Immunovia AB — Update 20 December 2016

Immunovia AB — Update 20 December 2016

Immunovia AB

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Immunovia

First NCI collaboration in the diabetes opportunity

Company update

Healthcare equipment & services

20 December 2016

Price

SEK83.25

Market cap

SEK1,399m

US$0.11/SEK

Net cash (SEKm) at 30 June 2016 plus September-October 2016 raise

278.3

Shares in issue

16.8m

Free float

64%

Code

IMMUNOV

Primary exchange

NASDAQ FN Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.4)

(7.7)

130.0

Rel (local)

(9.1)

(12.3)

112.0

52-week high/low

SEK119.0

SEK26.1

Business description

Immunovia is a Swedish diagnostics company based in Lund’s Medicon Village. It specialises in diagnostics for oncology and autoimmune diseases. Its main product is IMMray PanCan-d, an antibody microarray based on its proprietary IMMray platform. A prospective trial in high-risk patients has recently started. The company expects to generate initial out-of-pocket sales in 2018.

Next events

Commence commercial operations

2017

First revenues

2018

Complete prospective trial, registration

2019

Analysts

Juan Pedro Serrate

+44 (0)20 3681 2534

Lala Gregorek

+44 (0)20 3681 2527

Immunovia is a research client of Edison Investment Research Limited

Immunovia has taken key steps in both opportunities being pursued for its IMMray PanCan-d test for the early detection of pancreatic cancer. In diabetes, a collaboration with the Early Detection Research Network (EDRN), part of the US National Cancer Institute (NCI), is an important step forwards as it could lead to the start of the required clinical study. Diabetes is the larger of the two indications with 3.4 million newly diagnosed diabetes patients every year in the US and EU. In high-risk pancreatic cancer patients, Immunovia has now started a prospective clinical trial, as expected. This is a smaller opportunity (c 200k patients) but could generate initial revenues in 2018. Our valuation remains SEK155.2/share.

Year
end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/14

0.36

(8.86)

(0.80)

0.0

N/A

N/A

12/15

0.21

(7.38)

(0.65)

0.0

N/A

N/A

12/16e

0.20

(10.25)

(0.69)

0.0

N/A

N/A

12/17e

0.20

(10.68)

(0.64)

0.0

N/A

N/A

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

Immunovia delivers agreement with NCI

Immunovia has made important first steps towards its strategy of pursuing new onset diabetic patients by signing a memorandum of understanding (MoU) with the NCI EDRN. The goal of the collaboration with EDRN is to validate biomarkers to improve early diagnosis of pancreatic cancer, in particular in patients over 50 years old with new onset diabetes. These patients have eight times more risk to develop pancreatic cancer. We believe that this collaboration could lead to the start of a formal clinical trial to test IMMray PanCan-d in this population in order to gain regulatory approvals for the test. We anticipate that any such trial could involve 5,000 to 10,000 patients, analysed at least twice a year over three years. Immunovia recently raised c SEK218.6m to advance the diabetic opportunity.

Start of clinical trial in high-risk PC group announced

As expected, the company has announced the start of a three-year prospective clinical trial in 1,000 patients at high risk of pancreatic cancer (those with a family history of pancreatic cancer, hereditary pancreatitis, chronic pancreatitis or genetic diseases). The risk of developing pancreatic cancer is 32 to 132 times higher for these patients. At SEK5,000 per test and two tests per year for c 200,000 potential patients, we estimate this is an opportunity of c SEK2bn in the EU and US.

Valuation: No change to rNPV of SEK155.2/share

We have made no changes to our financial forecasts and maintain our rNPV valuation of SEK155.2 per share (SEK149.6 diluted), assuming a penetration rate of 35% in patients at high risk of pancreatic cancer and 5% in newly diagnosed diabetic patients, which targets total peak sales of c SEK2.1bn for both groups. The start of the formal clinical trial in diabetes could lead to an increase in our current 60% probability of success in this opportunity.

Heading towards a sizeable opportunity

Immunovia announced in September 2016 that it was holding talks with a large consortium focused on diabetes and pancreatic cancer. The company has effectively executed on this by signing an MoU with the NCI EDRN, which establishes the framework of a collaboration to identify, develop and validate biomarkers for early detection of pancreatic cancer, in particular in the risk group of patients over 50 years old with new onset diabetes.

We believe this is a positive step towards the development of a test for the early diagnosis of pancreatic cancer in the diabetes population and this collaboration could lead to a clinical trial in this group. As we mentioned in our initiation report, patients over 50 years of age diagnosed with diabetes have an up to eight times higher risk of pancreatic cancer. The Rochester study conducted in 2,122 diabetic subjects showed 1% of those over 50 years old were diagnosed with pancreatic cancer three years after diagnosis. To investigate this, public bodies like the NCI have created and funded the Consortium for the Study of Chronic Pancreatitis, Diabetes and Pancreatic Cancer (CPDPC), which includes leading US academic centres, with the aim of gaining insights into the epidemiology of chronic pancreatitis and the association between pancreatic cancer and diabetes.

IMMray PanCan-d could be a first filter to diagnose early-stage pancreatic cancer that would be confirmed later. Applying it to around 3.4 million patients diagnosed with diabetes every year in the EU and the US, with two tests per year for three years at a price of SEK5,000/test, represents an opportunity of SEK34bn per year.

Valuation: Risk-adjusted NPV of SEK155.2 per share

We maintain our valuation at SEK155.2 per share (SEK149.6/share fully diluted), using a 12.5% discount rate. In diabetes, our valuation is based on two tests in a potential population of 3.4 million new patients per year, which is 6.8m tests and represents a total market opportunity of SEK34bn at SEK5,000/test. To reflect the risk of this untested population, we apply a 60% success rate, with a slow ramp-up to peak sales in 2028, assuming initial launch in 2021. We complete our valuation with the 200,000 potential patients in the high-risk pancreatic cancer group, where we model the first out-of-pocket sales in 2018 in the US and in 2019 in the EU, with a probability of 70%. Peak sales in 2025 are SEK707m assuming a base price tag of SEK5,000 per test in all regions and 35% market share in Europe and the US, used twice a year.

We present two valuation scenarios. First, the scenario in which IMMray PanCan-d is reimbursed and gets 5% market share, which results in peak sales of SEK1.4bn in the EU and US in 2028; in this case our valuation is SEK155.2 per basic share (shown as Scenario 1 in Exhibit 1). Second, if the test is not reimbursed, we model a lower penetration rate of 1% and peak sales of SEK275m; in this case our valuation is SEK81.7 per basic share (shown as Scenario 2 in Exhibit 1).

We will update these assumptions as more information on the clinical development is disclosed.

Exhibit 1: Valuation summary

Scenario 1

Scenario 2

US$m

SEKm

US$m

SEKm

Peak sales in T2D patients (US and EU in 2028)

151

1,373

30

275

Peak sales in at risk patients (US and EU in 2025)

78

707

78

707

PV of explicit FCF forecast (2017-2028)

111

1,009

49.2

447

Terminal value (2.5% TGR)

599.3

5,448

294.4

2,676

PV of terminal value

145.8

1,326

71.6

651

Total NPV

256.8

2,334.6

120.8

1,098.5

Add net cash (FY16e)

30.1

273.6

30.1

273.5

Implied equity value

286.9

2,608.1

150.9

1,372.1

Number of shares (m)

16.8

16.8

16.8

16.8

Per basic share

$17.1/share

SEK155.2/share

$1.85/share

SEK81.7/share

Source: Edison Investment Research. Note: Exchange rate US$0.11/SEK.

Exhibit 2: Financial summary

SEK000s

2013

2014

2015

2016e

2017e

2018e

Year end 31 December

GAAP

GAAP

GAAP

GAAP

GAAP

GAAP

PROFIT & LOSS

Revenue

 

 

1,179

359

205

200

200

9,444

Cost of Sales

0

0

0

0

0

(6,611)

Gross Profit

1,179

359

205

200

200

2,833

Operating expenses

(1,875)

(7,549)

(17,377)

(22,058)

(20,882)

(43,333)

Personnel

(417)

(1,382)

(6,749)

(12,308)

(12,001)

(15,499)

EBITDA

 

 

(1,114)

(8,701)

(7,136)

(10,401)

(10,813)

(55,999)

Operating Profit (before GW and except.)

(1,614)

(8,960)

(7,424)

(10,932)

(11,334)

(56,510)

Intangible Amortisation

0

0

0

0

0

0

Exceptionals/Other

0

0

0

0

0

0

Operating Profit

(1,614)

(8,960)

(7,424)

(10,932)

(11,334)

(56,510)

Net Interest

17

101

40

683

651

496

Exceptionals/Other

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

(1,596)

(8,859)

(7,384)

(10,249)

(10,683)

(56,014)

Profit Before Tax (IFRS)

 

 

(1,596)

(8,859)

(7,384)

(10,249)

(10,683)

(56,014)

Tax

0

0

0

0

0

0

Discontinued operations

0

0

0

0

0

0

Profit After Tax (norm)

(1,596)

(8,859)

(7,384)

(10,249)

(10,683)

(56,014)

Profit After Tax (IFRS)

(1,596)

(8,859)

(7,384)

(10,249)

(10,683)

(56,014)

Average Number of Shares Outstanding (m)

6.24

11.05

11.42

14.93

16.80

16.80

EPS - normalised (ore)

 

 

(26)

(80)

(65)

(69)

(64)

(333)

EPS - IFRS (SEK)

 

 

(0.26)

(0.80)

(0.65)

(0.69)

(0.64)

(3.33)

Dividend per share (SEK)

0.00

0.00

0.00

0.00

0.00

0.00

Gross Margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

3,596

6,209

14,556

26,563

26,042

25,532

Intangible Assets

3,596

5,469

13,885

22,615

22,094

21,584

Tangible Assets

0

740

671

3,948

3,948

3,948

Other

0

0

0

0

0

0

Current Assets

 

 

3,869

32,664

76,959

274,893

262,531

201,746

Stocks

0

0

0

0

1,050

1,322

Debtors

228

464

814

733

733

1,889

Cash

3,607

31,804

75,767

273,559

260,452

198,239

Other

34

396

378

601

296

296

Current Liabilities

 

 

(2,526)

(3,131)

(7,713)

(9,464)

(7,264)

(1,983)

Creditors

(969)

(1,164)

(1,252)

(1,600)

(3,764)

(1,983)

Short term borrowings

0

0

0

0

0

0

Deferred revenues

0

0

0

0

0

0

Other short term liabilities

(1,557)

(1,967)

(6,461)

(7,864)

(3,500)

0

Long Term Liabilities

 

 

0

0

0

0

0

0

Long term borrowings

0

0

0

0

0

0

Deferred revenues

0

0

0

0

0

0

Other long term liabilities

0

0

0

0

0

0

Net Assets

 

 

4,939

35,742

83,802

291,992

281,309

225,294

CASH FLOW

Operating Cash Flow

 

 

(1,111)

(8,291)

(2,844)

(8,109)

(13,107)

(62,212)

Net Interest

0

0

0

0

0

0

Tax

0

0

0

0

0

0

Capex

0

-3,175

-8,636

(9,182)

0

0

Acquisitions/disposals

0

0

0

0

0

0

Financing

4,042

39,663

55,441

215,083

0

0

Dividends

0

0

0

0

0

0

Other

(17)

0

0

0

0

0

Net Cash Flow

2,914

28,197

43,961

197,792

(13,107)

(62,212)

Opening net debt/(cash)

 

 

(693)

(3,607)

(31,804)

(75,767)

(273,559)

(260,452)

HP finance leases initiated

0

0

0

0

0

0

Exchange rate movements

0

0

0

0

0

0

Other

0

1

2

0

(0)

0

Closing net debt/(cash)

 

 

(3,607)

(31,804)

(75,767)

(273,559)

(260,452)

(198,239)

Source: Immunovia accounts, Edison Investment Research

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 Immunovia 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

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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 Immunovia 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

Research: Investment Companies

The Law Debenture Corporation — Update 20 December 2016

The Law Debenture Corporation

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