Intec Pharma — Update 29 September 2016

Intec Pharma — Update 29 September 2016

Intec Pharma

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Intec Pharma

A new pill delivering best-in-class results

Initiation of coverage

Pharma & biotech

29 September 2016

Price*

NIS20.97

Market cap

NIS239m/
US$63m

*Priced at 28 September 2016
NIS3.77/$

Net cash (NISm) as at 30 June 2016

81

Shares in issue

11.4m

Free float

62%

Code

NTEC

Primary exchange

TASE

Secondary exchange

NASDAQ

Share price performance

%

1m

3m

12m

Abs

(5.2)

27.3

(8.1)

Rel (local)

(4.4)

23.2

(1.0)

52-week high/low

NIS23.8

NIS12.2

Business description

Intec Pharma is a drug delivery company that has developed the accordion pill, a novel gastroretentive controlled release formulation. The company is currently using this technology to develop AP-CDLD for Parkinson’s in Phase III and AP-ZP for insomnia in Phase II.

Next events

Announcement of NSAID ulcer programme details

H216

Cannabinoid Phase I

H117

AP-ZP partnering discussions

Ongoing

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

We are initiating our coverage of Intec Pharma, a drug delivery company that has developed a novel drug delivery device termed the accordion pill (AP), with advantages for drugs with poor solubility or absorption. The company currently has two disclosed development programmes: AP-CDLD, a controlled release formulation of carbidopa and levodopa for Parkinson’s in Phase III; and AP-ZP, a controlled release formulation of zaleplon for insomnia ready to enter Phase III though awaiting a strategic partner before doing so. We are initiating our valuation at NIS540-582m.

Year
end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/14

0.0

(20.4)

(4.22)

0.0

N/A

N/A

12/15

0.0

(27.9)

(3.58)

0.0

N/A

N/A

12/16e

0.0

(50.6)

(4.31)

0.0

N/A

N/A

12/17e

0.0

(51.6)

(4.18)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

A special pill with unique applications

The AP is a folded, multilayer membrane packaged into a normal capsule, which expands to a sheet within the stomach to many times its original size. This property causes the pill to be retained in the stomach for up to 12 hours. This is ideal for drugs with local activity in the stomach or upper digestive tract, or that have poor solubility and require extended periods of exposure to the gastric medium.

A better carbidopa/levodopa with definitive results

Carbidopa and levodopa is the most common treatment for Parkinson’s disease, but poor pharmacokinetics lead to a cycling of patients between “off” states and troubling dyskinesia. However, AP-CDLD significantly reduced off time by 45% and dyskinesia by 42% at the highest dose compared to patients’ current treatments in Phase II, which is best in class for oral formulations. The company initiated a 460 patient trial Phase III in April 2016 and is targeting 2019 approval.

A sleeping pill without the hangover

The FDA issued warning letters about both Ambien and Lunesta, citing severe impairment due to next-day residual effects of the drugs due to their long half-lives (three and six hours). Intec developed AP-ZP, a formulation of Zaleplon, a drug from the same class with a shorter (1h) half-life, which provides measureable sleep benefits, without any measurable next-day effects.

Valuation: NIS540-582m or NIS47-51

We value Intec at NIS540-582m or NIS47-51 per share, based on a risk-adjusted NPV analysis, with 73% of the value (NIS405m) associated with AP-CDLD because of the drug’s established mechanism and best-in-class performance. This correlates to 2% market share and peak sales of $196m. We forecast that the company will only need NIS70m in additional funding before profitability in 2020, but this will be offset via out-licensing AP-ZP.

Investment summary

Company description: Opening up new avenues

Intec Pharma is a drug delivery company that went public via an IPO on TASE in 2010 and NASDAQ in 2015. The company’s core technology is the accordion pill (AP), a controlled release drug delivery device in the form of layered membranes that are delivered in a normal capsule pill. The device expands in the stomach, leading to retention for up to 12 hours. This process is ideal for drugs that must be delivered to the upper digestive tract and drugs that dissolve poorly. Intec Pharma has developed AP-CDLD for Parkinson’s in Phase III and AP-ZP for insomnia is Phase II ready. There is also an undisclosed product in Phase I for the prevention of NSAID induced ulcers of the stomach, duodenum, and bowel. It will be launching a Phase I trial of cannabinoids for pain (and potentially other indications) in Q117. It has a development agreement with Biogen to develop an AP formulation of one of Biogen’s approved drugs.

Valuation: NIS540-582m or NIS47-51per basic share

We have derived an initial valuation of Intec of NIS540-582m or NIS47-51 per basic share based on a risk-adjusted NPV analysis. The highest value programme is AP-CDLD at NIS405m because of the well-established mechanism, best-in-class efficacy, and advanced development stage. We forecast 2% market share and $196m in peak sales. We expect to update our valuation to reflect data from the open label extension of the AP-CDLD trial, AP-ZP business development, progression of the cannabinoid programme, and with more information on the two undisclosed programmes.

Financials: NIS81m in cash at H116, NIS70m more needed

Intec raised NIS130m during the August 2015 IPO on NASDAQ, and ended H116 with NIS81m in cash. The company has stated that it intends to out-license AP-ZP for further development and commercialisation, which we believe will significantly offset the NIS70m in additional capital needed before profitability in 2020. The remaining cost to develop AP-CDLD is low (NIS87m) because the company is pursuing a 505(b)2 pathway, with a single Phase III needed for approval.

Sensitivities: Risks largely commercial

The development risks of Intec are largely centred on whether the AP technology can provide a definitive benefit over other controlled release (CR) formulations. The company has MRI evidence that APs are effectively retained in the stomach, but the question remains how this translates into a benefit for any given compound. The advantages of the formulation are most well-established for AP-CDLD, which demonstrated superior results to existing CR carbidopa/levodopa in Phase II. The benefit is less clear for AP-ZP, and it will likely be significantly more difficult to demonstrate a lack of next-day effects for the drug considering that these have generally not been observed during pivotal trials for other drugs of the class. We therefore see AP-ZP as the higher risk programme. Both drugs face significant commercial risks, because Parkinson’s and insomnia are two markets dominated by generics, with very large numbers of treatment options. In the case of Parkinson’s, there are multiple programmes aimed at the same treatment axis as AP-CDLD. In the case of insomnia, prescription hypnotics are half the total number of prescriptions for the disease, but are dwarfed by OTC treatments. The recent approval of Belsomra and other orexin inhibitors in development are a potentially disruptive force. Intec intends to out-license AP-ZP before further development, and there is a risk that these market effects will limit its options and eventual profitability. Financial risks for the company are limited, especially compared to other companies at this stage. Our predicted funding shortfall is small (NIS70m), and the out-licensing of AP-ZP would likely provide a significant offset to this amount. Development costs are limited due to the 505(b)2 pathway to approval, and this pathway has been confirmed by the FDA in the case of AP-CDLD.

Company description: A better formulation option

Intec is an Israeli specialty pharmaceutical company developing new formulations of existing drugs using its proprietary accordion pill (AP) technology. Intec has five development programmes based on the AP technology. The most advanced programme is AP-CDLD, an AP formulation of the well-established Parkinson’s drugs carbidopa and levodopa, which have proven difficult to formulate effectively in an extended release pill for an array of reasons. The programme in is Phase III. The company has also completed a Phase II trial of AP-ZP, an AP with zaleplon for the treatment of insomnia. This programme hopes to leverage the short half-life of zaleplon with controlled release to provide effective sleep maintenance without next-day residual effects. A third clinical programme is investigating a product to reduce the risk of NSAID induced ulcers in the stomach, duodenum, and small bowel. Intestinal ulcers, unlike peptic ulcers, are poorly controlled with proton pump inhibitors. The details of this programme are undisclosed. Also undisclosed are the details of a preclinical partnership with Biogen to develop an AP formulation of one of Biogen’s approved medications. The company is entitled to $8m upfront, $39m in milestones, and a low single digit royalty on sales up to $100m, should Biogen exercise the option. And finally, the company recently announced in August 2016 the intention to develop formulations of cannabidiol and tetrahydrocannabinol for the treatment of pain.

Exhibit 1: Intec pipeline

Programme

Stage

Indication

Molecule(s)

AP-CDLD

Phase III

Parkinson's

Carbidopa and levodopa

AP-ZP

Phase III ready

Insomnia

Zaleplon

Undisclosed drug

Phase I

Prevention of NSAID induced gastroduodenal and small bowel ulcers

Undisclosed

Biogen partnership

Preclinical

Undisclosed

Approved Biogen drug

AP-CBD/THC

Preclinical

Multiple including pain

Cannabinoids

Source: Intec Pharma

Polka pills

Intec’s key innovation is the development of the accordion pill drug delivery platform. The AP technology uses a typical gel-cap pill, which dissolves in the stomach to release a folded two-dimensional composite film impregnated with the drug of interest. The AP expands upon exposure to the gastric medium to 3.5cm in length, and is retained in the stomach while drug is released.

Exhibit 2: Composition and assembly of accordion pill

Source: Intec Pharma

The AP platform is versatile and can be adapted to an array of drugs and release profiles. Each accordion pill is comprised of a series of layers, which can be formulated independently to control the drug release profile:

Inner drug matrix – a polymer matrix impregnated with the drug of interest. The matrix is designed to dissolve when exposed to the gastric medium.

Outer membranes – an “envelope” that surrounds the inner matrix. These membranes are hydrophilic and swell upon exposure to the gastric medium, but are resistant to degradation in the stomach. The swelling of these membranes exposes the inner drug layer to the gastric juices allowing it to dissolve, while retaining the physical profile of the AP. This layer fully dissolves in the lower digestive tract.

Optional immediate release layer – this is a layer of drug in a matrix or film applied to the outside of the AP, designed to dissolve immediately after the drug reaches the stomach.

Intec is currently investigating the formulation for a series of controlled release (CR) applications because of a set of distinct advantages the AP has over other existing CR formulations. One of the central characteristics of the AP is that its expansion in the stomach leads to unprecedented gastric retention times (eight to 12 hours), as measured through MRI imaging. The gastric retention is driven by three factors that discourage passage through the pylorus: the device’s physical size, its two-dimensional profile, and its rigidity. Unlike other CR formulations that release drug continuously though their passage of the digestive tract, the AP isolates this dissolution to the stomach, and the drug is absorbed primarily in the duodenum and proximal small intestine, which can be important for drugs that have local activity or specific absorption in these regions. This provides a uniform absorption profile and can potentially improve plasma levels by prolonging the absorption phase. Moreover, the solubilisation of the drug is aided by the high concentration of bile acids. This consideration is important as an increasing number of new drugs are of low solubility, up to 60% by some measures.1

  Ku, MS (2008) Use of the Biopharmaceutical Classification System in Early Drug Development. AAPS J. 10, 208-212.

Exhibit 3: Accordion pill cross-section

Source: US Patent No. 9,259,387

The AP technology is covered by three patent families. First, the underlying technology is covered by a patent licensed from Hebrew University of Jerusalem, and broadly covers gastroretentive devices for drug delivery. This patent is associated with a 3% royalty on sales and 15% on sublicences and the patent expires in 2020. The second patent family covers manufacturing of accordion pills, which, based on the nature of the device, we consider a significant hurdle. These patents provide additional protection for the formulation of poorly soluble drugs like AP-ZP. These patents expire in 2028 in the US and in 2027 in other locations. The individual AP drug formulations are protected by independent patents, which at this time protect AP-CDLD until 2029.

AP-CDLD

Intec’s lead product is an AP co-formulation of carbidopa and levodopa (AP-CDLD) for the treatment of Parkinson’s disease. Parkinson’s disease is a neurodegenerative disease in which the dopamine secreting (dopaminergic) neurons in the brain are lost, leading to severe motor defects and cognitive impairment. Approximately one million people in the US have Parkinson’s and it affects 1.75% of people over 60.2,3

  Parkinson’s Disease Foundation.

  Cleveland Clinic.

Carbidopa and levodopa is the most widely used treatment for Parkinson’s worldwide. Levodopa, aka L-DOPA, is a precursor to dopamine but is able to cross the blood brain barrier, unlike the neurotransmitter. High doses of this molecule can increase dopamine concentrations in the brain and alleviate some of the symptoms associated with the loss of dopaminergic neurons. However, the molecule is also quickly converted into dopamine outside the brain, which is associated with gastrointestinal and other side effects and significantly reduces the concentration of drug available to the brain. This is avoided by the co-administration of carbidopa, which inhibits this conversion in peripheral tissue. Despite this, however, there are significant limitations to the administration of levodopa that limit its utility. Even with carbidopa, levodopa is still metabolised quickly with a half-life of 1.5 hours, leading to a pharmacokinetic profile with high peaks and deep valleys throughout the day. The valleys are associated with the motor defects typical of the disease, also known as being “off”, and the peaks can cause dyskinesia that interferes with normal function, leaving a fraction of a patient’s day where he is well treated. As the disease progresses, the therapeutic window for the drug gets smaller, leaving limited time in which the patient is in an “on” state without troublesome dyskinesia.

Competitive environment

The treatment of Parkinson’s disease is multifaceted and normally requires multiple concurrent pharmacological interventions on top of levodopa treatment to obtain optimal control of the disease. These treatments include dopamine agonists, glutamate antagonists, monoamine oxidase inhibitors, and other classes of drugs in addition to levodopa and drugs used in conjunction with it. Because of this, there are an exceptionally large number of drugs that are marketed or in development in for the indication, measured in the hundreds. However, there are substantially fewer programmes directly addressing the levodopa treatment axis that might affect the potential market for AP-CDLD.

There are approximately 300k total prescriptions for carbidopa/levodopa per month in the US.4 The market is dominated by generics, which constitute 97% of these prescriptions.

  Symphony Health

Similar to AP-CDLD, many companies are seeking drug delivery solutions to address the limitations of immediate release levodopa. There are two branded controlled release formulations of carbidopa and levodopa that are commercially available: Sinemet CR and Rytary (Numient in Europe). Sinemet CR did not compete well against generic immediate release carbidopa/levodopa because the pill is both slow to relieve off states and had low systemic bioavailability, requiring increased dosing over immediate release products. Generic equivalents to Sinemet currently have 17% market share. Rytary was approved in 2015 to address some of the shortcomings of Sinemet CR, and incorporates an immediate release component, to provide immediate relief from off states. Sales of Rytary are not explicitly stated by sponsor Impax Laboratories, but Symphony Health reports US sales of $16.2m for Q116 with approximately 2.7% market share.

Other programmes have addressed the levodopa delivery problem through the development of devices that continuously infuse the drug. The most prominent of these programmes is Duopa (AbbVie, Duodopa ex-US), which is a gel formulation of carbidopa and levodopa that is delivered directly to the duodenum via an implanted pump. This solution is effective at reducing off states (63% reduction, twice the effect of immediate release pills) and dyskinesia (86% more on time without dyskinesia compared to immediate release pills), but requires major surgery, and therefore we expect it to be limited to only the most poorly controlled patients. The product was approved in the US in early 2015, but has been approved in Europe since 2004. The product sold $231m in 2015, with 95% of sales in Europe.

Additionally there are a number of drugs designed to inhibit catechol-O-methyltransferase (COMT). COMT is an enzyme that breaks down dopamine and levodopa, and similar to carbidopa, inhibition of this enzyme can increase the half-life of levodopa in the body and increase dopamine concentrations in the brain. Therefore we consider these programmes to be direct competitors with drugs like AP-CDLD and other attempts to achieve sustained levodopa serum levels. The first drug of this class to be approved was Comtan. Novartis and Orion reported sales of this drug, along with the co-formulation with carbidopa and levodopa, Stalevo, of $446m worldwide in 2015 and it had peak sales of $737m in 2011 before US patent expiry in 2012.

Exhibit 4: Levodopa treatment axis programmes

Status

Name

Molecule(s)

Company

Notes

Approved

Comtan

entacapone

Novartis

First approved COMT inhibitor

Approved

Duopa

carbidopa; levodopa

AbbVie

Gel formulation delivered directly to duodenum via a pump

Approved

Rytary

carbidopa; levodopa

IMPAX Laboratories

Immediate and controlled release formulation

Approved

Sinemet CR

carbidopa; levodopa

Bristol-Myers Squibb

First approved controlled release CD LD formulation

Approved

Stalevo

carbidopa; entacapone; levodopa

Novartis

CD LD COMT combo pill, immediate release

Filed

Ongentys

opicapone

BIAL

"Third generation" COMT inhibitor

Phase III

LECIGon

carbidopa; entacapone; levodopa

LobSor Pharmaceuticals

Gel formulation deliver directly to duodenum via a pump

Phase II

DM-1992

carbidopa; levodopa

Depomed

Gastroretentive Immediate release/extended release co-formulation. Development suspended

Phase II

DopaFuse

carbidopa; levodopa

SynAgile

Drug delivered via a continuous oral pump

Phase II

IPX203

carbidopa; levodopa

IMPAX Laboratories

Follow on for Rytary. Fast onset followed by extended release

Phase II

ND0612H

carbidopa; levodopa

NeuroDerm

Liquid formulation delivered via a dermal pump

Phase II

XP21279

levodopa prodrug

XenoPort

Sustained release levodopa prodrug designed to improve absorption. Development halted pending a partnership

Phase I

CVT-301

levodopa

Acorda Therapeutics

Inhalable levodopa

Preclinical

ATT-LD

levodopa prodrug

Aposense

Long acting levodopa prodrug

Preclinical

CERC-406

-

Merck & Co

COMT inhibitor that passes the blood brain barrier

Source: Evaluate Pharma, company documents

The AP solution

Intec has developed an AP formulation of carbidopa and levodopa to address the issues of existing formulations: AP-CDLD. The properties of the AP lend themselves well to the delivery of these drugs, and the drug is formulated with levodopa in the controlled release inner layer and carbidopa in an immediate release layer. Levodopa is only absorbed in the upper GI tract because it requires an active transporter to ferry it across the intestinal wall that is only present in this location. Moreover, the controlled release properties of AP-CDLD could potentially improve the pharmacokinetic profile of the drug, reducing peaks and valleys and therefore reducing off time and dyskinesia. This is enhanced by a reduced food effect seen for this formulation, which was demonstrated in a clinical trial. Other formulations of carbidopa and levodopa have a pronounced food effect,5 which can affect the absorption of the drugs and contribute to under- and overdosing. The absorption of these drugs is strongly affected by gastric emptying rates which vary significantly on the basis of amount of food eaten and its caloric content. In the AP-CDLD study, no difference in absorption was seen between a 550 Kcal meal and a 1,000 Kcal meal. A final benefit of this formulation is that release over an extended period could help reduce the pill burden on these patients.

  Sinemet and Rytary labels.

Clinical experience

AP-CDLD has been investigated for the treatment of moderate to severe Parkinson’s in a Phase II study. The trial consisted of multiple sub studies designed to investigate the dosing, pharmacokinetics and efficacy of the formulation.

In the pharmacokinetic portion of the trial, patients were stabilised on either AP-CDLD with 50mg carbidopa and 375mg levodopa twice a day, or an equivalent amount of both drugs in an immediate release formulation four times a day. A total of eight patients completed this portion of the trial and the daily time course of levodopa blood concentration was measured (Exhibit 5).

Exhibit 5: Levodopa blood levels with AP-CDLD and IR Carbidopa/Levodopa

Levodopa

Source: Intec Pharma. Note: (1) 18.7mg carbidopa, 187.5 mg levodopa per dose, (2) 50mg carbidopa, 375mg levodopa per dose.

What was found was that the AP formulation of these chemicals substantially reduces the “peak and valley” profile typical of levodopa administration. Patients were able to maintain a relatively constant blood concentration of levodopa, with only a threefold change in the ratio of maximum and minimum exposure. Also interesting was finding that patients on AP-CDLD woke up with 500ng/mL of levodopa in their system, meaning that the kinetic profile of the drug was so long that it was able to maintain some exposure throughout the night and into the morning following the day’s last dose (12 hours before waking). Although it is unlikely that this low concentration supressed symptoms, this result poses the possibility that AP-CDLD could be effective as an overnight drug. Morning off states tend to be the most severe of the day for Parkinson’s sufferers and there are currently no options for oral carbidopa and levodopa that last through the night.

In the efficacy portion of the trial, two arms had a crossover design structured to investigate AP-CDLD at two different doses compared to the same patients on their optimised current carbidopa/levodopa based treatment. The endpoints were the difference in off time, on time with troublesome dyskinesia, and the number of additional levodopa doses needed. Of the patients that were comparable after three weeks in the study, 16 received AP-CDLD with 50mg carbidopa and 375mg levodopa (50/375) twice a day and 18 received AP-CDLD with 50mg carbidopa and 500mg levodopa twice a day (Exhibit 6).

Exhibit 6: AP-CDLD Phase II efficacy results

AP-CDLD 50/375mg (n=16)

AP-CDLD 50/500mg (n=18)

Rytary (n=393)

Comtan (n=205)

Current treatment

AP-CDLD

p

Current treatment

AP-CDLD

p

CDLD

Rytary

p

Placebo +CDLD

Comtan + CDLD

p

Off time (h)

4.3

2.4

<0.0001

5.1

2.8

<0.0001

4.88

3.87

<0.0001

5.3

4.2

<0.001

On time with troublesome dyskinesia (h)

0.7

0.6

n.s.

1.2

0.7

0.002

0.45

0.52

n.s.

increased6

0.002

Number of daily LD administrations

6.3

3.5

<0.0001

5.3

4

<0.0001

5.1

3.6

<0.0001

6.2

5.8

<0.001

Source: Intec Pharma, Rytary approval review documents, Comtan approval review documents, Parkinson’s Study Group. Note: Rytary and Comtan data reflect patients stabilised on different dosing regimens. CD=carbidopa, LD=levodopa, n.s.=not significant.

The study found that AP-CDLD was more effective at reducing off time at both dosing regimens, and the result was statistically significant by a wide margin (p<0.0001). The total mean reduction in off time of 1.9 hours per day was larger for AP-CDLD than has been previously observed for either Rytary or Comtan (1.0 hours and 1.1 hours, respectively). Moreover, the mean amount of on time with troublesome dyskinesia was reduced at the higher dose by 0.5 hours per day. It is understandable that this effect was only seen at the higher dose because patients with more severe Parkinson’s disease on higher doses of levodopa tend to experience this side effect with higher frequency. This result was not seen in the Phase III studies of Rytary, although it should be noted that baseline troublesome dyskinesia was substantially lower (0.35-0.37 hours per day) than seen in patients in the AP-CDLD trial. Studies of Comtan have shown that it increases the rate of dyskinesia (53% of patients compared to 32% for placebo, p=0.002).6 It should be noted that in the Rytary and Comtan trials, patients were optimized to different dosing regimens, and the data reflects an average of these optimized treatments.

Parkinson’s Study Group (1997) Entacapone Improves Motor Fluctuations in Levodopa-Treated Parkinson’s Disease Patients. Ann. Neurol. 42, 747-755.

The final measure of efficacy tracked in the study was the number of daily support doses of levodopa needed as part of the patient’s current treatment or on top of AP-CDLD. The number of additional pills was reduced by 2.8 per day on the lower AP-CDLD dose, and 1.3 on the higher dose. The reduction is not particularly surprising considering that AP-CDLD is providing a significant amount of levodopa and therefore reducing the total needed by a patient via other means throughout the day. However, this does give a measure of the pill burden for patients on this treatment. Pill burden can be significant for Parkinson’s patients, considering the number of overlapping treatment regimens these patients require. This finding indicates that the lower dose AP-CDLD may reduce the overall pill burden (2 pills of AP-CDLD but 2.8 fewer other pills), and although patients requiring the higher dose may have an increased pill burden, it is small (approximately one extra pill) considering the benefit to off time and dyskinesia.

Phase III programme

Intec will be seeking a 505(b)2 approval pathway for AP-CDLD in the US and a hybrid application pathway in Europe, which should enable a marketing application after a single Phase III trial, which enrolled its first patient in April 2016. These routes to market are available to reformulations of existing approved medications, like carbidopa and levodopa. Eligibility for the 505(b)2 pathway was confirmed by the FDA. The study consists of a head-to-head comparison between AP-CDLD and the immediate release carbidopa/levodopa drug Sinemet. The trial is randomised and double blind and will examine two dosage strengths of AP-CDLD (50mg carbidopa with either 400mg or 500mg levodopa) at two to three times daily. Prior to randomisation, patients will be stabilised on both Sinemet and AP-CDLD to determine the correct dosing regimen, and then patients will receive one of the drugs concurrently with a dummy version of the other (to prevent unblinding due to different dosing frequencies). Patients will be able to take two to three pills per day of AP-CDLD at two different doses (50/400mg or 50/500mg of carbidopa/levodopa). An important difference from the Phase II is that patients on the AP-CDLD arm will not be supplementing with IR levodopa if needed, which may increase off time, although this will be mitigated by the ability to take up to three APs per day if needed. The primary endpoint of the trial will be the reduction in number of off hours, as reported by a patient diary, but other efficacy measures such as the change in troublesome dyskinesia and global assessments such as the Unified Parkinson’s Disease Rating scale (UPDRS) will be made. The study will enrol approximately 460 patients and proceed for 25 weeks total. This trial design is substantially similar to previous levodopa/carbidopa trials, including the recent Rytary trial. Following completion of the trial protocol, patients will be entered into an open label extension, data from which may provide early insights into efficacy. Top-line data are expected in Q417.

Exhibit 7: AP-CDLD Phase III trial design

Source: Intec Pharma

AP-ZP

Intec is also developing an AP-based formulation of zaleplon for the treatment of insomnia, which it has termed AP-ZP. Estimates of the prevalence of insomnia vary significantly, based on the diagnostic criteria. Up to 30% of adults have difficulty initiating or maintaining sleep or have a poor quality of sleep.7 According to an NIH State-of-the-Science group on the disorder, 10% of adults have a daytime impairment or distress as the result of loss of sleep, and with the criteria that the insomnia is persistent for over a month this rate drops to 6% of adults, corresponding to 14.8 million people in the US.7 Despite the large number of patients with the disorder, rates of intervention with hypnotic drugs is low. The best data available on insomnia treatment trends are from a survey of managed care patients in the Detroit area, in which 1.38% of patients had received a prescription for hypnotics.8 This is about half of all prescriptions for insomnia treatment. In Europe these rates are lower, with 0.78% of people receiving hypnotics in the UK.9 However, the vast majority of patients self-medicate for insomnia, using OTC medications or alcohol, each at approximately twice the rate that prescriptions are used.10

  Roth T (2007) Insomnia: Definition, Prevalence, Etiology, and Consequences. J. Clin. Sleep. Med. 3(5s) s7-s10.

  Roehrs T and Roth T (2004) ‘Hypnotic’ prescription patterns in a large managed-care population. Sleep Med. 5 463-466.

  Stewart R, et al. (2006) Insomnia Comorbidity and Impact and Hypnotic Use by Age Group in a National Survey Population Aged 16 to 74 Years. Sleep 29(11), 1391-1397.

  Johnson EO, et al. (1998) Epidemiology Of Alcohol and Medication As Aids To Sleep in Early Adulthood. Sleep 21(2), 178-186.

Competitive landscape

The sleep market generally is highly fragmented, with numerous over-the-counter and prescription medications prescribed for the disorder. The prescription is further split into hypnotics, whose primary indication is insomnia, and other drug classes such as anxiolytics and anti-depressants (notably tricyclics), which are also prescribed for the disorder.

The most commonly prescribed hypnotic by a large margin is zolpidem, including Ambien (zolpidem, Sanofi), Ambien CR, and generics. According to Symphony Health, there were 35m prescriptions written for zolpidem, in 2015 with 90% market share of Z-drugs. Broadly, this class of drug are GABA agonists, but unlike other GABA agonists (barbiturates, benzodiazepines), they have fewer off-target interactions and better sleep quality improvement. The second bestselling Z-drug eszopiclone (Lunesta, Dainippon Sumitomo, and generics), by comparison, had 2.8m prescriptions for the year.

A notable recent development in the insomnia market is the approval of Belsomra (suvorexant, Merck), which launched in early 2015. This drug has a different mechanism of action (orexin antagonist) than other insomnia drugs, and a different profile compared to Z-drugs: better improvements in waking during the night but with higher rates of morning somnolescence, nightmares and suicidal ideation. The drug sold $33m in Q116, according to Symphony Health. There are multiple development programmes at other companies into drugs with a similar mechanism of action.

Exhibit 8: Competitive insomnia programmes

Status

Name

Molecule

Company

Notes

Approved

Belsomra

suvorexant

Merck

Orexin receptor antagonist

Approved

Ambien

zolpidem

Sanofi

Z-Drug

Approved

Silenor

doxepin

Pernix

Tricyclic

Approved

Lunesta

eszopiclone

Eisai

Z-Drug

Phase III

lemborexant

Eisai

Orexin receptor antagonist

Phase III

almorexant

Actelion

Orexin receptor antagonist

Phase III

piromelatine

Neurim Pharmaceuticals

Melatonin analogue

Phase II

EVT 201

Evotec

Benzodiazepine

Phase II

GSK649868

GlaxoSmithKline

Orexin receptor antagonist

Phase II

ACT-541468

Actelion

Mechanism undisclosed

Phase II

Lorediplon

Grupo Ferrer

Z-Drug

Phase II

MIN-202

Minerva Neurosciences

Orexin receptor antagonist

Phase II

ITI-007

Bristol-Myers Squibb

Serotonin antagonist

Source: Evaluate Pharma, company documents

Why do we need a new sleep drug?

Intec is developing AP-ZP as a new sleep aid with the goal of providing consistent sleep without any next-day after effects. Zaleplon is an insomnia treatment that was previously marketed under the name of Sonata, and is part Z-drug class. Zaleplon has a half-life of approximately one hour (compared to 2.6 for Ambien and 6 for Lunesta).11 Because of this, the drug can be taken before even relatively short periods of rest (less than two hours) without leading to any residual “hangover” effects.12 The hangover experienced by patients taking prescription hypnotics is an issue of significant public health interest, and the FDA has ordered a reduction in the dosing recommendations for both Ambien and Lunesta on the basis of post-marketing reports of impaired function the day after taking the medications. However, when compared to Ambien, patients taking zaleplon saw less improvement in overall sleep quality,13 which might be tied to the short half-life. The company believes that it can achieve a best of both worlds solution by providing the controlled release of zaleplon with an AP throughout the night to maintain sleep quality and still avoid morning hangover effects. Moreover, the AP is the ideal platform because poor solubility limits the bioavailability of the drug in traditional formulations.14

  Respective prescribing information

  Weitzel KW, et al. (2000) Zaleplon: a pyrazolopyrimidine sedative-hypnotic agent for the treatment of insomnia. Clin. Therapeutics 22(11), 1254-1267.

  Boland YD, et al. (2004) Newer hypnotic drugs for the short-term management of insomnia: a systematic review and economic evaluation. Health Tech. Ass. 8(24),

  Rosen AS, et al. (1999) Zaleplon pharmacokinetics and absolute bioavailability. Biopharm. Drug Dispo. 20(3), 171-175.

Clinical experience

AP-ZP’s most recent and most comprehensive clinical trial was a Phase II study that assessed its efficacy in a set of sleep parameters and measured the residual next-day effects in 83 individuals. The trial was of a crossover design, with patients receiving either placebo or active drug over six nights. The study was randomised and double blind and occurred at five US medical centres and one in Israel. It enrolled patients who had been diagnosed with insomnia and used electrical polysomnographic instruments to measure sleep parameters. The specific formulation of AP-ZP used in the trial contained 10mg of immediate release zaleplon and 15mg of extended release drug.

The trial demonstrated a statistically significant improvement in both total sleep time and the latency to persistent sleep (Exhibit 9). This improvement in both metrics was more pronounced than what was seen in previous studies of Sonata (10mg).15 Notably, AP-ZP significantly increased the total sleep time in patients, which was largely unaffected in the Sonata study, presumably due to the short half-life of the molecule. Sonata is approved for insomnia on the basis of reducing the time to persistent sleep and consistently did not improve total sleep time in clinical studies. It should be noted that the total amount of zaleplon in the AP-ZP formulation is 2.5x that of the standard 10mg dose of drug used in this study and indicated for the majority of patients. Additionally, patients in the Sonata registration study appeared to have less severe insomnia, as evidenced by lower latency to persistent sleep and longer sleep times on placebo.

  Walsh JK, et al (1998) Efficacy and Tolerability of 14-Day Administration of Zaleplon 5mg and 10mg for the Treatment of Primary Insomnia. Clin. Drug Invest. 16(5), 347-354.

It is useful to also compare AP-ZP to Ambien (10mg), due to its dominant market share (including generics, 90%). With respect to sleep parameters, Ambien clearly provides a greater improvement compared to AP-ZP, with a greater reduction in the time to persistent sleep and total sleep time. Additionally, Ambien decreased the amount of time that patients spent awake after sleep onset, which AP-ZP did not affect. We expect that any further trials of AP-ZP will use formulations with increased amounts of drug in an attempt to improve upon these results compared to Ambien. In Phase I, formulations containing 30mg and 35mg of total drug were also tested without safety issues.

Exhibit 9: Assessment of sleep parameters

AP-ZP 10/15mg (n=83)

Ambien 10mg (n=125)

Sonata 10mg (n=67)

(minutes)

Placebo

AP-ZP

Diff.

p

Placebo

Ambien

Diff.

p

Placebo

Sonata

Diff.

p

Total sleep time

364.11

382.39

18.28

<0.001

382.73

418.23

35.5

0.0001

400

402

2

n.s.

Wake time after sleep onset

75.57

70.44

-5.13

0.27

78.12

58.17

-19.95

0.033

Latency to persistent sleep

45.46

31.6

-13.86

<0.001

30.76

12.65

-18.11

0.004

25.38

19.25

-6.13

0.039

Source: Intec, Randal et al., Walsh et al. Note: AP-ZP data at six nights, Ambien data at one month, Sonata data at four to six nights.

AP-ZP may provide advantages over Ambien in terms of residual next-day effects (Exhibit 10). In the AP-ZP clinical trial, the drug did not show any significant worsening in the digit symbol substitution test (a measurement of cognition) or on a memory test, compared to placebo. There was a statistically significant increase in the patient assessment of symptoms on a visual analogue scale, but the magnitude of the increase was small (3%). Clinical trials of Ambien generally showed low levels or residual effects.16 However, these results were questioned following numerous post-marketing reports of impairment, which prompted the FDA to issue a warning letter in 2013. This warning letter stated that up to 15% or women and 3% of men had blood levels significant enough to cause impairment the morning after taking immediate release Ambien. For Ambien CR, the rates were even higher, with 33% of women and 25% of men.

  Fleming J, et al. (1995) Comparison of the Residual Effects and Efficacy of Short Term Zolpidem, Flurazepam and Placebo in Patients with Chronic Insomnia. Clin. Drug Invest. 9(6), 303-313.

The company has stated that it intends to seek a partner to commercialise AP-ZP prior to proceeding with a Phase III clinical trial.

Exhibit 10: Residual effects of AP-ZP

Placebo

AP-ZP

Difference

p

Digit symbol substitution test

41.7

41.6

-0.1

0.87

Memory test

5.55

5.51

-0.04

0.81

Visual analogue scale

55.34

58.63

3.29

0.021

Source: Intec Pharma

Sensitivities

Many of the development risks typically associated with pre-commercial pharmaceutical companies are mitigated in the case of Intec, because the company is developing reformulations of approved pharmaceuticals for their original indications, and the efficacy of these compounds is not under question. However, the data supporting the clinical benefit of the AP technology over other formulations is limited. The potential benefit appears most pronounced in the case of AP-CDLD, in which the pharmacokinetics of levodopa support a gastroretentive formulation. This translated into better improvements in off time than the recently approved controlled release formulation Rytary. However, this effect required supplementation with additional immediate release levodopa pills, meaning that AP-CDLD alone may perform worse, although the Phase III permits an increased dosing frequency (three times a day) which may mitigate this risk.

In the case of AP-ZP, the exact benefit of the AP technology over other controlled release formulations is much less clear. We do not know of a definitive benefit from gastroretention or drug absorption in the upper digestive tract. The drug improved total sleep time more than immediate release zaleplon, but underperformed on all sleep metrics compared to Ambien. The proposed benefits of AP-ZP are predicated on improvement in next-day residual effects, but these residual effects were not observed during the Ambien clinical trials under similar conditions to the AP-ZP clinical trial. This being said, some of the shortcomings of AP-ZP compared to Ambien may be addressed by moving to a higher dose in future trials.

The company will be facing significant commercial risks, as AP-CDLD and AP-ZP are both entering especially competitive markets where potentially disruptive technology is being developed. AP-CDLD is a viable solution to the difficulties in levodopa-based therapy, but there are the two products already available and others in various development stages. Additionally, there are marketed and development products that aim to achieve better disease control by using an alternative route of administration (ie the Duopa duodenal pump). And finally, the advancement of COMT inhibitors may further improve the pharmacokinetic profile of levodopa and limit the benefits of AP-CDLD over other formulations.

The insomnia market is difficult because although highly fractured in a broad sense, the class of prescription hypnotics is dominated by a single molecule: Ambien, and its generics. However, the recent approval of Belsomra and the development of multiple other orexin inhibitors is a potentially disruptive force in the space. The adverse effects of Belsomra, above and beyond those of Ambien, do not appear to be limiting its initial adoption, which may indicate that the insomnia market is not adverse to the factors that AP-ZP has been designed to solve.

There exists a financing risk for the company, as we expect it to require an additional NIS70m before profitability in 2020. This value is small in comparison to other development stage pharmaceutical companies, and limited primarily by the efficient 505(b)2 pathway in the US and the hybrid pathway in Europe. This financing requirement may also be offset through an upfront licensing fee for AP-ZP, which we currently include in our valuation as NIS45m.

Valuation

We arrive at an initial valuation range of NIS540-582m, based on a risk-adjusted NPV analysis of Intec’s clinical programmes and costs and the 52-week NIS exchange rate range to the dollar (3.70-3.99). This corresponds to a value per basic share of NIS47-51. These values include a H116 cash level of NIS81m (down from NIS120m at the end of 2015).

AP-CDLD

We attribute 64% of the company’s value to the AP-CDLD programme at NIS247m. This value assumes the internal commercialisation of the drug in the US and Europe. Although we acknowledge that the drug might be better served via a marketing agreement with a company with an established footprint in the Parkinson’s space, we believe that any future deals will be made advantageously over the internal commercialisation case we present here in lieu of such an agreement. We believe that this programme has a probability of success (60%), based on the well-established efficacy of carbidopa and levodopa and the Phase II results demonstrating a clear improvement over standard of care. We also see this formulation as potentially competitive with other carbidopa/levodopa solutions such as Rytary and Duopa, and predict peak penetration of 2% of moderate to severe Parkinson’s patients, with peak sales of $196m in 2029. Our pricing assumptions are based on a $20 daily cost in the US ($7,300 per year), which is approximately a 20% premium to Rytary (WAC $2.30 per pill, 7.2 pills per day)17 based on better efficacy, and an assumed 40% lower price in Europe. We currently do not include any other markets in our valuation, but consider these potential out-licensing opportunities. We estimate a manufacturing cost of approximately $1 per day, which equates to approximately 5% in the US and 8% in Europe, based on our current pricing. This is a premium to normal capsule formulations. Other COGS include the 3% royalty payment to the Hebrew University of Jerusalem repayments to the Office of the Chief Scientist of the Israeli Ministry of the Economy (OCS). For the years of 2019 through 2022, the company will be repaying a grant received from OCS in the form of a 3-4.5% royalty on sales (4.5% in our models).

Arnold RJG, et al (2015) Cost-Effectiveness Analysis of IPX066 (Extended-Release Carbidopa-Levodopa) in Advanced Parkinson’s Disease. ISPOR Annual Meeting

We assume a discount to payers of 30% for the product, which we see as a balance between efficacy and generic price pressures. Our selling fees of 15% are larger than average, but take into account the large number of prescribing doctors (over 16,000 neurologists in the US, and a mix of other prescribers). The R&D spending assumption is made on the basis of an expected 460 patients (company guidance, in line with previous studies) at $50k each, distributed over three years to account for the Phase III trial and the open label extension. This corresponds to a negative NPV of NIS70m.

AP-ZP

We value the AP-ZP programme at NIS91m (including NIS36m from licensing), corresponding to $155m in combined peak sales in the US and Europe. Our probability of success for this programme is 40%, which is lower than average, based on the difficulty we see in demonstrating an advantage over the market leader, Ambien and its generics. The Phase II trial showed insignificant day after residual effects by functional metrics, but after effects were significant by patient assessment. Additionally, market leader Ambien did not show significant after effects during its registration trials, and the reports of these effects were all derived post-marking approval. This is coupled with what we see as weaker efficacy in the AP-ZP programme compared to Ambien.

We assume that Intec will out-license the programme, consistent with guidance, and use a royalty of 15% on sales in our calculations. The company will owe 15% of its revenue from any licensing agreements to the Hebrew University of Jerusalem. Our sales estimates predict a peak 6% market share of hypnotic drug users (estimated at 4.4 million in the US and 3.9 million in Europe). Our pricing assumptions are based on a WAC of $7.20 per pill, in line with Sonata, and an average of 86 pills per diagnosis, based on historical data.8 European pricing assumes a 20% discount to US prices, which is low, considering this is a lower-margin product. Our gross-to-net discount is high at 50%, because we believe the highly fractured nature of the market and the high number of effective generics will translate to payer resistance in the absence of definitive efficacy improvements.

As part of the out-licensing of AP-ZP we have included an upfront payment of $12m followed by $15m upon approval in 2020 and a $15m sales milestone (out of a potentially larger pool) in 2025. These amounts are a 50% discount to the deal between Purdue Pharmaceuticals and Transcept Pharmaceuticals in 2009 for the sublingual formulation of zolpidem Intermezzo ($25m upfront, $30m on approval and $90m in milestones). The GSK licensing of Lunesta from Sepracor also had a $20m upfront, followed $155 in licence and milestone fees. The discount reflects the earlier stage of development (Intermezzo was licensed post Phase III). We attach relative risks of 60%, 40% and 30% for the upfront, approval milestone and sales milestone, respectively.

We currently do not include the Biogen collaboration, the undisclosed NSAID, or the cannabinoid AP in our valuation due to lack of insight into these programmes.

Exhibit 11: Intec valuation

Development programme

Clinical stage

Prob. of success

Launch year

Launch Pricing ($)

Peak sales ($m)

Patent/Exclusivity Protection

Royalty/ Margin

rNPV (NISm)

AP-CDLD, US

Phase III

60%

2019

7,700

111

2029

47%

273

AP-CDLD, Europe

Phase III

60%

2019

4,600

85

2029

40%

175

AP-CDLD development costs

Phase III

-43

AP-ZP (US and Europe)

Phase III ready

40%

2020

700

155

2028

15%

59

AP-ZP Licensing upfront

Phase III ready

30-50%

2018

36

Unallocated costs (administrative costs, etc.)

-30

Total

 

 

 

 

 

 

 

469

Net cash and equivalents (H116) (NISm)

81

Total firm value (NISm)

550

Total basic shares (m)

11.4

Value per basic share (NIS)

48.02

Options (m)

0.1

Total diluted shares (m)

11.6

Value per diluted share (NIS)

47.45

Source: Edison Investment Research, Intec Pharma reports. Note: Based on current exchange rate

Financials

Intec’s most recent financing was the IPO on NASDAQ on 7 August 2015, with gross proceeds of $34m (NIS130m). The company currently trades basic shares on both NASDAQ and TASE. Prior to this offering the company had received approximately NIS209m in other offerings. The company ended H116 with NIS81m in cash and investments.

We currently forecast NIS53m in spending for 2016. This corresponds to NIS41m in R&D spending, primarily associated with the Phase III clinical trial of AP-CDLD. We expect costs to remain in this range prior to commercial launch of AP-CDLD in 2019, after which we expect a substantial increase in SG&A expense associated with the hiring of a salesforce to market the drug (in the range of NIS70m during the launch year). This assumes an initial hire of 100 reps, but we expect this number to scale with increasing sales to over 300.

The company currently has a favourable tax status in Israel, allowing it to claim a tax exempt status until 2023. The company has the option to manufacture the product in underserved regions of Israel to receive a reduced tax rate at that time, although we currently forecast taxes post 2023 at the standard 25% rate until more details of the company’s development plan become available. We estimate that the tax exemption will save the company NIS98m assuming approval of both AP-CDLD and AP-ZP.

The company has received NIS37.8m in grants from OCS with approximately NIS20m more approved. These grants are repaid in the form of a royalty on sales (3-4.5%) and are forgiven in the event of a default, and as such are not recorded as liabilities. However, the company could face penalties or face repayment for the transfer of manufacturing or know-how from Israel, which could affect the company’s funding requirement.

We forecast that that the company will have a small funding requirement of NIS70m before 2018 to reach profitability in 2020. We expect this requirement to be offset via the out-licensing of AP-ZP. However, in lieu of such a deal in hand, we currently record this financing requirement as illustrative debt.

Exhibit 12: Financial summary

NIS'000s

2014

2015

2016e

2017e

2018e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

0

0

0

0

0

Cost of Sales

0

0

0

0

0

Gross Profit

0

0

0

0

0

Research and development

(12,196)

(18,701)

(40,728)

(40,488)

(40,272)

Selling, general & administrative

(9,332)

(10,828)

(11,911)

(13,102)

(14,412)

EBITDA

 

 

(22,784)

(32,351)

(54,948)

(55,412)

(56,952)

Operating Profit (before GW and except.)

(20,692)

(29,453)

(52,183)

(53,134)

(54,228)

Intangible Amortisation

0

0

0

0

0

Exceptionals/Other

0

0

0

0

0

Operating Profit

(20,692)

(29,453)

(52,183)

(53,134)

(54,228)

Net Interest

324

1,569

1,569

1,569

1,569

Other (change in fair value of warrants)

0

0

0

0

0

Profit Before Tax (norm)

 

 

(20,368)

(27,884)

(50,614)

(51,565)

(52,659)

Profit Before Tax (IFRS)

 

 

(20,368)

(27,884)

(50,614)

(51,565)

(52,659)

Tax

0

0

0

0

0

Deferred tax

0

0

0

0

0

Profit After Tax (norm)

(20,368)

(27,884)

(50,614)

(51,565)

(52,659)

Profit After Tax (IFRS)

(20,368)

(27,884)

(50,614)

(51,565)

(52,659)

Average Number of Shares Outstanding (m)

4.8

7.8

11.7

12.3

12.9

EPS - normalised (NIS)

 

 

(4.22)

(3.58)

(4.31)

(4.18)

(4.07)

EPS - IFRS (NIS)

 

 

(4.22)

(3.58)

(4.31)

(4.18)

(4.07)

Dividend per share (NIS)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

17,101

15,906

18,222

21,791

25,147

Intangible Assets

0

0

0

0

0

Tangible Assets

17,101

15,906

18,222

21,791

25,147

Other

0

0

0

0

0

Current Assets

 

 

31,519

129,135

76,474

93,081

38,878

Stocks

0

0

0

0

0

Debtors

0

0

0

0

0

Cash

30,107

119,684

55,584

72,191

17,989

Other

1,412

9,451

20,890

20,890

20,890

Current Liabilities

 

 

(716)

(2,394)

(4,268)

(4,345)

(4,433)

Creditors

(716)

(2,394)

(4,268)

(4,345)

(4,433)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(4,528)

(1,277)

(415)

(70,415)

(70,415)

Long term borrowings

0

0

0

(70,000)

(70,000)

Other long term liabilities

(4,528)

(1,277)

(415)

(415)

(415)

Net Assets

 

 

43,376

141,370

90,014

40,112

(10,823)

CASH FLOW

Operating Cash Flow

 

 

(16,997)

(30,796)

(54,895)

(47,547)

(48,122)

Net Interest

0

0

0

0

0

Tax

0

0

0

0

0

Capex

(271)

(5,405)

(5,621)

(5,846)

(6,080)

Acquisitions/disposals

0

(1)

0

0

0

Financing

17,272

124,090

0

0

0

Dividends

0

0

0

0

0

Other

(31)

49

0

0

0

Net Cash Flow

(27)

87,937

(60,517)

(53,393)

(54,202)

Opening net debt/(cash)

 

 

(29,650)

(30,107)

(119,684)

(55,585)

(2,192)

HP finance leases initiated

0

0

0

0

0

Exchange rate movements

535

1,478

(2,770)

0

0

Other

(51)

162

(813)

0

0

Closing net debt/(cash)

 

 

(30,107)

(119,684)

(55,585)

(2,192)

52,011

Source: Edison Investment Research, Intec Pharma reports. Note: Based on current exchange rate.

Contact details

Revenue by geography

12 Hartom st. (RMPE building)
P.O.Box 45219
Jerusalem 91450
Israel
+972 2 5864657
http://intecpharma.com/

N/A

Contact details

12 Hartom st. (RMPE building)
P.O.Box 45219
Jerusalem 91450
Israel
+972 2 5864657
http://intecpharma.com/

Revenue by geography

N/A

Management team

CEO: Zeev Weiss

CFO: Nir Sassi

Mr Weiss has been CEO of Intec since October 2014 and has served on the board of directors since October 2014. Prior to that, he served as the co-chief executive officer from November 2013 until October 2014, and before that as executive vice president of commercial operations, commencing in 2006.

Mr Nir Sassi has been the CFO of Intec since August 2016. Prior to serving as the CFO, he served as the VP finance commencing in March 2010. Prior to Intec, Mr Sassi served as a senior manager at PricewaterhouseCoopers Israel from 2002 until 2010.

Chairman: John W Kozarich

EVP R&D and Operations: Nadav Navon

Dr Kozarich has nearly 40 years of experience in the biopharmaceutical industry and academia. Dr Kozarich currently serves as chairman of Ligand Pharmaceuticals, and chairman and president of ActivX Biosciences. Prior to his role as chairman, Dr Kozarich was vice president at Merck.

Dr Nadav Navon has been with Intec since March 2006 and has served as the executive vice president of research & development and operations since March 2015. Before that he served as the vice president of research & development and operations since May 2013.

Management team

CEO: Zeev Weiss

Mr Weiss has been CEO of Intec since October 2014 and has served on the board of directors since October 2014. Prior to that, he served as the co-chief executive officer from November 2013 until October 2014, and before that as executive vice president of commercial operations, commencing in 2006.

CFO: Nir Sassi

Mr Nir Sassi has been the CFO of Intec since August 2016. Prior to serving as the CFO, he served as the VP finance commencing in March 2010. Prior to Intec, Mr Sassi served as a senior manager at PricewaterhouseCoopers Israel from 2002 until 2010.

Chairman: John W Kozarich

Dr Kozarich has nearly 40 years of experience in the biopharmaceutical industry and academia. Dr Kozarich currently serves as chairman of Ligand Pharmaceuticals, and chairman and president of ActivX Biosciences. Prior to his role as chairman, Dr Kozarich was vice president at Merck.

EVP R&D and Operations: Nadav Navon

Dr Nadav Navon has been with Intec since March 2006 and has served as the executive vice president of research & development and operations since March 2015. Before that he served as the vice president of research & development and operations since May 2013.

Principal shareholders

(%)

Cormorant Asset Management LLC

7.40%

Sabby Management, LLC

6.61%

Opaleye Management Inc.

6.01%

Migdal Insurance & Financial Holdings Ltd.

4.58%

Companies named in this report

AbbVie (ABBV), Dainippon Sumitomo (TYO:4506), Impax Laboratories (IPXL), Merck (MRK), Novartis (NVS), Orion (HEL:ORNBV), Sanofi (SNY)

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Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

eServGlobal — Update 28 September 2016

eServGlobal

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