Celyad — Update 13 July 2016

Celyad — Update 13 July 2016

Celyad

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Celyad

Japan deal on NKR-T cancer therapy

NKR-T allogeneic deal

Pharma & biotech

13 July 2016

Price

€23.64

Market cap*

€220m

*$1.11/€

Cash (€m) at 31 March 2016

94.7

Shares in issue

9.31m

Free float

54.7%

Code

CYAD

Primary exchange

Euronext Brussels

Secondary exchange

NASDAQ

Share price performance

%

1m

3m

12m

Abs

(47.1)

(42.7)

(49.6)

Rel (local)

(46.3)

(43.1)

(45.4)

52-week high/low

€57.00

€21.79

Business description

Celyad is developing an innovative CAR T-cell (NKR-T) immuno-oncology technology. Phase I/II studies have reached the highest 30m cell dose. C-Cure, an autologous stem cell therapy for chronic heart disease, missed its primary endpoint but an EMA filing is possible. A part-US trial may run if partnered.

Next events

Interim results

Q316

CHART-1 data detail

28 August 2016

Analysts

John Savin PhD

+44 (0)20 3077 5735

Lala Gregorek

+44 (0)20 3681 2527

Celyad is a research client of Edison Investment Research Limited

The Japanese pharmaceutical company ONO is jumping a therapeutic generation by licensing Celyad’s allogeneic preclinical NKR-T cancer cell therapy for Japan, Korea and Taiwan. Allogeneic NKR-T has the same action as the Phase I/II NKR-T autologous product; allogeneic versions could be mass produced and provided “off the shelf”. ONO paid €11.25m cash with €270.75m possible in milestones plus royalties. NKR-T is being tested in two haematological cancers with trials in solid tumours planned for early 2017. On an interim basis, until more data on NKR-T and C-Cure are available, the indicative value moves from €32 to €41 per share.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/14

0.15

(18.46)

(2.73)

0.0

N/A

N/A

12/15

0.00

(28.35)

(3.26)

0.0

N/A

N/A

12/16e

11.25

(14.30)

(1.54)

0.0

N/A

N/A

12/17e

0.00

(57.69)

(6.20)

0.0

N/A

N/A

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

ONO buys into allogeneic

The NKR-T technology uses a ubiquitous set of ligands expressed on many cancerous cell types. These ligands are recognised by the natural killer NKG2 receptor. By creating T-cells with the NKG2 receptor added, a variety of cancer types, including solid tumours, in theory, can be targeted. Preclinical models of cancer support this. Currently, this is being trialled in autologous cell therapy where the patient’s own cells are harvested, transformed and transfused. The allogeneic version uses the same general mechanism, but is still preclinical. CAR approaches by other companies need a new ligand type every time unless the cancer types are very similar. This CAR complexity and cost explains ONO’s interest in allogeneic NKR-T: a single, mass produced cancer therapy against multiple cancers.

Current status of NKR-T

The US NKR-2 immuno-oncology autologous Phase I is dosing at the anticipated maximum 30m cell dose level (report). It is not certain if this will be the maximum tolerated dose (MTD). Once a dose is found, the trial will move into an expansion phase where six acute myeloid leukemia (AML) and six multiple myeloma (MM) patients are recruited in total. Celyad management expects solid tumor indication studies to move into clinical development from late 2016-Q117.

Valuation: Revised from €32 to €41 per share

ONO has given the allogeneic technology a benchmark value in its deal for Japan, Korea and Taiwan (plus an option over autologous). This supports NKR-T generally. On an interim basis, we have increased the NKR-T probability from 17.5 to 18.5% while clinical data are awaited, probably by late summer. A nominal €10m value for allogeneic is also added for the first time. This moves the indicative value to €41/share from €32 previously. A scenario value of up to €519m If NKR-T moved into solid tumour indications was presented in our 8 April 2015 note.

Exhibit 1: Financial summary

€000s

2014

2015

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

146

3

11,250

0

Cost of Sales

(115)

(1)

0

0

Gross Profit

31

2

11,250

0

EBITDA

(18,247)

(28,639)

(14,519)

(57,669)

Operating Profit (before amort and except)

(18,440)

(28,912)

(14,792)

(57,942)

Intangible Amortisation

(677)

(760)

(760)

(760)

Other income and charges

3,778

0

0

0

Share-based payments

(1,098)

(795)

(795)

(795)

Operating Profit

(16,437)

(30,467)

(16,347)

(59,497)

Net Interest

(16)

558

500

250

Profit Before Tax (norm)

(18,456)

(28,354)

(14,292)

(57,692)

Profit Before Tax (FRS 3)

(16,453)

(29,909)

(15,847)

(59,247)

Tax

0

0

0

0

Profit After Tax (norm)

(18,456)

(28,354)

(14,292)

(57,692)

Profit After Tax (FRS 3)

(16,453)

(29,909)

(15,847)

(59,247)

Average Number of Shares Outstanding (m)

6.8

8.7

9.3

9.3

EPS - normalised (c)

(273.41)

(326.28)

(153.56)

(619.87)

EPS - (IFRS) (€)

(2.44)

(3.44)

(1.70)

(6.37)

Dividend per share (c)

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

11,041

50,105

49,222

48,339

Intangible Assets

10,266

48,789

48,029

47,269

Tangible Assets

598

1,136

1,013

890

Investments

177

180

180

180

Current Assets

30,265

109,420

87,440

29,173

Stocks

0

0

0

0

Debtors

830

549

549

0

Cash

27,633

107,513

85,637

27,919

Other

1,802

1,358

1,254

1,254

Current Liabilities

(6,053)

(11,490)

(11,592)

(11,215)

Creditors

(5,276)

(10,592)

(10,592)

(10,592)

Deferred revenue

0

0

0

0

Walloon loans for cash payment

(777)

(898)

(1,000)

(623)

Long Term Liabilities

(11,239)

(36,561)

(30,357)

(30,357)

Walloon loans (non-current)

(10,778)

(10,484)

(9,280)

(9,280)

Other long term liabilities

(461)

(26,077)

(21,077)

(21,077)

Net Assets

24,014

111,474

94,713

35,940

CASH FLOW

Operating Cash Flow

(17,398)

(27,862)

(18,928)

(56,856)

Net Interest

(16)

558

645

124

Tax

0

0

0

0

Capex

(640)

(838)

(150)

(150)

Acquisitions/disposals

(1,550)

(5,186)

0

0

Financing

26,417

109,155

0

0

Dividends

0

0

0

0

Other

1,638

(3,287)

(1,151)

(1,144)

Net Cash Flow

8,451

72,540

(19,584)

(58,026)

Opening net debt/(cash)

(9,557)

(16,078)

(96,131)

(77,649)

HP finance leases initiated

0

0

0

0

Walloon loan recognition (non-cash)

(1,930)

7,513

1,102

42

Closing net debt/(cash)

(16,078)

(96,131)

(77,649)

(19,666)

Source: Edison Investment Research estimates, Celyad reports and announcements. Note: No cardiac deals or royalties included.

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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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