Cantargia — CANFOUR study on track, US trial preparations

Cantargia (OMX: CANTA)

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Research: Healthcare

Cantargia — CANFOUR study on track, US trial preparations

On 23 August, Cantargia announced fresh preclinical in vivo data on CAN04 in bladder cancer, which suggests an opportunity to explore this indication. The company also recently announced that the CAN04 monotherapy arm is now fully enrolled (n=20) and these patients are receiving doses of 10mg/kg. Due to the fast enrolment, Cantargia has decided to enrol an additional monotherapy cohort to test a higher dose of 15mg/kg (n=12). Efficacy and biomarker data from the first 20 patients are expected in Q419. Preparations for its US study are underway – specific timelines were not provided, but we expect more news in this regard this year. Our valuation is virtually unchanged at SEK2.65bn or SEK36.4/share.

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Healthcare

Cantargia

CANFOUR study on track, US trial preparations

Q219 update

Pharma & biotech

27 August 2019

Price

SEK16.82

Market cap

SEK1,225m

US$:SEK9.05

Net cash (SEKm) at end Q219 (cash and cash equivalents + short term investments)

219.2

Shares in issue

72.8m

Free float

90%

Code

CANT

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.7

(7.0)

(11.9)

Rel (local)

5.8

(6.1)

(9.0)

52-week high/low

SEK23.3

SEK13.7

Business description

Cantargia is a clinical-stage biotechnology company based in Sweden, established in 2009 and listed on the Nasdaq Stockholm main market. It is developing two antibodies against IL1RAP, nidanilimab (CAN04) and CANxx. Nidanilimab is being studied in a Phase I/II clinical trial, CANFOUR, in solid tumours focusing on NSCLC and pancreatic cancer.

Next events

Initiate new US study

H219

CANFOUR monotherapy cohort data

Q419

Preclinical data supporting combination with platinum-based chemotherapy

2019

Phase IIa CANFOUR data

Early 2020

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Alice Nettleton

+44 (0)20 3077 5700

Cantargia is a research client of Edison Investment Research Limited

On 23 August, Cantargia announced fresh preclinical in vivo data on CAN04 in bladder cancer, which suggests an opportunity to explore this indication. The company also recently announced that the CAN04 monotherapy arm is now fully enrolled (n=20) and these patients are receiving doses of 10mg/kg. Due to the fast enrolment, Cantargia has decided to enrol an additional monotherapy cohort to test a higher dose of 15mg/kg (n=12). Efficacy and biomarker data from the first 20 patients are expected in Q419. Preparations for its US study are underway – specific timelines were not provided, but we expect more news in this regard this year. Our valuation is virtually unchanged at SEK2.65bn or SEK36.4/share.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

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)

(1.36)

0.0

N/A

N/A

12/20e

0.0

(117.8)

(1.62)

0.0

N/A

N/A

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

Fresh preclinical data: Opportunity in bladder cancer

This is the first preclinical data Cantargia has released on bladder cancer, and the first time the company is discussing it as a potential indication for CAN04 development. Results from immunohistochemistry carried out on tumour samples from 15 patients demonstrated that around 80% of the tumour samples contained IL1RAP positive cells (vs 85% NSCLC, 86% pancreatic cancer, 87% melanoma in a previous study). It was also able to demonstrate single agent activity in an in vivo mouse model with a functioning immune system, where the tumour cells overexpress IL1RAP. Cantargia also recently extended its collaboration with BioWa for its technology POTELLIGENT, which is important for Cantargia’s antibodies since it enhances antibody dependent cellular cytotoxicity (ADCC).

Financials: Q219 results, long cash runway to H121

With its Q219 results, Cantargia reported an operating loss of SEK25.2m vs SEK28.6m in Q218. R&D costs in Q219 were SEK20.8m vs SEK22.1m in Q218. In March 2019, Cantargia raised SEK106m (gross) in a directed share issue, primarily by long-term institutional investors. This extended the cash runway to H121 (in line with management guidance). The current net cash position is SEK219.2m (including short-term investments) vs SEK251.2m at end-Q119.

Valuation: SEK2.65bn or SEK36.4/share

We value Cantargia at SEK2.65bn or SEK36.4/share vs SEK2.62bn or SEK36.0/share previously (Exhibit 2). The slight increase in total NPV is due to rolling our model forward, which was offset by the lower net cash position. We make no changes to the assumptions described in previous reports and in detail in our initiation report. The next key catalyst for the share price will be the Phase IIa CANFOUR data in early 2020.

Data from monotherapy cohort expected Q419

Cantargia recently announced that the CAN04 monotherapy arm is now fully enrolled (n=20) and these patients are receiving doses of 10mg/kg. According to management, enrolment has been faster than expected. So far, the drug has a good safety profile, as in the Phase I part of the study. Around 12 additional patients are expected to be enrolled due to the fast enrolment into the monotherapy arm which will receive 15mg/kg. 60 further patients in total are due to be enrolled in the combination arms. Efficacy and biomarker data from the first 20 patients are expected in Q419.

Update on IL-1 competitive landscape

Exhibit 1 shows a summary of all ongoing studies with agents targeting the IL-1 pathway in cancer indications. Novartis now has two IL-1 beta antibodies, canakinumab and gevokizumab, which are being studied in a total of 10 clinical trials. Canakinumab is the most advanced asset and is being studied in three Phase III studies in NSCLC in different patient populations. Completion of these trials is estimated in 2021–22.

Exhibit 1: IL-1 pathway inhibitor landscape cancer indications

Pharmacological class / target

Product (generic name)

Company

Current development status of oncology indications

Notes

Anti-IL-1 beta Mab

Ilaris (canakinumab)

Novartis

Phase III NSCLC CANOPY-A, recruiting (NCT03447769, n=1,500)

Phase III NSCLC CANOPY-1, recruiting

(NCT03631199, n=627)

Phase III NSCLC CANOPY-2, recruiting (NCT03626545, n=240)

Phase II NSCLC CANOPY-N, not yet recruiting

(NCT03968419, n=110)

Phase II melanoma, recruiting

(NCT03484923, n=230)

Phase I renal cell carcinoma, recruiting

(NCT04028245, n=14)

Phase Ib triple negative breast cancer, recruiting

(NCT03742349, n=220)

Phase I, Colorectal Cancer, Triple Negative Breast Cancer, NSCLC - Adenocarcinoma

(NCT02900664, n=432)

Phase I NSCLC, active not recruiting

(NCT03064854, n=114)

Already marketed in immune indications: CIAS1 associated periodic syndromes, gout, juvenile idiopathic arthritis, adult-onset Still’s disease, familial Mediterranean fever, hyper-IgD syndrome. Filed in myocardial infarction prophylaxis and stroke prophylaxis.

Lung cancer data published from CANTOS (NCT01327846).

Gevokizumab

Novartis

Phase I metastatic colorectal, gastroesophageal and renal cancers (NCT03798626, n=172)

Novartis licensed gevokizumab from Xoma in 2017 with the rest of Xoma’s IL-1 beta IP portfolio. Prior to this, Xoma and Servier were developing the antibody for several immune indications, but these were not successful.

Anti-IL-1 alpha Mab

Xilonix

XBiotech

Two Phase III trials in colorectal cancer, status unclear (NCT01767857, NCT02138422);

Phase I pancreatic cancer patients with cachexia (NCT03207724)

Phase I NSCLC (XBiotech)

The first Phase III trial (European) trial was positive for the symptomatic progression of the cancer. The second Phase IIII trial (XCITE) was terminated due to lack of efficacy. Current development status in this indication unclear.

Anti-IL1RAP Mab

CAN04

Cantargia

Phase I/II NSCLC, pancreatic cancer (NCT03267316, n=100)

No other indications in the Phase IIa part of the trials.

CSC012

Cellerant Therapeutics

Preclinical acute myeloid leukaemia

No other indications found.

Anti-IRAK 4 small molecule

CA-4948

Curis

Phase I non-Hodgkin lymphoma (NCT03328078, n=110)

Preclinical acute myeloid leukaemia

Also in preclinical testing for arthritis and myelodysplastic syndrome.

Source: EvaluatePharma, company websites, clinicaltrials.gov. Notes: Ordered by most pharmacological target and most advanced asset.

More recently, Novartis disclosed new trials in its Q219 results and R&D day presentations, where canakinumab is being studied alongside other agents in triple negative breast cancer, melanoma and RCC. Gevokizumab is being studied in metastatic colorectal, gastroesophageal and renal cancers. In terms of the possible rationale for Novartis choosing these particular cancers, IL-1 is associated with tumour invasiveness and angiogenesis in RCC and breast cancers. XBiotech appears to have restarted Xilonix activity in cancer indications, since it recently announced that it has received funding from the Medical Research Council to conduct a Phase II study in advanced lung, pancreatic and ovarian cancers. We have described previous trials with Xilonix in our initiation report on Cantargia.

For the moment we do not include bladder cancer in our valuation, since it is still pre-clinical but will revise our valuation once we have more visibility on clinical development timelines.

Exhibit 2: Sum-of-the-parts Cantargia valuation

Product

Launch

Peak sales
($m)

Unrisked NPV (SEKm)

Unrisked NPV/
share (SEK)

Technology probability (%)

rNPV
(SEKm)

rNPV/share (SEK)

CAN04 - NSCLC

2026

3,091

6,279.1

86.2

15%

1,019.5

14.0

CAN04 - pancreatic cancer

2024

2,100

6,371.9

87.5

15%

1,413.2

19.4

Net cash at end-Q119

219.2

3.0

100%

219.2

3.0

Valuation

12,870.2

176.8

 

2,652.0

36.4

Source: Edison Investment Research. Note: WACC = 12.5% for product valuations.


Exhibit 3: 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

69.5

72.8

EPS - normalised (SEK)

 

 

(1.86)

(1.38)

(1.36)

(1.62)

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

174,623

56,808

Stocks

0

0

0

0

Debtors

0

0

0

0

Cash

149,781

76,528

172,984

55,169

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

0

Long term borrowings

0

0

0

0

Other long-term liabilities

0

0

0

0

Net Assets

 

 

246,119

155,045

161,182

43,367

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

100,700

0

Other

(139,499)

31,434

90,320

0

Dividends

0

0

0

0

Net Cash Flow

123,877

(73,253)

96,456

(117,815)

Opening net debt/(cash)

 

 

(25,904)

(149,781)

(76,528)

(172,984)

HP finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

(149,781)

(76,528)

(172,984)

(55,169)

Source: Cantargia accounts, Edison Investment Research. Note: *Mainly short-term investments.


General disclaimer and copyright

This report has been commissioned by Cantargia and prepared and issued by Edison, in consideration of a fee payable by Cantargia. Edison Investment Research standard fees are £49,500 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Cantargia and prepared and issued by Edison, in consideration of a fee payable by Cantargia. Edison Investment Research standard fees are £49,500 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Research: Industrials

Nabaltec — Margin expansion sustained

Nabaltec’s H119 results demonstrate that the margin expansion achieved in FY18 has been sustained, supporting management’s full year guidance. The improvement reflects a shift to high-margin products, including reactive alumina and boehmite used in lithium-ion batteries for electric vehicles and energy storage, as well as planned price increases. Longer-term boehmite could represent an activity equal in scale to the Specialty Alumina segment, which currently accounts for a third of group revenues.

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