BioInvent Q2 2023: Progress on all Fronts
Research Update
2023-08-31
07:10
Since our last update, new readouts have been published with BI-1808 and BI-1206 in solid tumours. We review these results and the near-term outlook of the project portfolio. In particular, we expect news about the subcutaneous version of BI-1206 soon, which will be key to its future development.
RR
Richard Ramanius
Contents
Investment thesis
Quality Rating
Outlook
Financial results
Valuation
Financials
Rating definitions
The team
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BI-1808
The monotherapy part of BI-1808’s phase I study has been successfully concluded. Doses of up to 1000mg, a very high dose, have been administered without issues. Disease stabilisation was observed in six out of 22 evaluable patients (27%). This motivates us to increase the likelihood of approval of BI-1808 in T-cell lymphoma (CTCL).
BI-1206 in solid tumours with pembrolizumab
BioInvent’s thesis is that the addition of BI-1206 could restore or enable checkpoint inhibitor efficacy. An update with six additional patients (eleven had been dosed by November 2021) was published in June. There were two objective responses across all 17 patients and one pseudo-progression. One stable disease and one response lasted more than 80 weeks. These are encouraging results considering the low dose of 1mg/kg for most patients, and that patients have received several lines of treatment, though it is difficult to separate the effect of BI-1206 from pembrolizumab alone at this stage.
Base case remains SEK80
We make changes across most indications, leading to higher valuations of some projects and lower in others, in particular for the oncolytic virus BT-001 (see the valuation discussion below), leading to the same base case as before (SEK80). The share is now trading below cash, which we believe is irrational considering the high quality the share represents in its class, especially since the cash will last through 2025.
Key financials
| SEKm | 2020 | 2021 | 2022 | 2023e | 2024e |
| Revenues | 147.4 | 19.4 | 326.2 | 59.3 | 54.0 |
| Revenue Growth | 57.2% | -86.8% | 1583% | -81.8% | -9.0% |
| EBITDA | -75.5 | -278.4 | -50.9 | -355.7 | -356.0 |
| EBIT | -89.5 | -278.2 | -50.9 | -355.7 | -356.0 |
| EBIT Margin | -60.7% | -1435% | -15.6% | -599% | -659% |
| Net Income | -90.3 | -278.4 | -42.5 | -340.1 | -356.0 |
| EV/Revenue | 13.3 | 69.0 | 1.5 | 11.7 | 19.5 |
| EV/EBIT | -21.8 | -4.8 | -9.6 | -2.0 | -3.0 |
Investment thesis
Case
Large cash position will fund six clinicals with partnering potential
Evidence
Excellent phase I data and strategic collaborations
Challenge
Small data sets
Challenge
Attrition and delays
Valuation
Dysfunctional valuation trading below cash
Quality Rating
People: 4
BioInvent is guided by a competent and experienced management team that is complemented by an equally experienced board. It has been highly successful in raising funds and getting institutional investors on board.
Business: 3
BioInvent is an early-stage research company that is dependent on partners to succeed. It operates in an industry that is highly profitable, yet at the same time highly regulated and subjected to strong competition. As a research company, it is dependent on market conditions, though its large cash position serves as a cushion.
Financials: 1
BioInvent is likely the best financed publicly traded Swedish biotech company in relation to its development stage. Funds should last through 2025. However, it is far from being cash-flow positive or reporting annual profits due to its early-stage programs.
Outlook
BioInvent now has a large pipeline that will consist of six clinical projects in H2 2023 (as well as six outlicensed). The first five have so far been safe, which is an impressive result by itself considering the average attrition rate of around 50%. BI-1206, BI-1808 and BT-001 have also demonstrated signals of efficacy despite being tested on patients who have received at least two rounds of prior treatment, in solid tumours even three. After some delay of BI-1206 due to the transition to the subcutaneous version, BioInvent is now ready to move this and the other projects forward:
- BI-1808: will initiate the phase IIa part as a monotherapy in ovarian cancer and CTCL in H2 2023. The phase I combination part together with pembrolizumab is ongoing with results expected by H1 2024. CTLC is a niche indication with potentially quick market access (as in an accelerated approval, though the FDA has recently become much restrictive).
- BI-1206 in melanoma: the first results of the subcutaneous formulation are expected after the summer. This should open the door to more important efficacy studies (phase II).
- BI-1206 in solid tumours: the study of the subcutaneous version together with pembrolizumab will begin in H2 2023. This should allow higher doses which might translate into better efficacy. As the mode of action essentially is the potentiation of pembrolizumab, we believe this could be an attractive asset for Merck.
- BI-1607: results from the phase I study should be published in H2 2023. If they are promising, the phase II expansion cohorts should get a green light.
- BI-1910: the second TNFR2 antibody has completed preclinical development and should enter phase I this year.
- BT-001: the phase I part which combines the virus with pembrolizumab is planned to start this year, 2023.
The subcutaneous version will be key to the future development of BI-1206. In addition to removing the infusion-related side effects from the IV version, there is a better commercial potential with the subcutaneous version, which could be administered in smaller clinics outside of hospitals. Furthermore, the drugs it is combined with, pembrolizumab and rituximab, either have subcutaneous formulations or will soon be available as such.
Financial results
BioInvent had revenues of SEK13m in Q2 2023 (shown below), mainly due to contract manufacturing of antibodies and research services, which is similar to Q1 2023 (SEK16m).
Total operating costs (shown below) amounted to SEK 110m, of which research and development costs made up SEK98m. This is an increase by SEK13m from the previous quarter. The cash flow for the period was SEK-91m in our non-IFRS cash flow model, where we treat investments as cash. The cash position is SEK1.46bn which will last through 2025.
The net result for the period was SEK-88m, which includes net financial items of SEK8.4m, which is a combination of currency changes and investment return on the invested cash.
Valuation
Together with a decrease in cash, we make several changes that result in a base case of SEK80 (SEK80):
- We have added some costs, in particular to the development of BI-1206 and BI-1808 in 2025, as the development has been somewhat slower than anticipated and we believe a licensing deal will occur after results in larger expansion cohorts in 2025.
- We increase the LOA of BI-1808 to 16% in CTCL (14%), as the monotherapy is safe and the phase II expansion cohort will initiate soon.
- We increase the LOA of BI-1607 in combination with trastuzumab to 10% (9%) as the phase I trial is completed but we await the full readout before setting a 100% completion rate for phase I.
- As BI-1910 (targeting TNFR2) is now ready for phase I (IND has been approved), we raise the likelihood of success to 9%. We have also assumed better licensing conditions, with an upfront of USD50m (USD30m) in 2026 and total milestone payments of USD 550m (USD400m).
- The deal environment for oncolytic viruses has become more challenging in recent times, with declining interest from larger pharmaceutical companies, meaning our previous assumptions for BT-001 are no longer reflective of real world conditions. We have therefore changed our deal assumptions for BT-001, reducing the total milestone payments to USD450m (USD1000) and the royalty rate to 13% (15%). After a review of the competitive environment, we have also reduced our sales forecast in second-line melanoma for BT-001, since this is a competitive indication with a large pipeline of competing projects, even though it is likely the indication with the best chances of success. This reduces peak sales by USD400m. We maintain our sales forecasts in mRCC.
| Sum-of-the-parts Valuation | Column1 | Column2 | Column3 | Column4 | Column5 | Column6 | Column7 | Column8 |
| Royalty | Peak sales | Market | LOA | Risk-adj. | Per share | |||
| Project | Indication | Stage | rate | (USDm) | launch | NPV (SEKm) | NPV (SEK) | |
| BI-1206 | NHL, solid tumors | 2 Phase I trials | 17% | 2,800 | 2026 | 12-27% | 2,424 | 37 |
| BI-1607 | Solid tumors | Phase I | 15% | 1,200 | 2029 | 10% | 531 | 8.1 |
| BI-1808 | Solid tumors/CTCL | Phase I | 15% | 1,700 | 2027 | 10-16% | 904 | 14 |
| BI-1910 | Solid tumors | Phase I ready | 15% | 1,000 | 2031 | 9% | 336 | 5.1 |
| Oncolytic Virus | Solid tumors | Phase I | 13% | 1,000 | 2028 | 13% | 340 | 5.2 |
| n-CoDeR partners | Multple indications | 3% | 2,000 | 15% | 428 | 6.5 | ||
| Technology value (EV) | 4,963 | 75 | ||||||
| Contract manufacturing | 251 | 3.8 | ||||||
| Net Cash (SEKm) | 1,462 | 22 | ||||||
| Overhead, incl. taxes | -1,403 | -21 | ||||||
| Total value (SEKm) | 5,273 | |||||||
| Outstanding shares (m) | 66 | |||||||
| Valuation per share (SEK) | 80 | 80 | ||||||
| * Based on the assumption of SEK /USD of SEK 10, and a WACC of 12.5% | ||||||||
| Source: Redeye Research |
Some of our project valuation assumptions are listed in the table above. Other important assumptions about deals are:
- BI-1206 (including solid cancers) upfronts of USD100m and total payments of USD1150m
- BI-1808 upfront of USD100m and total payments of USD1000m
- BI-1607 upfront of USD50m and total payments of USD650m
- BT-001 upfront of USD50m and total payments of USD450m
- BI-1910 upfront of USD50m and total payments of USD550m
Financials
| Income statement | |||||
| SEKm | 2020 | 2021 | 2022 | 2023e | 2024e |
| Revenues | 147.4 | 19.4 | 326.2 | 59.3 | 54.0 |
| Cost of Revenue | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Operating Expenses | 222.8 | 297.7 | 377.1 | 415.0 | 410.0 |
| EBITDA | -75.5 | -278.4 | -50.9 | -355.7 | -356.0 |
| Depreciation | 12.0 | -0.16 | 0.00 | 0.00 | 0.00 |
| Amortizations | 1.0 | 0.00 | 0.00 | 0.00 | 0.00 |
| EBIT | -89.5 | -278.2 | -50.9 | -355.7 | -356.0 |
| Shares in Associates | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Interest Expenses | 1.2 | 0.36 | 0.00 | 0.00 | 0.00 |
| Net Financial Items | -0.86 | -0.18 | 8.4 | 15.6 | 0.00 |
| EBT | -90.3 | -278.4 | -42.5 | -340.1 | -356.0 |
| Income Tax Expenses | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Net Income | -90.3 | -278.4 | -42.5 | -340.1 | -356.0 |
| Balance sheet | |||||
| Assets | |||||
| Non-current assets | |||||
| SEKm | 2020 | 2021 | 2022 | 2023e | 2024e |
| Property, Plant and Equipment (Net) | 16.8 | 21.7 | 26.5 | 26.5 | 26.5 |
| Goodwill | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Intangible Assets | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Right-of-Use Assets | 12.8 | 27.4 | 25.5 | 25.5 | 25.5 |
| Other Non-Current Assets | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Total Non-Current Assets | 29.6 | 49.1 | 52.0 | 52.0 | 52.0 |
| Current assets | |||||
| SEKm | 2020 | 2021 | 2022 | 2023e | 2024e |
| Inventories | 4.1 | 16.8 | 11.5 | 5.9 | 5.4 |
| Accounts Receivable | 39.7 | 16.3 | 55.1 | 4.7 | 4.3 |
| Other Current Assets | 0.00 | 0.00 | 0.00 | 4.7 | 4.3 |
| Cash Equivalents | 729.3 | 1,365.0 | 1,593.6 | 1,264.2 | 908.4 |
| Total Current Assets | 773.0 | 1,398.2 | 1,660.2 | 1,279.6 | 922.5 |
| Total Assets | 802.6 | 1,447.3 | 1,712.2 | 1,331.7 | 974.5 |
| Equity and Liabilities | |||||
| Equity | |||||
| SEKm | 2020 | 2021 | 2022 | 2023e | 2024e |
| Non Controlling Interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Shareholder's Equity | 743.5 | 1,367.0 | 1,606.1 | 1,266.0 | 910.0 |
| Non-current liabilities | |||||
| SEKm | 2020 | 2021 | 2022 | 2023e | 2024e |
| Long Term Debt | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Long Term Lease Liabilities | 5.6 | 21.5 | 18.8 | 18.8 | 18.8 |
| Other Long Term Liabilities | 0.00 | 52.0 | 0.00 | 25.6 | 25.6 |
| Total Non-Current Liabilities | 5.6 | 73.5 | 18.8 | 44.4 | 44.4 |
| Current liabilities | |||||
| SEKm | 2020 | 2021 | 2022 | 2023e | 2024e |
| Short Term Debt | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Short Term Lease Liabilities | 6.0 | 6.8 | 8.2 | 8.2 | 8.2 |
| Accounts Payable | 0.00 | 0.00 | 0.00 | 7.1 | 6.5 |
| Other Current Liabilities | 47.5 | 0.00 | 79.1 | 5.9 | 5.4 |
| Total Current Liabilities | 53.5 | 6.8 | 87.3 | 21.2 | 20.1 |
| Total Liabilities and Equity | 802.6 | 1,447.3 | 1,712.2 | 1,331.7 | 974.5 |
| Cash flow | |||||
| SEKm | 2020 | 2021 | 2022 | 2023e | 2024e |
| Operating Cash Flow | -62.6 | -245.8 | -41.2 | -329.4 | -355.8 |
| Investing Cash Flow | 0.00 | -13.3 | -12.4 | 0.00 | 0.00 |
| Financing Cash Flow | 644.6 | 894.9 | 274.4 | 0.00 | 0.00 |
Rating definitions
The team
Disclosures and disclaimers
Contents
Investment thesis
Quality Rating
Outlook
Financial results
Valuation
Financials
Rating definitions
The team
Download article