BelCHOP data at ASH ahead of Phase III start

Onxeo 22 December 2015 Update

Onxeo

BelCHOP data at ASH ahead of Phase III start

Clinical data

Pharma & biotech

22 December 2015

Price

€3.5

Market cap

€142m

Est. net cash (€m) at end September 2015

33.9

Shares in issue

40.6m

Free float

86%

Code

ONXEO

Primary exchange

Euronext Paris

Secondary exchange

OMX Copenhagen

Share price performance

%

1m

3m

12m

Abs

(6.9)

(6.2)

(27.7)

Rel (local)

(2.5)

(7.3)

(36.7)

52-week high/low

€6.6

€3.4

Business description

Onxeo is focused on orphan cancer and has three late-stage orphan oncology assets it could commercialise alone in Europe (Livatag, Beleodaq and Validive). Royalty-earning Beleodaq (belinostat) is launched in the US, along with two non-core, partnered, specialty products.

Next events

Start of Phase III Beleodaq trial

H116

Start of Validive Phase III oral mucositis study (in H&N cancer)

H116

Preclinical data from ongoing Livatag and Beleodaq collaborations

2016

Livatag Phase III data

H117

Analysts

Dr Philippa Gardner

+44 (0)20 3681 2521

Jonas Peciulis

+44 (0)20 3077 5700

Christian Glennie

+44 (0)20 3077 5727

With Phase I data confirming the existing safety profile from the BelCHOP (Beleodaq with CHOP) study in the treatment of frontline PTCL, the path is now clear for initiation of the planned Phase III trial during H116 with partner Spectrum. Beleodaq is one of a trio of orphan oncology assets under development at Onxeo, also including Livatag (liver cancer), which has now completed seven safety reviews, and Validive (oral mucositis arising from chemoradiotherapy). New preclinical collaborations for Livatag and Beleodaq could further expand the potential of both.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/13

1.5

(15.3)

(0.74)

0.0

N/A

N/A

12/14

22.1

0.2

(0.05)

0.0

N/A

N/A

12/15e

3.6

(21.5)

(0.60)

0.0

N/A

N/A

12/16e

7.0

(19.6)

(0.56)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items.

Phase I BelCHOP data support Phase III initiation

Data from the Phase I open-label safety study in 23 patients combining Beleodaq with CHOP chemotherapy (cyclophosphamide, hydroxydaunorubicin, oncovin, prednisone) were reported at ASH. The trial’s primary purpose was to establish the maximum tolerated dose (MTD) of Beleodaq in combination with CHOP (BelCHOP) for the planned Phase III trial. This was established as 1,000mg/m2 IV infusion on days 1-5 of a treatment cycle, the same dosing regimen as approved in r/r PTCL.

BelCHOP response rate of 86%

Efficacy data were also reported at ASH, with an overall response rate (ORR) of 86% based on data from 21 evaluable patients. 67% (n=14) achieved a complete response (CR) and there were four partial responses (19%). There was no control arm in the trial. With safety now confirmed, BelCHOP will be compared to CHOP alone in front-line PTCL in the planned Phase III trial. A controlled trial is required for approval in Europe and was a condition of FDA approval in relapsed/refractory PTCL (r/r PTCL). We anticipate this will start in H116. Assuming the trial takes around two to three years, we now estimate EU filing in 2019 and launch in 2020.

Preclinical collaborations for Livatag and Beleodaq

Onxeo recently signed two preclinical collaborations to investigate both Livatag and Beleodaq in indications and combinations beyond those currently in development (Beleodaq in PTCL and monotherapy Livatag in liver cancer). Both Beleodaq and Livatag will be combined with current and new treatments, including in combination with immuno-oncology, and investigated in liver cancer, but also a range of other cancers.

Valuation: rNPV of €329m or €8.1/share

Our valuation is largely unchanged at €329m or €8.1/share. The only change to our assumptions is Beleodaq’s filing in the EU being postponed by one year, which had minimal impact. We continue to believe that Onxeo’s current cash should be sufficient to fund operations into 2017.

Onxeo is a research client of Edison Investment Research Limited

Valuation

Our Onxeo valuation is largely unchanged at €329m or €8.1/share. The only change to our assumptions is Beleodaq’s filing in the EU being postponed by one year, but this had a minimal impact on valuation. We have rolled our valuation forwards in time, with the resulting increase largely offset by the lower cash position at end September 2015 compared with end June 2015. Our valuation, which is based on a risk-adjusted NPV analysis using a 12.5% discount rate, is shown in Exhibit 1.

Exhibit 1: Onxeo rNPV valuation

Product

Indication

Launch

Peak sales (€m)

NPV
(€m)

Probability
(%)

rNPV

(€m)

NPV/share (€/share)

Validive

Oral mucositis (H&N cancer)

2019

200

117.0

60

67.1

1.7

Livatag

Liver cancer

2018

250

154.5

40

56.7

1.4

Beleodaq US

PTCL

2014

80

44.2

100

44.2

1.1

Beleodaq EU

PTCL

2020

60

53.0

70

35.3

0.9

Loramyc/Oravig

Oropharyngeal candidiasis

2007

50

24.4

100

24.4

0.6

Sitavig

Recurrent herpes labialis

2014

110

67.3

100

67.3

1.7

Net cash

33.9

100

33.9

0.8

Valuation

 

 

 

494.4

329.1

8.1

Source: Edison Investment Research. Note: Specialty products shaded. PTCL: peripheral T-cell lymphoma.

Financials

We have made only one change to our financial forecasts to include a €0.3m milestone payment from Sitavig’s Italian partner Bruno Farmaceutici, which was received in Q315, increasing our 2015 revenue forecast and the consequent small increase to operating and net loss. We have made no other adjustments to our forecasts. A summary of the changes to our estimates is shown in Exhibit 2 and our updated forecasts are shown in Exhibit 3.

Onxeo reported cash and equivalents at end-September 2015 of €35.8m. Together with last reported debt at end-June 2015 of €1.9m (including short term-debt of €1.8m), we therefore estimate Onxeo had net cash at end September of approximately €33.9m. We continue to believe that this should be sufficient to fund operations into 2017. Development of Beleodaq in additional indications, which is under discussion with partner Spectrum, could affect the cash reach.

Exhibit 2: Summary of the main changes to our Onxeo financial forecasts

€m

2015e

2015e

% change

2016e

2016e

% change

 

Old

New

Old

New

Revenue

3.328

3.628

+9

7.049

7.049

+0

Personnel costs

(8.624)

(8.624)

-0

(9.056)

(9.055)

-0

External expenses

(16.437)

(16.437)

-0

(17.260)

(17.260)

-0

Operating profit

(24.380)

(24.070)

-1

(21.576)

(21.576)

+0

Profit before tax (reported)

(23.371)

(23.071)

-1

(21.195)

(21.195)

+0

Profit after tax (reported)

(26.337)

(26.037)

-1

(24.161)

(24.161)

+0

Source: Edison Investment Research

Exhibit 3: Financial summary

€000s

2009

2010

2011

2012

2013

2014

2015e

2016e

Year-end December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

7,536

22,532

3,231

4,028

1,467

22,081

3,628

7,049

Cost of Sales

(399)

(859)

(750)

(375)

(264)

(249)

(324)

(324)

Gross Profit

7,138

21,673

2,481

3,653

1,202

21,832

3,304

6,725

EBITDA

 

 

(15,024)

3,065

(14,429)

(11,300)

(15,189)

(4,505)

(22,099)

(19,590)

Operating Profit (before amort. and except.)

(15,362)

2,698

(14,841)

(11,506)

(15,412)

184

(22,484)

(19,990)

Intangible Amortisation

(117)

(105)

(97)

(9)

(10)

(800)

(1,586)

(1,586)

Exceptionals

0

0

0

0

0

(4,861)

0

0

Operating Profit

(15,478)

2,593

(14,938)

(11,515)

(15,422)

(5,477)

(24,070)

(21,576)

Other

0

0

0

0

(29)

(77)

(10)

0

Net Interest

95

217

316

(33)

126

5

1,009

381

Profit Before Tax (norm)

 

 

(15,266)

2,914

(14,525)

(11,539)

(15,286)

189

(21,476)

(19,609)

Profit Before Tax (reported)

 

 

(15,383)

2,809

(14,622)

(11,548)

(15,325)

(5,549)

(23,071)

(21,195)

Tax

0

(0)

0

0

0

(2,150)

(2,966)

(2,966)

Profit After Tax (norm)

(15,266)

2,914

(14,525)

(11,539)

(15,315)

(2,038)

(24,452)

(22,575)

Profit After Tax (reported)

(15,383)

2,809

(14,622)

(11,548)

(15,325)

(7,699)

(26,037)

(24,161)

Average Number of Shares Outstanding (m)

12.9

13.6

17.7

17.7

20.7

40.5

40.5

40.6

EPS - normalised (€)

 

 

(1.18)

0.21

(0.82)

(0.65)

(0.74)

(0.05)

(0.60)

(0.56)

EPS - normalised and fully diluted (€)

 

(1.18)

0.21

(0.82)

(0.65)

(0.74)

(0.05)

(0.60)

(0.56)

EPS - (reported) (€)

 

 

(1.19)

0.21

(0.83)

(0.65)

(0.74)

(0.19)

(0.64)

(0.60)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

94.7

96.2

76.8

90.7

82.0

98.9

91.1

95.4

EBITDA Margin (%)

N/A

13.6

N/A

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

12.0

N/A

N/A

N/A

0.8

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

2,319

2,083

1,793

1,540

1,300

89,052

87,252

85,619

Intangible Assets

130

117

27

33

23

87,932

86,346

84,760

Tangible Assets

1,919

1,632

1,401

1,086

908

711

507

459

Investments

270

334

366

422

369

409

399

399

Current Assets

 

 

19,017

24,251

32,288

20,581

16,432

62,946

39,188

17,688

Stocks

21

38

1

3

3

65

85

85

Debtors

957

243

456

2,089

338

582

398

772

Cash

14,710

20,947

28,666

14,503

11,329

57,227

33,633

11,758

Other

3,328

3,023

3,164

3,986

4,762

5,073

5,073

5,073

Current Liabilities

 

 

(6,794)

(5,737)

(7,051)

(6,147)

(6,357)

(12,919)

(12,792)

(13,053)

Creditors

(6,719)

(5,680)

(6,881)

(6,090)

(6,266)

(11,290)

(11,162)

(11,423)

Short term borrowings

(75)

(57)

(170)

(57)

(91)

(1,630)

(1,630)

(1,630)

Long Term Liabilities

 

 

(1,780)

(1,745)

(4,128)

(4,231)

(3,487)

(17,108)

(16,950)

(16,950)

Long term borrowings

(1,067)

(1,131)

(2,237)

(511)

(303)

(138)

0

0

Other long term liabilities

(714)

(614)

(1,891)

(3,720)

(3,185)

(16,970)

(16,950)

(16,950)

Net Assets

 

 

12,761

18,852

22,902

11,742

7,888

121,971

96,699

73,304

CASH FLOW

Operating Cash Flow

 

 

(17,426)

3,492

(11,614)

(14,076)

(14,020)

(7,733)

(21,521)

(18,938)

Net Interest

(714)

(61)

(1,106)

1,837

333

843

1,009

381

Tax

0

0

0

0

0

0

(2,762)

(2,966)

Capex

(230)

(108)

(148)

(39)

(119)

(2)

(181)

(352)

Acquisitions/disposals

0

0

0

0

0

14,208

0

0

Financing

610

2,867

19,367

(46)

10,807

37,207

0

0

Dividends

0

0

0

0

0

0

0

0

Net Cash Flow

(17,760)

6,191

6,499

(12,324)

(3,000)

44,524

(23,455)

(21,876)

Opening net debt/(cash)

 

 

(31,329)

(13,569)

(19,760)

(26,259)

(13,935)

(10,935)

(55,459)

(32,004)

HP finance leases initiated

0

0

0

0

0

0

0

0

Other

0

0

0

0

(0)

0

0

0

Closing net debt/(cash)

 

 

(13,569)

(19,760)

(26,259)

(13,935)

(10,935)

(55,459)

(32,004)

(10,128)

Source: Edison Investment Research, Onxeo accounts. Note: Historic financials display standalone data only, with Topotarget consolidated from H214.

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