Scancell : a leader in antibody and vaccine technology platforms

Trinity Delta

Scancell

A leader in antibody and vaccine oncology platforms

Scancell is a clinical stage immunology specialist. It has two promising oncology vaccine platforms, Moditope and ImmunoBody, and two antibody technologies, GlyMab (anti-glycans) and AvidiMab, with the potential to treat many solid cancers, either as monotherapy or in combination. Modi-1, the first Moditope programme, is progressing in a Phase I/II trial targeting hard-to-treat tumours with results due through 2023. The lead ImmunoBody programme, currently SCIB1, is in a Phase II study in metastatic melanoma. The broad acting GlyMab antibodies are generating exciting preclinical data, which led to a partnering deal with Genmab. Further such deals are expected. AvidiMab technology will be increasingly employed to enhance avidity and potency. Updating our risk adjusted NPV lifts our Scancell valuation to £269.6m, or 32.9p/share, from £237.4m, or 29.1p/share, previously.

Year-end: April 30	2021	2022	2023E	2024E
Revenues (£m)	0.0	0.0	5.3	0.0
Adj. PBT (£m)	(17.7)	(11.9)	(17.6)	(24.0)
Net Income (£m)	(15.5)	(2.1)	(15.7)	(21.9)
EPS (p)	(2.28)	(0.25)	(1.93)	(2.68)
Cash (£m)	41.1	28.7	17.8	20.2
EBITDA (£m)	(8.6)	(12.6)	(13.8)	(20.2)

Source: Trinity Delta Note: Adjusted numbers exclude exceptionals

• Moditope vaccine induces CD4 activation The Moditope platform should achieve a value inflection during 2023 as the lead vaccine, Modi-1,initially generates safety data from the ongoing Phase I/II trial. This should be followed later in the year by the first, admittedly early, indications of efficacy in difficult cancers. Moditope is unique; it targets highly tumour-specificepitopes and induces CD4 cytotoxic T cells, with the consequent immune cascade eliciting a direct killing effect on cancerous cells. Significantly, the trial design also examines treatment with a CPI combination.
• GlyMab is the lead antibody platform The deal with Genmab for a preclinical antibody programme provides attractive economics but, more importantly, is material validation for the GlyMab platform. Management has successfully created five monoclonal antibodies targeting tumour-associated glycans. These are exquisitely tumour-specific and, in contrast to other approaches, have been shown in preclinical models to have high affinity and good potency. The plan is to progress two of these proprietary programmes into the clinic before seeking partners.
• ImmunoBody and AvidiMab are also progressing The ImmunoBody platform is set to be revitalised as the current Phase II trial, SCOPE, exploring SCIB1 in advanced melanoma, transitions to the AvidMab enhanced and optimised formulation known as iSCIB1+. This should provide improved potency and efficacy, as well as usefully rejuvenating patent life for ImmunoBody and showcasing AvidiMab's properties.
• Execution is what will drive share appreciation Updating our Scancell model sees our valuation rise to £269.6m, equivalent to 32.9p per share (from £237.4m and 29.1p per share). Key near- and mid-termcatalysts will be delivery of encouraging clinical data, increasing visibility on clinical progress, and delivery of further commercial deals. Positive outcomes should boost investor sentiment materially.

Outlook

15 February 2023

Price	18.78p
Market Cap	£156.27m
Enterprise Value	£133.37m
Shares in issue	818.4m
12 month range	10.5p-29.4p
Free float	54.4%
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 has four broadly applicable technology platforms. Two are therapeutic vaccines, Moditope and ImmunoBody, and two are antibody based, GlyMab and AvidiMab.

Analysts

Lala Gregorek

[e-mail] [phone]

Philippa Gardner

[e-mail] [phone]

Trinity Delta

Four platforms: two vaccine and two antibody-based

Scancell

Investment case

Scancell is a clinical-stageimmuno-oncology specialist. It was founded in 1996 as a spin-out of research led by Professor Lindy Durrant at the University of Nottingham. There are four distinct technology platforms that address oncology vaccines and antibodies: Moditope vaccine effects are mediated via CD4 pathways; ImmunoBody vaccines employ CD8 T cell pathways; the GlyMab platform generates high affinity anti-glycan antibodies; and AvidiMab can enhance the avidity of most antibodies. All the therapeutic platforms should have broad applicability in many forms of solid tumours. The ImmunoBody technology was also employed to create COVIDITY, a second generation COVID-19 vaccine. Scancell initially listed on PLUS in 2008, moving to AIM in 2010. Sizeable investment by Redmile in 2020 transformed Scancell's ability to fund its activities. Leading shareholders are Redmile (29.7%), Vulpes (14.4%) and Calculus Capital (5.6%). The company is based in Oxford and Nottingham and has >50 employees.

A valuation of £269.6m, equal to 32.9p a share (27.4p diluted)

Valuation

We value Scancell using a sum-of-the parts, where the NPV of the four technology platforms are summed and netted out against forecast operational costs, and risk-adjusted to reflect the stage of development, with the clinical stage platforms assigned higher success probabilities. Conservative assumptions are employed for factors such as timings of clinical studies, market launches, adoption curves, and patient penetration. The antibody platforms may arguably have higher commercial potentials, but their earlier stage means lower success probabilities are used. Despite our cautious approach, we value Scancell at £269.6m, equivalent to 32.9p per share (27.4p fully diluted).

Plenty of opportunities and funded to value inflection points

Financials

H123 results were boosted by the £5.3m upfront fee from the Genmab deal. This saw the operating loss reduced to £2.0m (H122: £5.4m), despite the higher costs as three clinical trials progress, which saw R&D costs rise to £4.9m (H122: £4.0m). G&A costs were £2.4m (H122: £1.9m) due mainly to an increased share option charge. The interest payable and finance expense lines are impacted by the accounting treatment of the CLNs (see later). The cash balance was £24.0m (FY22: £28.7m), with the cash runway extending through to Q1 2024.

Oncology is a crowded and competitive segment

Sensitivities

Scancell's technology platforms, especially the GlyMab antibodies, are at the earlier development stages and, inevitably, carry a higher risk profile. The immuno-oncology sector is increasingly crowded and competitive, with multiple players (ranging from large pharmaceutical groups to biotech companies and even well-funded academic centres) vying to develop the definitive breakthroughs. Equally, the usual industry risks associated with clinical trial results, navigating regulatory hurdles, ensuring sufficient financing is in place, partnering discussions and, eventually, the exit strategy, also apply.

2	15 February 2023

Trinity Delta

Clinical data will define the value of the vaccine platforms

Modi-1 data will give indications of Moditope's potential role

iSCIB1+ effectively reboots whole ImmunoBody platform

Antibody platforms are at earlier stages but hold much promise

Scancell

Scancell: so much more than oncology vaccines

Scancell has assembled four novel technology platforms that split neatly into

therapeutic vaccines, ImmunoBody and Moditope, and antibodies, GlyMab (anti-

glycan mAbs) and AvidiMab. Whilst vaccines are the most advanced, with key

clinical efficacy data expected during 2023 for both the lead Moditope and

ImmunoBody programmes, it is the antibodies, notably GlyMabs, that we view

as less well understood and certainly under-appreciated. The recent deal with

Genmab, a highly respected antibody developer, serves to validate the GlyMab

approach and suggests the direct and potent anti-tumour activity seen in

preclinical models could translate to the clinic. The next 12 to 18 months should

see multiple, diverse, clinical trial results, a number of which could be genuine

value inflection points. Whilst not without risks, we believe the current share

pricefails to reflect the opportunities. Updating our rNPV-based model sees our Scancell valuation rise to £269.6m (32.9p/share), from £237.4m (29.1p/share).

We described the changes in cancer treatments in previous notes (eg Outlook April 2022), detailing the importance of the tumour micro-environment(TME) and the seven stepsin how the immune system normally recognises and kills abnormal cells. Checkpoint inhibitors (CPIs) have transformed clinical practice, but their success also highlights their failings. Because CPIs work by removing the "brakes" on the immune system, rather than directly boosting immune function, patients may also benefit from combination therapies that include immune-stimulatory elements. It is here that a therapeutic vaccine could act synergistically, and such thinking underpins why therapeutic cancer vaccines are back in vogue.

Scancell has a lead programme from both the Moditope and ImmunoBody vaccine platforms in clinical trials. Modi-1consists of three citrullinated tumour-associated peptides. The open label Phase I/II study, ModiFY, is flexible and sees Modi-1 used alone or in combination with CPIs in solid tumours, including triple negative breast (TNBC), ovarian, renal and head and neck (H&N) cancers. The first formal safety and immunogenicity results are expected shortly, with early efficacy data during 2023. We view positive data as a major value inflection point.

SCIB1, the lead ImmunoBody vaccine, is completing a Phase II trial for metastatic melanoma. The study now reflects changes in clinical practice and includes doublet therapy consisting of ipilimumab (Yervoy) plus nivolumab (Opdivo), and with pembrolizumab (Keytruda). The new protocol has also switched the delivery system from electroporation to the PharmaJet needle-free device. If successful, management intends to transition to iSCIB1+, an AvidiMab enhanced version of SCIB1, that should bring increased potency and extend patent life.

However, we feel it is GlyMab, anti-glycan tumour directed antibodies, and AvidiMab, avidity and potency enhancer, that are under-appreciated. The GlyMab platform has generated five preclinical compounds with attractive, and promising, anti-tumour activities that are fostering industry interest. The recent deal with Genmab, worth up to $624m if successful, is valued confirmation of clinical and commercial potential. AvidiMab is employed in the COVIDITY programme, where recent results have validated AvidiMab as an immune response booster. Our rNPV model has to place more emphasis on later stage programmes, yet we believe these antibody platforms are likely to also provide material value inflection points.

3	15 February 2023

Trinity Delta

Scancell

Four platforms addressing antibodies to vaccines

Greater understanding of oncology leads to more combination approaches

Over the past decade, the role of the immune system in tumour initiation and progression has become better understood,as has the importance of the tumour microenvironment (TME). The recognition of the multiple, and subtle, interactions between the two has seen clinical research and, increasingly, therapy being switched from a tumour-centric to a TME-centric model. The principles underlying the cancer-immunitycyclewere explored in our extensive April 2022 Outlook.This also covered how immunotherapy aims to identify and correct the imbalance so that the cycle becomes self-sustaining again; how, unfortunately, tumour cells appear to have intrinsic mechanisms to help evade anti-cancer therapies through bypassing every targeted step of the cycle; and how the research effort has shifted to identifying and developing combination regimens that will boost overall efficacy and limit treatment resistance but do so with manageable side-effects.

Exhibit 1: Scancell's pipeline of programmes funded with current resources

Source: Scancell

Four distinct platforms with broad applicability

Modi-1 clinical trial data expected throughout 2023

In this report we focus on Scancell's four technology platforms, which can be classified into Antibodies (GlyMab and AvidiMab) and Vaccines (Moditope and ImmunoBody). The vaccine platforms are the most advanced, with three programmes at varying stages of clinical trials. The GlyMab (anti-glycan tumour directed antibodies) and AvidiMab (avidity and potency enhancer) platforms are at earlier stages of development. Exhibit 1 details the programmes that are underway and funded through to value inflection points with current resources.

Modi-1, the lead programme of the Moditope platform, is progressing through the ModiFY Phase I/II study with safety and immunology data from the three initial cohorts expected shortly. Efficacy data from the expansion cohorts, evaluating Modi-1 with current standard of care in renal, head & neck, and triple negative breast cancers, will become available through 2023/24. For the ImmunoBody platform, the SCIB1 melanoma programme is transitioning to the improved iSCIB1+ construct, with the Phase II SCOPE study expected to complete in H225.

4	15 February 2023

Trinity Delta

Scancell

GlyMab antibodies: novel and highly differentiated

Glycan antibodies are a highly attractive, yet little known, field

Glycans are key elements in many biologic pathways

Glycosylation has an important role in immune evasion…

...malignancy, and tumour progression…

...and is associated with specific biologically relevant alterations

Monoclonal antibodies (mAbs) have quietly transformed clinical care for many chronic treatment regimens, being involved throughout the patient journey from initial diagnosis to targeted treatments. Their highly prized specificity makes them particularly suited to precision applications and their ubiquity across many disciplines, from ground-breaking academic research through to consumer pregnancy tests, is testament to their value. However, almost all mAbs target specific peptides or proteins, with few notable exceptions such as dinutuximab (United Therapeutics' Unituxin), which binds to the glycan GD2and is used to treat children with high-risk neuroblastoma.

Yet carbohydrate binding antibodies, such as glycans, play key roles in biology; such endogenous antibodies recognise bacterial, fungal, and other microbial carbohydrates to prevent systemic infections and help maintain microbiome homeostasis. Their presence on proteins has major impacts on functions such as bioactivity, folding, trafficking, stability, half-life, signalling, and mediation of cell- cell interactions. Aberrant glycosylation is known to be a common feature of many cancers and plays crucial roles during virtually all steps of tumour genesis and progression. Such aberrant glycosylation may occur in both glycoproteins and glycolipids, leading to the formation of tumour-associated carbohydrate antigens.

Glycosylation changes in cancer are not simply random

Work on how tumours create an immune-suppressive environment (TME) and exploit selective modifications (immunoediting) to evade effective anti-tumour immune responses is clarifying the role of tumour glycosylation in immune evasion. Aberrant tumour glycosylationalters how the immune system recognises the tumour and also induces immunosuppressive signalling through glycan-binding receptors. Tumour cells exploit glycans in a similar manner to pathogens, using their typical "normal" formats and functions to disguise themselves, hijacking the immune system for their own benefit.

These glycosylation alterations take a variety of forms ranging from loss of expression or excessive expression of certain glycans, to increased expression of incomplete or truncated glycans, and, less commonly, the appearance of novel glycans. It is notablethat these are not simply the consequence of disordered biosynthesis in cancer cells but highly specific changes that are correlated with malignant transformation and tumour progression. Given that cancer is a "micro- evolutionary" process in which only the fittest cells survive, and that tumours are under immune surveillance pressure, it is likely that these specific glycan changes have a functional role in tumour biology and are selected for during progression.

The key variations between a normal and cancer cell (Exhibit 2) include alterations to mucin expression and synthesis of incomplete or truncated O-glycans(encouraging pro-survival, migratory, and invasive behaviours), raised sialylation(a key step in cell fate decision), increased fucosylation(affecting adhesion molecules and growth factor receptors), and altered branching of N-glycans(profoundly involved in cancer growth, invasion and metastasis through pathways that are not yet fully understood).

5	15 February 2023