Selvita — Phase I/II with SEL24 to continue

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Research: Healthcare

Selvita — Phase I/II with SEL24 to continue

On 16 December 2017, Selvita announced that the FDA had lifted the clinical hold on the Phase I/II clinical trial with the company’s lead drug candidate SEL24 (dual PIM/FLT3 kinase inhibitor) for refractory/relapsed acute myeloid leukaemia (r/r AML). The asset is now out-licensed to Menarini Group, therefore the two companies worked together with the FDA to resolve the issues. The trial can now be restarted with some modifications to the design. While only few details have been disclosed, Selvita mentioned that the dose-finding scheme will be revised to the usual “3+3” design and the trial will resume.

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Written by

Healthcare

Selvita

Phase I/II with SEL24 to continue

Clinical hold lifted

Pharma & biotech

21 December 2017

Price

PLN55.50

Market cap

PLN764m

Net cash (PLNm) at end-Q317

32.0

Shares in issue

13.8m

Free float

45%

Code

SLV

Primary exchange

WSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

16.0

1.0

111.8

Rel (local)

16.5

2.6

67.1

52-week high/low

PLN75.0

PLN26.5

Business description

Selvita is an R&D and drug discovery services company. It operates two main business units: Innovations Platform (internal R&D pipeline) and Research Services (medicinal chemistry/biology, biochemistry).

Next events

Update on fund-raise plans

Q117

SEL120 Phase I study start

H218

Data from preclinical projects

2018

Analyst

Jonas Peciulis

+44 (0)20 3077 5728

Selvita is a research client of Edison Investment Research Limited

On 16 December 2017, Selvita announced that the FDA had lifted the clinical hold on the Phase I/II clinical trial with the company’s lead drug candidate SEL24 (dual PIM/FLT3 kinase inhibitor) for refractory/relapsed acute myeloid leukaemia (r/r AML). The asset is now out-licensed to Menarini Group, therefore the two companies worked together with the FDA to resolve the issues. The trial can now be restarted with some modifications to the design. While only few details have been disclosed, Selvita mentioned that the dose-finding scheme will be revised to the usual “3+3” design and the trial will resume.

Year end

Revenue (PLNm)

PBT*
(PLNm)

EPS*
(PLN)

DPS
(PLN)

P/E
(x)

Yield
(%)

12/15

56.1

7.5

0.84

0.0

N/M

N/A

12/16

66.7

4.6

0.64

0.0

N/M

N/A

12/17e

106.0

11.4

0.81

0.0

N/M

N/A

12/18e

99.2

0.3

0.02

0.0

N/M

N/A

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

Modification to dose escalation Part 1

As a reminder, the clinical hold was announced on 7 October 2017 after a fatal venous haemorrhagic stroke post thrombosis in one patient enrolled in the cohort 5 in Part 1 of the study. The stroke was classified as possibly related to the study treatment, which prompted the FDA to issue the clinical hold. The fatal stroke was associated with the treatment mainly because of the timing (the patient received four doses of SEL24); however, to actually prove it or disprove it is not straightforward, in our view, as AML patients already can have thrombosis risk factors. According to the original clinical trial design, the dose-finding Part 1 of the study had an accelerated dose escalation design, which will now be switched to the more comprehensive standard “3+3”, and restarted with a lower dose. According to Selvita, this could delay the study by around six months, which in oncology R&D is not very substantial, in our view. As previously stated, Menarini should take over the development as the study resumes. The study is expected to be completed by around end-2018.

Valuation: Upped to PLN1.09bn or PLN79.1/share

In our previous report we decreased the probability of success for SEL24 from 15% to 7.5% to reflect the uncertainty related to the clinical hold. We now increase it back to 15% and raise our valuation to PLN1.09bn or PLN79.1/share, from PLN1.04bn or PLN75/share. As a next step, Selvita should update on its fund-raise plans to fund the R&D expansion over 2018-21. This was introduced by the company in August 2017, but was put on hold due to the Phase I/II issues. Our forecasts and other valuation assumptions remain unchanged.

Exhibit 1: Financial summary

PLN000s

2015

2016

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

56,077

66,721

105,994

99,167

of which: Services (research outsourcing)

23,052

32,404

43,746

54,682

Innovation platform

15,416

18,353

38,638

20,189

Subsidies

14,700

12,067

16,290

16,290

Bioinformatics

2,561

3,431

6,855

7,541

EBITDA

 

 

10,235

8,264

17,915

5,770

Operating Profit (before amort. and except.)

6,802

4,646

13,212

1,067

Intangible Amortisation

0

0

0

0

Exceptionals/Other*

(4,729)

(5,860)

(583)

0

Operating Profit

2,073

(1,214)

12,629

1,067

Net Interest

748

947

(1,050)

20

Share in profit/(loss) of associates and JVs**

0

(1,016)

(808)

(808)

Other

0

0

0

0

Profit Before Tax (norm)

 

 

7,540

4,577

11,354

279

Profit Before Tax (reported)

 

 

2,821

(1,283)

10,771

279

Tax

(5)

0

(323)

(14)

Deferred tax

3,417

3,968

0

0

Profit After Tax (norm)

10,952

8,545

11,031

265

Profit After Tax (reported)

6,233

2,685

10,448

265

Average Number of Shares Outstanding (m)

13.1

13.4

13.6

13.6

EPS - normalised (gr)

 

 

83.58

64.22

81.31

1.96

EPS - reported (gr)

 

 

47.52

20.36

77.02

1.96

Dividend per share (gr)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

16,718

41,451

46,543

85,140

Intangible Assets

2,274

6,640

435

435

Tangible Assets

8,597

21,833

33,130

71,727

Other

5,847

12,979

12,979

12,979

Current Assets

 

 

48,524

47,669

60,692

49,882

Stocks

1,174

1,403

1,384

1,365

Debtors

17,961

16,320

16,320

16,320

Cash

28,807

29,095

40,688

29,897

Other

582

851

2,300

2,300

Current Liabilities

 

 

(16,319)

(18,933)

(23,665)

(23,355)

Creditors

(3,927)

(7,883)

(9,400)

(9,400)

Provisions

(3,327)

(3,600)

(6,650)

(6,650)

Deferred revenues

(7,384)

(5,469)

(5,069)

(5,069)

Short term borrowings

(33)

(859)

(950)

(950)

Other

(1,648)

(1,122)

(1,595)

(1,286)

Long Term Liabilities

 

 

(2,043)

(14,477)

(13,728)

(38,728)

Long term borrowings

0

(4,792)

(4,200)

(29,200)

Deferred revenues

(1,513)

(6,382)

(6,700)

(6,700)

Other long term liabilities

(529)

(3,303)

(2,828)

(2,828)

Net Assets

 

 

46,880

55,710

69,843

72,939

CASH FLOW

Operating Cash Flow

 

 

(16,430)

(6,280)

12,176

(8,459)

Net Interest

0

0

0

0

Tax

0

0

0

(323)

Capex

(5,190)

(21,210)

(16,000)

(43,300)

Acquisitions/disposals

0

0

0

0

Financing

27,314

303

328

0

Dividends

0

0

0

0

Other (incl. subsidies)

18,354

21,859

15,590

16,290

Net Cash Flow

24,049

(5,329)

12,094

(35,791)

Opening net debt/(cash)

 

 

(4,787)

(28,773)

(23,445)

(35,538)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

(63)

1

(1)

0

Closing net debt/(cash)

 

 

(28,773)

(23,445)

(35,538)

253

Source: Selvita accounts, Edison Investment Research. Note: *Non-cash cost related to the employee stock options programme. **Profit and loss from 2016 include share in Nodthera’s earnings according to an equity method valuation. Please note that the share changed in 2017 as a result of Nodthera's capital increase.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2017. “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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Germany

London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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