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Currency in SEK
Last close As at 09/06/2023
SEK4.64
▲ 0.03 (0.65%)
Market capitalisation
SEK775m
Research: Healthcare
Cantargia’s development programme for its lead asset, nadunolimab (CAN04), continued to build momentum in Q322. The company’s results for the period report an operating loss of SEK74.2m, which was largely driven by R&D expenses of SEK69.7m. Cash outflow from operations for Q322 was SEK81.4m, bringing the total cash used in operations for 9M22 to SEK297.3m, up from SEK256.6m in 9M21, due to expanded clinical activities. Cantargia received net proceeds from the rights issue completed in August 2022 of SEK223.9m, resulting in a cash and short-term investment position of SEK496.5m at end-Q322. Our current forecasts for FY22 and FY23 see the company funded to mid-FY24, beyond commencement of important randomised late-stage trials in FY23. Our valuation of Cantargia is broadly unchanged at SEK7.5bn or SEK44.9 per share.
Cantargia |
Strong momentum in first nine months of FY22 |
Q322 results |
Pharma/biotech |
11 November 2022 |
Share price performance
Business description
Next events
Analysts
Cantargia is a research client of Edison Investment Research Limited |
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Cantargia’s development programme for its lead asset, nadunolimab (CAN04), continued to build momentum in Q322. The company’s results for the period report an operating loss of SEK74.2m, which was largely driven by R&D expenses of SEK69.7m. Cash outflow from operations for Q322 was SEK81.4m, bringing the total cash used in operations for 9M22 to SEK297.3m, up from SEK256.6m in 9M21, due to expanded clinical activities. Cantargia received net proceeds from the rights issue completed in August 2022 of SEK223.9m, resulting in a cash and short-term investment position of SEK496.5m at end-Q322. Our current forecasts for FY22 and FY23 see the company funded to mid-FY24, beyond commencement of important randomised late-stage trials in FY23. Our valuation of Cantargia is broadly unchanged at SEK7.5bn or SEK44.9 per share.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
0.0 |
(173.1) |
(1.94) |
0.0 |
N/A |
N/A |
12/21 |
0.0 |
(366.5) |
(3.66) |
0.0 |
N/A |
N/A |
12/22e |
0.0 |
(322.8) |
(2.41) |
0.0 |
N/A |
N/A |
12/23e |
0.0 |
(296.7) |
(1.77) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Pipeline development continues
With Cantargia’s development pipeline generating supportive data for CAN04’s use in oncology, the company will look to leverage this to focus on the drug’s development in the treatment of non-small cell lung cancer (NSCLC) and pancreatic cancer (PDAC), two indications with large unmet medical need. Two key catalysts for the company, in our view, will be the initiation of randomised trials in these indications, both of which are expected to begin in FY23. We see the sustained pipeline momentum over FY22 as a very positive sign for the company.
Funding shores up cash runway to mid-2024
Proceeds from the August 2022 rights issue provided Cantargia with an important cash injection to fund key steps in the late-stage development of nadunolimab. In FY23 we expect the company to focus on the pipeline and reduce the number of clinical trials being run. As a result, we have reduced our estimated R&D spend. Combined, our new forecasts see the company’s operations sufficiently funded to mid-FY24 (previously into H124).
Valuation: SEK7.5bn or SEK44.9 per share
We have updated our valuation of Cantargia in light of Q322 results to SEK7.5bn or SEK44.9 per share (previously SEK7.35bn or SEK44.0 per share) The slight value uplift is due to rolling our model forward three months and updating our FX rate assumptions. Our valuation is based on a risk-adjusted NPV of nadunolimab in NSCLC and PDAC and includes a net cash and short-term investment position of SEK496.5m at end-September 2022.
Sustained pipeline momentum in Q322
FY22 has been a busy year for Cantargia. The company’s clinical development programme for nadunolimab (CAN04), an IL1RAP-targeting antibody, is involved in six separate clinical trials, in four oncology indications (Exhibit 1). Momentum in H222 is continuing as the Phase Ib CIRIFOUR trial (NCT04452214), evaluating CAN04 in first-line non-squamous NSCLC in combination with pembrolizumab and platinum-based chemotherapy, treated its first patient, and the Phase I CAPAFOUR (NCT04990037) and Phase I/II CESTAFOUR (NCT05116891) completed patient enrolment. Moving forward, management’s strategy will leverage data generated from the pipeline to mainly focus on nadunolimab’s development in PDAC and lung cancer, two areas with considerable unmet medical need. In our view, important near-term inflection points, namely the commencement of the Phase II/III clinical Precision Promise trial (in collaboration with PanCAN) and the planned randomised clinical trial in NSCLC, both due in 2023, mark the beginning of late-stage development for nadunolimab.
|
Exhibit 1: Cantargia development pipeline |
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Source: Cantargia report November 2022 |
New data support IL1RAP strategy
In November 2022, the company reported a handful of preclinical results that, in our view, support Cantargia’s strategy of pursuing IL1RAP in oncology and inflammatory diseases. The company presented data demonstrating nadunolimab (CAN04) reduced levels of tumour-promoting molecules in a PDAC microenvironment model with similar reductions having been observed in PDAC and NSCLC patients treated with nadunolimab. Importantly, an IL-1β targeting antibody showed no such effect (nadunolimab blocks both IL-1α and IL-1β activation). Investors will recall the failure of Novartis’s canakinumab (an anti-IL-1β antibody) to demonstrate meaningful survival benefits in Phase III trials for the treatment of NSCLC in October 2021. In our view, these data provide encouraging differentiation for nadunolimab’s mechanism of action (complete IL-1 pathway abrogation) in oncology.
Further, in November 2022 Cantargia reported new preclinical data that support the potential use of the company’s second IL1RAP-binding antibody CAN10 in the treatment of systemic sclerosis (SS), a life-threatening fibrotic disease with no cure. In the report, which has been selected for an oral presentation at American College of Rheumatology Convergence 2022 on 13 November, CAN10 produced a reduction in fibrosis and inflammation in skin and lung tissues in three different in vivo models of SS and reduced IL1RAP-stimulated inflammatory biomarkers. CAN10 is currently in preclinical development, with Cantargia planning to begin Phase I trials in SS and myocarditis in early-FY23. We see this new data as encouraging for CAN10’s potential use in SS and supportive of IL1RAP as a target of interest in inflammatory and fibrotic diseases.
SS (also known as scleroderma) is rare autoimmune disease (global incidence is estimated at 1.4/100,000 people per year) characterised by fibrosis (scar-like tissue formation) in the skin and visceral organs. Symptoms can vary widely depending on the area affected and cases that affect the lungs, heart, kidneys or digestive system can have serious implications and are often fatal. At present no curative treatments exist for SS and current medications can only control symptoms of the disease, for example anti-hypertensives, immunosuppressants and pain relief.
Hence, we see an opportunity for Cantargia in SS, providing CAN10 can translate the reported preclinical model results into the clinic. We note, however, that it is inappropriate to make specific clinical efficacy assumptions from preclinical data. Nevertheless, the in vivo SS model data is, in our view, supportive of the company’s strategy to pursue the treatment of SS with CAN10 and adds to previous evidence gathered by the company on IL1RAP’s potential utility in inflammatory and fibrotic diseases. In line with company guidance, we expect Cantargia to initiate Phase I clinical trials with CAN10 in SS in early-2023. We do not currently include CAN10 in our valuation of Cantargia. However, we will revisit this once the asset begins Phase I trials.
Financials
In Q322, management reported R&D related costs of SEK69.7m, a reduction of c 31% from the same period a year prior (Q321: SEK100.8m) and down from the higher R&D run rate of H1. The reduction in R&D expenses was driven by Cantargia’s newly implemented focus in the pipeline, with NSCLC and PDAC randomised trials being the main goal. We now expect that R&D expenses for the year will be front loaded and have therefore reduced our operating cost estimates for FY22 and FY23. In FY22 we forecast R&D expenses of SEK313.6m (previously SEK372.7m) and in FY23 SEK282.3m (previously SEK350m). This brings our estimated total operating expenditure to SEK332.9m and SEK296.3m in FY22 and FY23, respectively. With new estimates and taking into account the recent rights issue, we now estimate a cash runway for Cantargia to mid-2024; however, any changes to clinical timelines may affect this estimate.
Exhibit 2: Financial summary
SEK'000s |
2019 |
2020 |
2021 |
2022e |
2023e |
||
Year end 31 December |
|||||||
PROFIT & LOSS |
|||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
0 |
||
Research and development |
(97,477) |
(158,396) |
(352,709) |
(313,615) |
(282,253) |
||
EBITDA |
|
|
(111,577) |
(170,697) |
(366,821) |
(330,830) |
(293,957) |
Operating Profit (before amort. and excepts.) |
|
|
(111,589) |
(173,945) |
(370,267) |
(332,871) |
(296,249) |
Exceptionals |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(111,589) |
(173,945) |
(370,267) |
(332,871) |
(296,249) |
||
Net interest |
479 |
501 |
924 |
171 |
429 |
||
FX income/(expense) |
301 |
359 |
2,839 |
10,774 |
0 |
||
Profit Before Tax (norm) |
|
|
(110,809) |
(173,085) |
(366,504) |
(322,826) |
(296,721) |
Profit Before Tax (reported) |
|
|
(110,809) |
(173,085) |
(366,504) |
(322,826) |
(296,721) |
Tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(110,809) |
(173,085) |
(366,504) |
(322,826) |
(296,721) |
||
Profit After Tax (reported) |
(110,809) |
(173,085) |
(366,504) |
(322,826) |
(296,721) |
||
Average Number of Shares Outstanding (m) |
71.1 |
89.4 |
100.2 |
133.6 |
167.0 |
||
EPS - normalised (ore) |
|
|
(155.74) |
(193.65) |
(365.80) |
(240.98) |
(177.15) |
Dividend per share (ore) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
6,868 |
12,622 |
9,556 |
6,633 |
5,440 |
Intangible Assets |
0 |
7,360 |
6,459 |
5,559 |
4,658 |
||
Tangible Assets |
6,868 |
5,262 |
3,097 |
1,074 |
782 |
||
Investments |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
159,190 |
912,893 |
590,687 |
494,629 |
202,336 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
0 |
0 |
0 |
0 |
0 |
||
Cash |
39,871 |
693,354 |
247,322 |
217,593 |
162,083 |
||
Other* |
119,319 |
219,539 |
343,365 |
277,036 |
40,253 |
||
Current Liabilities |
|
|
(23,785) |
(30,469) |
(66,607) |
(63,795) |
(63,795) |
Creditors |
(23,785) |
(30,469) |
(66,607) |
(63,795) |
(63,795) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
(3,111) |
(892) |
(51) |
(51) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
0 |
(3,111) |
(892) |
(51) |
(51) |
||
Net Assets |
|
|
142,273 |
891,935 |
532,744 |
437,416 |
143,930 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(111,255) |
(156,387) |
(346,446) |
(339,711) |
(289,976) |
Purchase of intangibles |
0 |
(8,112) |
0 |
0 |
0 |
||
Capex |
(6,880) |
(890) |
0 |
(17) |
(2,000) |
||
Proceeds from sale of PPE |
0 |
0 |
(383) |
0 |
0 |
||
Financing |
98,037 |
918,514 |
0 |
223,945 |
(317) |
||
Net (Purchase)/Sale of short-term investments |
(16,743) |
(100,000) |
(102,046) |
75,281 |
236,783 |
||
Effect of FX on cash |
183 |
359 |
2,839 |
10,774 |
0 |
||
Net Cash Flow |
(36,658) |
653,484 |
(446,036) |
(29,729) |
(55,510) |
||
Opening net debt/(cash) |
|
|
(76,528) |
(39,871) |
(693,354) |
(247,322) |
(217,593) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
(1) |
4 |
(0) |
0 |
||
Closing net debt/(cash) |
|
|
(39,871) |
(693,354) |
(247,322) |
(217,593) |
(162,083) |
Source: company accounts, Edison Investment Research
|
|
Research: Investment Companies
BlackRock Sustainable American Income Trust (BRSA) changed its investment strategy at the end of July 2021 to integrate explicit ESG objectives. Its managers, Tony DeSpirito, David Zhao and Lisa Yang, aim to deliver an attractive level of income and long-term capital appreciation from a portfolio of dividend-paying companies that are trading at attractive valuations and are deemed to be ESG leaders, improvers or ‘sustainability enablers’. The managers say the odds of a recession are now higher compared with the end of 2021; hence, the structure of the portfolio has changed since then from a barbell approach of stability versus cyclical value and is now skewed towards stability.
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