WCLC 2019: detailed FALUCA data disclosed

Update | 11 September 2019

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Top-line data from the pivotal China Phase III FALUCA fruquintinib monotherapy trial in 3L NSCLC (third-line non-small cell lung cancer), released November 2018, indicated the study missed its overall survival (OS) endpoint but met all secondary endpoints. Full data presented at the 2019 World Congress on Lung Cancer revealed median OS of 8.94 months for fruquintinib vs 10.38 months for placebo (p=0.0841). A post hoc sensitivity analysis suggested use of subsequent anti-tumour therapies following disease progression was likely to have contributed to this result. FALUCA data coupled to the rapidly evolving treatment landscape in NSCLC supports Chi-Med’s decision to focus on development of fruquintinib in combination with PD-(L)1 checkpoint inhibitors; China Phase I combination studies have begun. However, the major near-term catalyst for fruquintinib remains commercial: potential NRDL inclusion in Q419 would provide strong impetus to China revenues.

Year-end: December 31	2017	2018	2019E	2020E
Sales (US$m)	241.2	214.1	168.6	207.6
Adj. PBT (US$m)	(53.5)	(86.7)	(205.6)	(202.0)
Net Income (US$m)	(23.0)	(71.3)	(170.6)	(164.4)
Earnings per ADS (US$)	(0.22)	(0.57)	(1.31)	(1.26)
Cash (US$m)	358.3	301.0	285.9*	233.8
Adj. EBITDA (US$m)	(17.2)	(69.7)	(163.9)	(159.5)

Source: Trinity Delta Note: Adjusted PBT excludes exceptionals, Cash includes short-term investments, Adjusted EBITDA includes equity in earnings of equity investees. *2020E cash figure includes assumed raise of $250m.

Primary endpoint missed but no other surprises Full FALUCA data showed median OS for fruqunitinib monotherapy was 8.94 months vs 10.38 months for placebo (hazard ratio 1.02, p=0.841). However, all secondary endpoints were met (p<0.001), including progression free survival (PFS: 3.68 months vs 0.99 months), objective response rate (ORR: 13.8% vs 0.6%), disease control rate (DCR: 66.7% vs 24.9%), and duration of response. Fruquintinib’s safety profile was consistent with Phase II.
Post-hoc analysis indicates role of newer therapies Since FALUCA initiation in December 2015, several new drugs have been approved in China for use in NSCLC (ie osimertinib, anlotinib); their availability may have influenced the study result. For context, median OS was 6.3 months for placebo vs 9.6 months for anlotinib in the Phase III ALTER 0303 study in a similar NSCLC patient population. Subsequent therapies provided OS benefit to patients in both FALUCA arms but were received by a higher percentage of placebo patients. Post hoc sensitivity analysis showed that fruquintinib prolonged median OS vs placebo (7.00 months vs 5.06 months, HR 0.64, p=0.010) in patients who did not receive subsequent therapy.
China reimbursement to catalyse sales Potential NRDL (National Reimbursement Drug List) inclusion in Q419 would significantly boost Elunate (fruquintinib) market penetration and future revenues. Over H218/H119, the drug generated $8.3m in royalty/manufacturing revenue for Chi-Med on c$13.1m of in-market China sales.
Valuation remains £5.93/share and $38.55/ADS Our DCF-based SOTP model includes an rNPV of the clinical pipeline and generates a valuation of $5.14bn ($38.55/ADS) or £3.95bn (£5.93/share). We anticipate multiple clinical, regulatory, and commercial catalysts will unlock further value over the next 12 months.

Update

11 September 2019


Price (US ADS) (UK share)	$21.72 361p
Market Cap	$2.90bn £2.41bn
Enterprise Value	$2.66bn £2.21bn
Shares in issue (ADS) (shares)	133.3m 666.6m
12-month range	$19.20-$39.68 312p-567p
Free float	40%
Exchanges	NASDAQ AIM
Sector	Healthcare
Company Code	HCM HCM.L

Corporate client	Yes

Company description

Hutchison China MediTech is a Hong Kong headquartered biopharma with an established Commercial Platform in China, and a diverse pipeline of first-in-class/best-in-class selective oral tyrosine kinase inhibitors (Innovation Platform). Its pipeline, discovered in-house, is in development for the China and global oncology markets.

Analysts

Franc Gregori
fgregori@trinitydelta.org
+44 (0) 20 3637 5041

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Exhibit 1: Summary of financials

Source: Company, Trinity Delta Note: Adjusted numbers exclude exceptionals. Historic and forecast EPS are adjusted for one-to-ten ordinary share split, with new ADS ratio of 1:5 shares. Our estimate of $250m proceeds from the proposed equity raise are shown as short-term debt in FY20e, until transaction size, structure, and terms are confirmed.

Disclaimer

Trinity Delta Research Limited (“TDRL”; firm reference number: 725161), which trades as Trinity Delta, is an appointed representative of Equity Development Limited (“ED”). The contents of this report, which has been prepared by and is the sole responsibility of TDRL, have been reviewed, but not independently verified, by ED which is authorised and regulated by the FCA, and whose reference number is 185325.

ED is acting for TDRL and not for any other person and will not be responsible for providing the protections provided to clients of TDRL nor for advising any other person in connection with the contents of this report and, except to the extent required by applicable law, including the rules of the FCA, owes no duty of care to any other such person. No reliance may be placed on ED for advice or recommendations with respect to the contents of this report and, to the extent it may do so under applicable law, ED makes no representation or warranty to the persons reading this report with regards to the information contained in it.

In the preparation of this report TDRL has used publically available sources and taken reasonable efforts to ensure that the facts stated herein are clear, fair and not misleading, but make no guarantee or warranty as to the accuracy or completeness of the information or opinions contained herein, nor to provide updates should fresh information become available or opinions change.

Any person who is not a relevant person under section of Section 21(2) of the Financial Services & Markets Act 2000 of the United Kingdom should not act or rely on this document or any of its contents. Research on its client companies produced by TDRL is normally commissioned and paid for by those companies themselves (‘issuer financed research’) and as such is not deemed to be independent, as defined by the FCA, but is ‘objective’ in that the authors are stating their own opinions. The report should be considered a marketing communication for purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. TDRL does not hold any positions in any of the companies mentioned in the report, although directors, employees or consultants of TDRL may hold positions in the companies mentioned. TDRL does impose restrictions on personal dealings. TDRL might also provide services to companies mentioned or solicit business from them.

This report is being provided to relevant persons to provide background information about the subject matter of the note. This document does not constitute, nor form part of, and should not be construed as, any offer for sale or purchase of (or solicitation of, or invitation to make any offer to buy or sell) any Securities (which may rise and fall in value). Nor shall it, or any part of it, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. The information that we provide is not intended to be, and should not in any manner whatsoever be, construed as personalised advice. Self-certification by investors can be completed free of charge at www.fisma.org. TDRL, its affiliates, officers, directors and employees, and ED will not be liable for any loss or damage arising from any use of this document, to the maximum extent that the law permits.

Scancell

A sweet source of financing

Update | 4 September 2019

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Scancell has formed a non-exclusive collaboration with a leading antibody technology company, with a view to out-licensing its glycan antibodies and AvidiMab technology. Antibodies against glycans (carbohydrates on proteins or lipids) are difficult to make but have much potential in oncology as many are highly specific to tumour cells. AvidiMab enables an antibody to kill cancer cells directly, without mediation by other elements of the immune system. The potential of the glycan antibodies and AvidiMab platform, although they are still preclinical, is such that we believe Scancell could receive significant upfront and milestone payments, providing material non-dilutive funding for the core ImmunoBody and Moditope platforms.

Year-end: April 30	2018	2019	2020E	2021E
Sales (£m)	0.0	0.0	0.0	0.0
Adj. PBT (£m)	(4.9)	(6.7)	(7.7)	(8.8)
Net Income (£m)	(4.2)	(5.6)	(6.4)	(7.2)
Adj. EPS (p)	(1.3)	(1.5)	(1.4)	(1.6)
Cash (£m)	10.3	4.6	3.4	6.2*
EBITDA (£m)	(4.9)	(6.7)	(7.7)	(8.8)

Source: Trinity Delta Note: Adjusted numbers exclude exceptionals; * Cash in FY21 includes a capital increase of £10m

Partnering process for glycan-antibody technology has begun Scancell acquired a panel of monoclonal antibodies that bind to glycans and the related IP from Nottingham University in April 2018, and has now started the partnering process for the antibodies and technology, having developed the data packages. Tumour-associated glycans (TaGs) are an attractive, but virtually untapped, pool of oncology targets as they are often highly tumour-specific. Scancell’s AvidiMab technology enables antibodies to kill tumours directly, without the intervention of the immune system, which could be particularly valuable in patients with “cold” tumours.
Potential for material non-dilutive funding Licensing deals for the glycan antibodies and AvidiMab technology could provide Scancell with meaningful, non-dilutive funding for its key technology platforms, ImmunoBody and Moditope. For reference, Scancell out-licensed some related antibodies to the Australian biotech, Peptech, in 2006 receiving an upfront payment of £2.0m and a £2.85m milestone. While a royalty will be payable to Nottingham University, any deal should deliver an impressive return on investment and improve Scancell’s cash position.
Important clinical data from ImmunoBody and Moditope in H220 Initial clinical data from the recently-started Phase II melanoma study with ImmunoBody SCIB1 in combination with pembrolizumab, and the Phase I/II trial in various solid tumours with Moditope Modi-1 are due in H220. Promising results from either trial could transform the prospects of the company.
Valuation maintained at 17.6p/share We value Scancell at £82.0m (17.6p/share) based on a rNPV and sum-of-the-parts methodology, with conservative assumptions. Licensing deal(s) would improve Scancell’s cash position. It had cash of £4.6m on 30 April 2018, and subsequently received c £4.8m in total from a R&D tax credit receipt and the private placement to Vulpes Life Sciences Fund.

Update

4 September 2019


Price	7.05p
Market Cap	£32.8m
Enterprise Value	£26.5m
Shares in issue	465.4m
12 month range	3.0-13.9p
Free float	79%
Primary exchange	AIM London
Other exchanges	N/A
Sector	Healthcare
Company Code	SCLP.L

Corporate client	Yes

Company description

Scancell is a clinical-stage immuno-oncology specialist that is developing two innovative and flexible therapeutic vaccine platforms. ImmunoBody and Moditope induce high avidity cytotoxic CD8 and CD4 responses, respectively, with the potential to treat various cancers.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 20 3637 5043

Scancell: A non-dilutive funding opportunity

Scancell acquired a panel of antibodies that target glycans and the IP connected to the AvidiMab technology in April 2018 from Nottingham University. The company has since strengthened the data package around both the antibodies and the AvidiMab platform, with greater preclinical validation of their potential and additional IP. The aim is now to out-license the antibodies and the AvidiMab technology, with the proceeds from any deal used to support the further development of the ImmunoBody and Moditope platforms. This process has already begun with the formation of a non-exclusive research collaboration with a leading antibody technology company, during which the antibodies and AvidiMab technology will be assessed.

The glycan technology and opportunity

Glycans are carbohydrates that are attached to proteins or lipids, which modify their behaviour. Glycosylation is the process of attaching a glycan to a protein or lipid. In the case of proteins, it is a form of post-translational modification, like phosphorylation, and is critical to the final function of a protein. Glycans are known to be involved in cell-cell interactions, protein folding and trafficking, and cell signalling. There are also significant changes in glycosylation patterns of proteins and lipids in tumour cells.

In many ways, glycans can make ideal antibody targets for cancer treatment. Some glycans are highly specific for tumour cells, where they may be expressed at high levels. The potential of glycan antibodies in oncology has been validated by dinutuximab (United Therapeutics’ Unituxin), which binds to the glycan GD2 and is used to treat children with high-risk neuroblastoma.

However, it is challenging to produce antibodies with therapeutic potential that bind to glycans. The carbohydrate structures are not highly immunogenic, unlike most proteins, and tend to result in the formation of IgM antibodies with low binding affinities that are not suitable for therapeutic use. It is also more difficult to identify those glycan antibodies that bind specifically to a glycan of interest, than it is with an antibody that binds to a protein epitope. The net result is that there is a largely untapped pool of glycans that could make good antibody targets in the field of oncology.

Scancell has in-licensed a panel of preclinical antibodies that bind specifically to tumour-associated glycans (TaGs). The company has also discovered that these antibodies have many features that make them attractive as potential therapeutic agents, including:

Sub-nanomolar binding affinities;
High specificity for target TaG;
Target TaGs have very limited expression in normal tissues;
High rates of internalisation for drug delivery;
Ability to kill tumour cells efficiently (directly or via the immune system).

By selecting TaG targets that are not in generally expressed in normal tissues and then producing highly specific antibodies, Scancell has developed antibodies that essentially only bind strongly to tumour cells. As an example, Exhibit 1 shows the limited binding on normal tissues of the antibody FG88.2, which recognises the glycan Lewis^acx on glycoproteins and glycolipids, and Exhibit 2 indicates the high levels of binding that can occur on tumour cells.

Exhibit 1: Lack of binding of glycan antibody FG88.2 to a broad range of normal tissues

Source: Chua J. X. et al, Clinical Cancer Research, March 2015; Notes: 1 placenta; 2 bladder; 3 adipose; 4 brain; 5 oesophagus; 6 colon; 7 cervix; 8 diaphragm; 9 skin; 10 gall bladder; 11 heart; 12 ileum; 13 rectum; 14 skeletal muscle; 15 spleen; 16 stomach; 17 breast; 18 cerebellum; 19 thyroid; 20 uterus; 21 duodenum; 22 pancreas; 23 ovary; 24 tonsil; 25 jejunum; 26 kidney; 27 liver; 28 lung; 29 testis; 30 thymus; and 31 small intestine.

Exhibit 2: The binding of glycan antibody FG88.2 to different tumours with (i) no, (ii) weak, (iii) moderate or (iv) strong expression of tumour-associated glycan Lewis^acx

Source: Chua J. X. et al, Clinical Cancer Research, March 2015

As with all tumour-associated antigens, the expression of a TaG is to a degree dependent on the tumour type and will vary between patients. For example, FG129 binds to 74% of pancreatic tumours, 50% of gastric cancers and 36% of colorectal cancers.

The highly targeted binding of Scancell’s TaG antibodies to tumour tissue means that these antibodies could be used as the starting point for the development of potent therapies, such as bispecific antibodies with a T-cell engager or CAR-T therapies, for solid tumours. A major issue with developing such novel therapies in these indications is on-target/off-tumour effects.

TaG antibodies are also well suited for potential development into antibody-drug conjugates (ADCs); they tend to be internalised more than those that bind to proteins (Exhibit 3). This in turn should result in more efficacious ADCs.

Exhibit 3: Images showing the internalisation of FG88 over time

Source: Chua J. X. et al, Clinical Cancer Research, March 2015

Glycan antibodies like others can result in tumour-cell killing mediated by the immune system via antibody dependent cell cytotoxicity (ADCC), antibody dependent cell phagocytosis (ADCP), or complement dependent cytotoxicity (CDC). But unusually, some glycan antibodies can kill cells directly by damaging the cell membrane (oncotic necrosis). This finding led to Prof Lindy Durrant and her team at Nottingham University developing the AvidiMab technology.

AvidiMab delivers direct killing of cells

AvidiMab antibodies have specific modifications made to the F_c domain, which confer increased avidity and direct-killing ability with certain targets to the antibody at nanomolar concentration in vitro. Exhibit 4 provides an illustration of the effect of the AvidiMab on tumour cells.

Many antibodies depend on ADCC or ADCP to kill tumour cells, which rely on the necessary effector cells (T-cells and NK-cells) being active within a tumour. However, many tumours develop immunosuppressive microenvironments (become “cold” tumours) to evade detection by the immune system, and in these tumours an AvidiMab antibody should be more efficacious than a standard antibody.

It is important to note that AvidiMabs can kill tumour cells efficiently both directly and indirectly (via ADCC, ADCP or CDC; Exhibit 5). Theoretically, this technology can be applied to any antibody and not just to glycan antibodies and could be used to enhance their potency in oncology.

Exhibit 4: The direct killing activity of FG88 antibodies with the AvidiMab technology

Source: Chua J. X. et al, Clinical Cancer Research, March 2015

Exhibit 5: Illustrations detailing the various killing mechanisms of glycan antibodies

Source: Vankemmelbeke M et al; OncoImmunology5:1; January 2016

Partnering potential

Scancell has started the partnering process, and has already formed a non-exclusive research collaboration with a leading antibody technology company so that the unnamed company can properly assess the antibodies and technology. The unique panel of glycan antibodies, and the ability of AvidiMabs to kill tumour cells could enhance the efficacy of many antibodies in oncology are likely to attract interest from other parties. So, we would not be surprised if other similar collaborations were formed ahead of a competitive, out-licensing discussions.

It should be noted that another company might have been reluctant to out-license such promising technologies, but sensibly Scancell is maintaining its focus on ImmunoBody and Moditope, and the funds received from any deal will be invested in the core technologies.

A summary of the characteristics of four of Scancell’s glycan antibodies is detailed in Exhibit 6. The data on these antibodies will be crucial for any licensor as they provide validation of the value of the technologies. Scancell has the option to out-license the antibodies, and the AvidiMab technology separately (and AvidiMab could be licensed to multiple parties on a non-exclusive basis), but in our opinion it is most likely that the greatest return for the company will be achieved by partnering these assets together.

It is always challenging estimating the potential value of early stage technologies. But as a reference, Scancell partnered some preclinical glycan antibodies (generated using an earlier version of the glycan antibody platform) to the Australian biotech company Peptech in 2006, whose CEO was at the time John Chiplin, for an upfront payment of £2m and a milestone payment of £2.85m (received in 2011). This suggests that Scancell could receive significant upfront and milestone payments, with a modest royalty being payable to Nottingham University, from out-licensing the glycan antibody platform and AvidiMab technology, with the potential to receive additional milestones.

No changes have been made to our estimates or valuation to be conservative.

Exhibit 6: A summary of the characteristics of four TaG antibodies that Scancell aims to partner

Source: Scancell

Exhibit 7: Summary of financials

Source: Scancell, Trinity Delta Note: Adjusted numbers exclude exceptionals. The short-term debt in FY21 is indicative of the company’s funding requirement

Disclaimer

Scancell

SCIB1 Phase II study starts in UK

Update | 21 August 2019

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Scancell reported FY19 results in line with expectations. The cash balance at April 19 was £4.6m, with an initial inflow of £3.9m (gross) from Vulpes Life Sciences post-period. However, the main news is that SCIB1 is back in the clinic, with the Phase II trial in combination with the checkpoint inhibitor pembrolizumab (Keytruda) now underway in the UK. This 25-patient open-label study should produce its first data in H120. The delay in initiating the US study has been frustrating for both the medical community and investors. Other development programmes are progressing as expected and the management team continues to be strengthened. We continue to value the company, using a risk-adjusted NPV model, at £82.0m, or 17.6p a share.

Year-end: April 30	2018	2019	2020E	2021E
Sales (£m)	0.0	0.0	0.0	0.0
Adj. PBT (£m)	(4.9)	(6.7)	(7.7)	(8.8)
Net Income (£m)	(4.2)	(5.6)	(6.4)	(7.2)
Adj. EPS (p)	(1.3)	(1.5)	(1.4)	(1.6)
Cash (£m)	10.3	4.6	3.4	6.2*
EBITDA (£m)	(4.9)	(6.7)	(7.7)	(8.8)

Source: Trinity Delta Note: Adjusted numbers exclude exceptionals; * Cash in FY21 includes a capital increase of £10m

SCIB1 Phase II trial is now underway The 25-patient open-label study of SCIB1 in combination with pembrolizumab (Keytruda) in melanoma patients has started in the UK. A US study had been awaiting FDA clearance of the Ichor Medical Systems’ TriGrid 2.0 electroporation delivery system; the newer commercial version of the device employed in earlier clinical work. Management has withdrawn the US IND in order to allow the UK study to start; with US sites expected to be added later once Ichor has addressed the FDA’s enquiries. Initial data from the UK study is likely to report in H120, with previous clinical evidence suggesting promising outcomes.
SCIB2 uses novel nanobody formulation Scancell’s second ImmunoBody, SCIB2, uses a new lipid nanoparticle formulation. The forthcoming CRUK-funded Phase I/II study will employ this via a standard injection, rather than using electroporation. Preclinical studies suggest the nanoparticle formulation is at least comparable to, and could be better than, using electroporation. Successful delivery should ease future regulatory interactions and also help with patient recruitment.
Results in line with expectations Scancell ended FY19 with a cash balance of £4.6m (vs £7.6m in January 19) with a net loss of £5.63m (£3.24m in H119). An investment of £3.9m (gross) was received in June 2109 through the issue of 77.6m new shares to Vulpes Life Sciences Fund at 5p per share. Vulpes holds 16.67% of the enlarged share capital, overtaking Calculus Capital as the largest shareholder. The cash burn is expected to rise as Scancell enters the clinical stages.
rNPV model suggests a valuation of 17.6p/share We maintain our valuation of Scancell based on a rNPV and sum-of-the-parts methodology at £82.0m, equivalent to 17.6p a share. There are various catalysts over the coming year with Phase II data with ImmunoBody SCIB1 and the first clinical study with a Moditope due to start.

Update

21 August 2019


Price	6.8p
Market Cap	£31.6m
Enterprise Value	£25.3m
Shares in issue	465.4m
12 month range	3.0-13.9p
Free float	79%
Primary exchange	AIM London
Other exchanges	N/A
Sector	Healthcare
Company Code	SCLP.L

Corporate client	Yes

Company description

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 20 3637 5043

Exhibit 1: Summary of financials

Source: Scancell, Trinity Delta Note: Adjusted numbers exclude exceptionals. The short-term debt in FY21 is indicative of the company’s funding requirement.

Disclaimer

Nexstim

Promising progress with NBT

Update | 20 August 2019

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Nexstim’s revenues grew by 13% to €1.2m on the back of sales of NBT systems increasing by 170% to €0.6m. The company has only been focused on this marketing NBT in major depressive disorder (MDD) since September 2019. Nexstim increased its installed base of NBT systems by eight to 18 during H119, and appears to be gaining momentum with repeat orders, and progress should be boosted by the White Paper from Island Psychiatry. Sales from NBS systems for pre-surgical mapping were slightly disappointing as sales were pushed back into H219, but careful cost control means that cash burn was as expected. The company had cash of €6.4m on 30 June, and continues to look to strengthen its balance sheet. We value Nexstim at €0.41/share diluted.

Year-end: December 31	2017	2018	2019E	2020E
Sales (€m)	2.6	2.7	3.4	5.4
PBT (€m)	(7.3)	(6.2)	(7.0)	(6.4)
Net Income (€m)	(7.3)	(6.2)	(7.1)	(6.4)
EPS (€)	(2.77)	(1.93)	(0.36)	(0.13)
Cash* (€m)	8.5	7.2	4.1	5.8
EBITDA (€m)	(5.3)	(5.9)	(6.1)	(5.3)

Source: Trinity Delta. Note: *Our cash forecast assumes that all the warrants issued with the rights issue are exercised at €0.115 raising €1.8m in Q419 and Nexstim raises an additional €10m in FY20

NBT launch making good headway Nexstim installed four NBT systems in the US and a further four in Europe during H119, helping to increase NBT sales by 170% (vs H118) to €0.6m. Momentum has continued into H219 with extra installations at Island Psychiatry in New York and Neuro Wellness TMS Centers of America in Florida. The growth should benefit from white papers detailing clinical outcomes with NBT. The first paper suggests that MDD remission rates can increase by over 20% to c 50% with NBT (vs other transcranial magnetic stimulation (TMS) systems), as NBT uniquely stimulates the key part of the brain accurately and reproducibly.
Delayed sales affected NBS in H119 Sales of NBS systems fell by €0.3m to €0.6m as potential sales were delayed into H219. Essentially, two fewer systems were installed compared to H118, but reassuringly, management believes that this is largely a matter of timing and that those sales should be achieved in H219.
Various funding paths being pursued Nexstim raised €3.5m in April 2019, and finished the period with €6.4m, which should be sufficient for the company to operate to the end of Q120. The company could raise c €2m from the warrants issued with the April capital raise in October/November; but recognises that additional capital will still be needed. It has started discussions with major shareholders and continues to explore divestment options for the NBS business.
Valuation updated to €0.41/share We have updated our model to reflect the H118 results. We now value Nexstim at €19.0m or €0.41/share diluted (in the money options or warrants only), compared to €18.8m or €0.40/share diluted previously, as the better than expected sales of NBT more than offset the weaker NBS sales. A new opportunity could materially increase our valuation as Nexstim is in strategic discussions with a major US institution for the treatment of very seriously depressed patients; further details could be disclosed in the coming months.

Update

20 August 2019


Price	€0.19
Market Cap	€6.7m
Enterprise Value	€8.3m
Shares in issue	35.4m
12 month range	€0.09-7.13
Free float	86.5%
Primary exchange	Helsinki
Other exchanges	Stockholm
Sector	Healthcare
Company Codes	NXTMH/NXTMS

Corporate client	Yes

Company description

Nexstim is a targeted neuro-modulation company that has developed a proprietary navigated rTMS platform for use in diagnostics (NBS) and therapeutics (NBT). NBS is used in planning brain surgery while NBT is focused on depression and chronic pain. FDA approval for depression was given in 2017, and the focus is on commercial roll out in the US, Europe and Asia.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5041

Nexstim: White Paper highlights potential of NBT

Island Psychiatry, which has three practices in New York, was the first organisation to purchase an NBT system in the US. The clinical results achieved by the first 10 patients to be treated with the devices suggest significantly better results can be achieved using NBT instead of one of the other transcranial magnetic stimulation (TMS) platforms.

Seven of the ten patients (70%) obtained a clinical response and five (50%) were in remission at the end of their treatment programmes, which on average included 37 therapy sessions. A clinical response was defined as a reduction of at least 50% in BDI (Beck’s Depression Inventory) or PHQ-9 Health Questionnaire, patient-reported measures of depression. The number of patients included in the White Paper is limited, but these initial clinical data compare favourably to those seen with other TMS systems. Historically, 41.5%-56.4% of MDD patients treated with TMS achieve a clinical response and 26.5%-28.7% enter remission.

A significant improvement in two measures of clinical depression was also observed, which is notable as there were only 10 patients in the sample group. The mean clinical improvement as measured using the BDI was 49.6% (p<0.01) and using PHQ9 was 46% (p<0.02), as shown in Exhibit 1.

Exhibit 1: Mean BDI and PHQ9 scores before and after treatment with NBT

Source: Island Psychiatry

The paper also reports the therapy was well tolerated by the patients. One patient did experience transient ocular migraine after two treatment sessions, but still completed all of his 36 sessions. The limited adverse events associated with NBT therapy is also indicated by the fact that the patients had 37 treatment sessions on average.

The key difference between NBT and other TMS platforms is that Nexstim’s system accurately and reproducibly stimulates the dorsolateral prefrontal cortex (DLPFC). NBT uses Nexstim’s SmartFocus, which can accurately map the different areas of the brain, so that the DLPFC is always stimulated. In comparison, the other TMS systems cannot directly identify the DLPFC and depend on the “5cm rule”, in which the cortex of the brain is stimulated to identify the area that triggers a movement of the thumb (APB location) and then the TMS coils are moved 5cm along the scalp anteriorly (towards the face) to target the DLPFC. Unfortunately, the distance between the two brain areas varies between patients (Exhibit 2), so that there might be sub-optimal stimulation of the DLPFC, which could result in less efficacious treatment of patients, with other TMS systems.

Exhibit 2: A patient described in the White Paper, in whom the “5cm rule” did not accurately locate the position of the DLPFC

Source: Island Psychiatry

The data in this first White Paper suggests that significantly better clinical outcomes can be achieved for MDD patients if Nexstim’s NBT system is used rather than a TMS system produced by one of its competitors (e.g. Neuronetics or BrainsWay). However, it should be remembered that the data in this paper is only from ten patients and it will be interesting to see if the similar results are achieved in larger patient groups and by different clinics. That said, data such as that reported in this White Paper should differentiate NBT from other TMS systems and increase adoption of Nexstim’s systems.

Financials and valuation

Our updated model takes into account the strong sales performance of NBT and the weaker than expected NBS sales. From a valuation perspective, the good progress being made with the launch of NBT more than offsets the disappointing NBS sales. Hence, we are increasing our valuation of Nexstim slightly to €19.0m or €0.54/share or €0.41/share diluted (in the money options or warrants only, Exhibit 3) having previously valued it at €18.8m or €0.53/share or €0.40/share diluted. To be conservative, we are forecasting that the delayed sales in H119 will have a knock-on effect on other periods and have not factored in the potential impact of the White Paper from Island Psychiatry. Similarly, we continue to include a financial risk adjustment and note that our valuation would be €39.7m or €0.81/share diluted if it was removed.

Exhibit 3: Updated DCF-based valuation of Nexstim

Source: Trinity Delta; Note: Peak sales achieved after nine years in the US and 10 years in Europe. We assume the subscription prices for the 2018 options is the weighted average of existing options, which is €5.337.

We have similarly revised our estimates, as shown in Exhibit 4. As indicated above, we are conservatively forecasting that the delayed NBS sales in H119 will have an impact on H219 and subsequent periods, and that we have increased slightly our forecasts for NBT sales solely due to the sales growth in H119. At this stage, we are not forecasting any potential acceleration in growth following the publication of the White Paper by Island Psychiatry. We estimate that the loss at the EBITDA level will only be slightly greater than before, because of the cost control measures (primarily in administrative costs) that have been implemented during H119 by management.

Exhibit 4: Summary of changes to estimates

Source: Trinity Delta Note: The change in Adj EPS estimate for FY19 primarily reflects an over estimation of the weighted average number of shares in H119 in our previous estimate.

Exhibit 5: Summary of financials

Source: Nexstim, Trinity Delta Note: The accounts are produced according to Finnish GAAP. In FY19, we assume that all the warrants associated with the May 2019 capital raise are exercised in November at a strike price of €0.115 and the short-term debt in FY20 is indicative of our view of the company’s funding requirement. Our sales forecasts do not include any contribution from indications that are yet to be approved. Historic EPS, DPS and Average no. of shares have been adjusted to reflect the 30:1 share consolidation in December 2018.

Disclaimer

BerGenBio

Refining the route ahead

Lighthouse | 20 August 2019

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BerGenBio continued to strengthen the data package for bemcentinib with the results presented at various conferences during Q219, including AACR and ASCO (see Update note). Importantly, the data continues to support the hypotheses that bemcentinib has promising activity MDS/AML and NSCLC, and can work synergistically with pembrolizumab (Keytruda) in NSCLC.
The data has also led to BerGenBio revising its clinical plans, and it is now going to expand the Phase II AML trial to include an arm with c 30 second-line, relapsed/refractory patients to receive bemcentinib in combination with LDAC (low-dose cytarabine), which will begin in Q319. There was an overall response rate (ORR) of 43% from all 14 evaluable patients (regardless of AXL expression) in the pilot study (vs historically c 18% with LDAC alone) with a heterogeneous patient populations and BerGenBio wants to evaluate the potential of this combination more thoroughly in a more homogeneous patient population before finalising the design of the pivotal study in AML.
The pivotal study with bemcentinib in AML is now due to start in H120, once it has analysed meaningful data from the expansion arm (open-label) and been able to finalise the clinical trial design. If results of the expansion arm are promising, the pivotal study will probably include patients being treated with bemcentinib monotherapy, bemcentinib with LDAC or standard-of-care.
Cohort B of the Phase II NSCLC trial has also being modified to include patients, who have progressed after receiving chemotherapy and PD‑1/PD‑L1 treatment and not just PD‑1/PD‑L1 (immuno-oncology, IO) relapsed patients. The amendment will better position bemcentinib for development in the second-line setting.
The pivotal study in NSCLC with bemcentinib in combination with a PD-1/PD-L1 inhibitor (probably pembrolizumab) is also expected to start in H120. The timing and final design of this trial depend on the results from Cohort B of the current Phase II NSCLC study.
The Phase I study with the AXL antibody BGB149 is nearing completion with no safety concerns identified to date and BerGenBio is now planning to initiate a Phase IIa trial in an undisclosed indication in H120, instead of a Phase Ib in Q419.
Further data is expected to be reported at conferences throughout H219. So far, BerGenBio expects to present more data from the NSCLC Phase II study with pembrolizumab at WCLC (7-10 September), ESMO (27 September-1 October and SITC (6-10 September); and more data from the Phase II trial AML with LDAC (low-dose cytarabine) reported at ASH (7-10 December)
The company finished Q219 with a cash position of NOK324m, after raising NOK73m (net) in a private placement in June.

Trinity Delta view: BerGenBio had another productive quarter in Q219. Notably, the initial Phase II data supports the further development of bemcentinib in MDS/AML in combination with LDAC, as well as monotherapy. Also, the second stage of the Phase II trial in NSCLC in combination with pembrolizumab is generating similar results to those seen in the first stage; while the total number of AXL-positive patients in this trial is still modest, the consistency of the results is encouraging.

The revisions to the clinical trial plan add a minor delay to the start of the pivotal programme, but provide very valuable information, which will help BerGenBio maximise the value of bemcentinib.

We value BerGenBio at NOK53.13/share (NOK3.21bn or $378m). We estimate that the company has sufficient capital to operate into H220, though this could be extended significantly through a licensing deal.

Lighthouse

20 August 2019


Price	NOK12.30
Market Cap	NOK745m
Primary exchange	Oslo
Sector	Healthcare
Company Code	BGBIO

Corporate client	Yes

Company description

BerGenBio is a clinical-stage, drug development company based in Bergen, Norway and Oxford, UK. It is developing innovative anti-cancer therapies that act on the promising Axl signalling pathway. The lead oncology compound, bemcentinib, is in a number of Phase II trials.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Disclaimer

e-therapeutics

Second agreement helps validate capabilities

Lighthouse | 13 August 2019

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e-therapeutics has announced an agreement to work on a neuro-degeneration project with a top 5 global pharmaceutical company. We believe the agreement is with MSD, the ex-US businesses of Merck & Co Inc, but this has not been confirmed.
The 12-month agreement employs the NDD platform to target the discovery of novel biological mechanisms and therapeutic approaches for neuro-degenerative diseases, such as Alzheimer’s and Huntington’s.
The initial terms are that e-therapeutics will be reimbursed for agreed costs, but a review will allow MSD to extend the deal into a full collaboration. If no collaboration is agreed, all rights arising from the agreement will be retained by e-therapeutics. Any small-molecule compounds generated will be tested through MSD’s assay systems.
This second agreement follows from the extension of the Novo Nordisk collaboration announced earlier in August. The original terms, from December 2018, have been extended by six months to June 2020 but, importantly, now also includes work using the GAINs (Genome-Associated Interaction Networks) platform.

Trinity Delta view: Business development and cost control remains management’s primary focus. These announcements suggest that business development activities are starting to gain traction. Demonstrable results will help validate the value of the NDD and GAINs platforms. In the meantime, we believe e-therapeutics remains well funded. End-January 2019 cash of £5.9m, plus a £1.1m tax credit, provides funding through FY21. Clearly, potential payments from new partners, cost-sharing deals, or M&A could extend this.

Lighthouse

13 August 2019


Price	2.5p
Market Cap	£6.8m
Primary exchange	AIM London
Sector	Healthcare
Company Code	ETX

Corporate client	Yes

Company description

e-therapeutics is a drug discovery company with a proprietary network-driven drug discovery (NDD) platform. Following management changes and a strategic review, the focus is on its immuno-oncology projects, the next generation of the platform, and on securing industry collaborations and partners.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Disclaimer

Hutchison China MediTech

Carrying momentum into H219

Update | 13 August 2019

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Hutchison China MediTech (Chi-Med) H119 results highlight ongoing financial and operational progress. First China NDA filings for surufatinib and savolitinib are on track for H219 and H120 respectively, following in the footsteps of Elunate’s November 2018 launch. Global registration studies of surufatinib and fruquintinib will also initiate in H120. Investment into the maturing China Oncology and Global Innovation pipelines means future R&D spend will continue to grow, but Chi-Med is well-funded with flexibility surrounding future funding options. These are not limited to a future Hong Kong IPO, but include prospects of enhanced revenues from Elunate (post potential NRDL inclusion in Q4) and near-term China approvals/launches, plus possible non-dilutive finance from non-core asset divestment (eg OTC). Our valuation remains $38.55/ADS ($5.14bn) or £5.93/share (£3.95bn).

Year-end: December 31	2017	2018	2019E	2020E
Sales (US$m)	241.2	214.1	168.6	207.6
Adj. PBT (US$m)	(53.5)	(86.7)	(205.6)	(202.0)
Net Income (US$m)	(23.0)	(71.3)	(170.6)	(164.4)
Earnings per ADS (US$)	(0.22)	(0.57)	(1.31)	(1.26)
Cash (US$m)	358.3	301.0	285.9*	233.8
Adj. EBITDA (US$m)	(17.2)	(69.7)	(163.9)	(159.5)

Source: Trinity Delta Note: Adjusted PBT excludes exceptionals, Cash includes short-term investments, Adjusted EBITDA includes equity in earnings of equity investees. *2020E cash figure includes assumed raise of $250m.

Near-term filings for second and third China Oncology products Surufatinib’s China NDA in non-pancreatic NET will be filed by year-end, with potential for 2020 approval/launch. Savolitinib NDA filing is not far behind; enrolment is complete in the ex14 del NSCLC China registration study. Fruquintinib (Elunate), Chi-Med’s first launched product in China, generated $4.7m of royalty/manufacturing revenues in H119 on $11.4m of in-market sales by partner Eli Lilly. Potential NRDL inclusion in Q419 should significantly boost market penetration and future Elunate revenues.
Further Global Innovation registration studies pending Savolitinib (partnered with AstraZeneca) is likely to be the first drug approved for the global market. Read out of the SAVANNAH NSCLC Phase II (savolitinib + osimertinib) in 2021 could support accelerated FDA approval. Unpartnered assets surufatinib (pancreatic NET) and fruquintinib (3L/4L CRC) are poised to start global registration studies in H120.
Flexibility on funding options Ongoing pipeline investment will be partially offset by growing China Oncology revenues; other options (eg non-core asset disposals) mean Chi-Med is not dependent on the proposed Hong Kong IPO and global raise. RMB/USD weakening benefits China R&D and with 2020 starts for Global Phase IIb/III studies, FY19 guidance is updated to R&D spend of $130-170m (vs $160-200m) and adj. non-GAAP group net cash outflows of $90-120m (vs $120-150m).
Valuation maintained at £5.93/share and $38.55/ADS Our DCF-based SOTP model includes an rNPV of the clinical pipeline. Our pre-money remains $5.14bn ($38.55/ADS) or £3.95bn (£5.93/share), and we continue to anticipate multiple clinical, regulatory, and commercial catalysts that will unlock further value over the next 12 months.

Update

13 August 2019


Price (US ADS) (UK share)	$20.20 340.5p
Market Cap	$2.75bn £2.27bn
Enterprise Value	$2.51bn £2.07bn
Shares in issue (ADS) (shares)	133.3m 666.6m
12-month range	$19.37-$39.68 312p-567p
Free float	40%
Exchanges	NASDAQ AIM
Sector	Healthcare
Company Code	HCM HCM.L

Corporate client	Yes

Company description

Analysts

Franc Gregori
fgregori@trinitydelta.org
+44 (0) 20 3637 5041

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Chi-Med: pipeline to deliver near-term catalysts

Hutchison China MediTech (Chi-Med) has made significant progress over H119 in advancing its proprietary Global Innovation and China Oncology pipelines. In China, NDAs for the first indications for surufatinib and savolitinib will be filed with the NMPA within the next 12 months. Potential NRDL inclusion of Elunate in Q419 should increase market penetration and catalyse revenue generation potential from the China Oncology franchise. Chi-Med’s Global Innovation ambitions are also progressing. The most advanced asset, savolitinib is currently enrolling in the registration-intent SAVANNAH trial for the global market; results from an interim analysis in H120 will determine whether conditional approval could be sought. Two other assets, surufatinib and fruquintinib are also on the cusp of initiating US/EU Phase IIb/III studies (H120). Near-term, these, clinical, regulatory, and commercial catalysts will unlock further pipeline value.

Anticipating pipeline progress

Continued pipeline progress (Exhibit 1) is expected over the coming 12 months as various clinical trials initiate and ongoing studies render data. In total eight assets are under evaluation in over 30 clinical trials, not including a newly disclosed China IND filing (IDH 1/2 inhibitor HMPL-306). An overview of anticipated news is shown in Exhibit 2, and we highlight the following as key catalysts:

Elunate (fruquintinib) potential NRDL inclusion (Q419): NRDL (National Reimbursement Drug List) inclusion would increase Elunate penetration as it automatically grants access and distribution to all hospital pharmacies across China. Listing is associated with a yet-to-be-negotiated discount to the launch price (US$3.26k/cycle, or a total out of pocket cost of US$9.8k under the patient assistance programme) but this will be more than compensated by greater volumes. Elunate H119 in-market sales were $11.4m; we forecast a $122m peak sales opportunity in China 3L CRC, and a potential $500m-1bn China sales opportunity across multiple indications, with Chi-Med eligible for minimum royalties of 15%.
Surufatinib China NDA filing in non-pancreatic NET (H219): The positive outcome of the interim analysis of the SANETep trial enables China NDA filing earlier than anticipated (see June Update; full data will be presented at a forthcoming conference). If approved, surufatinib should be launched in 2020, targeting an indication with major unmet medical need and limited treatment options. Surufatinib will be the first self-commercialised product by Chi-Med’s growing China Oncology commercial organisation (currently 60-strong but expected to expand to 200+ by end-2020).
Savolitinib China NDA filing in MET exon 14m/del 1L NSCLC (H120): The Phase II registration study completed enrolment in July. Initial data was presented at AACR 2019 (see April Update). If the mature data meets an agreed efficacy threshold, the China NDA will be filed in H120. Assuming a successful clinical and regulatory outcome, China would be the first market in which savolitinib would be launched. While AstraZeneca has commercialisation rights, Chi-Med is eligible for royalties of 30% on China sales, plus a potential approval milestone.
Savolitinib SAVANNAH interim analysis (H120): SAVANNAH, a Phase II with registration intent, is evaluating savolitinib + osimertinib combination in cMet+ 2L/3L EGFR/T790M refractory NSCLC. Interim analysis in H120 will define whether efficacy data generated by that point would support filing for conditional approval. We note that AstraZeneca and Chi-Med should articulate plans for further lung cancer studies by early-2020.

Exhibit 1: Chi-Med pipeline status

Source: Hutchison China MediTech Notes: [1] in planning/imminent, [2] proof of concept in Australia, [3] SXBX = She Xiang Bao Xin.

Exhibit 2: Hutchison China MediTech news flow to mid-2020

Source: Trinity Delta, Hutchison China MediTech Note: WCLC = World Congress on Lung Cancer; NSCLC = non-small cell lung cancer; CRC = colorectal cancer; RCC = renal cell carcinoma; NET = neuroendocrine tumours; BTC = biliary tract cancer; NHL = non-Hodgkin’s lymphoma

Financials and valuation

In H119, reported group revenues were flat at $102.2m compared to H118, or grew at 5% at constant exchange rates (CER) due to weakening of the renminbi against the US dollar.

Underlying sales growth was driven by the continued strong performance of the Commercial Platform, which grew at 2% on a reported basis or 7% at CER to $90.2m. Non-consolidated JVs performed similarly with reported sales increasing by 2% or 8% at CER to $276.9m. Total revenues from the Commercial Platform and non-consolidated JVs on a non-GAAP basis was $367m during the period, generating $28m in net income.

The sales contribution from the Innovation Platform, Hutchison Medipharma, fell by $1.6m to $12.0m due to reduced fee-for-service revenues, largely because of the renegotiation of the Eli Lilly fruquintinib collaboration in December 2018. The impact of lower research fees was offset by Elunate royalties of $1.7m and manufacturing revenues of $3.0m, which mark the start of the transition towards higher quality and more predictable sales for the Innovation Platform.

Investment in R&D grew by 15% to $69.3m to support the broadening pipeline. The increase was moderated slightly by the weaker renminbi, and, together with the start of the global registration studies with surufatinib and fruquintinib being delayed from H219 to H120, has led Chi-Med to reduce its guidance for R&D expenses for FY19 to $130m-170m as indicated in Exhibit 3.

Overall, group net loss during H119 increased by 39% (48% at CER) to $45.4m, reflecting the increase in R&D. In line with the revised R&D guidance, Chi-Med has also reduced its guidance for group net cash outflows to $90m-120m. The company remains very well-funded with a cash position of $237.3m: in addition to $146.3m in unutilised banking facilities and $64m in cash within the JVs.

A summary of the changes in our estimates is shown in Exhibit 4, and financial forecasts are shown overleaf in Exhibit 6.

Exhibit 3: Chi-Med FY19 guidance (US$m)

Source: Hutchison China MediTech Note: * excludes potential financing activities

Exhibit 4: Summary of changes to estimates

Source: Trinity Delta

Ongoing investment is required to maximise Chi-Med’s pipeline opportunities. The proposed Hong Kong IPO and associated global raise is one such mechanism to boost the company’s resources. Since the intention to list was announced in April, market conditions have deteriorated which, coupled with an underwriter mandated 90 day lock-in period and a lower share price in connection with CK Hutchison’s discounted secondary placement (see June Lighthouse), means timing is uncertain. Management’s view is that market conditions are a critical factor in determining transaction success. We believe that various other options are also available to finance Chi-Med’s pipeline.

Historically, profits from the Commercial Platform provided funding for the drug development activities of the Innovation Platform. In addition to these cash flows, divestment of non-core assets (such as the China OTC business) could generate further cash. Chi-Med is also going through a transition where the Innovation Platform, specifically the China Oncology business is starting to generate revenues. China Oncology will require significant near-term investment in both R&D and expanding its sales capabilities ahead of upcoming launches; however, over time, revenues from Elunate, surufatinib, and savolitinib will become material and increasingly contribute to profits, helping to fund the later-stage development of the Global Innovation pipeline.

We maintain our valuation at $38.55/ADS ($5.14bn) or £5.93/share (£3.95bn), which remains a pre-money valuation that does not include any assumed proceeds from the proposed Hong Kong IPO and global placement. Various upcoming catalysts highlighted in this note could prompt us to revisit our assumptions in future. Our valuation methodology is outline in our February 2019 Initiation report, and we provide a summary in Exhibit 5 below.

Exhibit 5: Relative contributions of Chi-Med programmes to valuation

Source: Trinity Delta

Exhibit 6: Summary of financials

Source: Company, Trinity Delta Note: Adjusted numbers exclude exceptionals. Historic and forecast EPS are adjusted for one-to-ten ordinary share split, with new ADS ratio of 1:5 shares. Our estimate of $250m proceeds from the proposed equity raise are shown as short-term debt in FY20e, until transaction size, structure, and terms are confirmed.

Disclaimer

Bonesupport

All eyes on Q3 following a record Q2

Update | 31 July 2019

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Bonesupport delivered its best quarterly net sales (SEK37.3m) in Q219, with this third successive quarter of CERAMENT sales growth providing early confirmation that the commercially focused strategy is starting to deliver. The next two quarters will be key for the company in setting the trajectory for future sales potential. Q319, the first full quarter of exclusive US sales, should see first sales under major US GPO contracts, publication of full CERTiFy data driving adoption in trauma, and the expanded global commercial footprint being closer to full operation. With the growth trajectory yet to be established, we conservatively rebase our 2019 and 2020 revenue expectations to reflect a more gradual ramp in sales. We continue to view management’s target of 40%+ revenue growth from 2020 onwards as achievable and anticipate more detailed guidance at the Capital Markets Day planned for H219. Our revised Bonesupport valuation is SEK37/share (or SEK 1.92bn), down from SEK39/share (or SEK 2.03bn).

Year-end: December 31	2017	2018	2019E	2020E
Sales (SEKm)	129.3	96.6	176.7	286.5
Adj. PBT (SEKm)	(127.9)	(173.8)	(156.4)	(85.7)
Net Income (SEKm)	(128.9)	(175.3)	(156.7)	(86.0)
EPS (SEK)	(3.2)	(3.4)	(3.0)	(1.7)
Cash (SEKm)	533.4	261.7	109.1	11.3
EBITDA (SEKm)	(98.1)	(172.7)	(152.9)	(79.0)

Source: Trinity Delta

Global CERAMENT sales growth Europe/ROW revenue of SEK22.5m benefited from continued strong CERAMENT G/V performance, increased penetration in key geographies and indications with historically limited presence, and filling of sales vacancies. US sales grew 28% on Q119 to SEK 14.8m, despite replacing 6 of the 40 independent distributors due to underperformance. Momentum in market access was shown by a third major GPO contract win with Kaiser Permanente (690 medical offices, 39 hospitals, 23k doctors). GPO contracts coupled with completion of initial sales training and BONIFY launch should boost US sales from H219.
Early days in establishing the growth trajectory Bonesupport’s revenue growth trajectory is contingent on various factors. We conservatively rebase our near-term forecasts (having underestimated the time for a new distribution infrastructure to become effective) and update our model to reflect ongoing cost control. Longer-term, we continue to view CERAMENT G FORTIFY data in fractures in 2020, followed by FDA approval potentially in 2021, as key inflection points.
Continued progress on costs R&D spend should fall after H219 once FORTIFY is fully enrolled; two of the four early-stage pipeline programmes have been selected for further development. Q219 costs include a SEK11m exceptional connected to Zimmer Biomet inventory return; from May 23 Bonesupport has had exclusive US CERAMENT BVF marketing rights.
Slower forecast sales ramp lowers our valuation to SEK37/share Our updated forecasts flow through to our three-phase DCF model generating a SEK37/share (SEK1.92bn) valuation. Following a transition period with the implementation of a new strategy; H219 should provide a better indication of sales potential for 2020.

Update

31 July 2019


Price	SEK32.9
Market Cap	SEK1,704m
Enterprise Value	SEK1,543m
Shares in issue	51.8m
12 month range	SEK9.7-35.5
Free float	87.2%
Primary exchange	OMX Stockholm
Other exchanges	N/A
Sector	Healthcare
Company Code	BONEX

Corporate client	Yes

Company description

Bonesupport is a Swedish ortho-biologics company focused on developing and commercialising a pipeline of unique injectable drug eluting bioceramic bone graft substitutes based on its proprietary CERAMENT technology.

Analysts

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Financials and valuation

Bonesupport’s Q219 net sales of SEK37.3m reached an all-time high (+32% on Q218; +14% on Q119), with both geographies delivering solid sales growth. Notably the previous peak in quarterly revenues was Q217 (SEK37.1m), prior to supply issues at Zimmer Biomet impacting US sales, and prior to implementation of Bonesupport’s current commercial strategy.

For Q219, Europe/ROW sales were SEK22.5m (+58% on Q218; +6% on Q119), with continued strong performance from the antibiotic eluting products CERAMENT G and V (+64% on Q218 to SEK18.8m) which account for 83% of sales in the region. Europe/ROW gross margin stood at 83.5%. US net sales were SEK14.8m, a 5.5% increase on Q218 (when Zimmer Biomet was the exclusive distributor) and up +28% on Q119 (the first full quarter of sales under Bonesupport’s direct distribution model). US gross margin was 90.5%. Gross profit for Q219 was SEK32.3m (Q218: SEK24.6m; Q119: SEK28.2m).

Disciplined cost control across the business was maintained alongside focused investment in initiatives to accelerate CERAMENT sales. Q219 R&D costs (SEK16m) and G&A spend (SEK10.5m) have stabilised at a lower level over the past three quarters, which management indicate is a reasonable proxy for future periods. We note that R&D costs are likely to fall further once the FORTIFY trial is fully enrolled in H219.

Sales expenses of SEK52.7m is not comparable to the same quarter last year for two reasons. Firstly, it includes the subsequent European sales force expansion and the establishment of the US direct distribution network. Secondly, US sales costs include a SEK11m exceptional connected to Zimmer Biomet inventory return from the previous US distributor. Since May 23, Bonesupport has had exclusive US CERAMENT BVF marketing rights. The exceptional was booked to sales expenses rather than COGS as returned stock is short-dated and not permitted for resale, but it could be used in product demonstrations. This non-recurring item was responsible for a wider Q219 operating loss of SEK47.8m (Q218: SEK37.8m; Q119: SEK39m) and net loss of SEK47.9m.

Q219 marked the third successive quarter of revenue growth; despite Q2 and Q3 typically being weaker quarters for sales (due to lower rates of surgery). However, it is still too early to accurately assess the likely growth trajectory of Europe/ROW and US sales as the new strategy is only 8 months into implementation and is still in the ‘build phase’.

Filling of vacancies in Europe has expanded the salesforce to 25 employees. Training is ongoing and a GM & EVP Commercial Operations EUROW is sought following the departure of the incumbent. In the US, GPO contracting has been ahead of management expectations, with three significant contracts and various smaller contracts already secured. These contracts are anticipated to have a significant impact on sales in 2020 and beyond. Ongoing performance evaluation of the 40-strong independent distributor network has resulted in turnover of 6 distributors as deliverables on sales and promotion activities were not met.

With the growth trajectory yet to be established, we conservatively rebase our 2019 and 2020 sales forecasts to reflect a more gradual ramp. In addition, we also moderate our expectations for admin and R&D spend over the same period. Exhibit 1 summarises the changes to key estimates.

Exhibit 1: Summary of changes to estimates

Source: Trinity Delta

These changes to our forecasts flow through to our three-stage DCF valuation model, which has also been updated with current FX rates (now SEK/US$ 9.4 vs 9.5 previously), last reported cash of SEK161m (as at end June 2019), and has been rolled forward to reflect the passage of time. Our updated valuation is summarised in Exhibit 2.

Exhibit 2: DCF-based valuation of Bonesupport

Source: Trinity Delta Note: Assumes USD/SEK exchange rate of 9.4 and 12.5% discount rate. The valuation is based on explicit cash flows to 2022, followed by a ten-year trending period, and a 2.5% terminal growth rate.

Bonesupport is planning a Capital Markets Day in late autumn, when we expect more detailed financial and operational guidance to be provided. This, in tandem with another quarter of sales demonstrating continued successful execution, is likely to prompt us to revisit our forecasts and valuation.

Q319 will be an important quarter for Bonesupport. It is the first full quarter of exclusive US sales, and first sales under major US GPO contracts should be delivered. In all regions, publication of full CERTiFy data (non-inferiority of CERAMENT BVF to gold-standard autograft) should assist in driving adoption in trauma, and with completion of initial training, the expanded global commercial footprint will be more established.

Exhibit 3: Summary of financials

Source: Company, Trinity Delta Note: Historical adjustment of number of shares following 5:1 consolidation in 2017.

Disclaimer

MaxCyte

Ideally placed to sustain growth

Update | 17 July 2019

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MaxCyte is maintaining its momentum, delivering revenue growth of 21% during H119 and having grown at a CAGR of 24% over the last four years. This was driven in part by the number of licensed cell therapy programmes increasing by c 10 to over 80. As was highlighted at the Capital Markets Day last week, the demand for MaxCyte’s technology, especially from those companies developing cell therapies, is only likely to grow. Cell therapy companies are focussing more on gene-modified therapies and are increasingly looking for alternatives to viral methods, leaving MaxCyte ideally positioned to benefit. At the same time, development of MaxCyte’s CARMA platform advances as expected: data from the current Phase I/II trial are due in H120. We value MaxCyte at £195m or 341p per share.

Year-end: December 31	2017	2018	2019E	2020E
Sales (US$m)	14.0	16.7	20.9	25.2
Adj. PBT (US$m)	(9.9)	(8.9)	(14.5)	(14.9)
Net Income (US$m)	(9.9)	(8.9)	(14.5)	(14.9)
EPS (USc)	(20.4)	(17.3)	(25.6)	(25.9)
Cash (US$m)	25.3	14.4	14.4	1.1
EBITDA (US$m)	(9.1)	(8.1)	(13.4)	(13.6)

Source: Trinity Delta Note: Adjusted numbers exclude share-based payments and exceptionals.

Strong revenue growth maintained in H119 MaxCyte sales in H119 rose by 21% to $8.4m (H118: $6.9m), sustaining its >20% top-line growth. The company also launched a new product suite of ExPERT instruments, which have been designed to respond to the growing needs of its clients and to sustain the company’s leadership in the field of non-viral cell modifications. This should contribute to growth in FY19 being weighted to H2, as is common for MaxCyte.
Evolving demand from cell therapies During H119, the number of new cell therapy programmes with licences to use MaxCyte’s technology has risen by c 10 (>80 in total), with the number with clinical licences growing by c 10 to >45 (including the agreement with Kite, a Gilead Company). Demand for MaxCyte’s technology for cell therapies is expected to drive its sales growth. Industry-wide, there were 362 clinical trials with gene-modified cell therapy in 2018 (an increase of 40% vs 2017), and there is also a growing realisation of the limitations of viral modifications. MaxCyte offers one of the few alternative methods to efficiently and reproducibly modify cells for therapies.
Lead CARMA asset advancing as expected MCY-M11 in ovarian cancer and mesothelioma is the first CARMA product to enter the clinic. MaxCyte has completed the first dose cohort and, in May, started the second cohort in the first Phase I trial. Reassuringly, no dose-limiting toxicities or safety concerns were observed in first patient cohort and we continue to expect first detailed data from the trial to be reported in H120.
Valuation unchanged at 341p/share We continue to value MaxCyte at £195m or 341p per share, and there are no changes to our estimates. Our valuation of the core business excluding CARMA is £111m, which is 53% more than the current market cap.

Update

17 July 2019


Price	127.0p
Market Cap	£72.8m
Enterprise Value	£59.7m
Shares in issue	57.3m
12 month range	125.0-243.0p
Free float	70%
Primary exchange	AIM
Other exchanges	NA
Sector	Healthcare
Company Code	MXCT.L MXCS.L

Corporate client	Yes

Company description

MaxCyte uses its patented flow electroporation platform to transfect a wide array of cells. Revenues arise from sale and lease of equipment, disposables and licence fees; with an impressive client list. Additionally, a novel mRNA mediated CAR technology, known as CARMA, is being explored in various cancers, including solid tumours.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5041

MaxCyte: Ideally placed to sustain growth

MaxCyte is continuing to grow strongly with sales increasing by 21% to $8.4m during H119. The number of cell therapy programmes with commercial licences (that include milestone payments) also rose from >35 to >45; this should ensure the current sales momentum is maintained and could accelerate. Key to the company’s success is its leading position in the non-viral cell modification market. To maintain its leadership, MaxCyte launched a new product suite under the ExPERT brand; and the company continues to benefit from the rapid increase in cell therapies in development, and the switch to non-viral modifications of cells. We maintain our valuation at 341p/share.

ExPERT: a versatile non-viral transfection platform

MaxCyte already had developed a flow electroporation platform with the ability to insert any molecule into any cell, efficiently and reproducibly. This is important as different companies use alternative methods to modify their cell therapies, and MaxCyte’s instruments can serve all of their needs (Exhibit 1).

Exhibit 1: Non-viral genome editing technologies

Source: Trinity Delta, company websites Note: TALE = Transcription Activator Like Effector; PAM = protospacer adjacent motif, a DNA motif specific to each Cas9 protein; sgRNA = single-guide RNA

It was, however, important that MaxCyte’s systems kept pace with the demands of its clients, especially in the dynamic cell therapy field. The ExPERT range has the necessary extra capabilities (eg touch screen controls, bar code reader etc) and has also been designed with lifecycle management in mind. Thus, it can continue to evolve and, over time, MaxCyte intends on adding further platform improvements, such as upstream and/or downstream sample preparation capabilities.

A summary of the ExPERT range and its functionality is detailed in Exhibit 2. The GTx is designed for GMP manufacturing of clinical cell and gene therapies; the STx for drug discovery applications such as protein production and cell-based assay development; and the ATx for academic institutes initiating the development of cell and gene therapies. MaxCyte also produces the VLx for biomanufacturing. Importantly, it is possible to move seamlessly from one instrument to another as products move through the development cycle.

Exhibit 2: The instrument features of GTx, STx and ATx ExPERT systems

Source: MaxCyte

Well-positioned for cell and gene therapy market growth

The rapid growth in programmes licensed to use MaxCyte’s systems reflects both the strength of the technology and the favourable market conditions. In 2018, companies developing gene and gene-modified cell therapies raised $9.7bn, an increase of 64% on the previous year. Analysis of clinical trials also showed there were 362 clinical studies being conducted with gene-modified cell therapies in 2018 compared to 259 in 2017 (+40%), while the number of clinical trials with unmodified cell therapies fell 25% to 263 (Exhibit 3).

Exhibit 3: Trials underway worldwide by specific technology in 2018

Source: Alliance for Regenerative Medicine, Trinity Delta

Among those companies developing gene-modified cell therapies, there is also a move away from viral transduction, currently the most popular method of modifying cells. The reasons why companies are looking at alternatives include:

Technical considerations, including the need to deliver more than one payload efficiently into a cell, as is needed for CRISPR therapies.
Immunology issues: virally transduced cells can induce an immune response so repeat dosing of a cell therapy might not be possible.
Cost of viruses: a batch of Lentivirus, sufficient to treat 2-10 patients, costs c $500k.
Complicated manufacturing procedures which are required with viruses.

The switch towards alternative methods, and in particular the adoption of MaxCyte’s technology, is highlighted by Kite Pharma (a Gilead company). Kite is a leader in the field of CAR-T therapies and historically has solely used viral transduction. In November 2018, however, the company entered into a research agreement with MaxCyte to start developing cell therapies modified using flow electroporation; this relationship was expanded in March 2019 by signing a clinical and commercial agreement that covered the development of up to 10 therapies.

Attractive revenue potential from commercial licenses

The number of cell therapy programmes covered by licences to MaxCyte’s technology has grown rapidly over the last few years, and we are now seeing many of the research agreements transitioning into commercial licences (Exhibit 4). The latter licences are considerably more lucrative to MaxCyte; for example, there is the potential to earn over $250m in milestones from the 35+ programmes, including those from the CRISPR Therapeutics and Precision Biosciences commercial agreements (Exhibit 5).

Exhibit 4: The growth in licensed cell therapy programmes

Source: MaxCyte, Trinity Delta

Exhibit 5: Commercial licences granted to date

Source: MaxCyte, Trinity Delta, Company websites. Note: Casebia is a joint venture between CRISPR Therapeutics and Bayer; R/R = relapsed/refractory; NHL = non-Hodgkins lymphoma; ALL = acute lymphoblastic leukaemia; CLL = chronic lymphocytic leukaemia; AML = acute myeloid leukaemia; MCL = mantle cell lymphoma.

MaxCyte estimates that the NPV of each programme with a commercial license is on average c $10m at the start of clinical development, after considering the development and commercial risks. It should be noted that not all programmes covered by a commercial licence will enter clinical development. Also, in common with most licensing agreements, the deals are backend-weighted with the most significant potential payments to MaxCyte dependent on the programme becoming a marketed product, as illustrated in Exhibit 6.

Exhibit 6: An illustration of the structure of a representative commercial licensing agreement for a single product

Source: MaxCyte

The first products using MaxCyte’s systems as an enabling technology are now in clinical development and we expect several more to enter the clinic over the coming years (Exhibit 7). It is also likely that other companies have products that depend on MaxCyte’s technology already in the clinic, but many are cautious about disclosure due to the highly competitive nature of the space.

Exhibit 7: Selected preclinical and clinical partners

Source: Trinity Delta, company presentations, clinicaltrials.gov

First CARMA therapy advancing in the clinic as planned

CARMA is MaxCyte’s proprietary autologous mRNA-based CAR therapy platform, and the lead therapy MCY-M11 entered the clinic in H218 (Exhibit 8). The Phase I trial with MCY-M11 has a dose escalation 3+3 design with intraperitoneal dosing and is progressing as planned. The 1 x 10⁷ dose was well tolerated by the first cohort, which is reassuring for such a novel cell therapy, and the second cohort started enrolling in May (Exhibit 9).

Exhibit 8: MaxCyte’s CARMA pipeline

Source: MaxCyte

Exhibit 9: Phase I trial design with MCY-M11 in ovarian cancer or peritoneal mesothelioma

Source: MaxCyte

The MCY-M11 Phase I trial is expected to complete in H120 and we also expect that first detailed data from the trial will be published during the same period, providing the first indication of the true potential of the CARMA platform. Having said that, at the Capital Markets Day, Christina Annanziata MD PhD, the Principal Investigator for the current trial, emphasised that CARMA is a true platform technology with broad opportunities, for example by producing CARMA therapies that target more than one protein expressed by tumour cells.

Valuation and financials

We continue to value MaxCyte at £195m or 341p per share as described in our Update note dated 24 April 2019. Throughout our valuation we use conservative assumptions, and we still value the company at £111m if we exclude the potential of CARMA. This compares to the current market cap of £73m, suggesting the market does not recognise the value of MaxCyte’s core flow electroporation technology, which is a key enabler for so many cell therapies currently in development.

There are no changes to our estimates. We continue to forecast that the company will grow at a CAGR of 21.6% over the next three years, while achieving a gross margin of 88%. We estimate that MaxCyte’s cash position at H119 was $21m following the capital raise of £10m (c $13m gross) in February, which provides a cash runway for operations into H220.

Exhibit 10: Summary of financials

Source: Company, Trinity Delta Note: Adjusted numbers exclude exceptionals.

Disclaimer

Mereo BioPharma

Accelerated approval path for NAVI

Lighthouse | 16 July 2019

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Mereo BioPharma has agreed in principle the design of a Phase II study with navicixizumab in advanced ovarian cancer, which could potentially by used for the accelerated approval of the product, with the US FDA in a Type B meeting.
Navicixizumab is a bispecific antibody that binds to DLL4 and VEGF, which was acquired by Mereo BioPharma during the merger with Oncomed. In a Phase Ib study in combination with paclitaxel in advanced platinum-resistant ovarian cancer, an unconfirmed overall response rate (ORR) of 41% (18/44 patients) was observed.
The primary endpoint of the trial will be confirmed ORR, and the secondary endpoints will include duration of response, CA-125 response rate, PFS (progression free survival) and OS (overall survival), with the dosing regimen the same as in the current Phase Ib trial.
There are currently limited treatment options for patients with advanced platinum-resistant ovarian cancer and an estimated 14,000 women will die from ovarian cancer in 2019.
Mereo BioPharma has commenced partnering activities for navicixizumab.
There is a contingent value right (CVR) for the former OncoMed shareholders linked to any partnering deal with navicixizumab; 70% of the net proceeds of any cash milestone payments received by Mereo BioPharma for five years post-completion will be received by the CVR holders (subject to a cap of c $80m), with the balance retained by Mereo BioPharma.

Trinity Delta view: The importance of navicixizumab to Mereo BioPharma from a DCF-valuation perspective is limited due to the linked CVR, but a deal would still be valuable to the company as it would strengthen its balance sheet and also demonstrate Mereo BioPharma’s ability to out-license assets. The outline of the Phase II design and potential accelerated approval pathway, agreed with the FDA in principle, should facilitate any partnering discussions and increase the likelihood of navicixizumab being out-licensed within the next 12 months.

We value Mereo BioPharma at £541m ($704m), equivalent to 506p/share or $25.59/ADS (fully diluted). This is based on the company’s four leading assets to be conservative, and excludes any contribution from navicixizumab.

Lighthouse

16 July 2019


Price (UK share) (US ADS)	45p $2.63
Market Cap	£45m $60m
Exchanges	AIM London NASDAQ
Sector	Healthcare
Company Code	MPH.L MREO

Corporate client	Yes

Company description

Mereo BioPharma develops and commercialises innovative therapeutics addressing rare and specialty diseases. These are acquired or licensed in at clinical stages from large pharmaceutical companies. The portfolio consists of four compounds that are progressing through late clinical development.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Disclaimer

Source: Trinity Delta Note: Adjusted PBT excludes exceptionals, Cash includes short-term investments, Adjusted EBITDA includes equity in earnings of equity investees. *2020E cash figure includes assumed raise of $250m.

Exhibit 1: Summary of financials

Source: Trinity Delta Note: Adjusted numbers exclude exceptionals; * Cash in FY21 includes a capital increase of £10m

Scancell: A non-dilutive funding opportunity

The glycan technology and opportunity

Exhibit 1: Lack of binding of glycan antibody FG88.2 to a broad range of normal tissues

Exhibit 2: The binding of glycan antibody FG88.2 to different tumours with (i) no, (ii) weak, (iii) moderate or (iv) strong expression of tumour-associated glycan Lewisacx

Source: Chua J. X. et al, Clinical Cancer Research, March 2015

Exhibit 3: Images showing the internalisation of FG88 over time

Source: Chua J. X. et al, Clinical Cancer Research, March 2015

AvidiMab delivers direct killing of cells

Exhibit 4: The direct killing activity of FG88 antibodies with the AvidiMab technology

Source: Chua J. X. et al, Clinical Cancer Research, March 2015

Exhibit 5: Illustrations detailing the various killing mechanisms of glycan antibodies

Source: Vankemmelbeke M et al; OncoImmunology5:1; January 2016

Partnering potential

Exhibit 6: A summary of the characteristics of four TaG antibodies that Scancell aims to partner

Source: Scancell

Exhibit 7: Summary of financials

Source: Scancell, Trinity Delta Note: Adjusted numbers exclude exceptionals. The short-term debt in FY21 is indicative of the company’s funding requirement

Source: Trinity Delta Note: Adjusted numbers exclude exceptionals; * Cash in FY21 includes a capital increase of £10m

Exhibit 1: Summary of financials

Source: Scancell, Trinity Delta Note: Adjusted numbers exclude exceptionals. The short-term debt in FY21 is indicative of the company’s funding requirement.

Source: Trinity Delta. Note: *Our cash forecast assumes that all the warrants issued with the rights issue are exercised at €0.115 raising €1.8m in Q419 and Nexstim raises an additional €10m in FY20

Nexstim: White Paper highlights potential of NBT

Exhibit 1: Mean BDI and PHQ9 scores before and after treatment with NBT

Source: Island Psychiatry

Exhibit 2: A patient described in the White Paper, in whom the “5cm rule” did not accurately locate the position of the DLPFC

Source: Island Psychiatry

Financials and valuation

Exhibit 3: Updated DCF-based valuation of Nexstim

Source: Trinity Delta; Note: Peak sales achieved after nine years in the US and 10 years in Europe. We assume the subscription prices for the 2018 options is the weighted average of existing options, which is €5.337.

Exhibit 4: Summary of changes to estimates

Source: Trinity Delta Note: The change in Adj EPS estimate for FY19 primarily reflects an over estimation of the weighted average number of shares in H119 in our previous estimate.

Exhibit 5: Summary of financials

Source: Trinity Delta Note: Adjusted PBT excludes exceptionals, Cash includes short-term investments, Adjusted EBITDA includes equity in earnings of equity investees. *2020E cash figure includes assumed raise of $250m.

Chi-Med: pipeline to deliver near-term catalysts

Anticipating pipeline progress

Exhibit 1: Chi-Med pipeline status

Source: Hutchison China MediTech Notes: [1] in planning/imminent, [2] proof of concept in Australia, [3] SXBX = She Xiang Bao Xin.

Exhibit 2: Hutchison China MediTech news flow to mid-2020

Source: Trinity Delta, Hutchison China MediTech Note: WCLC = World Congress on Lung Cancer; NSCLC = non-small cell lung cancer; CRC = colorectal cancer; RCC = renal cell carcinoma; NET = neuroendocrine tumours; BTC = biliary tract cancer; NHL = non-Hodgkin’s lymphoma

Financials and valuation

Exhibit 3: Chi-Med FY19 guidance (US$m)

Source: Hutchison China MediTech Note: * excludes potential financing activities

Exhibit 4: Summary of changes to estimates

Source: Trinity Delta

Exhibit 5: Relative contributions of Chi-Med programmes to valuation

Source: Trinity Delta

Exhibit 6: Summary of financials

Source: Trinity Delta

Financials and valuation

Exhibit 1: Summary of changes to estimates

Source: Trinity Delta

Exhibit 2: DCF-based valuation of Bonesupport

Source: Trinity Delta Note: Assumes USD/SEK exchange rate of 9.4 and 12.5% discount rate. The valuation is based on explicit cash flows to 2022, followed by a ten-year trending period, and a 2.5% terminal growth rate.

Exhibit 3: Summary of financials

Source: Company, Trinity Delta Note: Historical adjustment of number of shares following 5:1 consolidation in 2017.

Source: Trinity Delta Note: Adjusted numbers exclude share-based payments and exceptionals.

MaxCyte: Ideally placed to sustain growth

ExPERT: a versatile non-viral transfection platform

Exhibit 1: Non-viral genome editing technologies

Source: Trinity Delta, company websites Note: TALE = Transcription Activator Like Effector; PAM = protospacer adjacent motif, a DNA motif specific to each Cas9 protein; sgRNA = single-guide RNA

Exhibit 2: The instrument features of GTx, STx and ATx ExPERT systems

Source: MaxCyte

Well-positioned for cell and gene therapy market growth

Exhibit 3: Trials underway worldwide by specific technology in 2018

Source: Alliance for Regenerative Medicine, Trinity Delta

Attractive revenue potential from commercial licenses

Exhibit 4: The growth in licensed cell therapy programmes

Source: MaxCyte, Trinity Delta

Exhibit 5: Commercial licences granted to date

Exhibit 6: An illustration of the structure of a representative commercial licensing agreement for a single product

Source: MaxCyte

Exhibit 7: Selected preclinical and clinical partners

Source: Trinity Delta, company presentations, clinicaltrials.gov

First CARMA therapy advancing in the clinic as planned

Exhibit 8: MaxCyte’s CARMA pipeline

Source: MaxCyte

Exhibit 9: Phase I trial design with MCY-M11 in ovarian cancer or peritoneal mesothelioma

Exhibit 2: The binding of glycan antibody FG88.2 to different tumours with (i) no, (ii) weak, (iii) moderate or (iv) strong expression of tumour-associated glycan Lewis^acx