An additional firibastat partnership

Quantum Genomics 5 October 2020 Update
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Quantum Genomics

An additional firibastat partnership

Financial update

Pharma & biotech

5 October 2020

Price

€2.78

Market cap

€60m

Net cash (€m) at 30 June 2020 + financing

13.4

Shares in issue

21.6m

Free float

80%

Code

ALQGC

Primary exchange

Euronext Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

11.0

(2.6)

(36.2)

Rel (local)

15.5

1.1

(28.7)

52-week high/low

€4.50

€1.88

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 enrolling patients.

Next events

QUORUM heart failure enrolment completion

YE20

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Quantum Genomics is a research client of Edison Investment Research Limited

Quantum Genomics recently announced it has signed a licensing and collaboration agreement with Orient Europharma (OEP) to develop and commercialise firibastat for hypertension in South East Asia, Australia and New Zealand. As part of the agreement, Quantum Genomics will receive US$19m in upfront and milestone payments as well as double-digit royalties. Additionally, OEP will fund part of the Phase III FRESH study in difficult to treat/resistant hypertension patients in Taiwan.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

0.0

(13.6)

(0.94)

0.0

N/A

N/A

12/19

0.0

(10.8)

(0.53)

0.0

N/A

N/A

12/20e

0.0

(15.6)

(0.64)

0.0

N/A

N/A

12/21e

0.0

(21.6)

(0.85)

0.0

N/A

N/A

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

An established pharma chosen as partner

Quantum Genomics’ new partner for South East Asia, Australia and New Zealand, OEP, was founded in 1982 and publicly listed on the Taiwan exchange in 2003. OEP has over 1,000 worldwide employees and had revenues of NT$6.1bn (over US$200m) in 2019.

Phase III FRESH study on track

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 continue to be expected in H221, although are likely closer to the end of that period.

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. The company expects to complete enrolment by the end of the year, a slight delay mainly due to COVID-19. Based on this we now expect results in H121 (previously H220).

Valuation: €1,028m or €47.63 per share

We have adjusted our valuation to €1,028m or €47.63 per share from €963m or €51.74 per share. The total value increased due to rolling forward our NPVs, while the per-share value falls due to a higher number of shares.

H120 update and a new partnership

Quantum Genomics recently announced it has signed a licensing and collaboration agreement with OEP to develop and commercialise firibastat for difficult to treat/resistant hypertension in South East Asia (specifically, Taiwan, Malaysia, the Philippines, Singapore, Vietnam, Indonesia, Myanmar and Cambodia), Australia and New Zealand. As part of the agreement, Quantum Genomics will receive US$19m in upfront and milestone payments (the precise split was not disclosed) as well as double digit royalties. Additionally, OEP will fund part of the Phase III FRESH study in difficult to treat/resistant hypertension patients in Taiwan. OEP seems to be a good choice of partner for Quantum Genomics as it is an established company with decades of experience. Additionally, OEP has over 1,000 employees worldwide (40% of which are outside of Taiwan) and had revenues of NT$6.1bn (over US$200m) in 2019.

Previously, in December 2019, Quantum Genomics had announced it has licensed firibastat for the treatment of hypertension 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 were around US$600m, according to the licensing agreement press release. As part of the agreement, Biolab Sanus is obligated to pay US$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 are expected to account for around 20% of the patients enrolled in the Phase III FRESH trial.

Clinical trial updates

Quantum Genomics launched its Phase III programme for firibastat for the treatment of difficult-to-treat or resistant hypertension patients, enrolling the first patient in July. The FRESH study is 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, once all sites are online, is expected to be conducted in approximately 70 hospitals in total across Europe (especially France, Germany, Poland, Spain and the Czech Republic), Canada, the United States and Latin America (primarily Brazil and Mexico). The primary endpoint will be a change from baseline in systolic AOBP. Data continue to be expected in H221, although are likely closer to the end of that period.

In terms of the heart failure programme, Quantum Genomics is continuing to enrol 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 the company expects to complete enrolment by the end of the year, a slight delay mainly due to COVID-19. Based on this we now expect results in H121 (previously H220).

Valuation

We have adjusted our valuation to €1,028m or €47.63 per share from €963m or €51.74 per share. The total value increased due to rolling forward our NPVs, while the per-share value falls due to a higher number of shares (shares increased from 18.6m to 21.6m since our last update).

Exhibit 1: Quantum Genomics valuation

Product

Main indication

Local

Status

Prob. of success

Launch year

Peak sales ($m)

Patent protection

rNPV

Firibastat (QGC001)

Hypertension

US

Phase III

50%

2023

$1,110

2031

€ 526.69

Firibastat (QGC001)

Hypertension

Europe

Phase III

50%

2023

$959

2031

€ 446.86

Firibastat (QGC001)

Development costs

 

 

 

 

-€ 164.06

Firibastat (QGC001)

Heart failure

US

Phase IIb

20%

2023

$574

2031

€ 134.49

Firibastat (QGC001)

Heart failure

Europe

Phase IIb

20%

2023

$687

2031

€ 159.57

Firibastat (QGC001)

Development costs

-€ 88.61

Total

 

 

 

 

 

 

 

€ 1,014.94

Pro-forma Net Cash (30 June 2020 + financing) (€m)

€ 13.43

Total firm value (€m)

€ 1,028

Total shares (29 September 2020) (m)

21.59

Value per basic share (€m)

€ 47.63

Source: Edison Investment Research

Financials

The company reported an operational loss of €6.0m in H120 compared to €5.3m in H119. Due to a lower than expected run rate, we have reduced our estimated FY20 operating loss to €15.6m from €20.7m. We continue to expect an acceleration in spending due to the FRESH study and estimate an operating loss of €21.6m in FY21.

Quantum had €13.2m in cash and investments and €2.4m in debt at the end of H120. The company raised €1.7m through an equity line of credit with Kepler Cheuvreux in March and €6m through its Negma Group financing arrangement in the first half. It raised an additional €2m from Negma after the end of H120, bringing the total raised from that financial group to €8m. The Negma financings are loans that are repaid with warrants that are then exercised by Negma. At the end of September, only €1.7m of the €8.0m had yet to be repaid. Additionally, Quantum Genomics has decided not to renew the agreement with Negma so while it could have potentially raised up to €24m from the group, the total amount actually raised from the facility will not exceed €8m. While facilities such as Negma’s do help fund the company, the shares made as payment are almost immediately sold on the market as they are not long-term investors. The company has stated it has cash to Q321. We forecast €28m in additional financing to the end of 2021 (previously €36m), which we model as illustrative debt. The need for additional funding past this point will depend on the FRESH data and the company’s ability to sign other regional partnerships in difficult to treat and resistant hypertension.

Exhibit 2: Financial summary

€000s

2018

2019

2020e

2021e

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

 

 

(13,598)

(10,760)

(15,617)

(21,572)

Operating Profit (before amort. and except.)

 

 

(13,598)

(10,760)

(15,617)

(21,572)

Intangible Amortisation

0

0

0

0

Other

0

(0)

15

0

Exceptionals

0

0

0

0

Operating Profit

(13,598)

(10,760)

(15,617)

(21,572)

Net Interest

0

0

0

0

Other

150

134

17

0

Profit Before Tax (norm)

 

 

(13,598)

(10,760)

(15,617)

(21,572)

Profit Before Tax (FRS 3)

 

 

(13,448)

(10,626)

(15,601)

(21,572)

Tax

1,458

1,547

2,028

2,804

Deferred tax

0

0

0

0

Profit After Tax (norm)

(12,140)

(9,213)

(13,589)

(18,768)

Profit After Tax (FRS 3)

(11,990)

(9,078)

(13,572)

(18,768)

Average Number of Shares Outstanding (m)

12.8

17.5

21.2

22.1

EPS - normalised (€)

 

 

(0.94)

(0.53)

(0.64)

(0.85)

EPS - FRS 3 (€)

 

 

(0.94)

(0.52)

(0.64)

(0.85)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

626

884

968

960

Intangible Assets

0

360

360

360

Tangible Assets

24

27

107

99

Other

602

497

501

501

Current Assets

 

 

17,855

14,222

18,922

20,162

Stocks

422

333

1,070

1,070

Debtors

2,636

2,486

3,163

3,163

Cash

14,797

11,164

14,456

15,696

Other

0

239

232

232

Current Liabilities

 

 

(5,764)

(4,061)

(6,757)

(5,057)

Creditors

(5,762)

(4,060)

(5,057)

(5,057)

Short term borrowings

(2)

(1)

(1,700)

0

Long Term Liabilities

 

 

(849)

(874)

(8,755)

(28,755)

Long term borrowings

(12)

(6)

(8,061)

(28,061)

Other long term liabilities

(837)

(869)

(695)

(695)

Net Assets

 

 

11,868

10,171

4,378

(12,690)

CASH FLOW

Operating Cash Flow

 

 

(10,901)

(10,665)

(14,324)

(18,742)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(16)

(118)

(18)

(18)

Acquisitions/disposals

0

0

0

0

Financing

15,071

7,382

5,293

0

Dividends

0

0

0

0

Other

(446)

(232)

(9)

0

Net Cash Flow

3,708

(3,633)

(9,058)

(18,760)

Opening net debt/(cash)

 

 

(11,069)

(14,783)

(11,157)

(4,696)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

6

7

2596

1700

Closing net debt/(cash)

 

 

(14,783)

(11,157)

(4,696)

12,364

Source: Quantum Genomics, 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.

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).

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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

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Germany

London +44 (0)20 3077 5700

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New York +1 646 653 7026

1185 Avenue of the Americas

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United States of America

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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

1185 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).

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

1185 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

1185 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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