Cantargia has commissioned Nordea Markets to produce a research report with the aim of providing investors with quality research on the company.
Preclinical achievments and CANFOUR update – Updated 23 August 2018
Cantargia delivered a Q2 with slightly higher R&D spending than we had anticipated. Otherwise, there was limited news in the report, as the delay in the results from the ph I part of the CANFOUR study, as well as preclinical progress, had already been announced. CAN04 has shown a good safety profile so far, however, and the company presented new preclinical findings and improved its patent situation during the quarter. We make slight positive revisions to our milestone assumptions following the report, and raise our estimates due to the stronger USD.
First part of CANFOUR is nearing completion – Updated 16 May 2018
Decent cost control during Q1
Cantargia reported Q1 EBIT of SEK -15.3m, compared with our estimate of SEK -19.6m and SEK -18.4m in Q1 2017. The better result was attributable to lower R&D spending in the quarter y/y and versus our estimates.
Continued M&A activity in the immuno-oncology space
So far in 2018, there have been multiple M&A deals in the immunooncology field, indicating the potential for attractive product candidates in the space. For example, Eli-Lilly recently announced an all-cash USD 1.6bn acquisition of ARMO BioSciences. Its lead product candidate, AM0010 (pegilodecakin, PEGylated interleukin-10), has shown clinical benefits as a single agent as well as in combination with chemotherapy and checkpoint inhibitors across several tumour types. It is being investigated in a ph III trial in pancreatic cancer, as well as earlier-phase trials in lung cancer and other solid tumours.
Phase 1 results of the CANFOUR study forthcoming
We expect Cantargia to reveal preliminary ph I results during the summer, followed by immediate progress into ph IIa. We believe the study will yield positive results and a solid safety profile for CAN04, as no serious adverse events have been reported yet. We expect the complete CANFOUR study to be finalised at the end of 2019, which could spark partnership discussions.
Innovative antibody with combination potential – Updated 9 May 2018
Promising future for next generation antibodies
Immuno-oncology is a rapidly evolving field and has recently experienced a flurry of partnership deals. In the last five years, the segment accounted for 32 of the 35 multi-billion dollar oncology licensing deals. Cantargia’s lead candidate is the antibody CAN04, which has a dual mechanism of action, as it fights cancer by activating the immune system and by blocking signals that lead to tumour growth. It is currently undergoing a phase I/IIa trial within NSCLC and pancreatic cancer.
External validation for the IL-1 pathway
The scientific case for CAN04 was recently strengthened when Novartis’ extensive CANTOS trial externally validated its IL-1 pathway. The study was primarily designed to investigate cardiovascular events, but an additional clinical benefit was the striking reductions in lung cancer incidence and death of 67% and 77%, respectively. The results were promising enough for Novartis to commission three additional phase III studies. We believe CAN04 could plausibly have a higher potential in cancer, as it exhibits a broader mechanism of action.
Multiple inflection points ahead
We expect Cantargia to reveal preliminary phase I during the summer, followed by an immediate step into phase IIa. We expect the study to be finalised at the end of 2019, which could trigger partnership discussions. A potential partnership could then provide funding to explore interesting fields outside cancer, such as expanding into the treatment of autoimmune/inflammatory diseases. Based on our fundamental DCF approach, and assuming a WACC of between 10%-12%, we derive an equity value per share of SEK 15 to SEK 17.4.
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This report has been reviewed, for the purpose of verification of fact or sequence of facts, by the issuer of the relevant financial instruments mentioned in the report prior to publication. The review has led to changes of facts in the report. Completion date: 16 May 2018, 07:05 CET