Coverage Initiation: CureVac

Target Price  


Credit Risk 


Fundamental Strength  


Sustainability Score  


Independent Board  


8.88 


DDD 


0/10 


4/10 


No 




 

We are pleased to initiate coverage on the German Clinical-stage biopharmaceutical company CureVac NV (CureVac). CureVac has pioneered a novel and game-changing mRNA technology that demonstrated its strength in the fast (clinical) development of COVID-19 vaccines. In summary, the company researches, develops and produces mRNA-based medicines. Meanwhile its latest clinical development candidate CVnCoV (proposed INN Zorecimeran), which had been in a global phase III trial for prophylactic vaccination against COVID-19, has been wound down. Approval had yet to be filed. 

mRNA as a technology has meanwhile emerged as a hot topic and many companies are using this type of molecule as a potential drug. In the race for a potential COVID-19 vaccine, mRNA platforms demonstrated their potential as two of the three leading firms (BioNTech and Moderna) crossed the finishing line in 2020. Despite CureVac’s slow start in the clinical development of its candidate, the company gained new impetus following a financial “refuelling” 

CureVac runs a typical clinical-stage business model based on its mRNA technology platform and proprietary know-how. Based on mRNA’s modular nature, the company has generated extensive expertise in appropriate fields such as mRNA biology, optimisation and production. The key to the business is the RNAoptimizer™, which is backed by a database. The platform has three pillars: 

  • mRNA optimisation: enhancing the translation efficacy of the mRNA molecule 
  • Protein design: optimising the specific properties of the target protein 
  • mRNA delivery: application of the optimal delivery system from its own proprietary or third-party delivery systems. 

We like the fact that the company’s pipeline is broad although it is not very diversified in terms of clinical stages. Like other mRNA tech companies, CureVac has a partnership with a pharma bigwig, GSK, which comprises a co-development and co-marketing strategy. Since CureVac’s pockets have not been as deep as its rivals, the company has in fact done very well. 
Broadly, CureVac’s development pipeline can be split into 

  • Prophylactic Vaccines (e.g. against COVID-19) 
  • Oncology (e.g. therapeutic vaccines, intra-tumoural applications) 
  • Protein Therapy (e.g. rare diseases, gene editing and other therapeutic antibodies) 

Our thesis 

The new CEO could be a game changer or a grave digger. Depending on the decision(s) he takes, CureVac has the potential to catch up with the leading mRNA companies. Should this happen, CureVac shares will be seriously undervalued. 
As a still-loss-making company, financial resources define the company’s leeway. CureVac reported net cash of €500m at the Q3 22 stage. Assuming a higher cash burn in the fourth quarter, net cash could be be ~€460m. Additionally, the company has an At-the-Market Facility of €600m in place, of which €250m was drawn in February 2023. All in all, the company is likely to have ~€1bn in cash. This will not be enough to steer the whole R&D pipeline through all the remaining clinical development stages in our view. We see two possibilities: A) a continuation based on the hope of finding new partners with deep pockets and some swift development. Nevertheless, the company’s pockets will not be deep enough to fund the more expensive next steps with all candidates. B) The new CEO could earn his stripes by rightsizing the R&D pipeline. This could include selecting the most promising two to three candidates and a prioritisation of the rest of the pipeline. In order to generate additional cash, development candidates could be sold or spun off into a new separate entity, which would then look for separate VC funding. Such efforts could help to prolong CureVac’s runway to finance a higher pipeline value. 

Recommendation 

We initiate coverage of CureVac with an Add recommendation based on our DCF and SOTP valuations despite the early-stage pipeline as it stands today. The company has sufficient financial leeway to select the most promising candidates as we believe the new CEO will do some serious work on rightsizing the pipeline. 
We allow for the following outlook: 
  1. new CEO introduces some changes 
  2. the pioneer of the mRNA technology has some promising clinical candidates 
  3. rightsizing of the clinical pipeline 
  4. new partnerships 

Analyst – Martin Schnee 


 
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