Viralytics — Cavatak combo data at AACR next month

Viralytics — Cavatak combo data at AACR next month

Viralytics will present updates on three Phase Ib trials of Cavatak in combination with marketed immune checkpoint inhibitor (ICI) drugs at the AACR conference in the first week of April, including two prestigious podium presentations. The presentations will include preliminary data from the MITCI and CAPRA intralesional injection trials and an update on the Keynote 200 (STORM) IV Cavatak trial. We leave our valuation unchanged at A$385m or A$1.60/share as we await the updates.

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Viralytics

Cavatak combo data at AACR next month

AACR preview

Pharma & biotech

9 March 2017

Price

A$1.06

Market cap

A$254m

US$0.76/A$

Net cash (A$m) at 31 December 2016

39.6

Shares in issue

239.9m

Free float

84.6%

Code

VLA

Primary exchange

ASX

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

(1.4)

(16.3)

63.6

Rel (local)

(3.0)

(19.2)

45.8

52-week high/low

A$1.27

A$0.55

Business description

Viralytics is a biopharmaceutical company developing Cavatak oncolytic virotherapy to target late-stage melanoma and other solid tumour types. It is trialling Cavatak as a monotherapy and in combination with checkpoint inhibitors. The virus can be delivered intravenously or by intralesional injection.

Next events

Keynote 200 Keytruda combo update

April 2017

MITCI Yervoy combo trial update

April 2017

CAPRA Keytruda combo trial update

April 2017

Analysts

Dennis Hulme

+61 (0)2 9258 1161

Juan Pedro Serrate

+44 (0)20 3681 2534

Viralytics is a research client of Edison Investment Research Limited

Viralytics will present updates on three Phase Ib trials of Cavatak in combination with marketed immune checkpoint inhibitor (ICI) drugs at the AACR conference in the first week of April, including two prestigious podium presentations. The presentations will include preliminary data from the MITCI and CAPRA intralesional injection trials and an update on the Keynote 200 (STORM) IV Cavatak trial. We leave our valuation unchanged at A$385m or A$1.60/share as we await the updates.

Year
end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/15

2.5

(5.5)

(3.0)

0.0

N/A

N/A

06/16

4.7

(8.0)

(3.8)

0.0

N/A

N/A

06/17e

4.4

(10.2)

(4.3)

0.0

N/A

N/A

06/18e

3.2

(8.6)

(3.6)

0.0

N/A

N/A

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

Preliminary data on Cavatak intralesional combos…

Viralytics will present updates on three Phase Ib trials that are testing its Cavatak oncolytic virus immunotherapy in combination with marketed ICI drugs at the American Association for Cancer Research (AACR) conference in Washington DC on 1-5 April. Updated preliminary results will be presented on two studies of Cavatak delivered by intratumoural injection in melanoma patients, in combination with IV doses of either Keytruda (in CAPRA) or Yervoy (in the MITCI study).

…plus an update on Keynote 200 IV Cavatak combo

There will also be a report at AACR on progress in the Keynote 200 (STORM Part B) study of IV Cavatak in combination with Keytruda. The trial has completed the first two cohorts, with no dose-limiting toxicities observed. The third and highest-dose expansion cohort commenced recruitment in January 2017; ~80 patients (~40 NSCLC and ~40 metastatic bladder cancer) will be treated at a higher dose (1x109 TCID50) in this cohort. If IV administration of Cavatak can be shown to increase responses to ICI drugs, this would expand the range of cancers that it could potentially be used to treat and would enhance its commercial value.

PsiOxus deal illustrates potential value

The December 2016 licence deal between Bristol-Myers Squibb and the unlisted British biotech PsiOxus for its preclinical oncolytic virus NG-348 highlights the potential value of oncolytic virotherapy products. Terms included US$50m upfront, and up to $886m in development, regulatory and sales-based milestones, as well as royalties on net sales. NG-348 is an oncolytic virus that has been armed with two membrane proteins that activate tumour-infiltrating T-cells; like Cavatak, it can be administered by the IV route.

Valuation: Unchanged at A$385m or A$1.60/share

Our valuation is unchanged at A$385m or A$1.60/share. The PsiOxus deal shows the attractive terms that can be achieved for oncolytic immunotherapies, which supports the increased deal metrics for Cavatak we adopted in our previous report.

Exhibit 1: Financial summary

A$'000s

2014

2015

2016

2017e

2018e

30-June

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,508

2,454

4,655

4,400

3,200

R&D expenses

(4,998)

(5,925)

(8,604)

(11,000)

(8,000)

SG&A expenses

(2,438)

(2,568)

(4,515)

(4,515)

(4,515)

EBITDA

 

 

(4,928)

(6,040)

(8,464)

(11,115)

(9,315)

Operating Profit (before amort. and except.)

 

 

(4,956)

(6,074)

(8,501)

(11,170)

(9,371)

Intangible Amortisation

(390)

(390)

(390)

(390)

(390)

Exceptionals

0

0

0

0

0

Other

0

0

0

0

0

Operating Profit

(5,346)

(6,465)

(8,891)

(11,560)

(9,761)

Net Interest

296

527

508

922

727

Profit Before Tax (norm)

 

 

(4,660)

(5,547)

(7,993)

(10,247)

(8,645)

Profit Before Tax (FRS 3)

 

 

(5,050)

(5,938)

(8,383)

(10,637)

(9,035)

Tax

0

0

0

0

0

Profit After Tax (norm)

(4,660)

(5,547)

(7,993)

(10,247)

(8,645)

Profit After Tax (FRS 3)

(5,050)

(5,938)

(8,383)

(10,637)

(9,035)

Average Number of Shares Outstanding (m)

119.2

184.0

212.2

240.3

240.3

EPS - normalised (c)

 

 

(3.9)

(3.0)

(3.8)

(4.3)

(3.6)

EPS - normalised fully diluted (c)

 

 

(3.9)

(3.0)

(3.8)

(4.3)

(3.6)

EPS - (IFRS) (c)

 

 

(4.2)

(3.2)

(3.9)

(4.4)

(3.8)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

2,523

2,116

1,722

1,310

896

Intangible Assets

2,475

2,034

1,643

1,253

863

Tangible Assets

48

82

79

57

33

Investments

0

0

0

0

0

Current Assets

 

 

27,120

24,441

50,970

41,175

32,554

Stocks

0

0

0

0

0

Debtors

2,784

2,875

4,849

4,849

4,849

Cash

24,336

21,566

46,121

36,326

27,706

Other

0

0

0

0

0

Current Liabilities

 

 

(767)

(1,685)

(2,364)

(2,364)

(2,364)

Creditors

(767)

(1,685)

(2,364)

(2,364)

(2,364)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

0

0

0

0

0

Long term borrowings

0

0

0

0

0

Other long term liabilities

0

0

0

0

0

Net Assets

 

 

28,877

24,872

50,328

40,120

31,086

CASH FLOW

Operating Cash Flow

 

 

(5,486)

(5,010)

(8,050)

(11,114)

(9,314)

Net Interest

0

544

508

922

727

Tax

0

0

0

0

0

Capex

(8)

(69)

(33)

(33)

(33)

Acquisitions/disposals

0

0

0

0

0

Financing

25,180

40

30,799

0

0

Dividends

0

0

0

0

0

Net Cash Flow

19,686

(4,495)

23,224

(10,225)

(8,621)

Opening net debt/(cash)

 

 

(5,079)

(24,336)

(21,566)

(46,121)

(36,326)

HP finance leases initiated

0

0

0

0

0

Other

(429)

1,725

1,331

429

(0)

Closing net debt/(cash)

 

 

(24,336)

(21,566)

(46,121)

(36,326)

(27,706)

Source: Company data, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Viralytics and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Viralytics and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street

Sydney NSW 2000

Australia

Centrale del Latte d’Italia — Integration progressing

The domestic market remains challenging, and raw material prices are now increasing. FY16 revenues were slightly ahead of our forecast and FY17 seems to have got off to a good start. Centrale del Latte d’Italia (CLI) is due to increase its list prices as of 1 April, which should help it offset the cost inflation. The main event of FY16 – the merger between CLT and CLF which gave rise to the new entity CLI – is still being bedded in, and we expect the integration to continue to make progress.

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