Ultimovacs — Patient enrolment continues; catalysts approach

Ultimovacs (OSE: ULTI)

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NOK7.55

0.06 (0.80%)

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Research: Healthcare

Ultimovacs — Patient enrolment continues; catalysts approach

Readouts from Ultimovacs’ clinical pipeline inch closer as patients continue to enrol in the company’s busy clinical programme. UV1, Ultimovacs’ potential universal cancer vaccine, is being investigated in ongoing trials for malignant melanoma, mesothelioma, ovarian cancer, head and neck cancers and non-small cell lung cancer (NSCLC). We expect a collection of readouts from the UV1 programme to begin with top-line data from the Phase II INITIUM (malignant melanoma, plus nivolumab and ipilimumab) and NIPU (mesothelioma, plus nivolumab and ipilimumab) trials in H123. Ultimovacs retains a strong cash position at end-Q122 of NOK524m, which we see funding it to H124. We reintroduce our estimates and increase our valuation of Ultimovacs to NOK6.90bn, or NOK202/share, from NOK6.13bn, or NOK179/share.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Ultimovacs

Patient enrolment continues; catalysts approach

Q121 update

Pharma and biotech

15 June 2022

Price

NOK66.5

Market cap

NOK2,274m

US$/NOK9.48

Net cash (NOKm) at end-March 2022

523.7

Shares in issue

34.2m

Free float

56%

Code

ULTI

Primary exchange

Oslo Stock Exchange

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.7)

(10.5)

(15.1)

Rel (local)

(10.3)

(11.6)

(19.9)

52-week high/low

NOK162

NOK66.3

Business description

Ultimovacs is developing novel immunotherapies against cancer. Lead product candidate, UV1, is a peptide-based vaccine against the universal cancer antigen telomerase (hTERT), which is expressed in c 85% of all cancer types. UV1 therefore has a broad potential in a variety of different settings and combinations.

Next events

Phase II INITIUM top-line data

H123

Phase II NIPU top-line data

H123

Phase I UV1-103 OS data (two-year)

Q323

Phase I UV1-103 OS data (three-year)

Q423

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Harry Shrives

+44 (0)20 3077 5700

UltimovacsUltimovacs is a research client of Edison Investment Research Limited

Readouts from Ultimovacs’ clinical pipeline inch closer as patients continue to enrol in the company’s busy clinical programme. UV1, Ultimovacs’ potential universal cancer vaccine, is being investigated in ongoing trials for malignant melanoma, mesothelioma, ovarian cancer, head and neck cancers and non-small cell lung cancer (NSCLC). We expect a collection of readouts from the UV1 programme to begin with top-line data from the Phase II INITIUM (malignant melanoma, plus nivolumab and ipilimumab) and NIPU (mesothelioma, plus nivolumab and ipilimumab) trials in H123. Ultimovacs retains a strong cash position at end-Q122 of NOK524m, which we see funding it to H124. We reintroduce our estimates and increase our valuation of Ultimovacs to NOK6.90bn, or NOK202/share, from NOK6.13bn, or NOK179/share.

Year end

Revenue (NOKm)

PBT*
(NOKm)

EPS*
(NOK)

DPS
(NOK)

P/E
(x)

Yield
(%)

12/20

0.0

(120.6)

(3.98)

0.0

N/A

N/A

12/21

0.0

(164.7)

(5.09)

0.0

N/A

N/A

12/22e

0.0

(243.2)

(7.11)

0.0

N/A

N/A

12/23e

0.0

(206.2)

(6.02)

0.0

N/A

N/A

Note: *PBT is reported, EPS is fully diluted

UV1 development progressing on all fronts

While the Phase II INITIUM and NIPU trials continue to spearhead the company’s development pipeline, further Phase II studies in ovarian cancer (DOVACC), head and neck cancer (FOCUS) and NSCLC (LUNGVAC) follow closely behind. With the exception of LUNGVAC, which the company expects to enrol first patients in Q222, all trials are on schedule, providing confidence in management’s proposed timelines. Phase II development is supported by good safety data and signals of efficacy from three Phase I/IIa trials.

Strong cash position in a turbulent market

Following the completion of a private placement of shares in October 2021, raising NOK270m in gross proceeds, Ultimovacs remains well funded. In a turbulent market environment (SPDR S&P Biotech ETF: XBI is down c 37% ytd), we continue to see Ultimovacs’ cash position as sufficient to fund UV1 development to H124 (consistent with prior estimates), past anticipated key Phase II readouts from the INITIUM, NIPU, DOVACC, FOCUS and LUNGVAC trials.

Valuation: NOK6.90bn or NOK202/share

We value Ultimovacs at NOK6.90bn or NOK202/share, based on a risk-adjusted net present value (rNPV) analysis for UV1 in malignant melanoma, mesothelioma, ovarian cancer, head and neck cancer and NSCLC, and net Q122 cash of NOK523.7m. We have rolled our model forward and updated our $/NOK assumption to $/NOK9.48 (from $/NOK8.99), which itself had a c 5% upside effect on our rNPV. We have revised our FY22e estimates but our underlying long-term assumptions remain unchanged (for details see our previous note).

Catalysts on the horizon

As a reminder, UV1 is a cancer vaccine that primes the patient’s immune system to recognise human telomerase reverse transcriptase (hTERT), a protein that is estimated to be over-expressed in up to 85–90%% of human cancers but not in healthy tissues. Recognising the potential universality of hTERT as a cancer vaccine target, Ultimovacs is pursuing the development of UV1, in combination with well-known immune checkpoint inhibitors (ICIs) such as ipilimumab, nivolumab, durvalumab and pembrolizumab, in multiple indications (Exhibit 1).

Exhibit 1: Ultimovacs’ clinical development schedule

Source: Ultimovacs corporate presentation

The most significant mid-term catalysts for Ultimovacs are top-line readouts from the Phase II INITIUM trial (in first-line advanced or metastatic malignant melanoma in combination with ipilimumab and nivolumab) and NIPU trial (in second-line malignant pleural mesothelioma, again in combination with ipilimumab and nivolumab) both of which are expected in H123. Management regularly reports enrolment figures for ongoing trials and, as of 11 May 2022, INITIUM was 89% enrolled (137 of 154 expected) and NIPU was 66% enrolled. In our view, this progress conforms to management’s expected readout timeline. The company also expects top-line results from the DOVACC and FOCUS Phase II trials in 2023 and we expect an update on this guidance with the Q422 report. Finally, the Phase II LUNGVAC study is anticipated to begin enrolling patients in H122, with top-line results expected by end-2024.

Development supported by three Phase I/IIa studies

Ultimovacs’ Phase II development programme for UV1 is supported by data from three Phase I/IIa studies covering malignant melanoma, NSCLC and prostate cancer. Recently published follow-up data showed that UV1 caused a long-term immune response in combination with ipilimumab in these patients. Overall, 78.4% of patients (n=52) had a vaccine-induced T-cell response, with several patients demonstrating an hTERT specific immune response up to 7.5 years after the first vaccination. The UV1/ipilimumab combination showed a significantly prolonged median overall survival (mOS) in immune responders compared to non-responders (54.8 months versus 23.4 months), providing encouraging support for the UV1/ipilimumab combination, in our view. Additionally, these data showed a median time to immune response of four, five and 10 weeks in melanoma, NSCLC and prostate cancer, respectively.

Valuation

We value Ultimovacs at NOK6.90bn or NOK202/share (previously NOK6.13bn or NOK179/share). Our underlying long-term assumptions remain unchanged and we roll our model forward in time. We have also updated our FX assumptions to $/NOK9.48 (from $/NOK8.99), which itself had a c 5% upside effect on our valuation. Our valuation is based on an rNPV analysis using a 12.5% discount rate and including net cash of NOK523.7m at end-Q122. Our model includes five rNPV projects (Exhibit 2), all of which are based on a similar bottom-up approach (for more details, see our initiation report).

Exhibit 2: Valuation of Ultimovacs

Platform

Launch

Peak sales
($m)

NPV
(NOKm)

NPV/
share (NOK)

Probability of success

rNPV
(NOKm)

NPV/share
(NOK)

UV1 - Malignant melanoma

2028

1,230

3,746.7

109.5

25.0%

1,038.8

30.4

UV1 - Mesothelioma

2028

560

1,754.1

51.3

25.0%

494.1

14.4

UV1 - Ovarian cancer

2028

764

2,336.0

68.3

25.0%

681.0

19.9

UV1 - H&N cancer

2028

1,330

4,267.4

124.7

25.0%

1,278.5

37.4

UV1 - NSCLC

2029

2,683

9,116.3

266.4

25.0%

2,883.0

84.2

Net cash at end-Q122

523.7

15.3

100.0%

523.7

15.3

Valuation

 

 

21,744.2

635.4

6,899.2

201.6

Source: Edison Investment Research. Note: Peak sales rounded to nearest $10m.

Financials

Total operating expenses for Q122 were NOK31.9m, in line with Q121 (NOK31.2m). On an annualised basis, operating costs were lower than our updated estimates for FY22e of NOK244m (previously NOK215m). We expect this difference to be accounted for by an increase in R&D costs during the year (NOK179m, previous estimate NOK149m), as patients are recruited into the relatively recent DOVACC, FOCUS and LUNGVAC (first patient enrolment expected in H122) Phase II trials. If management’s timelines prove accurate, we expect Ultimovacs to be simultaneously funding five separate Phase II trials during FY22. On a quarterly cost basis of c NOK10m per study (consistent with a Q122 and Q121 R&D expense of c NOK20m) and with the Phase II INITIUM and NIPU trials completing enrolment throughout H222, we believe our R&D expense estimate of NOK179m (FY21: NOK99m) for FY22 is justified. On the same basis, we anticipate R&D costs will decrease in FY23 (NOK139m), as the DOVACC and FOCUS studies are also expected to complete enrolment and report top-line results through the second half of the year. In FY22, we forecast a small increase in SG&A expenses of 2.5% to NOK63m and a further increase to NOK65m in FY23.

Net cash flow from operating activities for Q122 was NOK45m and on an annualised basis was below our updated estimate for FY22e of NOK236m. Again, we expect the cash burn rate to increase during 2022 as clinical development of UV1 progresses. Thus, with a cash position of NOK523.7m at end-Q122, we assume the company has sufficient cash to maintain operations into H124 (consistent with prior estimates).

Exhibit 3: Financial summary

Accounts: IFRS, year-end December, NOK’000s

 

2019

2020

2021

2022e

2023e

INCOME STATEMENT

 

 

 

 

 

 

Total revenues

 

0

0

0

0

0

Cost of sales

 

0

0

0

0

0

Gross profit

 

0

0

0

0

0

SG&A (expenses)

 

(20,160)

(50,989)

(61,916)

(63,464)

(65,050)

R&D costs

 

(43,995)

(70,438)

(99,213)

(178,583)

(138,898)

Other income/(expense)

 

0

0

0

0

0

Exceptionals and adjustments

 

0

0

0

0

0

Reported EBITDA

 

(64,155)

(121,427)

(161,129)

(242,047)

(203,949)

Depreciation and amortisation

 

(2,063)

(2,720)

(2,703)

(2,537)

(2,454)

Reported Operating Profit/(loss)

 

(66,218)

(124,147)

(163,832)

(244,584)

(206,402)

Finance income/(expense)

 

5,051

3,593

(889)

1,352

232

Other income/(expense)

 

0

0

0

0

0

Exceptionals and adjustments

 

0

0

0

0

0

Reported PBT

 

(61,167)

(120,554)

(164,721)

(243,232)

(206,171)

Income tax expense

 

0

0

0

0

0

Reported net income

 

(61,167)

(120,554)

(164,721)

(243,232)

(206,171)

Basic average number of shares (m)

 

22.9

30.3

32.4

34.2

34.2

Basic EPS (NOK)

 

(2.67)

(3.98)

(5.09)

(7.11)

(6.02)

Diluted EPS (NOK)

 

(2.67)

(3.98)

(5.09)

(7.11)

(6.02)

BALANCE SHEET

 

 

 

 

 

 

Property, plant and equipment

 

536

377

212

194

176

Intangible assets

 

55,519

64,551

60,088

57,851

55,698

Other non-current assets

 

3,523

3,630

1,951

1,951

1,951

Total non-current assets

 

70,429

80,353

73,282

71,027

68,856

Cash and equivalents

 

399,607

440,925

574,168

337,813

148,895

Trade and other receivables

 

0

0

0

0

0

Other current assets

 

8,004

8,438

8,087

8,087

8,087

Total current assets

 

407,611

449,363

582,255

345,900

156,982

Non-current loans and borrowings*

 

0

0

0

0

0

Total non-current liabilities

 

13,152

13,870

11,488

11,488

11,488

Trade and other payables

 

11,768

8,611

22,555

15,583

19,069

Other current liabilities

 

7,164

17,149

26,714

26,714

26,714

Total current liabilities

 

20,257

27,467

50,897

43,925

47,411

Equity attributable to company

 

444,632

488,380

593,153

361,516

166,940

CASH FLOW STATEMENT

 

 

 

 

 

 

Operating Profit/(loss)

 

(66,218)

(124,147)

(163,832)

(244,584)

(206,402)

Depreciation and amortisation

 

2,063

2,720

2,703

2,537

2,454

Other adjustments

 

0

0

0

0

0

Movements in working capital

 

(1,862)

6,395

23,860

(6,972)

3,486

Interest paid / received

 

0

0

0

0

0

Income taxes paid

 

0

0

0

0

0

Cash from operations (CFO)

 

(62,989)

(108,224)

(125,827)

(236,072)

(188,636)

Capex

 

(172)

(282)

(85)

(282)

(282)

Acquisitions & disposals net

 

0

0

0

0

0

Other investing activities

 

4,490

(455)

3,062

0

0

Cash used in investing activities (CFIA)

 

4,318

(737)

2,977

(282)

(282)

Net proceeds from issue of shares

 

344,582

152,933

261,852

0

0

Movements in debt

 

0

0

0

0

0

Other financing activities

 

(1,579)

(1,916)

(1,895)

0

0

Cash flow from financing activities

 

343,003

151,017

259,957

0

0

Increase/(decrease) in cash and equivalents

 

284,067

41,317

133,244

(236,354)

(188,918)

Cash and equivalents at beginning of period

 

115,539

399,606

440,923

574,167

337,813

Cash and equivalents at end of period

 

399,606

440,923

574,167

337,813

148,895

Net (debt)/cash

 

399,607

440,925

574,168

337,813

148,895

Source: Ultimovacs company accounts, Edison Investment Research. Note: *Long term debt used instead of equity issue.



General disclaimer and copyright

This report has been commissioned by Ultimovacs and prepared and issued by Edison, in consideration of a fee payable by Ultimovacs. 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.

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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 2022 Edison Investment Research Limited (Edison).

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New Zealand

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United Kingdom

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General disclaimer and copyright

This report has been commissioned by Ultimovacs and prepared and issued by Edison, in consideration of a fee payable by Ultimovacs. 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 2022 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.

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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

1185 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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