Scancell has raised c £15m (gross) in aggregate through the issue of new shares (via a placing, subscription, and open offer) and £6m in convertible loan notes (CLNs). The raise was underpinned by the £10m investment (£5m in equity, £5m CLNs) from new investor, Redmile Group LLC, a specialist healthcare and life sciences fund group. Redmile’s investment, coupled to support from existing cornerstone investor, Vulpes (£1m in equity, £1m CLN) provides important validation of Scancell’s technology platforms, and the clinical and commercial value they represent. Scancell now has the financial resources to enable it to progress the clinical opportunities outlined in our May 2020 Outlook. Following confirmation of shareholder approvals at the August 11th General Meeting, we update our rNPV model and reinstate our Scancell valuation. This is now £83.7m, equivalent to 13.3p/share (11.5p/share fully diluted).
Year-end: April 30 | 2018 | 2019 | 2020E | 2021E |
Revenues (£m) | 0.0 | 0.0 | 0.0 | 0.0 |
Adj. PBT (£m) | (4.9) | (6.7) | (6.8) | (7.7) |
Net Income (£m) | (4.2) | (5.6) | (5.7) | (6.4) |
Adj. EPS (p) | (1.3) | (1.5) | (1.2) | (1.1) |
Cash (£m) | 10.3 | 4.6 | 3.5 | 11.2 |
EBITDA (£m) | (4.9) | (6.7) | (6.8) | (7.6) |
Update
12 August 2020
Price | 6.91p |
Market Cap | £43.5m |
Enterprise Value | £25.9m |
Shares in issue | 629.1m |
12 month range | 4.15-9.80p |
Free float | 59.2% |
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 three 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
Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043
Franc Gregori
fgregori@trinitydelta.org
+44 20 3637 5041
We have revisited our Scancell valuation model following the shareholder vote confirming approval of the capital raise at the General Meeting on August 11. To recap, in line with our policy, we had suspended our valuation and forecasts on the announcement of the proposed raise on July 22. For context, this previous valuation was £72.4m, equivalent to 15.6p share.
Our new Scancell valuation is £83.7m, equivalent to 13.3p/share or 11.5p/share fully diluted. The various components of the valuation are summarised in Exhibit 1. We continue to value Scancell using an DCF model, where the rNPV of each of the three most advanced oncology projects (adjusted for the likely success probabilities) is summed and netted against the costs of running the operation. The success probabilities are based on standard industry criteria for the respective stage of the clinical development process, but are flexed to reflect the inherent risks of the individual programme, the indication targeted, and the trial design.
The key update vs our previous valuation model is the inclusion of the capital raise (ie cash position, number of shares). Given the CLN component, which introduces potential future dilution, we now also calculate a fully diluted per share valuation. This figure also includes outstanding share options, assuming that only those with an exercise price lower than our undiluted per share value are exercised.
We continue to employ conservative assumptions regarding market sizes and growth rates, net pricing, adoption curves, and peak market penetration. Importantly, we have valued only the clinical programmes (including those ready to enter the clinic) with nothing currently attributed to the technology platforms themselves and their use in other clinical applications. We accept that this is arguably overly conservative, especially as the platforms do have an inherent value. Nonetheless, we would counter that the approach leaves us with ample headroom and scope to revisit our assumptions should the need arise.
We reiterate our view that there are a number of likely catalysts over the coming year; including further AvidiMab collaborations, the SCIB1 Phase II trial recruiting patients more actively, the first Moditope Phase I/II study initiating enrolment, and potential increased visibility of progress with the COVID-19 vaccine collaboration.
At this stage we have made no changes to our forecasts (summarised in Exhibit 2). We expect to revisit our financial model following the reporting of FY20 results in September, when we anticipate management will provide further guidance on financial and clinical plans.
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 publicly 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.
Copyright 2020 Trinity Delta Research Limited. All rights reserved.