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Currency in EUR
Last close As at 25/03/2023
EUR5.08
▲ −0.05 (−0.97%)
Market capitalisation
EUR95m
Research: Healthcare
The pathway to regulatory approval for OSE’s neoepitope cancer vaccine, Tedopi, continues to be a key point of focus for the company. Following the presentation of positive data from the Phase III ATALANTE-1 trial over H122, OSE is discussing potential pathways to approval of Tedopi in non-small cell lung cancer (NSCLC) with the regulators. We expect an update on this in H222, with the possibility of inclusion in the FDA early access programme still on the table. Concomitantly, the company is preparing for further Phase III trials with Tedopi. In its H122 report, the company reported results that are largely in line with our estimates (excluding a €10m milestone payment from Boehringer Ingelheim). At end-June 2022, OSE reported a cash position of €31.2m, which, at our estimated FY22 burn rate of €20.4m, we forecast will fund the company to Q323.
OSE Immunotherapeutics |
Tedopi remains focus in FY22 |
H122 results |
Pharma and biotech |
23 September 2022 |
Share price performance
Business description
Next events
Analysts
OSE Immunotherapeutics is a research client of Edison Investment Research Limited |
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The pathway to regulatory approval for OSE’s neoepitope cancer vaccine, Tedopi, continues to be a key point of focus for the company. Following the presentation of positive data from the Phase III ATALANTE-1 trial over H122, OSE is discussing potential pathways to approval of Tedopi in non-small cell lung cancer (NSCLC) with the regulators. We expect an update on this in H222, with the possibility of inclusion in the FDA early access programme still on the table. Concomitantly, the company is preparing for further Phase III trials with Tedopi. In its H122 report, the company reported results that are largely in line with our estimates (excluding a €10m milestone payment from Boehringer Ingelheim). At end-June 2022, OSE reported a cash position of €31.2m, which, at our estimated FY22 burn rate of €20.4m, we forecast will fund the company to Q323.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
10.4 |
(18.5) |
(1.02) |
0.0 |
N/A |
N/A |
12/21 |
26.3 |
(16.5) |
(0.89) |
0.0 |
N/A |
N/A |
12/22e |
16.0 |
(27.8) |
(1.28) |
0.0 |
N/A |
N/A |
12/23e |
0.0 |
(44.2) |
(2.42) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Tedopi clinical programme holds potential
The company continued to invest significantly in the development of Tedopi over the period. As such and in addition to the ATALANTE-1 trial, OSE has three Phase II trials, being led by clinical oncology groups, aiming to expand the clinical utility of Tedopi in combination with Opdivo (NSCLC), Keytruda (ovarian cancer) and chemotherapy (pancreatic cancer). If Tedopi can demonstrate similar or increased survival as a combination regimen compared to the monotherapy in these indications, we expect this could significantly increase the commercial impact of the neoepitope cancer vaccine.
Company funded to Q323
In H122, OSE recorded €15m in milestone payments from Boehringer Ingelheim for BI 765063 (€10m) and Veloxis for VEL-101/FR104 (€5m). Operating expenses remained largely stable excluding the R&D tax credit and the H122 net loss was €2m. With €31.2m cash-in-hand and our forecast cash burn of €20.4m in FY22 and €41.2m in FY23, we estimate an operating cash runway to Q323, versus our previous estimate of Q123, in line with management guidance.
Valuation: €398.4m or €21.5 per share
We value OSE at €398.4m or €21.5 per share (previously €319.4 or €17.5 per share). Our increased valuation reflects raising the probability of success (PoS) for Tedopi in NSCLC to 50% from 25% previously in addition to rolling our model forward and updating our FX forecasts. These factors are partially offset by removing FR104 in autoimmune diseases from our valuation and updating our base indication for BI 765063 to MSS CRC (previously TNBC). Our valuation includes a net cash position of €0.3m at end-June 2022.
Valuation
Our updated valuation of OSE is €398.4m or €21.5 per share (previously €319.4m or €17.5 per share), based on a sum-of-the-parts (SOTP) calculation, including risk-adjusted NPV calculations for Tedopi in NSCLC, OSE-127 in ulcerative colitis, BI 765063 in multiple cancer indications and deal milestones from the out-licensing of FR104 to Veloxis. We apply an unchanged discount rate of 12.5% to our NPV calculations. In addition, our valuation reflects a net cash position of €0.3m at end-June 2022. A breakdown of our valuation is shown in Exhibit 1.
Considering recent data from the completed Phase III ATALANTE-1 trial, we have increased the PoS for the neoepitope cancer vaccine Tedopi in NSCLC to 50%, from 25% previously. We now value Tedopi in NSCLC at €220.7m or €11.9 per share, an increase from €90.2 or €4.9 per share previously. We will revisit our PoS assumptions for Tedopi when results from the company’s discussions with the regulators are made public, which we expect in H222.
Further value uplift is realised as we roll our model forward and update our FX rate estimates. These factors are partially offset as we have removed our risk-adjusted NPV calculation for FR104 in rheumatoid arthritis (previously €59.4m or €3.2 per share), as OSE is no longer focusing on developing the drug in this area. Additionally, we have updated our valuation of BI 765063 in multiple cancer indications to be based on micro-satellite stable (MSS) colorectal cancer (previously triple negative breast cancer), as this is the largest patient population in which the drug is being investigated and has significant unmet medical needs. In our updated valuation of BI 765063 we assume:
■
c 150k patients are diagnosed with CRC in 2022 of which 85% are classified as MSS. This population remains stable over the valuation period.
■
BI 765063 is initially investigated in third-line treatment of MSS CRC with 30% of patients progressing to this stage of treatment.
■
A peak market penetration of 10% (previously 30%), as the busy development pipeline for CRC is expected to fragment the market by 2028.
We now value BI 765063 at €57.9m or €3.1 per share, previously €70.4m or €3.8 per share. Our remaining valuation assumptions for OSE are unchanged (details can be found in our previous reports).
Exhibit 1: SOTP OSE valuation
Product |
Launch |
Peak Sales (€m) |
NPV (€m) |
NPV/share (€) |
Probability |
rNPV (€m) |
rNPV/Share (€) |
Tedopi - NSCLC |
2023 |
722 |
441.5 |
23.8 |
50% |
220.7 |
11.9 |
OSE-127 - ulcerative colitis |
2027 |
952 |
271.2 |
14.6 |
15% |
66.6 |
3.6 |
BI 765063 - multiple cancer indications (MSS CRC) |
2027 |
608 |
231.0 |
12.5 |
15% |
57.9 |
3.1 |
FR104 - Veloxis deal milestones |
133.2 |
7.2 |
15% |
53.0 |
2.9 |
||
Net Cash/(Debt) |
0.3 |
0.0 |
100% |
0.3 |
0.0 |
||
Valuation |
|
|
1,077.1 |
58.1 |
|
398.4 |
21.5 |
Source: Edison Investment Research
Financials
In H122, OSE recorded €16m of turnover primarily due to milestone payments received: Boehringer Ingelheim for BI 765063 (€10m) and Veloxis for VEL-101/FR104 (€5m). In May 2022, Boehringer Ingelheim began a Phase I clinical expansion trial for BI 765063 (SIRPα antagonist monoclonal antibody) in advanced hepatocellular carcinoma and head and neck cancer patients, prompting a milestone payment to OSE of €10m. Furthermore, a €5m milestone payment was received from Veloxis Pharmaceuticals during H122 for FR104 (CD28 antagonist), post acceptance of NDA application for kidney transplant immunosuppression. Operating expenses stood at €19.4m in H122, marginally lower than €20.6m in H121 due to an R&D tax credit impact; excluding this expenses remained stable as per management guidance. We note that 78% of the operating expenses (€14.4m) related to R&D in H122.
As at end-H122, OSE had cash and cash equivalents of €31.2m, which is sufficient to fund operations until Q323, according to the company and to our updated model. The balance sheet also includes long-term debt of €28.1m and a short-term financial liability of €2.8, of which €7.9m is a loan from the European Investment Bank and the rest is government loans or debt guaranteed by the government. Thus net cash at 30 June 2022 was €0.3m, excluding total lease liabilities of €4.8m, which are virtually unchanged from H121 and correspond largely to the leasing of new real estate in France in FY21.
Exhibit 2: Financial summary
EUR'000s |
2020 |
2021 |
2022e |
2023e |
||
December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
10,431 |
26,306 |
16,047 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
10,431 |
26,306 |
16,047 |
0 |
||
Research and development |
(22,355) |
(30,550) |
(30,550) |
(30,550) |
||
EBITDA |
|
|
(18,109) |
(13,601) |
(25,343) |
(42,346) |
Operating Profit (before amort. and excepts.) |
|
|
(18,533) |
(15,938) |
(27,255) |
(43,685) |
Intangible Amortisation |
(457) |
(687) |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Operating Profit |
(18,990) |
(16,625) |
(27,255) |
(43,685) |
||
Net Interest |
0 |
(589) |
(500) |
(500) |
||
Profit Before Tax (norm) |
|
|
(18,533) |
(16,527) |
(27,755) |
(44,185) |
Profit Before Tax (reported) |
|
|
(18,990) |
(17,214) |
(27,755) |
(44,185) |
Tax |
2,692 |
364 |
4,300 |
0 |
||
Profit After Tax (norm) |
(15,841) |
(16,163) |
(23,455) |
(44,185) |
||
Profit After Tax (reported) |
(16,298) |
(16,850) |
(23,455) |
(44,185) |
||
Average Number of Shares Outstanding (m) |
15.6 |
18.2 |
18.3 |
18.3 |
||
EPS - normalised (c) |
|
|
(1.02) |
(0.89) |
(1.28) |
(2.42) |
EPS - reported (€) |
|
|
(1.05) |
(0.93) |
(1.28) |
(2.42) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
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 |
|
|
57,141 |
57,670 |
55,758 |
54,419 |
Intangible Assets |
52,600 |
51,122 |
51,122 |
51,122 |
||
Tangible Assets |
947 |
926 |
926 |
926 |
||
Investments |
3,594 |
5,622 |
3,710 |
2,371 |
||
Current Assets |
|
|
30,442 |
34,351 |
16,233 |
2,851 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
1,074 |
772 |
811 |
851 |
||
Cash |
29,368 |
33,579 |
15,423 |
2,000 |
||
Other |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(14,128) |
(16,762) |
(17,242) |
(17,747) |
Creditors |
(14,078) |
(15,151) |
(15,631) |
(16,136) |
||
Short term borrowings |
(50) |
(1,611) |
(1,611) |
(1,611) |
||
Long Term Liabilities |
|
|
(21,481) |
(37,224) |
(37,224) |
(63,240) |
Long term borrowings |
(16,552) |
(30,801) |
(30,801) |
(56,817) |
||
Other long term liabilities |
(4,929) |
(6,423) |
(6,423) |
(6,423) |
||
Net Assets |
|
|
51,974 |
38,035 |
17,525 |
(23,716) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(16,807) |
(9,857) |
(21,957) |
(38,938) |
Net Interest |
273 |
634 |
(500) |
(500) |
||
Tax |
(2,742) |
(696) |
4,300 |
0 |
||
Capex |
(210) |
(472) |
0 |
0 |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
17,427 |
265 |
0 |
0 |
||
Other |
(1,258) |
(1,473) |
1 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(3,317) |
(11,599) |
(18,156) |
(39,438) |
||
Opening net debt/(cash) |
|
|
(16,083) |
(12,766) |
(1,167) |
16,989 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(12,766) |
(1,167) |
16,989 |
56,428 |
Source: OSE Immunotherapeutics, Edison Investment Research
|
|
Research: Consumer
Portobello demonstrated strong revenue growth in H122 as it executed its retail-focused expansion strategy. Significantly, given the greater pressures on consumer discretionary income, the more established stores grew on an underlying basis, according to management. It believes the value-based retail offer is well positioned for more difficult economic times. Lower profitability reflects price investment to drive footfall and upfront investment in new trading space. Our operational estimates are unchanged, but our DCF-based valuation reduces to €115/share (€121/ share previously) to reflect a higher bond yield and net debt position.
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