A deal and a Phase III initiation

Quantum Genomics 6 January 2020 Update
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Quantum Genomics

A deal and a Phase III initiation

Development update

Pharma & biotech

6 January 2020

Price

€3.25

Market cap

€57m

Net cash (€m) at 30 June 2019

11.6

Shares in issue

17.5m

Free float

86.5%

Code

ALQGC

Primary exchange

Euronext Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

2.0

(27.2)

(30.0)

Rel (local)

(3.1)

(34.3)

(46.0)

52-week high/low

€5.77

€2.94

Business description

Quantum Genomics is a biopharmaceutical company developing firibastat, a brain aminopeptidase A inhibitor for treating hypertension and heart failure. Its mechanism is implicated in the 25% of patients resistant to treatment. The Phase IIb study in hypertension was very positive and a Phase III was recently initiated. Also, a Phase IIb study in heart failure is currently enrolling patients.

Next events

QUORUM heart failure study data

H220

Analysts

Maxim Jacobs

+1 646 653 7027

Wiktoria O’Hare

+1 646 653 7028

Quantum Genomics is a research client of Edison Investment Research Limited

Quantum Genomics recently announced a regional licensing agreement for firibastat for the treatment of hypertension in Latin America with Biolab Sanus Pharmaceutical, one of the largest Brazilian pharmaceutical companies, for $21.2m in upfront and milestones as well as royalties. In addition, the company announced the initiation of the pivotal Phase III FRESH study in 500 difficult-to-treat and resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes. Data are expected in H221.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

0.0

(10.3)

(0.93)

0.0

N/A

N/A

12/18

0.0

(13.6)

(0.94)

0.0

N/A

N/A

12/19e

0.0

(17.0)

(0.87)

0.0

N/A

N/A

12/20e

0.0

(22.6)

(1.11)

0.0

N/A

N/A

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

Licensing agreement with Biolab Sanus

The company announced that it has licensed firibastat for the treatment of hypertension (but not for the heart failure indication, which can be licensed separately) to Biolab Sanus covering the Latin American region. As part of the agreement, Biolab Sanus is obligated to pay $21.2m in upfront and milestone payments as well as royalties. Additionally, Biolab Sanus will be responsible for clinical trial costs in Latin America, which is expected to account for around 20% of the patients enrolled in the trial.

Phase III FRESH study initiated

The pivotal FRESH study is a three-month, 500-patient study comparing firibastat to placebo in difficult-to-treat or resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes (firibastat and placebo will be added on top of the current treatment), yet still have systolic automated office blood pressure (AOBP) above 140mmHg. The primary endpoint will be a change from baseline in systolic AOBP. Data are expected in H221.

Phase IIb QUORUM study enrolment ongoing

The Phase IIb QUORUM study is enrolling 294 subjects from 40 centres in the US and Europe within 72 hours of suffering acute myocardial infarction (AMI), commonly referred to as a heart attack. The primary endpoint will be the change from baseline in the left ventricular ejection fraction (LVEF) after a three-month treatment. Results are expected in H220.

Valuation: €909m or €51.80 per share

Our valuation is €909m or €51.80 per share compared to €909m or €53.01 per share previously. We have not adjusted our model following the Biolab Sanus collaboration as the breakout of upfront versus milestone payments was not disclosed. Our per-share value fell slightly due to a higher number of shares.

A strong finish to the year

Quantum Genomics announced that it has licensed firibastat for the treatment of hypertension (but not for the heart failure indication, which can be licensed separately) to Biolab Sanus covering the Latin American region. Biolab Sanus is one of the largest pharmaceutical companies in Brazil, with over 140 products and 3,200 employees and 2019 revenues expected to be around $600m, according to the licensing agreement press release. Importantly, it is also a leader in cardiology and hypertension in Brazil, with more than a 15% market share in that category.

As part of the agreement, Biolab Sanus is obligated to pay $21.2m in upfront and milestone payments as well as royalties (though the precise rate is undisclosed). Additionally, Biolab Sanus will be responsible for clinical trial costs in Latin America, which are expected to account for around 20% of the patients enrolled in the Phase III FRESH trial.

Quantum Genomics also announced the initiation of its Phase III programme for firibastat for the treatment of difficult-to-treat or resistant hypertension patients. The FRESH study will be a three-month, 500-patient study comparing firibastat (at a dose of 500mg twice a day) to placebo in difficult-to-treat or resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes (firibastat and placebo will be added on top of the current treatment), yet still have systolic AOBP above 140mmHg. The trial is expected to be conducted in approximately 70 hospitals across Europe (especially France, Germany, Poland, Spain and the Czech Republic), Canada, the US and Latin America (primarily Brazil and Mexico). The primary endpoint will be a change from baseline in systolic AOBP. Data are expected in H221.

Based on feedback from the FDA, two studies will be required for approval, one focused on efficacy (FRESH) and one focused on safety. The safety study will enrol 750 patients, with 650 staying on the drug for six months and 100 staying on it for a year. Precise timing for the initiation of the safety study has not been announced.

In terms of the heart failure programme, Quantum Genomics is continuing to enrol patients in the QUORUM study, which is assessing the safety and efficacy of Quantum’s drug firibastat compared to ramipril, an angiotensin-converting enzyme inhibitor, in 294 subjects enrolled within 72 hours of suffering AMI, who were treated with primary percutaneous coronary intervention and have reduced LVEF. There are three arms in this randomised, double-blind, active-controlled study with patients receiving either 100mg of firibastat twice a day, 500mg of firibastat twice a day or 5mg of ramipril twice a day. The primary endpoint is the change from baseline in LVEF after a three-month treatment. Secondary endpoints will include cardiac events, functional status and change in heart failure biomarkers. The subjects will be recruited from 40 centres in the US and Europe and trial results are expected in H220. We expect potential partnership discussions for firibastat in heart failure to intensify once the QUORUM study results are out. We do not believe that licensing agreements for hypertension will necessarily preclude separate agreements for heart failure, as the product may have different formulations and dosages in the two indications.

Valuation

Our valuation is €909m or €51.80 per share compared to €909m or €53.01 per share previously. We have not adjusted our model following the Biolab Sanus collaboration as the breakout of upfront versus milestone payments was not disclosed. Our per-share value fell slightly due to a higher number of shares.

Exhibit 1: Quantum Genomics valuation

Product

Main indication

Local

Status

Prob. of success

Launch year

Peak sales ($m)

Patent protection

rNPV
(€m)

Firibastat (QGC001)

Hypertension

US

Phase IlI

50%

2023

1,110

2031

468.17

Firibastat (QGC001)

Hypertension

Europe

Phase IlI

50%

2023

959

2031

397.21

Firibastat (QGC001)

Development costs

 

 

 

 

(148.70)

Firibastat (QGC001)

Heart failure

US

Phase IIb

20%

2023

574

2031

119.54

Firibastat (QGC001)

Heart failure

Europe

Phase IIb

20%

2023

687

2031

141.84

Firibastat (QGC001)

Development costs

(80.82)

Total

 

 

 

 

 

 

 

897.25

Net cash (30 June 2019) (€m)

11.57

Total firm value (€m)

908.82

Total shares (30 November 2019) (m)

17.54

Value per basic share (€m)

51.80

Source: Edison Investment Research

Financials

Quantum had €11.6m in cash and investments at the end of H119. In March 2018, it announced an equity line of credit with Kepler Cheuvreux and has approximately €5.8m of the original €24m line remaining after drawing down an additional €3.4m during the first half of the year. The company stated in October that it believes its available cash and equity line will be enough to fund the company for the next 12 months. We model (as illustrative long-term debt) that the company will have used the remainder of the available credit line in 2019 and will raise an additional €17.5m in 2020 (which we have not reduced following the Biolab Sanus partnership as the upfront payment was not disclosed).

Exhibit 2: Financial summary

€000s

2017

2018

2019e

2020e

Year end 31 December

PCG

PCG

PCG

PCG

PROFIT & LOSS

Revenue

 

 

0

0

0

0

Cost of Sales

0

0

0

0

Gross Profit

0

0

0

0

EBITDA

 

 

(10,292)

(13,598)

(16,507)

(20,704)

Operating Profit (before amort. and except.)

 

 

(10,292)

(13,598)

(16,507)

(20,704)

Intangible Amortisation

0

0

0

0

Other

0

0

6

0

Exceptionals

0

0

0

0

Operating Profit

(10,292)

(13,598)

(16,507)

(20,704)

Net Interest

0

0

(468)

(1,868)

Other

(239)

150

310

0

Profit Before Tax (norm)

 

 

(10,292)

(13,598)

(16,976)

(22,572)

Profit Before Tax (FRS 3)

 

 

(10,531)

(13,448)

(16,666)

(22,572)

Tax

1,150

1,458

2,167

2,934

Deferred tax

0

0

0

0

Profit After Tax (norm)

(9,142)

(12,140)

(14,809)

(19,638)

Profit After Tax (FRS 3)

(9,381)

(11,990)

(14,499)

(19,638)

Average Number of Shares Outstanding (m)

9.9

12.8

17.0

17.7

EPS - normalised (€)

 

 

(0.93)

(0.94)

(0.87)

(1.11)

EPS - FRS 3 (€)

 

 

(0.95)

(0.94)

(0.85)

(1.11)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

439

626

940

961

Intangible Assets

91

0

260

260

Tangible Assets

52

24

34

55

Other

296

602

646

646

Current Assets

 

 

13,478

17,855

11,070

8,912

Stocks

189

422

422

422

Debtors

2,197

2,636

3,461

3,461

Cash

11,089

14,797

7,055

4,897

Other

3

0

132

132

Current Liabilities

 

 

(4,572)

(5,764)

(4,577)

(4,577)

Creditors

(4,571)

(5,762)

(4,576)

(4,576)

Short term borrowings

(1)

(2)

(1)

(1)

Long Term Liabilities

 

 

(474)

(849)

(6,705)

(24,205)

Long term borrowings

(19)

(12)

(5,853)

(23,353)

Other long term liabilities

(454)

(837)

(852)

(852)

Net Assets

 

 

8,871

11,868

729

(18,909)

CASH FLOW

Operating Cash Flow

 

 

(7,977)

(10,901)

(16,774)

(19,630)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

32

(16)

(29)

(29)

Acquisitions/disposals

0

0

0

0

Financing

7,733

15,071

3,360

0

Dividends

0

0

0

0

Other

104

(446)

(99)

0

Net Cash Flow

(108)

3,708

(13,542)

(19,659)

Opening net debt/(cash)

 

 

(11,179)

(11,069)

(14,783)

(1,201)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

(2)

6

(40)

0

Closing net debt/(cash)

 

 

(11,069)

(14,783)

(1,201)

18,457

Source: Quantum Genomics accounts, Edison Investment Research


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This report has been commissioned by Quantum Genomics and prepared and issued by Edison, in consideration of a fee payable by Quantum Genomics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “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.

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New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Quantum Genomics and prepared and issued by Edison, in consideration of a fee payable by Quantum Genomics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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