Initial coverage Elicera: Cell Therapy Company Under the Radar

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Initiation of Coverage Elicera 20 Dec 2021

Carlsquare Equity Research initiates coverage of Elicera Therapeutics and identifies a cancer research company with good potential. The Company is developing novel cell therapy therapies based on the enhancement of validated technologies. A primary focus is on the CAR-T area, where the market should multiply in the coming years. We estimate a risk-adjusted value of about SEK 13 per share. We see significant room for further appreciation upon clinical trials and business development progress.

The First Listed Swedish CAR-T-company Out of the Starting Blocks

Elicera is developing, among other things, new cancer treatments in CAR-T cell therapy, an area that has generated strong clinical results in patients with difficult-to-treat cancer and whose market should grow strongly in the coming years. Leading scientists back the Company, and Elicera’s candidates are differentiated with a proprietary technology to boost immune responses to cancer. So far, there is limited clinical data for Elicera’s portfolio, but the success of similar external projects bodes well. The corporate cash position is sufficient for the next two years. If outstanding warrants are exercised next year, financial sustainability will improve.

Benefitting from Regulatory and Financial support

Elicera intends to address rare cancers such as lymphoma and brain cancer, opening potentially faster clinical development than the average drug project. The projects have also received significant research funding. The aim is to license out projects and technology to essential partners, and examples of business development in the industry show that this can happen relatively early. At the same time, the risk of setbacks in clinical trials is high in drug development, as it is for Elicera’s project portfolio. However, we believe that the prospects for the Company’s immune-activating technology iTANK are not entirely dependent on a single project, which mitigates the technical risk to some extent

Weak Share Performance not Linked to Project Development

We believe that the low valuation, with a net asset value of over SEK 50 million, stands out compared to similar companies. An explanation is that Elicera already has one project in clinical development and is expected to add another in the coming year. The share price has been pressured by sell-offs related to a pre-IPO issue and, as expected, a somewhat limited news flow. We see the potential for more share price-driving news in 2022. We calculate a risk-adjusted justified value of SEK 13 in a base case scenario. In case of progress in clinical development, we estimate that the stock could double further in a bull scenario. The share is currently trading just above our bear scenario, where we only include the brain tumour project in our valuation.

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