AFT Pharmaceuticals — US milestone triggers upside and guidance bump

AFT Pharmaceuticals (ASX: AFT)

Last close As at 24/04/2024

NZD3.07

−0.06 (−1.92%)

Market capitalisation

NZD322m

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Research: Healthcare

AFT Pharmaceuticals — US milestone triggers upside and guidance bump

AFT Pharmaceuticals has announced the first sale of its intravenous pain relief medicine, Maxigesic IV, through its US licensing partner, Hikma Pharmaceuticals, a material milestone for AFT’s portfolio expansion and geographic diversification. The NZ$6m milestone payment triggered a bump in FY24 operating profit guidance to NZ$23–25m (from NZ$22–24m previously). The upside was partially offset by slower than anticipated sales traction in Australasia. We adjust our FY24 and FY25 estimates to reflect the update and revised guidance, including the earlier than anticipated milestone payment (pulled forward to FY24 from FY25) and increased anticipated expenses (SG&A and R&D) to align with management’s portfolio and geographic growth aspirations. Our valuation resets to NZ$698m or NZ$6.65/share (from NZ$723m or NZ$6.90/share).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

AFT Pharmaceuticals

US milestone triggers upside and guidance bump

Guidance update

Pharma and biotech

19 February 2024

Price

NZ$3.49

Market cap

NZ$366m

NZ$0.61/US$

Net debt (NZ$m) at 30 September 2023

30.6

Shares in issue

104.9m

Free float

25.9%

Code

AFT

Primary exchange

NZX

Secondary exchange

ASX

Share price performance

%

1m

3m

12m

Abs

(5.31)

8.18

(1.92)

Rel (local)

(4.93)

(3.98)

(5.03)

52-week high/low

NZ$3.90

NZ$3.26

Business description

AFT Pharmaceuticals is a specialty pharmaceutical company that operates primarily in Australasia but has product distribution agreements across the globe. The company’s product portfolio includes prescription and over-the-counter drugs to treat a range of conditions and a proprietary nebuliser.

Next events

FY24 results

May 2024

US Maxigesic Rapid launch

FY25

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Jitisha Malhotra

+44 (0)20 3077 5700

AFT Pharmaceuticals is a research client of Edison Investment Research Limited

AFT Pharmaceuticals has announced the first sale of its intravenous pain relief medicine, Maxigesic IV, through its US licensing partner, Hikma Pharmaceuticals, a material milestone for AFT’s portfolio expansion and geographic diversification. The NZ$6m milestone payment triggered a bump in FY24 operating profit guidance to NZ$23–25m (from NZ$22–24m previously). The upside was partially offset by slower than anticipated sales traction in Australasia. We adjust our FY24 and FY25 estimates to reflect the update and revised guidance, including the earlier than anticipated milestone payment (pulled forward to FY24 from FY25) and increased anticipated expenses (SG&A and R&D) to align with management’s portfolio and geographic growth aspirations. Our valuation resets to NZ$698m or NZ$6.65/share (from NZ$723m or NZ$6.90/share).

Year
end

Revenue (NZ$m)

PBT*
(NZ$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

03/22

130.3

18.9

19.2

0.0

18.3

N/A

03/23

156.6

16.7

11.0

1.10

34.2

0.3

03/24e

187.5

22.3

15.5

1.55

23.5

0.5

03/25e

223.5

26.3

18.2

1.82

19.8

0.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Guidance updated in the run-up to full-year results…

The earlier than anticipated milestone receipt and unexpectedly slower domestic market performance in H224 (given the strong H124 performance with 20% and 8% y-o-y growth in Australia and New Zealand, respectively) have led to AFT revising guidance. The slower than anticipated launch activity and sales uptake for new products will push timelines back slightly and we expect these launches and commensurate sales to now be realised in FY25. Margins are also likely to be affected by the required upfront investments in sales and marketing and R&D activities to expand into new products across new geographies, which should translate to stronger traction in the medium term.

…triggering an estimate revision

We have adjusted our FY24 top-line and operating profit estimates to reflect the revised operating profit guidance and now estimate an operating profit of NZ$23.9m in FY24 (NZ$22.7m previously). Adjustments to our FY25 estimates are more substantial, where we remove the milestone payment benefit (now reflected in FY24) and raise expected investments in sales and marketing and R&D, given sales spend will likely remain high with roll-over of launch activity and the active search for attractive pipeline candidates. Our revised operating profit estimate for FY25 is NZ$28.3m, versus NZ$40.3m previously. Our longer-term assumptions remain unchanged for now.

Valuation: Adjusts to NZ$698m or NZ$6.65/share

We continue to use a discounted cash flow (DCF) method to value AFT. Following the revisions to our forecasts, our valuation is now NZ$698m or NZ$6.65/share, from NZ$723m or NZ$6.90/share previously.

Forecasts and financials

We adjust our FY24 and FY25 estimates (both revenue and expenses) based on AFT’s upgraded operating profit guidance for FY24, slower sales traction in the domestic market and the potential upside from the recent launch of Maxigesic IV in the US market.

For FY24, we have lowered our sales estimates in Australia and New Zealand to NZ$105.4m and NZ$46.2m, respectively (from NZ$112.9m and NZ$47.5m previously), to reflect launch delays and slower-than-anticipated sales for newly launched products in these markets. While we expect some of the launch activity to roll over to FY25, we slightly temper our estimates and now project domestic sales of NZ$176.9m in FY25 across Australasia (from NZ$181.0m). Furthermore, we revise our FY24 and FY25 sales estimates for international market to NZ$24.5m and NZ$29.7m, respectively (from NZ$18.1m and NZ$36.2m previously), to account for the recognition of the US$6m milestone payment from Hikma (of which AFT’s share is US$3.9m or c NZ$6m) in FY24, sooner than our previous estimate of FY25. Overall, we now estimate total sales growth of 19.7% and 19.2% y-o-y in FY24 and FY25, respectively.

With the earlier-than-expected recognition of the NZ$6m milestone payment (AFT’s share) from Hikma, we revise our gross margin estimates for FY24 (46.0% vs 45.0% previously) and FY25 (47.0% vs 48.0% previously). This is because we now expect the full flow-through impact of the milestone payment to benefit the gross margin in FY24, as opposed to FY25. We note that the company plans to use this licence fee income to accelerate investments in new product launches in Australasia, Europe, the UK (Maxigesic/Combogesic tablets), the US (Maxigesic Rapid) and Canada alongside supporting other R&D projects. This includes the formation of AFT Pharmaceuticals USA and AFT Pharmaceuticals Canada along with continued investment into AFT Pharm Europe.

We raise our selling and distribution expense estimates for FY24 (to NZ$50.6m from NZ$49.3m previously) and FY25 (to NZ$53.6m from NZ$49.0m previously) to reflect the delayed product launches and incremental investments by the company. We also raise our R&D expense estimates for both FY24 and FY25 to reflect the company’s increased R&D efforts (recent investments in strawberry birthmarks, burning mouth syndrome and vulvar lichen sclerosus), resulting in an increase in our opex estimates. Our FY24 operating profit estimate is now NZ$23.9m (management guidance: NZ$23–25m) and includes c NZ$6m in licence income from Hikma, as discussed earlier. For FY25, we estimate operating profit at NZ$28.3m, from NZ$40.3m previously.

With these changes, we estimate that the company will end FY24 with a net debt position of NZ$25.6m, which translates into a net debt/EBITDA ratio of 1.0x, in line with management’s target.

Valuation

We value AFT using a DCF valuation methodology, projecting free cash flows over a 10-year explicit forecast period (FY24–33e) and thereafter ascribing a terminal growth value (assuming a conservative 2% ongoing top-line growth and an EBIT margin of 36%).

We have incorporated the above-mentioned estimate changes in our model, which results in our valuation for AFT changing to NZ$698m or NZ$6.65/share, from NZ$723m or NZ$6.90/share previously. We note that the company continues to expect to declare a dividend for FY24, which is reflected in our model (assuming a 10% payout ratio, in line with the 11% paid in FY23). We see this announcement of consecutive dividend payouts as a sign of strengthening business operations and improving cash flow expectations, a positive boost to investor sentiment in our opinion.

Exhibit 1: AFT DCF valuation

NZ$'000s

2024e

2025e

2026e

2027e

2028e

2029e

2030e

2031e

2032e

2033e

Revenue

187,465

223,490

282,539

310,793

334,102

350,808

368,348

386,765

406,104

426,409

Growth (%)

19.7%

19.2%

26.4%

10.0%

7.5%

5.0%

5.0%

5.0%

5.0%

5.0%

EBIT

23,907

28,314

51,083

66,550

74,059

95,922

109,053

127,443

135,534

144,424

Margin (%)

12.8%

12.7%

18.1%

21.4%

22.2%

27.3%

29.6%

33.0%

33.4%

33.9%

Tax

(6,027)

(7,138)

(13,513)

(17,844)

(19,946)

(26,068)

(29,745)

(34,894)

(37,159)

(39,649)

Rate (%)

28.0%

28.0%

28.0%

28.0%

28.0%

28.0%

28.0%

28.0%

28.0%

28.0%

D&A

1,696

1,696

1,696

1,696

1,696

1,696

1,696

1,696

1,696

1,696

Working capital

(1,965)

(5,169)

(4,797)

(5,584)

(5,724)

(5,867)

(5,867)

(5,867)

(5,867)

(5,867)

Capex

(9,725)

(9,761)

(11,107)

(10,995)

(10,638)

(10,053)

(9,500)

(8,978)

(8,484)

(8,017)

Free cash flow

7,886

7,942

23,363

33,823

39,447

55,630

65,637

79,401

85,720

92,588

Value
(NZ$m)

Value/share

(NZ$)

DCF for forecast period (2024 to 2033)

252.7

2.41

Terminal value

475.7

4.54

Enterprise value

728.3

6.95

Net cash (debt) at end September 2023

(30.6)

(0.29)

Equity value

697.7

6.65

Source: Edison Investment Research

Exhibit 2: Financial summary

NZ$000

2022

2023

2024e

2025e

Year end 31 March

NZGAAP

NZGAAP

NZGAAP

NZGAAP

PROFIT & LOSS

Revenue

 

 

130,314

156,641

187,465

223,490

Cost of Sales

(68,539)

(83,658)

(101,323)

(118,540)

Gross Profit

61,775

72,983

86,142

104,950

Operating Expenses

(40,567)

(51,590)

(65,353)

(74,940)

Other Operating Income

225

-

4,814

-

EBITDA

 

 

21,433

21,393

25,603

30,010

Depreciation

(784)

(808)

(914)

(914)

Operating profit (before amort. and excepts.)

 

 

20,649

20,585

24,689

29,096

Intangible Amortisation

(260)

(916)

(782)

(782)

Exceptionals

-

-

-

-

Other

-

-

-

-

Operating Profit

20,389

19,669

23,907

28,314

Net Interest

(1,704)

(3,870)

(2,384)

(2,822)

Profit Before Tax (norm)

 

 

18,945

16,715

22,305

26,274

Profit Before Tax (reported)

 

 

18,685

15,799

21,523

25,492

Tax

1,163

(5,145)

(6,027)

(7,138)

Profit After Tax (norm)

20,108

11,570

16,279

19,136

Profit After Tax (reported)

19,848

10,654

15,497

18,354

Average Number of Shares Outstanding (m)

104.7

104.8

104.9

104.9

EPS - normalised (c)

 

 

19.2

11.0

15.5

18.2

EPS - (reported) (NZ$)

 

 

0.19

0.10

0.15

0.18

Dividend per share (c)

0.00

1.10

1.55

1.82

Gross Margin (%)

47.4

46.6

46.0

47.0

EBITDA Margin (%)

16.4

13.7

13.7

13.4

Operating Margin (before GW and except.) (%)

15.8

13.1

13.2

13.0

BALANCE SHEET

Fixed Assets

 

 

44,218

53,463

66,954

75,020

Intangible Assets

38,093

45,627

53,652

61,677

Tangible Assets

3,360

3,365

3,370

3,410

Investments

2,765

4,471

9,933

9,933

Current Assets

 

 

77,542

93,142

103,350

120,294

Stocks

33,500

42,397

48,757

53,632

Debtors

36,002

46,718

46,217

54,794

Cash

7,940

3,291

7,640

11,132

Other

100

736

736

736

Current Liabilities

 

 

(29,050)

(38,317)

(47,673)

(55,956)

Creditors

(23,845)

(36,376)

(40,270)

(48,553)

Short term borrowings

(4,000)

(1,000)

(1,000)

(1,000)

Other

(1,205)

(941)

(6,403)

(6,403)

Long Term Liabilities

 

 

(35,966)

(35,020)

(35,020)

(35,020)

Long term borrowings

(33,200)

(32,200)

(32,200)

(32,200)

Other long term liabilities

(2,766)

(2,820)

(2,820)

(2,820)

Net Assets

 

 

56,744

73,268

87,611

104,338

CASH FLOW

Operating Cash Flow

19,848

10,654

15,497

18,354

Movements in working capital

(7,472)

(6,947)

(1,965)

(5,169)

Depreciation and amortisation

1,044

1,724

1,696

1,696

Net Interest

2,084

2,625

2,886

2,822

Taxes

(1,175)

3,742

-

-

Other adjustments

(177)

(169)

-

-

Cash flow from operating activities

 

 

14,152

11,629

18,114

17,703

Capex

(329)

(197)

(187)

(223)

Acquisitions/disposals

(5,256)

(8,980)

(9,538)

(9,538)

Cash flow from investing activities

 

 

(5,585)

(9,177)

(9,725)

(9,761)

Financing

295

475

-

-

Dividends

-

-

(1,154)

(1,628)

Net Borrowings

500

(4,593)

-

-

Other adjustments

(4,709)

(2,860)

(2,886)

(2,822)

Cash flow from financing activities

 

 

(3,914)

(6,978)

(4,039)

(4,450)

Cash and cash equivalents at the beginning of the period

3,209

7,940

3,291

7,640

Increase/(decrease) in cash and equivalents

4,653

(4,526)

4,349

3,492

Effect of FX on cash and equivalents

78

(123)

-

-

Cash and equivalents at end of period

7,940

3,291

7,640

11,132

Closing net debt/(cash)

 

 

29,260

29,909

25,560

22,068

Source: Company reports, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by AFT Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by AFT Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by AFT Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by AFT Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Research: Healthcare

Ultimovacs — Universal approach with critical readouts in March

Ultimovacs recapped an active FY23 period for its universal cancer vaccine, UV1, including the reported benefit in overall survival and desirable safety profile from the NIPU trial in malignant pleural mesothelioma (MPM), which sets the stage for its Phase III programme. Management provided multiple updates across all its trials, but the upcoming combination trial result of INITIUM in malignant melanoma (confirmed for March 2024) remains a critical catalyst. FY23 cash stood at NOK266.6m, which is anticipated to fund operations through 2024. As we roll forward our model with FX updates, our valuation increases to NOK8.5bn or NOK248 per share (from NOK7.6bn or NOK222 per share).

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