Ultimovacs — Universal approach with critical readouts in March

Ultimovacs is a clinical-stage biotechnology company focused on investigating its lead cancer vaccine, UV1, in combination with various immune checkpoint inhibitors (ICIs) across multiple cancer indications. As part of the company’s year-end results, management shared an overview of the five Phase II trials (Exhibit 1).

Malignant melanoma is Ultimovacs’ lead indication for UV1 and, as the Phase II INITIUM trial results are expected in March 2024, we believe this represents the most significant upcoming catalyst for the company as this would be a major win for a universal off-the-shelf vaccine in addressing a challenging indication. As a reminder, guided timelines for INITIUM top-line results were pushed back multiple times due to patients taking longer than expected to experience disease progression. While this may often be considered an encouraging sign for patients and the outcome of the trial, we note that this is not assured, for example if the observation was driven by the control arm performing better than anticipated. In October 2023, management confirmed that it had amended the study protocol to ensure no further delays to these readouts. The original trial protocol specified that data analysis would begin after the observation of disease progression in 70 of 156 patients (referred to as the number of endpoints). Regulatory authorities subsequently agreed that the data analysis could be conducted after a minimum follow-up period of 18 months for all evaluable patients. In mid-January 2024, management confirmed that while 70 progression events had not yet occurred, the 18-month follow-up point had been reached for the last enrolled patient, and that the results would be reported in March 2024. Importantly, we note that the amendment is not expected to have an impact on the integrity of the statistical analysis planned for this study, which remains set up with 80% statistical power.

In November 2023, Ultimovacs announced it had completed patient enrolment for a planned supplementary study (n=21) to INITIUM. This is intended to investigate the biological activity and mode of action of T-cells induced by UV1. All 21 malignant melanoma patients enrolled had completed treatment with UV1 in combination with IPI-NIVO as part of the main INITIUM Phase II clinical trial. The additional research aims to assess the ability of UV1 in improving overall immune responses, as well as its ability to enhance the responsiveness of ICIs, such as ipilimumab and nivolumab. We note that while the data analysis for this supplementary study will take place in parallel with the main INITIUM analysis, the results will be shared at a later date. In our view, this supplementary study could strengthen the foundation for discussions with potential partners, and may lead regulators to view the growing data package for UV1 more favourably.

Alongside the ongoing Phase II trial, Ultimovacs is also assessing the combination of UV1 with pembrolizumab in patients with unresectable or metastatic melanoma in Phase I (UV1-103), for which the three-year survival data was encouraging, in our view. This corresponds to the full patient population (n=30) for UV1-103, which comprises two patient cohorts whereby the only difference between the two is in the dose of vaccine adjuvant GM-CSF (cohort 1: 37.5 µg, n=20; cohort 2: 70 µg, n=10). At a median follow-up of 47.8 months, median progression-free survival (PFS) was 18.9 months and median overall survival (OS) had not yet been reached (Exhibit 2). The objective response rate was 57%, with 33% achieving a complete response (defined as disappearance of tumours). We also note that there have been no confirmed patient deaths since the three-year follow-up point for this cohort. In our view, this data demonstrates the durable efficacy of UV1 in combination with pembrolizumab. While we caution against direct read across and acknowledge differences in study design, we highlight that pembrolizumab alone showed an OS rate of 51% in the registrational KEYNOTE-006 study (advanced melanoma).

We note that patients included in cohort 1 have now been followed for four years, and of the 17 who agreed to long-term follow-ups, one patient could not be reached temporarily, so their status is pending. By a conservative approach, 11 of 16 patients were confirmed alive after four years. Management has communicated that four-year survival data from both cohorts will be reported in Q224; we believe the encouraging interim results to date may be a sign of promising things to come with INITIUM. However, we caution against direct read across between clinical trials and note that there are differences in design and the precise target patient populations. Mainly, UV1-103 is assessing UV1 in combination with pembrolizumab, whereas INITIUM is assessing UV1 with IPI-NIVO.

On the regulatory front, we note that the potential of UV1 has been supported with regulatory designations. In October 2021, the FDA granted Fast Track designation to UV1 as an add-on therapy to ICIs for the treatment of unresectable or metastatic melanoma. In December 2021, the FDA granted Orphan Drug designation (ODD) to UV1 for the treatment of stage IIB–V melanoma.

In Ultimovacs’ FY23 results presentation, management provided an overview and guided timelines for the UV1 Phase II trials, including updated guidance for the last two programmes:

The Phase II NIPU trial (n=118) was a randomised, multi-centre study to investigate UV1 in combination with IPI-NIVO as a potential second-line treatment in patients with relapsed/refractory (r/r) MPM. This is an aggressive cancer type with a high mortality rate, few therapeutic options in first-line treatment (platinum and pemetrexed chemotherapy, or IPI-NIVO as of October 2020) and no established standard of care in the second-line setting. Initial clinical results were reported in June 2023 and were initially perceived negatively as the trial did not meet its primary endpoint of PFS. However, despite the lack of significance in the initial results, management was encouraged by the trends in OS benefit in the UV1 treatment arm.

Detailed results from NIPU were shared in October 2023. The results showed a reduced risk of death by 27% with UV1 in combination with IPI-NIVO, compared to IPI-NIVO alone. OS was recorded as 15.4 months in the UV1 arm versus 11.1 months in the control arm, marking a key highlight of the results, in our view, as OS is regarded as the gold standard of endpoints in oncology clinical trials. In addition, a blinded independent central review (BICR) assessed the objective response rates from the trial data, defined as a tumour reduction of at least 30%. The objective response rate was measured as 31% for the UV1 treatment arm, approximately twice that of the control arm where the objective response rate was measured as 16% (Exhibit 3). Collectively, we believe the clinically meaningful results, per these measures, warrant further clinical development in this indication. For a more detailed discussion of the NIPU trial results, we direct readers to our November update note.

In October 2023, the FDA granted ODD to UV1 for the treatment of mesothelioma based on the NIPU results. Further, in February 2024, Ultimovacs announced that the FDA had also granted Fast Track designation to UV1 in combination with IPI-NIVO for the treatment of patients with unresectable MPM to improve overall survival. Importantly, the Fast Track designation includes the use of UV1 in the first-line setting. Collectively, these regulatory designations mark important recognition of the potential efficacy of UV1 in this indication, in our view, and provide a strong foundation for further clinical development efforts. Management is evaluating the best way to optimise the potential for UV1 in patients with mesothelioma and we believe this could include a Phase III programme focused on the first-line setting, which would represent a greater commercial opportunity than later line settings; we expect an update from management on this front once more material decisions have been made.

Cancer vaccines have been in the headlines recently due to movements from big pharma in this space. Merck and Moderna’s mRNA-4157/V940 vaccine has dominated attention. This is of particular relevance to Ultimovacs as it is targeting the treatment of stage III–IV melanoma in combination with pembrolizumab. Notably, in December 2022, the clinical data (from the Phase IIb KEYNOTE-942 trial) showed that the combination reduced the risk of tumour recurrence, or death, in patients by 44% versus pembrolizumab alone at the two-year timepoint. More recently, in December 2023, the latest data showed that patients receiving the combination were 49% less likely to experience disease progression or death at a median of three years post-treatment, compared to pembrolizumab alone, indicating strong durability of the observed responses. We believe the encouraging data provide clinical validation of the application of cancer vaccines, as well as the potential of combination approaches.

We note, however, that mRNA-4157/V940 is a personalised cancer vaccine, and that such patient-specific therapies are generally associated with manufacturing challenges that increase costs, prohibiting accessibility. Such therapies may struggle with production bottlenecks and the timely supply of treatments, which, in our view, may have a serious impact on patients battling aggressive cancers. Conversely, Ultimovacs’ UV1 is a universal off-the-shelf treatment option that is simpler to manufacture, addressing key considerations in accessibility in this competitive space, in our view.

As mentioned, Ultimovacs is focused on the development of novel immunotherapies to tackle cancer. The company’s lead asset, UV1, is a cancer vaccine with universal potential. UV1 is a peptide-based vaccine, designed to trigger immune responses through the recognition of human telomerase reverse transcriptase (hTERT), a protein that has been consistently associated with cancer growth. It is estimated that hTERT is overexpressed in up to 90% of human cancers, but not in healthy tissue, making it an attractive immunotherapy target. Ultimovacs is focused on demonstrating combinational synergies between the immune priming capabilities of UV1 and ICIs and is investigating UV1 in combination with various ICIs across multiple cancer indications (Exhibit 4).

Further to Ultimovacs’ clinical development efforts for UV1, it is also investigating its first product from its Tetanus-Epitope Targeting (TET) platform, which combines antigens and the vaccine adjuvant into the same active ingredient, aiming to enhance T-cell responses against cancer-specific peptides. In December 2023, Ultimovacs shared an update from the exploratory TENDU trial, which involved 12 patients with relapsed prostate cancer across three doses. Encouragingly, the study met its primary objective, showing desirable safety across all dose cohorts, and with no dose-limiting toxicities. It also met its secondary endpoint of activating an immune response against prostate specific peptides, which we view as an encouraging early indicator of the platform’s potential. While the TET platform represents a secondary focus for Ultimovacs (after ongoing clinical activities for UV1), we anticipate updates in this space once more material decisions have been made.

Our immune systems are well equipped to manage potential threats without causing damage to healthy parts of the body. However, cancer cells have often developed techniques to evade the natural surveillance systems of our bodies. While more traditional cancer treatments have focused on chemotherapy/radiation to directly target certain cancers, these are associated with myriad side effects and toxicity concerns. In contrast, immunotherapy (or immuno-oncology) has emerged as an innovative approach to fight cancer, while also offering considerably more desirable safety profiles. Immunotherapies harness the innate capabilities of the immune system, working by enhancing the body’s natural defence mechanisms. In this light, immunotherapies are akin to removing the brakes that cancer may put on our immune systems. We note that the immunotherapy treatment market is projected to have a value of c $155bn by 2030, from c $27bn in 2021, corresponding to a sizeable compound annual growth rate of 23%.

Most notably, ICIs have had profound success in recent years. Most ICIs are monoclonal antibodies designed to block receptors used by cancers to evade immune T-cell responses. The ICIs therefore switch the tumour microenvironment from ‘cold’ (ie immunosuppressive) to ‘hot’ (ie vulnerable to the immune system). Merck’s programmed death receptor 1 (PD-1) checkpoint inhibitor pembrolizumab (Keytruda) continues to dominate the immunotherapeutic market, having now received FDA approval for the treatment of 19 cancer types, with an additional 40 indications in the pipeline. Currently, the FDA has approved four different categories of ICIs, including inhibitors of: PD-1; the ligand PD-L1; the cytotoxic T-lymphocyte associated protein 4 (CTLA-4); and lymphocyte-activation gene 3 (LAG-3) (Exhibit 5). A product called Opdualag, a combination of nivolumab and relatlimab targeting both PD-1 and LAG-3, respectively, has been approved for the treatment of melanoma.

Additional PD-1 programmes that have been approved, but are less significant when it comes to therapeutic use, are:

While ICIs lead the way for the treatment of various cancers, their use as monotherapies has limitations, such as low response rates in certain indications, as well as observations of tumour resistance. However, combination therapies are demonstrating the potential to provide more desirable patient outcomes compared to monotherapies, and in our view, such approaches (characterised by a distinct synergy between ICIs and new treatment options) show promise in disrupting existing standards of care in cancer treatment.

In FY23, Ultimovacs reported total operating expenses of NOK215.7m, up 17.5% y-o-y and in line with our estimate of NOK213.6m. The increase in operating expenses primarily resulted from a significant upturn (30.1% y-o-y) in external R&D expenses to NOK123.8m (versus NOK95.2m in FY22). The main contributors to the FY23 R&D expenses were the INITIUM trial and chemistry, manufacturing and controls activities. Total personnel (or SG&A) expenses recorded a moderate growth of 5.1% y-o-y to reach NOK75.1m in FY23 (versus NOK71.5m in FY22). This was driven by the employment of two additional employees during FY23 (25 full-time equivalents in FY23 vs 23 in FY22) and a general salary increase, offset by lower expenses related to the share-based compensation programme.

The operating loss, which mainly reflects operating expenses due to the absence of any revenue inflow, stood at NOK215.7m in FY23 (vs NOK183.6m in FY22) and was in line with our estimate of NOK213.6m. Net cash outflow from operating activities came in at NOK189.8m in FY23, 13.2% higher than FY22.

With FY23 numbers largely in line with our estimates, we have kept our FY24 estimates for R&D and other operating expenses broadly unchanged. We make minor tweaks to our financial expense and share-based compensation estimates, which result in a slight decline in our FY24 operating cash flow to NOK217.3m (from NOK230.2m previously). Furthermore, we introduce FY25 estimates as we roll forward our model by one year. In FY25, we forecast total operating expenses of NOK133.0m, which includes total personnel (or SG&A) expenses of NOK99.2m and R&D expenses of NOK15.9m (with preclinical assets and the TENDU project being the main contributors to the R&D costs).

As noted earlier, two key trial readouts are expected in 2024 (INITIUM and FOCUS), and we therefore expect to see progress on the partnering/licensing front for the company’s UV1 asset should trial outcomes be positive. Our model assumes a $1.64bn global out-licensing deal for UV1 across all five indications by end-2024, and we expect the company to receive its first set of development milestone payments totalling $114.2m in FY25 from three indications (malignant melanoma, mesothelioma and head and neck cancer).

We value Ultimovacs at NOK8.5bn or NOK248 per share (from NOK7.6bn or NOK222 per share previously) based on a risk-adjusted net present value (rNPV) analysis using a 12.5% discount rate, including net cash of NOK266.6m. This increase mainly represents the positive effect of rolling forward our model by one year combined with a positive FX impact. The US$/NOK exchange rate increased to NOK10.610/US$ from NOK10.182/US$ in our last update note, a material 4.2% change.

Our current valuation is wholly attributable to the five ongoing Phase II trials for UV1 and excludes other early-stage clinical (the Phase I TENDU trial) and preclinical assets, each of which offers upside on successful clinical progress. The rNPV valuation for all five indications is based on a similar bottom-up approach and we keep our long-term assumptions unchanged. While the company has pushed out the timeline for two of the Phase II readouts by six months (for the DOVACC and LUNGVAC trials), we continue to keep our launch estimates for these unchanged given our existing conservative clinical development timelines for these two programmes.

Ultimovacs ended the year with a net cash position of NOK266.6m, which management expects will to be sufficient to fund operations through 2024, which is also in line with our operating cash burn estimates. We continue to assume that a global out-licensing deal for UV1 across all indications will be secured by end-2024 and the company will turn cash flow positive following the deal thanks to the receipt of development milestone payments across multiple indications. However, we do not expect Ultimovacs to be fully revenue generating until the launch of UV1, which we forecast in 2028.