |
||
Cash |
149,781 |
76,528 |
72,284 |
0 |
||
Other* |
121,715 |
91,958 |
1,639 |
1,639 |
||
Current Liabilities |
(28,334) |
(16,398) |
(16,398) |
(16,398) |
||
Creditors |
(28,334) |
(16,398) |
(16,398) |
(16,398) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
0 |
0 |
0 |
(45,531) |
||
Long term borrowings |
0 |
0 |
0 |
(45,531) |
||
Other long-term liabilities |
0 |
0 |
0 |
0 |
||
Net Assets |
246,119 |
155,045 |
60,482 |
(57,333) |
||
CASH FLOW |
||||||
Operating Cash Flow |
(40,860) |
(105,165) |
(94,924) |
(117,815) |
||
Net Interest |
(243) |
478 |
360 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
0 |
0 |
0 |
0 |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
304,479 |
0 |
0 |
0 |
||
Other |
(139,499) |
31,434 |
90,320 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
123,877 |
(73,253) |
(4,244) |
(117,815) |
||
Opening net debt/(cash) |
(25,904) |
(149,781) |
(76,528) |
(72,284) |
||
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
(149,781) |
(76,528) |
(72,284) |
45,531 |
Source: Cantargia accounts, Edison Investment Research. Note: *Mainly short-term investments.
|
|
Research: Industrials
Leclanché has announced that it expects FY18 revenues in excess of CHF47m, ahead of our CHF42.5m estimate. This is more than double the CHF18m reported in FY17. We place our estimates under review until the full FY18 results are announced in early April.
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