Scandion Oncology — SCO-101 clinical progression continues

Scandion Oncology (OMX: SCOL)

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Research: Healthcare

Scandion Oncology — SCO-101 clinical progression continues

Scandion’s Q322 results provided an update on management’s continued commitment to execute on SCO-101’s clinical development strategy. Q322 operating losses amounted to DKK23.6m, largely driven by R&D expenses of DKK18.9m, with a net cash outflow from operations of DKK34.4m. With the initiation of CORIST part 3 in October, we now expect FY22 operating losses to increase to DKK86.5m (DKK65.2m previously). The net cash balance at end-Q322 stood at DKK91.4m (no debt) which, given current cash burn rates and our projections, should fund operations into Q124, beyond key anticipated clinical readouts in FY23. Based on our revised operating expenses and lower net cash position we value Scandion at SEK241.1m or SEK5.9/share (SEK279.0m or SEK6.9/share previously).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Scandion Oncology

SCO-101 clinical progression continues

Q322 update

Pharma and biotech

18 November 2022

Price

SEK2.08

Market cap

SEK85m

SEK10.5/US$; SEK1.45/DKK

Net cash (DKKm) at end-Q322

91.4

Shares in issue

40.7m

Free float

74%

Code

SCOL

Primary exchange

Nasdaq First North Growth Market

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.2

(70.2)

(84.0)

Rel (local)

(4.0)

(69.3)

(79.0)

52-week high/low

SEK19.0

SEK1.9

Business description

Scandion Oncology is a biotechnology company focused on the development of add-on therapies to reverse chemotherapy resistance in oncology. The company’s lead asset, SCO-101, is in Phase II trials for mCRC and Phase Ib trials for pancreatic cancer.

Next events

PANTAX top-line data

Q123

CORIST part 3 top-line data

Q323

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Adam McCarter

+44 (0)20 3077 5700

Scandion Oncology is a research client of Edison Investment Research Limited

Scandion’s Q322 results provided an update on management’s continued commitment to execute on SCO-101’s clinical development strategy. Q322 operating losses amounted to DKK23.6m, largely driven by R&D expenses of DKK18.9m, with a net cash outflow from operations of DKK34.4m. With the initiation of CORIST part 3 in October, we now expect FY22 operating losses to increase to DKK86.5m (DKK65.2m previously). The net cash balance at end-Q322 stood at DKK91.4m (no debt) which, given current cash burn rates and our projections, should fund operations into Q124, beyond key anticipated clinical readouts in FY23. Based on our revised operating expenses and lower net cash position we value Scandion at SEK241.1m or SEK5.9/share (SEK279.0m or SEK6.9/share previously).

Year end

Revenue (DKKm)

PBT*
(DKKm)

EPS*
(DKK)

DPS
(DKK)

P/E
(x)

Yield
(%)

12/20

1.0

(21.5)

(0.53)

0.0

N/A

N/A

12/21

0.8

(57.2)

(1.61)

0.0

N/A

N/A

12/22e

0.6

(87.7)

(2.25)

0.0

N/A

N/A

12/23e

0.6

(75.8)

(1.73)

0.0

N/A

N/A

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

CORIST and PANTAX on track

SCO-101’s clinical plans continue to make headway in both the Phase II CORIST (colorectal cancer) and Phase Ib PANTAX (pancreatic cancer) trials. Part 3 of the CORIST study initiated patient dosing in October 2022 with recruitment of the first cohort (n = 3) now complete. CORIST part 2 demonstrated safety and tolerability of SCO-101 and the company believes that part 3’s optimised dosing schedule may better support SCO-101 achieving the primary endpoint, missed in part 2. The dose-escalation in PANTAX also provides further support for SCO-101’s tolerability and encouraging signs for the trial meeting its safety endpoints, in our view.

Cash runway into FY24

The July 2022 rights issue raised c DKK52m in gross proceeds (DKK42m net) taking Scandion’s net cash position to DKK91.4m at end Q322. Given the current clinical plan for the two assets and funds on hand, we have revised our R&D estimates for FY22-24 (raising the FY22 estimate based on the 9M run-rate and reducing the FY23 figure on the expectation that Scandion will defer the Pantex next Phase to 2024 following the H123 readout from the ongoing study). Our revised cash-burn projections see the company past anticipated readouts in FY23.

Valuation: SEK241.1m or SEK5.9 per share

We revise our valuation down to SEK241.1m or SEK5.9/share (SEK279.0m or SEK6.9/share previously) based on a lower net cash position (SEK132.4m versus SEK167.1m previously) and minor adjustments in our timing forecasts and cost estimates. However, our underlying long-term assumptions are unchanged.

Financials

As a result of Scandion’s continued clinical development activities with the ongoing part 2 CORIST study, initiation of CORIST part 3 and dose escalation of PANTAX, it reported research and development (R&D) expenses for Q322 of DKK18.9m, above our expectations, bringing total R&D expenses for the first nine months of the year (9M22) to DKK51.9m. In light of the quarterly update and 9M performance, we have updated our FY22 estimates and now forecast total operating expenses to amount to DKK86.5m (previously DKK65.2m), with R&D expenses totalling DKK69.2m (previously DKK52.5m).

CORIST part 2 completed patient recruitment in FY22 and part 3 of CORIST, initiated in October 2022, will continue to enrol patients in FY23, with top-line data expected in Q323. Due to the timely initiation of CORIST part 3, we expect part of the R&D expenses associated with the study to be brought forward into FY22 (we previously expected initiation and hence a larger portion to be realized in FY23). Additionally, with the expected wind down of the Phase Ib PANTAX trial we anticipate no material costs associated with the study after H123 and that management may wait for results from CORIST before pursuing follow-on Phase II studies in pancreatic cancer in FY24. As a result, we reduce our estimates for FY23 total operating expenses to DKK77m (previously DKK83.2m), with R&D expenses of DKK60m (previously DKK70.5m), reflecting a previously estimated portion now deferred to FY24 in our model.

We estimate free cash outflows of c DKK87.3m in FY22 and DKK70.1m in FY23. On completion of the rights issue, Scandion had raised DKK52m and reported a net cash position of DKK91.4m at end-Q322. Based on our cash burn projections and in line with management’s guidance, we expect this to be sufficient to fund operations into Q124. However, we estimate that Scandion will be required to raise a further c DKK200m in FY24–25 to fund operations into FY26, at which point we have assumed in our model that the company will secure a licensing deal.

Exhibit 1: Financial summary

Accounts: IFRS, year-end: 31 December, DKK’000s

 

 

2020

2021

2022e

2023e

PROFIT & LOSS

 

 

 

 

 

 

Total revenues

 

 

1,003

797

590

600

Cost of sales

 

 

0

0

0

0

Gross profit

 

 

1,003

797

590

600

Total operating expenses

 

 

(24,758)

(56,164)

(86,492)

(76,946)

Research and development expenses

 

 

(21,672)

(47,711)

(69,200)

(60,000)

SG&A

 

 

(3,086)

(8,453)

(17,292)

(16,946)

EBITDA (normalized)

 

 

(23,474)

(54,763)

(85,060)

(76,030)

Operating income (reported)

 

 

(23,755)

(55,367)

(85,902)

(76,346)

Operating margin %

 

 

N/A

N/A

N/A

N/A

Finance income/(expense)

 

 

2,233

(1,846)

(1,778)

532

Exceptionals and adjustments

 

 

0

0

0

0

Profit before tax (reported)

 

 

(21,522)

(57,213)

(87,680)

(75,814)

Profit before tax (normalised)

 

 

(21,522)

(57,213)

(87,680)

(75,814)

Income tax expense (includes exceptionals)

 

 

4,384

5,508

5,500

5,500

Net income (reported)

 

 

(17,138)

(51,705)

(82,180)

(70,314)

Net income (normalised)

 

 

(17,138)

(51,705)

(82,180)

(70,314)

Basic average number of shares, m

 

 

32.1

32.1

36.5

40.7

Basic EPS (DKK)

 

 

(0.53)

(1.61)

(2.25)

(1.73)

Adjusted EPS (DKK)

 

 

(0.53)

(1.61)

(2.25)

(1.73)

Dividend per share (DKK)

 

 

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

Tangible assets

 

 

136

386

494

553

Intangible assets

 

 

0

0

0

0

Right-of-use assets

 

 

312

1,215

499

341

Other non-current assets

 

 

148

314

272

256

Non-current tax receivables

 

 

0

0

5,500

5,500

Total non-current assets

 

 

596

1,915

6,765

6,650

Cash and equivalents

 

 

5,814

105,710

71,326

1,270

Current tax receivables

 

 

4,384

5,500

5,500

5,500

Trade and other receivables

 

 

1,414

2,018

1,815

1,815

Other current assets

 

 

174,513

1,076

795

795

Total current assets

 

 

186,125

114,304

79,436

9,380

Non-current loans and borrowings

 

 

8

0

0

0

Non-current lease liabilities

 

 

0

500

249

249

Other non-current liabilities

 

 

504

84

905

905

Total non-current liabilities

 

 

512

584

1,154

1,154

Accounts payable

 

 

26,064

4,580

4,931

4,931

Illustrative debt

 

 

0

0

0

0

Current lease obligations

 

 

316

723

374

374

Other current liabilities

 

 

3,962

5,791

6,810

6,810

Total current liabilities

 

 

30,342

11,094

12,115

12,115

Equity attributable to company

 

 

155,867

104,541

72,932

2,761

 

 

 

 

 

 

 

CASH FLOW STATEMENT

 

 

 

 

 

 

Operating income

 

 

(23,755)

(55,367)

(85,902)

(76,346)

Depreciation and amortisation

 

 

281

604

842

316

Share based payments

 

 

0

0

0

0

Other adjustments

 

 

4,223

2,899

(2,158)

152

Movements in working capital

 

 

2,024

2,066

133

6,023

Cash from operations (CFO)

 

 

(17,227)

(49,798)

(87,085)

(69,854)

Capex

 

 

(46)

(318)

(192)

(202)

Acquisitions & disposals net

 

 

0

(167)

25

0

Other investing activities

 

 

0

0

0

0

Cash used in investing activities (CFIA)

 

 

(46)

(485)

(167)

(202)

Capital changes

 

 

7,892

150,690

53,486

0

Debt Changes

 

 

0

0

0

0

Other financing activities

 

 

(226)

(511)

(618)

0

Cash from financing activities (CFF)

 

 

7,666

150,179

52,868

0

Cash and equivalents at beginning of period

 

 

15,421

5,814

105,710

71,326

Increase/(decrease) in cash and equivalents

 

 

(9,607)

99,896

(34,384)

(70,056)

Effect of FX on cash and equivalents

 

 

0

0

0

0

Cash and equivalents at end of period

 

 

5,814

105,710

71,326

1,270

Net (debt)/cash

 

 

5,806

105,710

71,326

1,270

Source: Scandion oncology, Edison Investment Research


General disclaimer and copyright

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

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Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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United Kingdom

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Frankfurt +49 (0)69 78 8076 960

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London +44 (0)20 3077 5700

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New York +1 646 653 7026

1185 Avenue of the Americas

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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

General disclaimer and copyright

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

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

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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