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Evomela sales going strong into 2021

CASI Pharmaceuticals 19 February 2021 Update
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CASI Pharmaceuticals

Evomela sales going strong into 2021

Financial update

Pharma & biotech

19 February 2021

Price

US$2.8

Market cap

US$346m

Net cash ($m) at 31 December 2020

57.1

Shares in issue

123.9m

Free float

61.5%

Code

CASI

Primary exchange

Nasdaq

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(17.7)

41.3

26.8

Rel (local)

(20.8)

28.8

9.2

52-week high/low

US$3.6

US$1.4

Business description

CASI Pharmaceuticals is building a portfolio of drugs it intends to market for Chinese and worldwide markets, including Evomela launched in China, anti-CD19 CAR-T therapy CNCT19 and anti-CD38 drug CID-103, among others. The goal is to seek approval through new pathways that have opened in the quickly changing Chinese regulatory environment.

Next events

B-ALL Phase II initiation

Q121

Phase I CAR-T studies complete

Q121

CID-103 trial start

Q121

Analyst

Nathaniel Calloway

+1 646 653 7036

CASI Pharmaceuticals is a research client of Edison Investment Research Limited

CASI has announced as part of its preliminary results that it sold $4.8m worth of Evomela in Q420 and approximately $15m for the year (unaudited), exceeding the company guidance of $14m and our estimate of $14.4m. The company stated that it is targeting 50% growth in Evomela sales in 2021. Additionally, in 2021 the company will be jump starting its clinical development engine as it is expected to initiate clinical studies on a majority of its portfolio during the year.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/18

0.0

(20.0)

(0.24)

0.00

N/A

N/A

12/19

4.1

(36.5)

(0.39)

0.00

N/A

N/A

12/20e

15.2

(29.7)

(0.27)

0.00

N/A

N/A

12/21e

25.8

(23.4)

(0.18)

0.00

N/A

N/A

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

Evomela exceeds expectations again

Evomela revenues are continuing to grow at a breakneck pace, 269% year-on-year in FY20. A large part of this is because it is the first melphalan product approved in the country so it is immediately filling a known gap in the treatment of multiple myeloma patients. Further, CASI will be able to realize a bigger portion of the revenue going forward after securing a lower cost source of the product in Q320.

Numerous studies starting in 2021

CASI has significantly increased the size of its portfolio in recent years, with the in-licensing of a range of early-stage products. It plans on initiating a Phase I study of CID-103, its CD38 targeted treatment for multiple myeloma, and its partner Juventas will be initiating the pivotal Phase II study for CNCT19 for acute lymphoblastic leukemia (ALL) (the pivotal study for non-Hodgkin lymphoma, NHL, initiated in 2020). Additionally, registrational studies for octreotide and thiotepa are on deck.

BI-1206 interim results

CASI’s partner BioInvent presented interim results from its Phase I study of BI-1206 for the treatment of relapses and refractory indolent NHL. Six of nine patients on the study had a response, two of which were complete responses (CRs), which were maintained for over a year. Also, very importantly, a protocol adjustment regarding a new steroid regimen seems to have reduced the incidence of dose-limiting toxicities. A total of 15 patients are currently enrolled and BioInvent is planning an end of Phase I meeting with the FDA in Q321.

Valuation: Increased to $431m or $3.47 per share

We have increased our valuation to $431m or $3.47 per share, from $425m or $3.43 per share. This increase is driven by rolling forward our NPVs. We have also slightly increased the peak penetration of Evomela (35% from 30%) to reflect the strong launch to date. These factors are offset by removing Marqibo from our models and lower net cash ($57.1m at the end of 2020, from $64.4m).

Financial past, present and future

We are very encouraged by the company’s preliminary report of revenues for 2020. We previously forecasted sequential sales being down slightly going into Q4 ($4.1m) from Q3 ($4.2m) due to seasonality effects and other factors, but the reported revenue of $4.8m exceeded our expectations. The company is targeting 50% growth in 2021, which we believe is very achievable following the recent pace of growth. We have slightly increased our 2021 revenue projections to $25.8m from $25.3m based on the current growth curve for the product, which exceeds the company’s 50% growth target. We expect an increased marketing effort with the product (2021 SG&A estimate: $31.4m) as the company expands its reach within China. At this point in time, we expect most of the hematologists at major treatment centers such as the Institute of Hematology in Tianjin to have integrated the product into their treatment algorithms.

However, the biggest shift we expect on the company P&L will be an increased focus on R&D in 2021. The company has been on a blitz in-licensing new assets over the past two years, and in 2021 most of them will be entering the clinic. In 2020, the company’s partner Juventas initiated Phase I clinical trials for the CAR-T therapy CNCT19, and that program has since initiated the first of two pivotal Phase II studies (the first for NHL). The second pivotal study is slated to start in Q121. Additionally, CID-103 is expected to enter the clinic in Q121. The company also expects to initiate registrational studies for octreotide and thiotepa during the year. These products have been previously approved overseas and therefore can go directly into registrational studies. We forecast R&D spending of $21.0m in 2021 compared to an estimated $10.9m in 2020 (before accounting for the $10.8m acquired R&D cost).

The company reported $57.1m (unaudited) in cash at the end of 2020. Based on this value we have delayed our forecasts for the expected deployment of the $10.9m earmarked for Phase I of the company’s buildout of the Wuxi facility into 2021. We continue to record $55m in future financing needs in our models as illustrative debt in 2022. This value is to cover the costs of the company’s current programs until profitability (estimated in 2024). However, this is subject to any future in-licensing of new assets, which the company in actively engaged in.

A first look at BI-1206

CASI in licensed the Chinese rights to the novel anti-cancer agent BI-1206 from BioInvent in October 2020. The drug has a novel mechanism of action by targeting FcγRIIB, an antibody receptor on leukocytes with checkpoint-like properties. The product is being developed for hematologic and solid tumors and BioInvent recently reported interim results from its ongoing Phase I dosing study in patients in indolent NHL used in combination with rituximab.

The most important readout from this interim result, by our estimation, is that a recent protocol amendment regarding the administered steroid regimen seems to be addressing some of the safety and tolerability issues seen earlier in the trial (although the specifics of the protocol amendment have not been disclosed). A total of four dose-limiting toxicities (two thrombocytopenias and two AST/ALT elevations) across two dosing cohorts (total of seven patients within these 70mg and 100mg cohorts) were seen before the protocol was changed, and none have been seen in the five patients treated since (Exhibit 1). One takeaway from this is that if these toxicities can be mitigated with steroids, they are likely immunological in nature and associated with the activity of the drug, and this suggests that the drug has some on-target activity.

Exhibit 1: BI-1206 Phase I progress

Source: BioInvent

BioInvent reported that six of nine patients who were evaluable and completed induction had responses to therapy, two of which were CRs. At this stage it is difficult to separate the activity of BI-1206 from the activity of rituximab in these patients. Although they are relapsed, rituximab-based treatments can be used after multiple relapses and retain efficacy, although efficacy diminishes on average. One study reported a response rate for rituximab in the second line after relapse on rituximab of 76% in follicular lymphoma and 65% in mantle cell lymphoma.1 Of the patients in the BI-1206 study, 12 have follicular lymphoma and three have mantle cell lymphoma, and these patients were more heavily pretreated (on average 3.7 prior lines of therapy), but right now there are too few patients to draw many conclusions regarding efficacy.

  Johnston A, et al. (2010) Retreatment with rituximab in 178 patients with relapsed and refractory B-cell lymphomas: a single institution case control study. Leuk Lymphoma 51, 399-405.

Valuation

We have increased our valuation to $431m or $3.47 per basic share, from $425m or $3.43 per basic share. This increase is driven primarily by rolling forward our NPVs. Additionally, we have increased our expected peak penetration for Evomela from 30% to 35% because it has consistently outperformed our estimates. These changes are offset by lower net cash ($57.1m from $64.4m) and because we have removed Marqibo from our models. This product is deprioritized and the company is not expecting to enter the clinic with it in 2021. Other aspects of our valuation may be changed when the company reports its complete 2020 results in March.

Exhibit 2: Valuation of CASI

Portfolio

Asset

Region

Peak sales ($m)

Margins

Clinical risk adjustment

Value ($m)

Hematology

Evomela

China

39.1

50%

100%

92.11

Zevalin

China

25.5

64%

90%

44.75

Thiotepa

China

8.8

39%

90%

4.75

CID-103

China & US & Europe

766.6

59%

5%

14.92

CNCT19

China

306.2

up to 50% profit share

10%

26.82

BI-1206

China

249.9

59%

10%

17.76

Other products

ANDA portfolio

China & US

142.0

47%

100%

180.88

Octreotide LAI

China

15.7

41%

80%

12.75

Total

394.74

Net cash and equivalents (Q420) ($m)

57.10

Noncontrolling interest ($m)

(21.27)

Total firm value ($m)

430.57

Total shares (m)

123.94

Value per basic share ($)

3.47

Dilutive warrants and options (m)

15.91

Value per diluted share ($)

3.39

Source: CASI reports, Edison Investment Research

Exhibit 3: Financial summary

$'k

2018

2019

2020e

2021e

2022e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

INCOME STATEMENT

Revenue

 

 

0.0

4,131.0

15,153.7

25,772.6

28,802.2

Cost of Sales

0.0

(3,935.0)

(9,642.7)

(6,408.5)

(7,165.9)

Gross Profit

0.0

196.0

5,511.0

19,364.1

21,636.3

EBITDA

 

 

(19,402.4)

(37,495.0)

(32,358.4)

(23,380.8)

(23,185.9)

Normalised operating profit

 

 

(19,767.9)

(38,098.0)

(32,860.4)

(23,437.5)

(23,992.5)

Amortisation of acquired intangibles

(1,305.4)

(1,550.0)

(1,511.9)

(1,511.9)

(1,511.9)

Exceptionals

0.0

0.0

(1,087.0)

0.0

0.0

Share-based payments

(6,118.1)

(7,310.0)

(7,478.0)

(7,478.0)

(7,478.0)

Reported operating profit

(27,191.4)

(46,958.0)

(42,937.3)

(32,427.4)

(32,982.5)

Net Interest

(280.1)

1,062.0

854.0

0.0

0.0

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

534.0

2,292.0

0.0

0.0

Profit Before Tax (norm)

 

 

(20,048.1)

(36,502.0)

(29,714.4)

(23,437.5)

(23,992.5)

Profit Before Tax (reported)

 

 

(27,471.6)

(45,362.0)

(39,791.3)

(32,427.4)

(32,982.5)

Reported tax

0.0

0.0

0.0

6,485.5

6,596.5

Profit After Tax (norm)

(20,048.1)

(36,502.0)

(29,714.4)

(23,437.5)

(23,992.5)

Profit After Tax (reported)

(27,471.6)

(45,362.0)

(39,791.3)

(25,941.9)

(26,386.0)

Minority interests

0.0

(670.0)

(403.0)

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(20,048.1)

(37,172.0)

(30,117.4)

(23,437.5)

(23,992.5)

Net income (reported)

(27,471.6)

(46,032.0)

(40,194.3)

(25,941.9)

(26,386.0)

Basic average number of shares outstanding (m)

85

96

110

130

137

EPS - basic normalised (c)

 

 

(23.65)

(38.74)

(27.28)

(18.00)

(17.55)

EPS - diluted normalised (c)

 

 

(23.65)

(38.74)

(27.28)

(18.00)

(17.55)

EPS - basic reported (c)

 

 

(32.41)

(47.98)

(36.41)

(19.92)

(19.30)

Dividend (c)

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

20,845.4

41,130.0

51,903.0

61,641.2

74,669.6

Intangible Assets

18,784.7

16,895.0

18,015.0

16,503.1

14,991.1

Tangible Assets

1,750.6

985.0

850.0

12,100.2

26,640.5

Investments & other

310.0

23,250.0

33,038.0

33,038.0

33,038.0

Current Assets

 

 

92,564.6

61,501.0

64,813.5

36,746.3

60,042.9

Stocks

0.0

4,542.0

3,170.2

2,106.9

2,355.9

Debtors

0.0

1,293.0

2,491.0

4,236.6

4,734.6

Cash & cash equivalents

85,117.0

54,246.0

57,060.3

28,381.8

50,931.4

Other

7,447.6

1,420.0

2,092.0

2,021.0

2,021.0

Current Liabilities

 

 

(3,873.9)

(7,947.0)

(6,763.1)

(6,898.0)

(7,131.0)

Creditors

(968.0)

(5,113.0)

(3,905.1)

(4,040.0)

(4,273.0)

Tax and social security

0.0

0.0

0.0

0.0

0.0

Short term borrowings

(1,499.5)

0.0

0.0

0.0

0.0

Other

(1,406.4)

(2,834.0)

(2,858.0)

(2,858.0)

(2,858.0)

Long Term Liabilities

 

 

(73.6)

(1,019.0)

(4,962.0)

(4,962.0)

(59,962.0)

Long term borrowings

0.0

0.0

0.0

0.0

(55,000.0)

Other long term liabilities

(73.6)

(1,019.0)

(4,962.0)

(4,962.0)

(4,962.0)

Net Assets

 

 

109,462.5

93,665.0

104,991.4

86,527.5

67,619.5

Minority interests

0.0

20,670.0

21,271.0

21,271.0

21,271.0

Shareholders' equity

 

 

109,462.5

72,995.0

83,720.4

65,256.5

46,348.5

CASH FLOW

Op Cash Flow before WC and tax

(19,402.4)

(37,495.0)

(32,358.4)

(23,380.8)

(23,185.9)

Working capital

(9,780.4)

4,452.0

(3,098.1)

(547.4)

(514.0)

Exceptional & other

598.9

9,800.0

10,275.0

6,485.5

6,596.5

Tax

0.0

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(28,583.9)

(23,243.0)

(25,181.5)

(17,442.7)

(17,103.4)

Capex

(1,131.1)

(7,053.0)

(367.0)

(11,306.8)

(15,347.0)

Acquisitions/disposals

(20,642.4)

(21,005.0)

(21,978.0)

0.0

0.0

Net interest

0.0

0.0

0.0

0.0

0.0

Equity financing

92,269.8

3,545.0

45,922.0

0.0

0.0

Dividends

912.0

0.0

0.0

0.0

0.0

Other

0.0

20,000.0

2,195.0

71.0

0.0

Net Cash Flow

42,824.4

(27,756.0)

590.5

(28,678.5)

(32,450.4)

Opening net debt/(cash)

 

 

(41,991.7)

(83,617.5)

(54,245.5)

(57,060.0)

(28,381.5)

FX

(1,197.5)

(1,328.0)

587.0

0.0

0.0

Other non-cash movements

(1.0)

(288.0)

1,637.0

0.0

0.0

Closing net debt/(cash)

 

 

(83,617.5)

(54,245.5)

(57,060.0)

(28,381.5)

4,068.9

Source: CASI reports, Edison Investment Research


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

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General disclaimer and copyright

This report has been commissioned by CASI Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by CASI Pharmaceuticals. 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 2021 Edison Investment Research Limited (Edison).

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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.

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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

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