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.
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