cells

Doubling down on clinical development

Kazia Therapeutics 5 September 2022 ADR Update
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Kazia Therapeutics

Doubling down on clinical development

FY22 results

Pharma and biotech

6 September 2022

ADR research

Price

$1.42

Market cap

$20m

ADR/Ord conversion ratio 1:10

Pro forma net cash (US$m) including US$2.5m raised after 30 June 2022

7.6

ADRs in issue

14.96m

ADR code

KZIA

ADR exchange

Nasdaq

Underlying exchange

ASX

Depository

BNY

ADR share price performance

52-week high/low

US$12.00

US$1.39

Business description

Kazia Therapeutics is a late-stage clinical pharmaceutical company with lead asset paxalisib (a PI3K inhibitor that can cross the blood-brain barrier, licensed from Genentech) in a pivotal study for GBM and in early-stage studies in childhood brain cancers, DIPG and AT/RT. The other asset is the Phase I drug EVT801, an inhibitor of VEGFR3.

Next events

Interim data from the EVT801 Phase I study

H1 CY23

Phase III GBM AGILE top-line data

H2 CY23

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Harry Shrives

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Kazia Therapeutics is a research client of Edison Investment Research Limited

Kazia Therapeutics’ FY22 results recapped a busy year focused on strengthening its oncology-focused pipeline. While the year was marked by encouraging data readouts from several preclinical/clinical programs (particularly in rare childhood brain cancers and brain metastases), this was partially offset by recent news that lead asset paxalisib (PI3K/mTOR inhibitor) has not graduated to Stage 2 of the Phase III GBM AGILE study in glioblastoma multiforme (GBM). Final survival and response data from the fully blinded study are expected in H2 CY23. Net cash at the end of FY22 was US$5.3m, bolstered by a US$2.5m injection from the at-the-market (ATM) facility and we estimate the need of another c US$50m before break-even. Our valuation remains largely unchanged at US$146.6m and the per basic ADR calculation decreases to US$9.79, reflecting the updated share count with the recent equity raise.

Year end

Revenue (US$m)

PTP*
(US$m)

EPADR*
(US$)

DPADR
(US$)

P/E
(x)

Gross yield
(%)

06/21

10.5

(3.1)

(0.25)

0.0

N/A

N/A

06/22

0.0

(14.6)

(1.08)

0.0

N/A

N/A

06/23e

0.0

(18.6)

(1.23)

0.0

N/A

N/A

06/24e

10.6

(16.8)

(1.11)

0.0

N/A

N/A

Note: *Converted at A$1.45/US$. Dividend yield excludes withholding tax. Investors should consult their tax advisor regarding the application of any domestic and foreign tax laws.

More than a GBM play

While paxalisib in GBM was Kazia’s most clinically advanced asset, it boasts a broad clinical pipeline with as many as seven other investigator-sponsored clinical trials ongoing (involving paxalisib), both in other primary brain cancers (diffuse intrinsic pontine glioma (DIPG) and primary central nervous system lymphoma) and secondary cancers that have metastasized to the brain. Most recently, interim data released from a Phase I study assessing paxalisib in the treatment of brain metastases recorded an impressive overall response rate of 100% in the nine-patient cohort. We expect forthcoming interim data from EVT801’s Phase I trial (H1 CY23) and final results for the GBM AGILE study (H2 CY23) to be the next catalysts for Kazia.

Funding support crucial to progress pipeline

At the current quarterly cash burn run rate of US$3.5–4m, the current cash balance of US$7.6m (including US$2.5m raised post-period end) provides a six-month operating runway that could be extended slightly by drawing on the ATM facility. However, given the early-stage pipeline, we anticipate the need for c US$51m in the coming years, including US$22m in each of FY23 and FY24. We expect Kazia to seek strategic partnering opportunities as a possible alternative to dilutive equity raising to support its clinical development plans.

Valuation: US$146.6m or US$9.79 per basic ADR

We have rolled forward our model to include the FY22 results, reflect the latest FX rates and incorporate the latest pro forma net cash figure in our valuation. Our overall valuation for Kazia remains largely unchanged at US$146.6m. However, the per ADR valuation decreases to US$9.42 (US$10.86/ADR previously) with the additional c 10 million shares due to the utilization of the ATM facility.

Exhibit 1: Financial summary

US$'000s

2021

2022

2023e

2024e

30-June

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

10,501.5

18.7

0.0

10,620.7

Cost of Sales

0.0

0.0

0.0

(1,149.0)

Gross Profit

10,501.5

18.7

0.0

9,471.7

R&D

10,028.5

13,967.0

17,669.0

20,420.7

SG&A

4,842.6

3,111.4

3,480.9

8,378.1

EBITDA

 

 

(3,058.2)

(14,558.0)

(18,648.1)

(16,825.3)

Operating profit (before amort. and excepts.)

 

(3,058.2)

(14,558.0)

(18,648.1)

(16,825.3)

Amortization of acquired intangibles

(872.6)

(1,346.9)

(1,346.9)

(1,346.9)

Exceptionals

(1,772.6)

(192.6)

0.0

0.0

Share-based payments

(438.9)

(1,154.9)

(1,154.9)

(1,154.9)

Reported operating profit

(6,142.3)

(17,252.3)

(21,149.8)

(19,327.0)

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

Pre-Tax Profit (norm)

 

 

(3,058.2)

(14,558.0)

(18,648.1)

(16,825.3)

Pre-Tax Profit (reported)

 

 

(6,142.3)

(17,252.3)

(21,149.8)

(19,327.0)

Reported tax

334.0

253.8

311.2

284.4

Profit After Tax (norm)

(2,891.9)

(14,343.8)

(18,373.7)

(16,577.7)

Profit After Tax (reported)

(5,808.2)

(16,998.5)

(20,838.6)

(19,042.7)

Minority interests

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

Net income (normalized)

(2,891.9)

(14,343.8)

(18,373.7)

(16,577.7)

Net income (reported)

(5,808.2)

(16,998.5)

(20,838.6)

(19,042.7)

Average Number of ADRs Outstanding (m)

11.8

13.2

15.0

15.0

EPADR - diluted normalized (US$)

 

 

(0.25)

(1.08)

(1.23)

(1.11)

EPADR - basic reported (US$)

 

 

(0.49)

(1.28)

(1.39)

(1.27)

Dividend (US$)

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

19,790.5

18,862.4

16,136.3

13,410.1

Intangible Assets

15,174.2

13,827.3

12,480.5

11,133.6

Tangible Assets

0.0

0.0

0.0

0.0

Investments & other

4,616.3

5,035.1

3,655.8

2,276.5

Current Assets

 

 

20,269.5

5,247.1

13,204.0

20,617.0

Stocks

0.0

0.0

0.0

283.3

Debtors

58.2

62.7

0.0

6,983.5

Cash & cash equivalents

19,025.4

5,076.6

13,096.3

13,242.5

Other

1,186.0

107.7

107.7

107.7

Current Liabilities

 

 

(5,742.5)

(3,231.1)

(5,236.1)

(7,405.5)

Creditors

(3,401.8)

(2,593.2)

(4,598.2)

(6,767.5)

Tax and social security

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

Other

(2,340.6)

(638.0)

(638.0)

(638.0)

Long Term Liabilities

 

 

(8,213.6)

(8,024.4)

(28,402.8)

(48,808.1)

Long term borrowings

0.0

0.0

(20,689.7)

(41,379.3)

Other long-term liabilities

(8,213.6)

(8,024.4)

(7,713.2)

(7,428.8)

Net Assets

 

 

26,103.9

12,854.0

(4,298.7)

(22,186.5)

Minority interests

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

26,103.9

12,854.0

(4,298.7)

(22,186.5)

CASH FLOW

Operating Cash Flow

(3,058.2)

(14,558.0)

(18,648.1)

(16,825.3)

Working capital

(3,855.7)

(72.5)

3,135.8

(4,002.5)

Exceptional & other

630.8

(1,067.9)

311.2

284.4

Tax

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(6,283.1)

(15,698.4)

(15,201.1)

(20,543.4)

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

19,385.4

2,569.8

2,531.0

0.0

Dividends

0.0

0.0

0.0

0.0

Other

0.0

(1,630.8)

0.0

0.0

Net Cash Flow

13,102.3

(14,759.5)

(12,670.0)

(20,543.4)

Opening net debt/(cash)

 

 

(6,234.3)

(19,215.4)

(5,266.7)

7,403.3

FX

(121.1)

810.7

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(19,215.4)

(5,266.7)

7,403.3

27,946.7

Source: Kazia Therapeutics company accounts, 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 £60,000 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 2022 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 £60,000 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 2022 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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