Cantrixil final Phase I data reported

Kazia Therapeutics 10 December 2020 Update
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Kazia Therapeutics

Cantrixil final Phase I data reported

Clinical update

Pharma & biotech

10 December 2020

Price

A$1.42

Market cap

A$179m

A$1.40/US$

Net cash (A$m) at 30 September 2020

6.54

Shares in issue

126.2m

Free float

60.1%

Code

KZA

Primary exchange

ASX

Secondary exchange

NASDAQ

Share price performance

%

1m

3m

12m

Abs

58.7

54.3

124.5

Rel (local)

48.4

34.3

120.3

52-week high/low

A$1.75

A$0.36

Business description

Kazia Therapeutics is a pharmaceutical company with lead asset paxalisib, a PI3K inhibitor licensed from Genentech that can cross the blood-brain barrier, which is entering a pivotal study for GBM. It is also being investigated for other brain cancers such as breast cancer brain metastases.

Next events

BCBM Phase II results

H220

First patient in GBM AGILE

Early 2021

GBM Phase IIa complete

H121

Analysts

Nathaniel Calloway

+1 646 653 7036

Kazia Therapeutics is a research client of Edison Investment Research Limited

Kazia Therapeutics announced the final data from both parts of the Phase I dosing study of cantrixil for the treatment of metastatic ovarian cancer. Of the 16 patients evaluable for efficacy, one had a complete response (CR) and two had a partial response (PR). This response rate data has not changed significantly since the dosing portion of the study was completed in 2018. The company will seek partners for the further development of the product, while it focuses its efforts on paxalisib.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(A$)

DPS
(A$)

P/E
(x)

Yield
(%)

06/19

1.6

(7.4)

(0.13)

0.00

N/A

N/A

06/20

1.1

(10.8)

(0.15)

0.00

N/A

N/A

06/21e

1.4

(11.4)

(0.10)

0.00

N/A

N/A

06/22e

1.5

(12.0)

(0.09)

0.00

N/A

N/A

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

Final data a long time coming

The trial was a dose escalation/expansion study with the primary endpoint of determining the maximum tolerated dose (MTD) of cantrixil, which was found to be 5mg/kg in the earlier dose escalation portion of the study (Part A). Patients received two cycles of cantrixil monotherapy followed by up to six cycles in combination with other chemotherapy. The study completed recruitment in August 2019 and the last patient visit was in March 2020.

One CR, two PRs, similar to previous data

The efficacy data from the current release is very similar to previous releases on this study: one CR and two PRs. The company previously reported one CR and two PRs from the Phase I dosing portion of the study (Part A), and we assume that these are the same patients in the current report. Progression free survival (PFS) was not reported for the current data release, but was previously reported at 5.5 months (n=9) for Part A.

Partnering expected for further development

It is encouraging to see cantrixil have activity in this population of heavily pre-treated patients. Kazia did not break down patient prior treatment characteristics for the current data set, but previous reports from Part A had a median of four prior treatments, of which a median of three were platinum therapies. However, we expect the company to focus its resources on the advancement of paxalisib, which recently reported positive data and is moving into pivotal studies.

Valuation: Cantrixil removed until partnership secured

We have lowered our valuation to A$244.1m or A$1.93 per share, from A$257.1m or A$2.04 per share, because we have removed cantrixil from our model until the company secures a partner for its further development. Otherwise our assumptions remain unchanged.

Cantrixil Phase I done, but partner needed to advance

On 9 December 2020, Kazia reported the top-line final data from the Phase I dose escalation/expansion study of cantrixil for the treatment of recurrent metastatic ovarian cancer. The study began in 2016, when the dose escalation portion of the study (Part A) was initiated. This portion of the study was successful in determining the MTD of 5mg/kg in October 2018, at which time it transitioned to the dose expansion portion of the study (Part B). Part B enrolled 14 patients who were evaluable for efficacy at the MTD, and the company’s current update is the first including data on these patients.

However, the efficacy data presented in the current release is very similar to previous reports on Part A: one CR and two PRs (overall response rate (ORR): 19%). We assume that these are the same responders from Part A, and therefore no responses were seen in the expansion cohort. No additional efficacy analysis was presented like PFS, which again makes us assume that the data from the expansion cohort underperformed the previous Part A. This response rate is roughly similar to what is seen with other chemotherapies in this population.1 It is difficult however to draw any definitive conclusions from response rates alone, and we expect better insight when the full PFS survival analysis is published. The company previously reported a PFS of 5.5 months for Part A. The company stated that it expects to present the complete data from the study (including PFS and other parameters) at a medical conference in the first half of CY21. We will be better able to evaluate if this drug will have a role in the treatment of this disease at that time. Our current assessment, however, is that although cantrixil appears to have some activity in this population of heavily pre-treated patients, further development work will be needed to identify effective treatment strategies such as a more well-defined subgroup of patients.

  Pujade-Lauraine E, et al. (2019) Management of Platinum-Resistant, Relapsed Epithelial Ovarian Cancer and New Drug Perspectives. Journal of Clinical Oncology, J Clin Oncol 37, 2437-2448. 

The company has stated that it intends to seek a partner for the further development of cantrixil, while it focuses its efforts on developing paxalisib, its PI3K inhibitor in development for glioblastoma multiforme. We recently reported on the very encouraging results from the drug in Phase II, which confirmed an attractive safety profile and good efficacy in a very difficult disease. We agree with the decision to focus on this program. The company recently formally started its participation in the pivotal Phase II/III GBM AGILE study, and stated that first patients are expected to be enrolled in early 2021.

Valuation

We have removed cantrixil from our valuation, which has reduced it to A$244.1m or A$1.93 per share from A$257.1m or A$2.04 per share. We intend to add the product back into our valuation in the future if the company secures a partnership for its further development. Otherwise our remaining valuation assumptions remain unchanged.

Exhibit 1: Valuation of Kazia

Development Program

Indication

Clinical stage

Probability. of success

Launch year

Patent/ exclusivity protection

Launch pricing (US$/ course)

Peak sales (US$m)

rNPV
(A$m)

Paxalisib

GBM

Phase II

35%

2025

2037

169,000

450

212.52

BCBMs

Phase II

5%

2029

2037

183,000

249

8.36

Total

220.88

Net cash and equivalents (fiscal Q121 + subsequent transactions) (A$m)

23.23

Total firm value (A$m)

244.11

Total basic shares (m)

126.2

Value per basic share (A$)

1.93

Dilutive options (m)

4.54

Total diluted shares (m)

130.70

Value per diluted share (A$)

1.90

Source: Kazia Therapeutics reports, Edison Investment Research

Financials

Our financial forecasts remain unchanged. We previously did not include costs associated with the cantrixil program in our forecasts because of the company’s stated intent to partner the program. The company has a future financing requirement of A$20m, which we include in our forecasts as illustrative debt in FY23.

Exhibit 2: Financial summary

A$'000s

2019

2020

2021e

2022e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,565.0

1,060.9

1,404.8

1,521.8

Cost of Sales

0.0

0.0

0.0

0.0

Gross Profit

1,565.0

1,060.9

1,404.8

1,521.8

R&D

6,475.6

9,494.3

10,285.0

10,845.0

SG&A

3,785.6

3,689.9

3,899.9

3,977.9

EBITDA

 

 

(7,365.3)

(10,776.8)

(11,433.6)

(11,954.7)

Normalised operating profit

 

 

(7,365.4)

(10,776.8)

(11,433.6)

(11,954.7)

Amortization of acquired intangibles

(1,084.3)

(1,084.3)

(1,084.3)

(1,084.3)

Exceptionals

(1,872.3)

(642.4)

0.0

0.0

Share-based payments

(246.4)

(262.1)

(262.1)

(262.1)

Reported operating profit

(10,568.5)

(12,765.7)

(12,780.1)

(13,301.1)

Net Interest

0.0

0.0

0.0

0.0

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(7,365.4)

(10,776.8)

(11,433.6)

(11,954.7)

Profit Before Tax (reported)

 

 

(10,568.5)

(12,765.7)

(12,780.1)

(13,301.1)

Reported tax

298.2

298.2

487.7

507.6

Profit After Tax (norm)

(7,365.4)

(10,776.8)

(11,433.6)

(11,954.7)

Profit After Tax (reported)

(10,270.3)

(12,467.5)

(12,292.3)

(12,793.5)

Minority interests

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

Net income (normalised)

(7,365.4)

(10,776.8)

(11,433.6)

(11,954.7)

Net income (reported)

(10,270.3)

(12,467.5)

(12,292.3)

(12,793.5)

Basic average number of shares outstanding (m)

58

73

118

133

EPS - basic normalised (A$)

 

 

(0.13)

(0.15)

(0.10)

(0.09)

EPS - diluted normalised (A$)

 

 

(0.13)

(0.15)

(0.10)

(0.09)

EPS - basic reported (A$)

 

 

(0.18)

(0.17)

(0.10)

(0.10)

Dividend (A$)

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

13,662.3

12,410.1

11,325.8

10,241.5

Intangible Assets

13,494.5

12,410.1

11,325.8

10,241.5

Tangible Assets

0.0

0.0

0.0

0.0

Investments & other

167.8

0.0

0.0

0.0

Current Assets

 

 

7,514.2

10,653.6

21,334.7

9,537.3

Stocks

0.0

0.0

0.0

0.0

Debtors

1,710.7

1,352.3

923.7

1,000.6

Cash & cash equivalents

5,433.9

8,764.0

19,873.7

7,999.4

Other

369.6

537.3

537.3

537.3

Current Liabilities

 

 

(1,900.3)

(5,067.5)

(3,494.2)

(3,651.5)

Creditors

(1,763.9)

(3,488.9)

(3,165.6)

(3,323.0)

Tax and social security

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

Other

(136.4)

(1,578.5)

(328.5)

(328.5)

Long Term Liabilities

 

 

(5,081.4)

(3,870.7)

(3,382.9)

(2,875.3)

Long term borrowings

0.0

0.0

0.0

0.0

Other long term liabilities

(5,081.4)

(3,870.7)

(3,382.9)

(2,875.3)

Net Assets

 

 

14,194.8

14,125.6

25,783.3

13,252.0

Minority interests

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

14,194.8

14,125.6

25,783.3

13,252.0

CASH FLOW

Op Cash Flow before WC and tax

(7,365.3)

(10,776.8)

(11,433.6)

(11,954.7)

Working capital

352.9

1,669.1

(1,632.5)

(427.2)

Exceptional & other

298.2

298.2

487.7

507.6

Tax

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(6,714.2)

(8,809.5)

(12,578.4)

(11,874.3)

Capex

0.0

0.0

0.0

0.0

Acquisitions/disposals

0.0

0.0

0.0

0.0

Net interest

0.0

0.0

0.0

0.0

Equity financing

3,815.7

12,139.7

23,688.0

0.0

Dividends

0.0

0.0

0.0

0.0

Other

2,359.1

0.0

0.0

0.0

Net Cash Flow

(539.4)

3,330.2

11,109.6

(11,874.3)

Opening net debt/(cash)

 

 

(5,956.2)

(5,433.9)

(8,764.0)

(19,873.7)

FX

17.1

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(5,433.9)

(8,764.0)

(19,873.7)

(7,999.4)

Source: Kazia Therapeutics reports, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Kazia Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Kazia Therapeutics. 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

General disclaimer and copyright

This report has been commissioned by Kazia Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Kazia Therapeutics. 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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