Selvita — Update 22 August 2016

Ryvu Therapeutics (WSE: RVU)

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Research: Healthcare

Selvita — Update 22 August 2016

Selvita

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Healthcare

Selvita

SEL24 moves to clinic; Nodthera established

R&D pipeline news

Pharma & biotech

22 August 2016

Price

PLN24.60

Market cap

PLN330m

Net cash (PLNm) at end Q116

29.6

Shares in issue

13.4m

Free float

45%

Code

SLV

Primary exchange

WSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

12.3

9.9

36.3

Rel (local)

11.9

9.9

45.7

52-week high/low

25.8

66.0

Business description

Selvita is a drug discovery services provider based in Poland. It employs c 352 staff (30% with PhDs) and operates two main business units: the Innovations Platform (internal NME pipeline) and Research Services (medicinal chemistry/biology, biochemistry).

Next events

H116 results

30 August 2016

SEL24 Phase I start

Q416

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Lala Gregorek

+44 (0)20 3681 2527

Selvita is a research client of Edison Investment Research Limited

Selvita announced last week that the FDA has accepted the initial new drug application (IND) for its lead R&D project SEL24, which can now proceed to Phase I/II in acute myeloid leukaemia (AML) patients. This is the first of Selvita’s R&D assets to be tested in the clinical study that the company intends to begin in Q416, in line with our expectations (H216), while the design of the trial has not yet been disclosed. Upcoming H116 report to be released on 30 August will provide an update on the company’s operational performance. Our valuation is under review.

Year end

Revenue (PLNm)

PBT*
(PLNm)

EPS*
(PLN)

DPS
(PLN)

P/E
(x)

Yield
(%)

12/14

41.6

5.4

0.56

0.0

43.9

N/A

12/15

56.1

7.6

0.84

0.0

29.3

N/A

12/16e

66.9

5.8

0.44

0.0

55.9

N/A

12/17e

76.5

8.7

0.63

0.0

39.0

N/A

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

First-in-class, most advanced, dual PIM/FLT3 inhibitor

SEL24 is a first-in-class compound with a dual mechanism of action to target two kinases, namely PIM (1, 2 and 3 isoforms) and FLT3 mutants, which have been shown to be important in the development of AML and other haematological malignancies. With its mechanism of action, SEL24 is the first compound to progress to Phase I/II. Selvita said previously that the FDA asked for supplemental preclinical information, which now has been delivered and shows a good working relationship between the company and the regulatory agency, in our view.

Innovative asset financing with Nodthera

In July 2016, Selvita, together with Epidarex Capital announced the formation of a new company, Nodthera, headquartered in Edinburgh, Scotland. Nodthera centres on NLRP3 inflammasome inhibitors, a first-in-class technology developed internally by Selvita. While it is still at an early preclinical stage with few details released, inflammasome’s role in immune system response and its modulation is an emerging field that has potential across several indications with high unmet need, such as cancers and non-malignant diseases like diabetes, rheumatoid arthritis and Alzheimer’s disease. Epidarex is a specialist, early-stage life sciences investor and we find the solution to carve out the asset and fund the research together with specialist investors as innovative with the potential to speed up the preclinical development in Selvita’s portfolio.

Valuation: PLN363m or PLN27.0/share under review

Our previous valuation of Selvita was PLN363m or PLN27.0/share and assigned a probability of success of 7.5% for SEL24 to reach the market, which is now under review. We look forward to H116 results due shortly and will revise our forecasts and valuation subsequently.

Exhibit 1: Financial summary

PLN'000s

2013

2014

2015

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

21,914

41,557

56,077

66,862

76,456

of which: Services (research outsourcing)

9,812

16,121

25,612

33,279

41,598

Innovation pipeline funding

3,241

12,744

15,416

17,817

18,320

Subsidies

8,688

12,430

14,700

15,424

16,195

EBITDA

 

 

(146)

7,626

10,235

9,262

12,792

Operating Profit (before GW and except.)

 

(2,228)

5,272

6,802

5,823

8,729

Intangible Amortisation

0

0

0

0

0

Exceptionals/Other

0

0

(4,729)

(5,860)

(583)

Operating Profit

(2,228)

5,272

2,073

(37)

8,146

Net Interest

(198)

155

748

14

10

Exceptionals/Other

0

0

0

0

0

Profit Before Tax (norm)

 

 

(2,427)

5,427

7,550

5,838

8,739

Profit Before Tax (reported)

 

 

(2,427)

5,427

2,821

(22)

8,156

Tax

(19)

(45)

(5)

0

(245)

Deferred tax

0

468

3,417

0

0

Profit After Tax (norm)

(2,445)

5,850

10,962

5,838

8,495

Profit After Tax (reported)

(2,445)

5,850

6,233

(22)

7,912

Average Number of Shares Outstanding (m)

10.5

10.5

13.1

13.3

13.4

EPS - normalised (PLN)

 

 

(0.23)

0.56

0.84

0.44

0.63

EPS - reported (PLN)

 

 

(0.23)

0.56

0.48

(0.00)

0.59

Dividend per share (PLN)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

7,067

9,494

16,718

18,279

17,716

Intangible Assets

282

331

2,274

2,274

2,274

Tangible Assets

4,932

6,845

8,597

10,158

9,595

Other

1,854

2,318

5,847

5,847

5,847

Current Assets

 

 

11,191

17,310

48,524

40,639

48,332

Stocks

391

706

1,174

1,158

1,142

Debtors

5,161

10,314

17,961

17,961

17,961

Cash

5,418

4,878

28,807

20,937

28,646

Other

221

1,411

582

582

582

Current Liabilities

 

 

(11,401)

(15,271)

(16,319)

(16,315)

(16,560)

Creditors

(3,481)

(6,055)

(3,927)

(3,927)

(3,927)

Provisions

(2,104)

(2,801)

(3,327)

(3,327)

(3,327)

Deferred revenues

(5,455)

(4,617)

(7,384)

(7,384)

(7,384)

Short term borrowings

(161)

(91)

(33)

(33)

(33)

Other

(200)

(1,708)

(1,648)

(1,643)

(1,888)

Long Term Liabilities

 

 

(3,454)

(2,278)

(2,043)

(2,043)

(2,043)

Long term borrowings

0

0

0

0

0

Deferred revenues

(3,222)

(2,010)

(1,513)

(1,513)

(1,513)

Other long term liabilities

(232)

(268)

(529)

(529)

(529)

Net Assets

 

 

3,403

9,254

46,880

40,561

47,445

CASH FLOW

Operating Cash Flow

 

 

(7,198)

(4,902)

(16,430)

(18,288)

(4,987)

Net Interest

0

0

0

0

0

Tax

0

0

0

(4)

0

Capex

(2,167)

(3,610)

(5,190)

(5,000)

(3,500)

Acquisitions/disposals

0

0

0

0

0

Financing

0

0

27,314

0

0

Dividends

0

0

0

0

0

Other (incl. subsidies)

9,567

7,972

18,354

15,424

16,195

Net Cash Flow

202

(540)

24,049

(7,868)

7,708

Opening net debt/(cash)

 

 

(5,192)

(5,257)

(4,787)

(28,773)

(20,904)

HP finance leases initiated

0

0

0

0

0

Exchange rate movements

0

0

0

0

0

Other

(137)

71

(63)

(1)

0

Closing net debt/(cash)

 

 

(5,257)

(4,787)

(28,773)

(20,904)

(28,612)

Source: Edison Investment Research, Selvita

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Selvita 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2016. “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.

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London +44 (0)20 3077 5700

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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

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

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Selvita 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2016. “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 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

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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