September 2021 Investor Forum

Making good progress with Sol

Incanthera (INC) was a spin-out from the Institute of Cancer Therapeutics (ICT) at the University of Bradford to exploit development opportunities generated by ICT. Following its listing on the Aquis Growth Exchange in February 2020, INC has been concentrating its resources on the further advancement of lead product, Sol, which is now the subject of progressive discussions with two global cosmetic companies. A recent Placing with institutional investors raised ca.£1.0m net, which is providing the group with a cash runway until the second half of calendar 2022, excluding any income that may be included as part of a licensing deal.

• Strategy: INC is a specialist oncology company using a novel pro-drug approach to deliver cytotoxic warheads directly to tumour cells. It intends to develop drugs to a suitable valuation inflection point and then out-license them for late-stage trials, in return for development milestones and royalties.
• Sol: Sol is being developed for preventing the progression of sun-damaged skin (solar keratoses) to skin cancer Over the past year, INC delivered two successful independent skin studies and filed for a new patent, paving the way for a cosmetic licensing deal. Discussions are under way with two global players.
• Valuation: A group of seven AIM-listed peers developing new drugs in the field of cancer currently trade on an average EV of £97.3m (range £5.5m-£244.5m), and a median of £62.7m. The relative EV of these UK companies to the EV of INC is in the range of 0.6x (Evgen) to 28.6x (Redx), with an average of 11.4x.
• Risks: Investments in small, early-stage pharmaceutical companies carry a significant risk, and additional capital will be required for future expansion of clinical programmes. This additional capital may come from commercialisation of Sol, and/or INC may need to raise more capital in the future.
• Investment summary: INC offers distinct technology with the potential to attract major players, especially given management’s strategy to out-license products early. Since listing, the focus has been on Sol, a patent-protected, value-added formulation for the treatment and prevention of pre-cancerous and cancerous skin conditions into a sun cream for cosmetic use to prepare it for out-licensing. The current EV does not fully reflect the strong progress, suggesting that there is good upside potential when comparing INC with a group of UK-listed peers.