Investment continues amidst various market challenges
EARNINGS/SALES RELEASES

Sensei has given an update on its Q1 22 performance – which was largely in line with our expectations. The firm also announced that it is prioritising the development of its SNS-101 over the SNS-401-NG program, possibly to manage cash, considering the sharp sentiment reversal in the Biotech sector. While the attractiveness of sector valuations could help trigger a re-rating via a growing acquisitive interest from Big Pharma, the road ahead for Sensei is a long one and, hence, warrants investor patience.


FACT

Sensei Biotherapeutics (hereafter referred to as ‘Sensei’) has reported Q1 22 results – largely in line with our expectations, with a quarterly net loss of $12.4m (vs. $9.4m Q4 21) mainly due to a sustained increase in operating expenses as the team continues to grow, while further progress was made on the pipeline front. The firm also announced that it has prioritised the development of its SNS-101 over the SNS-401-NG program, possibly to manage cash burn, considering the recent decline in Biotech sector fundraising. Remember, Sensei has been funding its R&D initiatives through cash in the absence of an earnings stream. As a result, the group ended the quarter with a cash (including marketable securities) balance of $136.2m vs. $147.6m at end Q4 21 which, according to the management, is enough to fund the operations until Q1 25 vs. H1 24 guided previously.


ANALYSIS

Oncology market dynamics
In Q1, oncology markets again failed to revive, with cancer diagnosis remaining below its pre-pandemic levels. This has also been highlighted by oncology heavyweights like Roche (Q1 oncology: -3%) and Novartis (-3%), who continue to report oncology sales pressure. Even Astra (+18%), despite possessing a young (and hence, lower biosimilar risks vs. the Swiss giants) and administratively-convenient oncology portfolio, has faced pressure in some of its key drugs like Imfinzi and Lynparza. Astra’s performance was also impacted due to rebate adjustments in the US, and increasing pricing pressure in China – due to huge discounts for various access programs. Moreover, escalating global macro-economic concerns, strict lockdowns in China and an on-going war in Europe could further delay a complete recovery in oncology markets as the near-term focus shifts to fulfilling high-priority daily needs, where battling inflation remains a pressing concern.

Biotechs rout, but there could be silver lining
In Q1, the Biotech sector rout continued – evident in the sustained erosion for the NASDAQ Biotechnology Index (illustrated below). This downturn was largely due to investors becoming increasingly risk-averse due to brewing macroeconomic concerns, also translating into faster interest rate hikes and spiralling inflation. These concerns could make it difficult for Biotechs to raise fresh capital in the near-term.

However, with Biotech valuations now having witnessed a significant correction – from an all-time-high at the peak of the pandemic, driven mainly by success stories like Moderna – the markets are now noticing (reviving) acquisitive interest from the Big Pharmas, who had shunned major deals for most of the past two years on high valuation concerns. Also, considering the lacklustre R&D performance of most (European) Big Pharmas in recent months, including Roche and Novartis, there is an increased need for them to add muscle to their product pipelines.

The potential benefits for the likes of Sensei could be limited, however, considering that its product pipeline is still in the pre-clinical stage. Nevertheless, as the firm has ample liquidity to continue its R&D initiatives for the next three-four years a lack of acquisitive interest should not be concern, unless there’s another (major) R&D setback.


IMPACT

Our model is under review and we will tweak our estimates.