Firibastat Phase III to start by end of the year

Quantum Genomics 8 October 2019 Update
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Quantum Genomics

Firibastat Phase III to start by end of the year

Development update

Pharma & biotech

8 October 2019

Price

€4.00

Market cap

€68m

Net cash (€m) at 30 June 2019

11.6

Shares in issue

17.1m

Free float

89.4%

Code

ALQGC

Primary exchange

Euronext Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

(18.5)

(21.6)

100.0

Rel (local)

(17.3)

(20.6)

97.0

52-week high/low

€7.25

€1.85

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 IIb study in heart failure was recently initiated.

Next events

Phase III hypertension study initiation

YE19

QUORUM heart failure study data

H220

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Quantum Genomics is a research client of Edison Investment Research Limited

The company recently reported positive feedback from the FDA for its Phase III programme design for firibastat. There will be two studies required for approval: one focused on efficacy and one on safety. The efficacy study, QGC001/3QG1, will be 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. Enrolment is expected to begin by the end of this year with data in H221. The safety study will enrol 750 patients, with 650 staying on the drug for six months and 100 staying on it for a year.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

0.0

(10.3)

(0.93)

0.0

N/A

N/A

12/18

0.0

(13.6)

(0.94)

0.0

N/A

N/A

12/19e

0.0

(17.0)

(0.87)

0.0

N/A

N/A

12/20e

0.0

(22.6)

(1.11)

0.0

N/A

N/A

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

Advanced partnership discussions ongoing

The company has stated it is in advanced discussions with several pharmaceutical companies to partner firibastat and recently announced exclusive negotiations with a potential partner to commercialise firibastat for hypertension in Latin American markets. If these negotiations prove successful, they will enable Quantum Genomics to fund development through non-dilutive financing (we currently model €23.3m in additional financing through the end of 2020.).

QUORUM study in heart failure enrolling patients

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. Results are expected in H220.

Trial in patients with renal failure launched

Based on analysis of the NEW-HOPE study, firibastat appears to not have any impact on renal function, which is a problem with many popular treatments such as Diovan. To confirm this finding, the company has initiated a small study investigating one 500mg dose of firibastat in 14 healthy volunteers and 14 patients with severe renal failure. Results are expected in April 2020. If confirmed, this finding would help expand the market and provide a marketing edge for firibastat.

Valuation: €909m or €53.01 per share

We have increased our valuation from €860m or €51.76 per share to €909m or €53.01 per share mainly due to rolling forward our NPV. It was partially offset by a lower net cash balance and a slightly higher number of shares outstanding. Quantum had €11.6m in cash and investments at the end of H119. It has an additional €5.8m available through its equity line of credit with Kepler Cheuvreux.

Progress on the clinical front

In September Quantum Genomics reported that it received positive feedback from the FDA for its Phase III programme design for firibastat. There will be two studies required for approval: one focused on efficacy and one on safety. The efficacy study, QGC001/3QG1, will be 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. Enrolment is expected to begin by the end of the year with data in H221. The safety study will enrol 750 patients, with 650 staying on the drug for six months and 100 staying on it for a year.

The company’s most recent trial in hypertensive patients, NEW-HOPE, completed enrolment faster than expected, enrolling 256 patients (254 included in the intent-to-treat analysis) in just 10 months. NEW-HOPE focused enrolment on hypertensive overweight (BMI 25–45kg/m2) patients (65% of patients were obese), with a primary endpoint of change from baseline in systolic AOBP at week eight. Patients saw a statistically significant reduction from baseline (p<0.0001) in AOBP of 9.7mmHg. The results are in the vicinity of many of the standards of care (see Exhibit 1), but with a differentiated mechanism, which could be especially helpful in treating those currently not well controlled.

Exhibit 1: Competitor efficacy table

Drug

Class

Company (originator)

Peak sales (all indications)

Duration

Reduction in systolic blood pressure (mmHg)

Firibastat

BAPAI

Quantum Genomics

N/A

8 weeks

9.7

Diovan (valsartan)

ARB

Novartis

$6.0bn (2010)

8 weeks

5.6–9

Vasotec (enalapril)

ACE inhibitor

Merck

$2.5bn (1996)

4 weeks

10–14

Norvasc (amlodipine)

Calcium channel blocker

Pfizer

$4.9bn (2006)

8 weeks

12.1–16

Source: Quantum Genomics, FDA, company filings, Liu et al, (2010) Tolerability and effectiveness of (S)-amlodipine compared with racemic amlodipine in hypertension; Current therapeutic research, clinical and experimental 71, 1-29; Ruilope et al. (2010) Blood-pressure reduction with LCZ696, a novel dual-acting inhibitor of the angiotensin II receptor and neprilysin, Lancet; 375: 1255-66.

The design of Phase III will be somewhat different than NEW-HOPE with one of the major differences being that patients in NEW-HOPE were taken off their prior treatment (if any) before receiving firibastat, whereas in the upcoming Phase III it will be used on top of the patients’ current treatment regimen. This may make it more difficult to see the degree of treatment effect that was seen in NEW-HOPE. However, another design change that may benefit firibastat is that the QGC001/3QG1 trial will be somewhat longer than NEW-HOPE (90 days versus 56 days) and data from NEW-HOPE indicated a greater efficacy the longer patients were on firibastat (see Exhibit 2).

Exhibit 2: Change in systolic AOBP at week eight in NEW-HOPE trial

Source: Quantum Genomics

Importantly, the company has stated it is in advanced discussions with several pharmaceutical companies to partner firibastat and announced in October it is in exclusive negotiations with a potential partner to commercialise firibastat for hypertension in Latin American markets. This potential partner has a portfolio of over 100 products and has signed over 50 international partnerships. Quantum Genomics has also stated it will be moving forward with a regional partnership strategy in hypertension rather than one global partner. This should mean shorter timelines for partnership agreements and an increased commercial focus on firibastat by those smaller regional partners as it would be more strategic for it than for a giant pharmaceutical company.

In terms of the heart failure programme, Quantum Genomics is continuing to enrol the QUORUM study, which will assess 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 trial results are expected in H220. We expect potential partnership discussions for firibastat in heart failure to intensify once the QUORUM study results are out. We do not believe that licensing agreements for hypertension will necessarily preclude separate agreements for heart failure as the product may have different formulations and dosages in the two indications.

Valuation

We have increased our valuation of Quantum Genomics from €860m or €51.76 per share to €909m or €53.01 per share mainly due to rolling forward our NPV. It was partially offset by a lower net cash balance and slightly higher shares outstanding.

Exhibit 3: Quantum Genomics valuation

Product

Main indication

Local

Status

Prob. of success

Launch year

Peak sales ($m)

Patent protection

rNPV (€m)

Firibastat (QGC001)

Hypertension

US

Phase Il

50%

2023

1,110

2031

468.17

Firibastat (QGC001)

Hypertension

Europe

Phase Il

50%

2023

959

2031

397.21

Firibastat (QGC001)

Development costs

 

 

 

 

-148.70

Firibastat (QGC001)

Heart failure

US

Phase IIb

20%

2023

574

2031

119.54

Firibastat (QGC001)

Heart failure

Europe

Phase IIb

20%

2023

687

2031

141.84

Firibastat (QGC001)

Development costs

-80.82

Total

 

 

 

 

 

 

 

897.25

Net cash (30 June 2019) (€m)

11.57

Total firm value (€m)

908.82

Total shares (30 September 2019) (m)

17.15

Value per basic share (€m)

53.01

Source: Edison Investment Research

Financials

The company reported an operational loss of €5.3m in H119 compared to €6.8m in H118, with the decrease primarily driven by the completion of the NEW-HOPE study. We have decreased our operating loss estimates for 2019 by around €0.3m to €16.5m due to lower than expected spending in the first half. We have also lowered operating loss estimates for 2020 by €0.2m to €20.7m.

Quantum had €11.6m in cash and investments at the end of H119. In March 2018, it announced an equity line of credit with Kepler Cheuvreux and has approximately €5.8m of the original €24m line remaining after drawing down an additional €3.4m during the first half of the year. The company has stated it believes its available cash and equity line will be enough to fund the company for the next 12 months. We model (as illustrative long-term debt) that the company will use the remainder of the available credit line by the end of 2019 and will raise an additional €17.5m in 2020, assuming no partnerships are signed. These financing needs could be significantly reduced or eliminated through successful partnership discussions and upfront/milestone payments.

Exhibit 4: Financial summary

€000s

2017

2018

2019e

2020e

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

 

 

(10,292)

(13,598)

(16,507)

(20,704)

Operating Profit (before amort. and except.)

 

 

(10,292)

(13,598)

(16,507)

(20,704)

Intangible Amortisation

0

0

0

0

Other

0

0

6

0

Exceptionals

0

0

0

0

Operating Profit

(10,292)

(13,598)

(16,507)

(20,704)

Net Interest

0

0

(468)

(1,868)

Other

(239)

150

310

0

Profit Before Tax (norm)

 

 

(10,292)

(13,598)

(16,976)

(22,572)

Profit Before Tax (FRS 3)

 

 

(10,531)

(13,448)

(16,666)

(22,572)

Tax

1,150

1,458

2,167

2,934

Deferred tax

0

0

0

0

Profit After Tax (norm)

(9,142)

(12,140)

(14,809)

(19,638)

Profit After Tax (FRS 3)

(9,381)

(11,990)

(14,499)

(19,638)

Average Number of Shares Outstanding (m)

9.9

12.8

17.0

17.7

EPS - normalised (c)

 

 

(93.45)

(93.94)

(87.03)

(111.02)

EPS - FRS 3 (€)

 

 

(0.95)

(0.94)

(0.85)

(1.11)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

439

626

940

961

Intangible Assets

91

0

260

260

Tangible Assets

52

24

34

55

Other

296

602

646

646

Current Assets

 

 

13,478

17,855

11,070

8,912

Stocks

189

422

422

422

Debtors

2,197

2,636

3,461

3,461

Cash

11,089

14,797

7,055

4,897

Other

3

0

132

132

Current Liabilities

 

 

(4,572)

(5,764)

(4,577)

(4,577)

Creditors

(4,571)

(5,762)

(4,576)

(4,576)

Short term borrowings

(1)

(2)

(1)

(1)

Long Term Liabilities

 

 

(474)

(849)

(6,705)

(24,205)

Long term borrowings

(19)

(12)

(5,853)

(23,353)

Other long term liabilities

(454)

(837)

(852)

(852)

Net Assets

 

 

8,871

11,868

729

(18,909)

CASH FLOW

Operating Cash Flow

 

 

(7,977)

(10,901)

(16,774)

(19,630)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

32

(16)

(29)

(29)

Acquisitions/disposals

0

0

0

0

Financing

7,733

15,071

3,360

0

Dividends

0

0

0

0

Other

104

(446)

(99)

0

Net Cash Flow

(108)

3,708

(13,542)

(19,659)

Opening net debt/(cash)

 

 

(11,179)

(11,069)

(14,783)

(1,201)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

-2

6

-40

0

Closing net debt/(cash)

 

 

(11,069)

(14,783)

(1,201)

18,457

Source: Quantum Genomics accounts, 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.

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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.

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London +44 (0)20 3077 5700

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London, WC1V 7EE

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New York +1 646 653 7026

1,185 Avenue of the Americas

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United States of America

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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.

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Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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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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The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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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