Imminent data from two lead clinical trials

Nanobiotix 31 May 2016 Outlook

Nanobiotix

Imminent data from two lead clinical trials

Company outlook

Pharma & biotech

31 May 2016

Price

€18.71

Market cap

€292m

Net cash (€m) at end 2015 (including private placement in Q116)

32.7

Shares in issue

15.6m

Free float

87%

Code

NANO

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.6

13.2

(8.2)

Rel (local)

6.5

8.6

1.3

52-week high/low

€20.8

€12.7

Business description

Nanobiotix is a French nanotechnology company developing radiotherapy enhancers for the treatment of cancer. Lead product NBTXR3 is in Phase II/III clinical development in STS in Europe and is partnered with PharmaEngine in Asia-Pacific. NBTXR3 is in earlier clinical development in a number of other indications.

Next events

Phase I/II H&N cancer data

Mid-2016

Interim Phase II/III STS data

Mid-2016

Phase I/II liver cancer and metastases data

H216

STS CE mark approval

End 2016

Phase I/II prostate cancer data

Mid-2017

Analyst

Jonas Peciulis

+44 (0)20 3077 5728

Nanobiotix is a research client of Edison Investment Research Limited

The next 12 months will deliver a number of catalysts for Nanobiotix. Readouts from a Phase I/II study with head and neck (H&N) cancer and a Phase II/III study with soft tissue sarcoma (STS) patients are due any time now. H&N cancer will be the second indication with clinical data for Nanobiotix’s lead product NBTXR3, which may have a de-risking effect on other indications in the pipeline due to the physical property of NBTXR3 to universally enhance the effect of radiotherapy. Our valuation of Nanobiotix is €543m.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/14

2.8

(9.5)

(0.74)

0.0

N/A

N/A

12/15

4.0

(17.0)

(1.20)

0.0

N/A

N/A

12/16e

7.1

(27.6)

(1.85)

0.0

N/A

N/A

12/17e

8.4

(55.0)

(3.49)

0.0

N/A

N/A

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

Clinical data from second indication out soon

The Phase I/II clinical study with H&N cancer patients is the second most advanced Nanobiotix project after STS with data readout any time now. Due to its physical property to enhance radiotherapy, NBTXR3’s mechanism of action is the same in different cancers. This would lead to a theoretical assumption of transferability of NBTXR3’s effect to other tumours. The upcoming H&N cancer data could potentially be the proof-of-concept of this thesis and, if the results are comparable between the STS and H&N cancer studies, we believe this will have a de-risking effect on other indications in the pipeline. The final clinical benefit to H&N cancer patients will be established in a further Phase II/III trial to be conducted after the ongoing Phase I/II.

Strong news flow over next 12 months

A second imminent data release is for the STS indication, which is in Nanobiotix’s most advanced Phase II/III trial. This is the last step before the company can obtain the CE mark, which could then lead to initial self-pay sales in STS. A couple of Phase I/II trials in liver cancers (hepatocellular carcinoma and metastases) and prostate cancer are also likely to report results within the next 12 months. In addition, we expect news from the company’s partner PharmaEngine, which could launch clinical studies in new indications in Asia. PharmaEngine is responsible for running the Phase I/II studies in rectal cancer in Asia, and is also responsible for the Asian part of the Phase II/III STS study.

Valuation: €543m (€34.8/sh) with two catalysts ahead

Our valuation remains based on lead product NBTXR3 and the indications being investigated in clinical trials. We leave our underlying assumptions unchanged and have updated our model for the FY15 results including rolling forward in time. The net effect is slightly positive with the new risk-adjusted NPV at €543m vs €527m previously. The valuation per share reduces slightly down from €37.2 to €34.8 following the recent equity issue. Upcoming H&N cancer and STS clinical data are the key near-term catalysts for the share price.

Investment summary

Company description: Nanoparticles enhancing radiotherapy

Nanobiotix is a French nanotechnology company developing treatments that could enhance the efficacy of existing radiotherapy used to treat various cancers. Its lead product, NBTXR3, is being investigated in a Phase II/III trial with soft tissue sarcoma (STS) patients and the results are expected in the coming weeks. This will allow filing for Nanobiotix’s first CE mark in Europe, which if successful could be approved by end 2016. NBTXR3 works by enhancing the efficacy and tumour destruction of radiotherapy in cancerous tissue, but without increasing damage to surrounding healthy tissues. Follow-on products based on the same core NanoXray technology include NBTX-TOPO, a gel formulation for application into a tumour bed during surgery, prior to wound closure, and NBTX-IV for intravenous injection for hard-to-reach tumours. These products could all be used to improve the well-known benefits of radiotherapy without increasing the risks. Nanobiotix employs around 60 people and has partnered its lead product NBTXR3 with PharmaEngine in Asia-Pacific.

Exhibit 1: Nanobiotix pipeline

Product

Indication

Comments

NBTXR3

Intra-tumour radiotherapy enhancer

NBTXR3 is regulated as a medical device in Europe with usually two clinical trials (Phase I/II and Phase II/III) sufficient for registration. In the US it is classified as a drug. NBTXR3 is being investigated for a total of six indications including STS (Europe/Asia; in Phase II/III trial; in partnership with PharmaEngine), liver cancers (Europe; hepatocellular carcinoma and metastases; in Phase I/II trial), head and neck cancers (Europe; in Phase I/II trial), rectal cancer (in Phase I/II trial, run by PharmaEngine in Asia) and intermediate- and high-risk prostate cancer (US; in Phase I/II trial).

NBTX-TOPO

Surgical gel for post-surgery radiotherapy

In preclinical development

NBTX-IV

Iv injection radiotherapy enhancer

In preclinical development

Source: Nanobiotix, Edison Investment Research

Financials: Private placement in Q116 boosted cash

We have fine-tuned our financial forecast after the FY15 results. Nanobiotix carried out a private placement in March 2016 by issuing c 1.4m shares (10% of the outstanding share capital at that time) with gross proceeds of €21.3m. This added to the 2015 year-end cash position of €17.0m. We believe that net cash should be sufficient to fund operations to H117, assuming development continues in all ongoing indications at the same pace. For the purpose of our model we include illustrative long-term debt of c €40m, calculating that all projects can be fully supported with this in 2017.

Valuation

We make no changes to our underlying assumptions for NBTXR3 and modestly adjust our model for the latest financial data and rolling forward in time. The net effect is slightly positive with the new rNPV at €543m vs €527m previously, while the valuation per share is slightly down from €37.2 to €34.8 following the recent share issue. We note that in Nanobiotix’s case we use an accelerated R&D de-risking approach in our model (see Valuation section).

Sensitivities

Nanobiotix is subject to the usual biotech risks, including clinical development delays or failures, regulatory risks, competitor successes, partnering setbacks, financing and commercial risks. In the near term, Nanobiotix’s investment case depends on NBTXR3 and data from upcoming clinical trials (see next events on front page). Nanobiotix has sufficient cash to fund operations through H117. Phase II/III clinical development in additional indications and building a salesforce in Europe would likely require additional funds. There were c 3.4m (vs 15.6m total outstanding shares after the private placement in March 2016) potentially dilutive instruments at the end of 2015 with various contingencies and price points.

Outlook: Multiple major catalysts ahead

NBTXR3 is being investigated for a total of six indications with multiple catalysts coming within the next 12 months:

Head and neck cancer: a Phase I/II study is ongoing in Europe with results expected mid-2016. This could be the first trial to report results outside the lead STS indication. Due to NBTXR3’s physical properties in how it enhances radiotherapy, the mechanism of action is the same in different cancers. As a result, if successful, this trial will not only open new and large H&N cancer market, but would also de-risk other indications as well.

STS: a Phase II/III trial is ongoing in Europe and Asia (run by partner PharmaEngine). Readout of interim data are expected mid-2016, which will allow filling for the CE mark in Europe. This could lead to self-pay sales ahead of reimbursement. Nanobiotix will decide whether to continue development in the US, which could be a bridging study (NBTXR3 is regulated as a medical device in Europe, but classified as a drug in the US).

Liver cancers (HCC and metastases): a Phase I/II study for safety and feasibility is ongoing in Europe with the first intermediate results expected in H216.

Intermediate- and high-risk prostate cancer: a Phase I/II trial is ongoing in the US. We expect first results to be reported around mid-2017.

Rectal cancer: a Phase I/II study is ongoing in Asia run by Nanobiotix’s partner PharmaEngine. Results are expected in early 2018.

Recently Nanobiotix announced new plans to expand preclinical research into immuno-oncology. The underlying rationale is the observed effect of radiotherapy (RT) in amplifying the immune system’s response to the tumours it targets. Although this is a new area for the company, Nanobiotix will be able to use its lead product NBTXR3 as it is. The core idea behind this is a so-called immunogenic cell death (ICD) effect, which occurs after the RT. A combination regimen of RT enhanced with Nanobiotix’s NBTXR3 and used alongside immuno-oncology treatment theoretically should have a number of synergies. The first preclinical results are expected later this year.

NanoXray technology

NanoXray is Nanobiotix’s lead product family of nanoparticles, developed to enhance existing radiotherapy treatment by amplifying efficacy without increasing damage to surrounding healthy tissue. The average size of the particles is 50nm, which allows for entering cancer cells. Nanoparticles have an inorganic core of crystallised hafnium oxide coated with a biopolymer. NBTXR3 is the most advanced product for direct injection into a tumour. NBTX-IV for intravenous injection (hard-to-reach tumours) and NBTX-TOPO for topical application (into a tumour cavity during surgery) are two other follow-on products in preclinical development.

Radiotherapy is a common cancer treatment used in around 50% of all cancer patients,1 from front-line treatment to adjuvant (add-on) therapy with surgery and/or chemotherapy. Radiotherapy is effective at killing cells, but it does not specifically target malignant cells. Hence the dose has to be limited and an optimal therapeutic window chosen to minimise the effect on surrounding healthy tissue (left-hand side of Exhibit 2).

  Delaney, G., et al. The role of radiotherapy in cancer treatment: estimating optimal utilization from a review of evidence-based clinical guidelines. Cancer 104, 1129–1137 (2005).

To overcome these issues, NanoXray nanoparticle products have been designed around the physical properties of hafnium oxide (HfO2). Current radiotherapy works by causing water found within cells to emit electrons, creating free radicals that damage DNA leading to cell death. HfO2 in the tissue absorbs more energy from ionising radiation and produces a larger quantity of electrons than water, multiplying the effect of the radiotherapy inside the tumour. Therefore, HfO2 introduced into a cancer cell and exposed to radiotherapy could lead to increased local tumour damage, but without worsening the impact on surrounding healthy tissue, thereby broadening the therapeutic window (right-hand side of Exhibit 2). Hence, NanoXray could be used to improve the benefits of radiotherapy without increasing the risks.

Exhibit 2: Therapeutic window (left) broadened in the presence of NanoXray (right)

Source: Nanobiotix. Note: RT: Radiotherapy; Gy: Grey.

Development strategy

Nanobiotix’s strategy is to commercialise NBTXR3 alone in the US and Europe. While this will require a higher initial cash outlay, it should be more profitable in the long run. In Asia the company collaborates with PharmaEngine, a Taiwan-based biopharmaceutical company.

Europe: Medical device status accelerates approval

Typically two successful clinical trials – pilot and pivotal – would be sufficient for CE mark approval for a medical device. In addition to the lead STS indication in Europe, Nanobiotix is also conducting pilot trials in head and neck and liver cancers (HCC and metastases). In 2014 NBTXR3 completed the pilot STS development and data from the pivotal STS trial in Europe is expected by mid-2016. This could allow for first approval in STS in Europe as a medical device by end 2016. Given its setting in STS, where NBTXR3 is being used to improve the outcome of surgical tumour removal, surrogate endpoints such as tumour shrinkage and pathologic response (a measure of tumour cell death) were measured. Nanobiotix will focus on the pricing and reimbursement process in main European markets after the CE mark is approved. We expect limited revenues from self-pay patients in 2017 with more significant uptake once reimbursements are granted.

US: Prostate cancer is the first indication

Prostate cancer is the newest indication. On 30 December 2015 the FDA approved the investigational new drug application (IND) for NBTXR3 to enter clinical trials for intermediate- and high-risk prostate cancer patients. As well as being a potentially large new indication, this is Nanobiotix’s first trial to be conducted in the US. A bridging study for the lead STS indication could also be undertaken in the US to gain regulatory approval, depending on data from the Phase II/III trial in Europe. Notably, the data from all other indications that are being explored in Europe can also be used for further development in the US.

Asia: Partnership with PharmaEngine

PharmaEngine and Nanobiotix are running the STS trial in partnership, recruiting patients in Europe and Asia. PharmaEngine is also conducting a Phase I/II trial in rectal cancer on its own. According to the agreement signed in August 2012, the Asian partner is able to develop and commercialise NBTXR3 in the Asia-Pacific region for at least three indications. Although precise indications were not disclosed, we assume in our model that PharmaEngine will also develop NBTXR3 for oesophageal and liver cancer.

Under the terms of the deal, Nanobiotix received $1m upfront (recognised as deferred revenues) and is eligible for a further $56m in development and commercial milestone payments, in addition to tiered, up to double-digit royalties on sales. A milestone payment of $1m was triggered in October 2014 after PharmaEngine decided to co-sponsor the STS trial. Nanobiotix and PharmaEngine will share all data generated within this agreement. Nanobiotix could therefore potentially use data generated in Asia to support European development, and vice-versa.

Exhibit 3: NBTXR3 strategy summary

Europe

US

Asia*

Partner

Nanobiotix commercialises

Nanobiotix commercialises

PharmaEngine

Regulatory status

Medical device

Drug

Country-specific

Initial target indications

STS; head and neck cancer; liver cancers (HCC and metastases).

Prostate cancer; we also assume bridging studies for indications tested in Europe.

Not disclosed. Currently ongoing trials in rectal cancer and STS; we assume will include oesophageal cancer and liver cancer.

First potential launch

2017 in STS with self-pay sales

2019 (H&N cancer)

2017 (STS)

Source: Nanobiotix, Edison Investment Research. Note: *Includes countries under the PharmaEngine partnership.

Progress with clinical development

Phase II/III STS trial on track to deliver interim readout mid-2016

In its latest update published with FY15 results, Nanobiotix confirmed that interim data from the ongoing STS trial is on track to be announced by mid-2016. This will include a data set from 104 patients, with the final analysis of all 156 enrolled patients due by end 2016. If successful, Nanobiotix will be able to file for the CE mark after the interim data. The trial is a two-arm study comparing NBTXR3 (10% tumour volume) with radiotherapy versus radiotherapy alone before surgical removal of the tumour. Patients with locally advanced STS of the extremity (arms and legs) and the trunk wall will be recruited. The primary endpoint is complete pathologic response (cPR), a measure of tumour necrosis, with secondary endpoints including safety, tumour volume changes and surgical resection rates. These endpoints are supporting the clinical value for the patients, while value for the payers is demonstrated by all those above in addition to quality of life.

Exhibit 4: Design of the Phase II/III STS trial

Source: Nanobiotix, Edison Investment Research

H&N cancer: Second indication with imminent clinical data

H&N cancers represent a group of aggressive tumours that can be located in the oral cavity or in the upper parts of the respiratory and digestive tracts. If detected early the cancer is highly curable. In more advanced cases a combination treatment includes surgery, chemotherapy and radiation therapy. Nanobiotix is conducting an open-label, non-randomized, dose-escalation Phase I/II study. NBTXR3 is administered via intra-arterial or intra-tumour injection routes. The primary endpoints are the determination of the recommended dose and safety/toxicity (including for intra-arterial delivery). Secondary endpoints include evaluation of the objective response rate (ORR), progression free survival (PFS) and complete response rate (CRR), using Response Evaluation Criteria in Solid Tumours (RECIST) criteria).

Preliminary data has already been announced confirming a good safety/toxicity profile and feasibility of the delivery of NBTXR3. At the time of this preliminary analysis, two dose levels of 5% and 10% of the tumour volume were tested. 10% is the recommended dose in the lead STS Phase I/II study. No serious adverse events were recorded and no significant leakage to surrounding healthy tissues has been observed.

Nanobiotix confirmed that full Phase I/II data announcement is imminent. If positive, the company plans a Phase II/III registration trial. As this will be the first data set outside STS, particular attention from Nanobiotix will be on a comparative analysis between the STS and H&N cancer trials. This will provide insights about the transferability of the NBTXR3 treatment approach to other indications.

Liver cancers: HCC (primary) and metastases – high unmet need

In July 2015 Nanobiotix started a Phase I/II trial in liver cancers, namely hepatocellular carcinoma and liver metastases that arise from the spread of other primary cancers (such as colorectal, breast and lung cancer). The non-randomised, open-label, dose escalation study explores both intra-lesion and intra-arterial dosing. After the dose escalation part, NBTXR3 will be tested in three patient groups: those with liver metastases; with HCC and no portal vein thrombosis; and with HCC and with portal vein thrombosis. Portal vein thrombosis is a complication associated with HCC, which significantly complicates the management of the disease. Primary endpoints are the determination of the recommended dose and safety/toxicity. Secondary endpoints are efficacy measured by (CRR), local progression-free survival (LPFS) and overall survival (OS). Initial data (safety and feasibility) are expected in H216.

Prostate cancer: First step in the US

Following the approval of the IND by the FDA, Nanobiotix plans to initiate the Phase I/II prostate cancer trial in the US in 2016. The trial will be a Phase I/II, open-label, non-randomised study with two treatment arms and will involve at least three US oncology centres. We expect the initial results could be released in H217. Notably, NBTXR3 is classified as a drug in the US and thus subject to more rigorous development compared to the medical device route.

Rectal cancer: PharmaEngine’s own trial in Asia

Nanobiotix’ partner in Asia is conducting a Phase I/II trial with unresectable rectal cancer patients in Taiwan. According to clinicaltrials.gov, the study started in June 2015 and is expected to be completed by end 2017. This is a Phase Ib/II prospective, open-label, single-arm, non-randomised, dose-escalation study with estimated enrolment of 42 patients and intra-tumour injection method. Listed endpoints include the determination of the recommended dose, safety/toxicity and anti-tumour activity measured by response rate (RR, using RECIST criteria).

Existing clinical data

The Phase II/III STS study delivered the first clinical data in mid-2014. The trial was designed to investigate the feasibility of an intra-tumoral NBTXR3 injection in addition to safety. In terms of efficacy, the study evaluated the pathologic response according to RECIST criteria and tumour volume.

The trial included 20 patients with locally advanced STS of the extremity (arms and legs) or trunk wall. Updated efficacy data from 17 patients were presented at ASCO (American Society of Clinical Oncology) in June 2014. The trial was a four-step, volume-escalation trial (2.5%, 5%, 10% and 20% of tumour volume). NBTXR3 was administered 24 hours before a standard course of radiotherapy (typically five days a week for up to five weeks). This was followed by tumour removal, if operable, five weeks after the end of radiotherapy. There was no control arm in the trial.

NBTXR3 was safe and well tolerated, with no dose-limiting toxicity observed. Different sizes of tumours were successfully injected with NBTXR3, with the product well dispersed within the tumour and remaining in place throughout radiotherapy treatment with no leakage, which is important to ensure minimal damage to healthy tissues during radiotherapy.

While the main goals of this Phase I/II trial were to establish the feasibility and safety of NBTXR3’s intra-tumour injection, the trial also investigated the efficacy of NBTXR3. A summary of the key efficacy-related findings are shown in Exhibit 5. All patients were able to have their tumour surgically removed, which is key in STS. In addition, at the chosen optimal 10% by tumour volume cohort, the average tumour shrinkage was 49%, with an average pathologic response (a measure of cell death) of 74%.

Exhibit 5: Overview of efficacy conclusions

Parameter

Findings

Tumour shrinkage

Average tumour shrinkage increased with NBTXR3 volume; at 10% volume average shrinkage was 49%

Pathologic response*

at 10% volume average pathologic response (tumour necrosis) was 74%

Surgical resection

All patients had successful surgical removal post radiotherapy

Parameter

Tumour shrinkage

Pathologic response*

Surgical resection

Findings

Average tumour shrinkage increased with NBTXR3 volume; at 10% volume average shrinkage was 49%

at 10% volume average pathologic response (tumour necrosis) was 74%

All patients had successful surgical removal post radiotherapy

Source: ASCO 2014 poster, Nanobiotix. Note: *Percentage of tumour cell death assessed post-surgical removal.

Exhibit 6: 3D CT-scan reconstructions of NBTXR3 after direct injection and post RT

Source: ASCO 2014 poster, Nanobiotix

The average tumour shrinkage increased with NBTXR3 dose (as a percent of tumour volume) indicating a dose response relationship (Exhibit 7). In the 10% volume dose, which is being investigated in the Phase II/III STS trial, four of five patients had more than 40% tumour shrinkage. Although there was no comparator arm in the trial, historical reference data2 from conventional radiotherapy alone suggest that 12% of patients achieve >20% tumour shrinkage. In the 10% volume cohort, the average pathologic response was 74%. While not directly comparable, the historical median pathologic response was 30% (range 5-100%) from conventional radiotherapy alone.2 All patients were able to undergo surgical resection of the tumour. This is a key benefit as current radiotherapy alone does not always cause the necessary changes in tumour size and morphology to facilitate surgery, meaning the tumour can be too large or too embedded to remove completely.

  Canter RJ, Martinez SR, Tamurian RM, et al. Radiographic and histologic response to neoadjuvant radiotherapy in patients with soft tissue sarcoma. Annals of Surgical Oncology. October 2010; 17(10): 2578–2584.

Exhibit 7: Tumour volume shrinkage in each volume cohort

Source: ASCO 2014 poster, Nanobiotix

Expanding NanoXray technology beyond intra-tumoral injection

The goal of other pipeline products NBTX-TOPO and NBTX-IV is the same as NBTXR3: to improve the benefits of existing radiotherapy without increasing the risks, thereby broadening the therapeutic window. All the products in the pipeline are based on the same hafnium oxide (HfO2) NanoXray nanoparticles, but in either a different formulation or with a different surface coating. Both products are in the preclinical stage and progress will depend on cash management priorities.

NBTX-TOPO, a surgical gel for post-surgery radiotherapy: NBTX-TOPO is a gel formulation for topical application into a tumour bed during tumour resection (removal) surgery and before wound closure. Aside from enhancing the effects of post-resection radiotherapy, NBTX-TOPO could also be a visual aid for more precise radiotherapy, as hafnium shows up on x-rays. NBTX-TOPO could be used in indications such as breast cancer and glioblastoma, where surgical tumour resection is commonly followed by radiotherapy.

NBTX-IV, an IV injection for systemic use: NBTX-IV is for intravenous injection for hard-to-reach tumours. A different coating to NBTXR3 has been designed to allow take-up from the blood stream by cancer cells, rather than healthy cells within the body. A lead candidate has been selected and Nanobiotix is collaborating with the US National Cancer Institute (NCI) on preclinical development.

Preclinical research in immuno-oncology to deliver first data

Research in immuno-oncology is Nanobiotix’s latest initiative and was described in more detail in our last note. The first preclinical results are expected later this year. The rationale is radiotherapy’s property of amplifying the immune system’s response to the tumour it targets. The core idea behind this is a so-called immunogenic cell death (ICD) effect, which occurs after the RT. A combination regimen of RT enhanced with Nanobiotix’s NBTXR3 and used alongside immuno-oncology treatment theoretically should have a number of synergies. When RT is applied to a tumour locally, the resulting cancerous cell death activates different chain reactions that in turn amplify the immune system’s response to the tumour itself, which is also visible in distant locations away from the treatment field of RT.3

  K. Reynders, D. De Ruysscher (2015) Radiotherapy and immunotherapy: improving cancer treatment through synergy. Immuno-Oncology, vol 42: 67-78.

The successful advance of immuno-oncology products has given the ICD effect a whole new perspective. Immuno-oncology drugs are meant to boost a patient’s immune system to fight the cancer, which implies the efficacy of such products depends on the status of a patient’s health and the cancer’s immunogenicity. A variety of different mechanisms have been described,4 whereby the cancer cells shield themselves from being noticed by the immune system. This in turn lessens immuno-oncology drugs’ efficacy. Therefore a combination of immuno-oncology treatments with RT looks like a natural fit. In preclinical trials Nanobiotix will investigate the potential of NBTXR3-enhanced RT in combination with existing immuno-oncology products. This could lead to innovative combination treatments potentially allowing new patent applications. An attractive aspect of such a strategy is that these combination products would exploit radiation therapy benefit, which so far has not been patentable. Although specific oncology products are not disclosed, in our view, some obvious examples would be anti-PD-1/PD-L1, anti-CTLA4 or CAR T-cell therapies.

  C. Vanpouille-Box, et al. (2015) In situ vaccination by radiotherapy to improve responses to anti-CTLA-4 treatment. Vaccine.

Sensitivities

Nanobiotix is subject to the usual biotech risks, including clinical development delays or failures, regulatory risks, competitor successes, partnering setbacks, financing and commercial risks. In the near term, Nanobiotix’s investment case depends on NBTXR3 and data from upcoming clinical trials (see next events). Positive clinical data from Phase I/II STS trials were encouraging; nevertheless, this does not eliminate the risk of the results failing to meet expectations in the ongoing trials. Attracting premium pricing and driving sales of NBTXR3 in these and other indications will need robust survival data; the magnitude of any survival benefit is unknown at this stage. Nanobiotix has sufficient cash to fund operations through H117. Phase II/III clinical development in additional indications and building a salesforce in Europe would likely require additional funds. These assumptions exclude any potential milestone income from additional licensing deals, for which we have limited visibility on both the potential timing and terms. There were c 3.4m potentially dilutive instruments at end 2015 (vs 15.6m total estimated outstanding shares after the private placement in March 2016) with various contingencies and price points. Notably, 650k of these are warrants attached to shares that were subscribed by Capital Ventures International (CVI) during a private placement in end of 2014. They expire in June 2016 and if exercised before that, could raise €14m for Nanobiotix.

Valuation: Positive H&N data may de-risk other indications

Our valuation remains focused on lead product NBTXR3 and the indications being investigated in clinical trials. We make no changes to our underlying assumptions for NBTXR3 and only slightly update our model with the latest financial data including rolling forward in time. The net effect is slightly positive, with the new risk-adjusted NPV at €543m vs €527m (Exhibit 8). The valuation per share has slightly decreased from €37.2 to €34.8, which is purely technical following the recent equity issue. Given the upcoming dense news flow, we can see opportunities for the revision of our R&D pipeline model. Our combined global peak NBTXR3 sales are €1.7bn. Further details on the market potential of NBTXR3 in all of the active indications were discussed in our previous reports. Our valuation also includes a contribution from the partnership with PharmaEngine in Asia Pacific in indications that we believe could be pursued in this region.

In Nanobiotix’s case the adjustment for R&D risk needs special consideration. The company expects to announce the results from the H&N cancer trial any time now, which will be the second indication with clinical data after the STS. If the results are comparable between the STS and H&N cancer studies, we believe this will have a de-risking effect on other indications. Due to its physical properties of enhancing radiotherapy, NBTXR3’s mechanism of action is the same in different cancers. In theory this could imply that NBTXR3’s efficacy in one cancer is likely transferable to other cancers. The upcoming H&N cancer data could potentially be proof-of-concept of this thesis. Nanobiotix also indicated that a special focus will be on comparative analysis of the clinical data from STS and H&N cancer. Our model includes modifications to account for this accelerated de-risking after the H&N cancer data.

Exhibits 9 analyses the impact of H&N cancer data on our model. In our current valuation, the H&N cancer project represents a significant part of the total rNPV (28%). In a typical de-risking approach we would increase the H&N cancer indication’s probability to 60% if the data from the Phase I/II H&N cancer trial are positive and the project moves to Phase II/III stage (commensurate with the typical probabilities for Phase III drug studies and our previous approach with STS development). Probabilities for other indications would stay unchanged. However, if the data from H&N cancer Phase I/II study shows similarities compared to the STS study, ie NBTXR3’s effect is likely to be transferable, then the success probabilities (to reach the market) of other indications should be raised as well. In the event of negative data, we would remove the H&N cancer project from the valuation without modifying current probabilities for other indications. This is because, in a scenario of a negative H&N cancer trial data, there would be a conflict with the positive results from STS trial, meaning that the only way to know whether NBTXR3 works in other indications would be to continue the trials.

Exhibit 9 shows our assumed probabilities for both an accelerated de-risking and our usual de-risking approach. In the event of positive H&N cancer data, the impact on rNPV/share under the accelerated de-risking approach would be +16% versus +10% under the usual de-risking approach. Notably, the transferability effect (if seen in the H&N data) should accumulate going forward, eg if the liver cancers trial also delivers positive data, the probabilities of the remaining indications would increase further.

Exhibit 8: Nanobiotix rNPV valuation

Product

Indication

Launch

Peak sales (€m)

NPV (€m)

Probability

rNPV (€m)

rNPV/share (€/share)

NBTXR3 – US/Europe

STS

2016

190

220.7

60%

127.2

8.2

Head & neck cancer

2019

350

351.8

45%

151.9

9.7

Liver cancers including liver mets

2021

500

304.9

40%

112.5

7.2

Prostate cancer

2022

400

243.7

40%

90.3

5.8

NBTXR3 – Asia

STS; rectal, oesophageal, liver cancer

2017

300

70.5

40%

28.2

1.8

Net cash

32.7

100%

32.7

2.1

Valuation

 

 

 

1,224.3

 

542.8

34.8

Source: Edison Investment Research. Note: 12.5% discount rate used.

Exhibit 9: H&N cancer data impact on other indications – accelerated vs typical de-risking

Product

Indication

Probability to reach market

rNPV/share (€/share)

Current

H&N Ca data positive

Current

H&N Ca data positive

NBTXR3 - US/Europe

STS

60%

60%

8.2

8.2

Head & neck cancer

45%

60%

9.7

13.2

Liver cancers including liver mets

40%

45%

7.2

8.2

Prostate cancer

40%

45%

5.8

6.6

NBTXR3 - Asia

STS; rectal, oesophageal, liver cancer

40%

45%

1.8

2.0

Net cash

100%

100%

2.1

2.1

Valuation (with accelerated de-risking)

34.8

40.4

H&N cancer data impact, %

16%

Valuation (with typical de-risking)*

34.8

38.3

H&N cancer data impact, %

10%

Source: Edison Investment Research. Note: *In the valuation with typical de-risking, only H&N cancer success probabilities are affected by the outcome of the trial, ie if negative, the project is removed; if positive, probability increases to 60%.

Financials

We have updated our financial forecasts to include FY15 results. Nanobiotix reported revenues of €4.0m, largely in line with our estimate. R&D tax credits of €3.5m accounted for the majority of this. R&D expenses of €13.9m were lower than our expected €18.0m. This was offset by higher than estimated G&A of €7.3m versus our forecast of €4.5m. The increase was mainly related to increased market access activities ahead of the NBTXR3 launch in Europe and costs associated with share-based payments of €1.2m, which had no cash effect. Reported loss per share of €1.20 was somewhat better than our expected €1.30. Our projections are fine-tuned to increase G&A expenses and reduce the R&D cost estimate for 2016 with a small positive impact on EPS for 2016.

Nanobiotix carried out a private placement in March 2016 by issuing c 1.4m shares (10% of outstanding at that time) with gross proceeds of €21.3m. We estimate that net cash (€32.7m), consisting of €37.3m gross cash (end-2015 + private placement) together with debt of €4.6m of OSEO grants and bank loans, should be sufficient to fund operations to H117, assuming development continues in all planned indications. Further cash requirements could be partially met by the €10m commitment from Capital Ventures International (CVI) as part of the end 2014 private placement, in addition to €14m warrants that expire at the end of June 2016. We do not include the future €10m commitment or the exercise of the warrants in our financial forecasts, but for the purpose of our model we include illustrative long-term debt of c €40m, assuming that all projects can be fully supported with this in 2017.

Exhibit 10: Changes to forecasts

€000s

2015

2015

% Dev

2016

2016

% Change

2017

2017

% Change

 

Estimate

Actual

Old

New

Old

New

Revenue

3,868

4,015

+4%

6,959

7,144

+3%

9,178

8,363

+2%

Research and development costs

(18,000)

(13,902)

N/M

(24,000)

(20,000)

N/M

(37,000)

(37,000)

N/M

General and administration costs

(4,531)

(7,255)

N/M

(11,383)

(14,189)

N/M

(21,598)

(24,488)

N/M

Operating Profit

(18,662)

(17,127)

N/M

(28,568)

(27,189)

N/M

(49,711)

(53,416)

N/M

Profit Before Tax

(18,291)

(17,003)

N/M

(28,568)

(27,562)

N/M

(49,720)

(54,989)

N/M

EPS (€)

(1.30)

(1.20)

N/M

(2.01)

(1.85)

N/M

(3.47)

(3.49)

N/M

Source: Nanobiotix accounts, Edison Investment Research.

Exhibit 11: Financial summary

€000s

2010

2011

2012

2013

2014

2015

2016e

2017e

Year end December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,135

1,360

971

1,595

2,771

4,015

7,144

8,363

Cost of Sales

0

0

0

0

0

0

(143)

(291)

Gross Profit

1,135

1,360

971

1,595

2,771

4,015

7,001

8,072

Research and development

(4,186)

(5,213)

(4,312)

(6,026)

(8,076)

(13,902)

(20,000)

(37,000)

EBITDA

 

 

(3,935)

(5,030)

(5,006)

(7,945)

(9,312)

(16,686)

(26,825)

(53,019)

Operating Profit (before amort. and except.)

(4,092)

(5,213)

(5,146)

(8,171)

(9,605)

(17,132)

(27,178)

(53,405)

Intangible Amortisation

(4)

(14)

(7)

(8)

(15)

(10)

(11)

(11)

Exceptionals

0

0

0

0

0

0

0

0

Other

(0)

(0)

(22)

0

2

15

0

0

Operating Profit

(4,096)

(5,227)

(5,175)

(8,179)

(9,618)

(17,127)

(27,189)

(53,416)

Net Interest

11

(19)

(77)

34

141

124

(373)

(1,573)

Profit Before Tax (norm)

 

 

(4,081)

(5,233)

(5,223)

(8,137)

(9,464)

(17,008)

(27,551)

(54,978)

Profit Before Tax (reported)

 

 

(4,086)

(5,247)

(5,252)

(8,145)

(9,477)

(17,003)

(27,562)

(54,989)

Tax

0

0

(79)

18

(79)

0

0

0

Profit After Tax (norm)

(4,081)

(5,233)

(5,324)

(8,118)

(9,541)

(16,993)

(27,551)

(54,978)

Profit After Tax (reported)

(4,086)

(5,247)

(5,331)

(8,126)

(9,557)

(17,003)

(27,562)

(54,989)

Average Number of Shares Outstanding (m)

6.8

7.7

8.2

10.8

12.9

14.1

14.9

15.7

EPS - normalised (€)

 

 

(0.60)

(0.68)

(0.65)

(0.75)

(0.74)

(1.20)

(1.85)

(3.49)

EPS - normalised and fully diluted (€)

 

(0.60)

(0.68)

(0.65)

(0.75)

(0.74)

(1.20)

(1.85)

(3.49)

EPS - (reported) (€)

 

 

(0.60)

(0.68)

(0.65)

(0.76)

(0.74)

(1.20)

(1.85)

(3.49)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

98.0

96.5

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

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

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

682

580

485

545

1,549

3,470

3,436

3,423

Intangible Assets

2

7

0

9

10

8

5

1

Tangible Assets

638

511

416

468

1,292

2,432

2,400

2,391

Investments

42

63

69

68

247

1,031

1,031

1,031

Current Assets

 

 

7,253

2,333

13,539

6,894

35,505

22,948

20,472

7,055

Stocks

0

0

0

0

0

0

0

24

Debtors

0

0

1

1

2

80

142

167

Cash

649

899

12,361

5,002

32,986

17,003

14,465

1,000

Other

6,604

1,434

1,177

1,891

2,517

5,865

5,865

5,865

Current Liabilities

 

 

(1,539)

(1,415)

(2,160)

(3,282)

(4,424)

(7,102)

(10,845)

(3,713)

Creditors

(1,349)

(1,119)

(1,800)

(3,051)

(4,103)

(6,032)

(9,774)

(2,705)

Short term borrowings

(190)

(295)

(360)

(231)

(321)

(1,070)

(1,070)

(1,008)

Long Term Liabilities

 

 

(505)

(573)

(1,167)

(975)

(2,314)

(3,705)

(3,468)

(50,867)

Long term borrowings

(474)

(527)

(1,072)

(875)

(2,002)

(3,531)

(3,281)

(43,673)

Other long term liabilities

(31)

(46)

(95)

(100)

(312)

(174)

(187)

(7,194)

Net Assets

 

 

5,891

926

10,697

3,182

30,315

15,611

9,596

(44,102)

CASH FLOW

Operating Cash Flow

 

 

(4,157)

(4,862)

(3,786)

(6,837)

(8,573)

(16,843)

(21,841)

(51,838)

Net Interest

13

(7)

(119)

(18)

(48)

432

(373)

(1,573)

Tax

0

0

0

0

0

0

0

0

Capex

(245)

(60)

(45)

(196)

(963)

(1,495)

(321)

(376)

Acquisitions/disposals

0

0

1

4

0

73

(8)

(8)

Financing

8,011

15

14,807

14

36,532

355

20,255

0

Dividends

0

0

0

0

0

0

0

0

Net Cash Flow

3,621

(4,914)

10,858

(7,034)

26,947

(17,478)

(2,288)

(53,795)

Opening net debt/(cash)

 

 

(396)

15

(76)

(10,929)

(3,895)

(30,663)

(12,402)

(10,114)

HP finance leases initiated

0

0

0

0

0

0

0

0

Other

(4,033)

5,006

(5)

0

(179)

(784)

0

0

Closing net debt/(cash)

 

 

15

(76)

(10,929)

(3,895)

(30,663)

(12,402)

(10,114)

43,681

Source: Nanobiotix accounts, Edison Investment Research. Note: In 2017 long-term liabilities include an illustrative future fund-raising estimate of €41m. This could partially be met by commitments from the strategic US investor, CVI.

Contact details

Revenue by geography

60 rue de Wattignies
Bat B
75012 Paris
France
+33 (0) 1 40 26 07 55
www.nanobiotix.com

N/A

Contact details

60 rue de Wattignies
Bat B
75012 Paris
France
+33 (0) 1 40 26 07 55
www.nanobiotix.com

Revenue by geography

N/A

Management team

CEO: Laurent Levy

CFO: Philippe Mauberna

Mr Levy co-founded Nanobiotix in 2003 and is president of the executive board. He has over 15 years’ experience in nanotechnology and previously worked as a consultant in this field for companies including Sanofi (pharma), Guerbet (medical imaging) and Rhodia (chemistry). He holds a doctorate in physical chemistry from the Pierre and Marie Curie University (Paris) and completed his post-doctoral training at the University of Buffalo.

Mr Mauberna joined Nanobiotix in 2013 with over 10 years of experience in the life sciences industry. He has held senior financial and operations positions at Astellas Pharma Europe, supporting market authorisation for several healthcare products. He also has experience in financial projects for start-up launches and innovative SME development. Mr Mauberna successfully executed the recent capital increase, diversifying the shareholder base.

CBO: Bernd Muehlenweg

CMO: Elsa Borghi

Mr Muehlenweg joined Nanobiotix in 2011 and is a member of the executive board. He was previously business development director for Wilex. He is a member of the Pharma Licensing Club of Germany (Pharmalizenzclub) and the Pharma Licensing Club, France. He holds a doctorate in chemistry from the Technical University of Munich and completed management training at the St. Gallen business school.

Ms Borghi joined Nanobiotix in 2008, having previously worked at Sanofi-Aventis in the oncology R&D department. She has nearly 20 years’ industrial experience, including managing oncology clinical trials up to registration. She received her MD from the University of Cordoba, Spain, and obtained an MSc in biological sciences from the University of Paris VI.

Management team

CEO: Laurent Levy

Mr Levy co-founded Nanobiotix in 2003 and is president of the executive board. He has over 15 years’ experience in nanotechnology and previously worked as a consultant in this field for companies including Sanofi (pharma), Guerbet (medical imaging) and Rhodia (chemistry). He holds a doctorate in physical chemistry from the Pierre and Marie Curie University (Paris) and completed his post-doctoral training at the University of Buffalo.

CFO: Philippe Mauberna

Mr Mauberna joined Nanobiotix in 2013 with over 10 years of experience in the life sciences industry. He has held senior financial and operations positions at Astellas Pharma Europe, supporting market authorisation for several healthcare products. He also has experience in financial projects for start-up launches and innovative SME development. Mr Mauberna successfully executed the recent capital increase, diversifying the shareholder base.

CBO: Bernd Muehlenweg

Mr Muehlenweg joined Nanobiotix in 2011 and is a member of the executive board. He was previously business development director for Wilex. He is a member of the Pharma Licensing Club of Germany (Pharmalizenzclub) and the Pharma Licensing Club, France. He holds a doctorate in chemistry from the Technical University of Munich and completed management training at the St. Gallen business school.

CMO: Elsa Borghi

Ms Borghi joined Nanobiotix in 2008, having previously worked at Sanofi-Aventis in the oncology R&D department. She has nearly 20 years’ industrial experience, including managing oncology clinical trials up to registration. She received her MD from the University of Cordoba, Spain, and obtained an MSc in biological sciences from the University of Paris VI.

Principal shareholders

(%)

Prunier (Bernard)

9.20%

Matignon Investissement et Gestion

6.14%

Levy (Laurent)

3.46%

Bpifrance Investissement

2.60%

Norges Bank Investment Management (NBIM)

0.62%

Franklin Templeton SinoAm Securities Investment Management

0.50%

Borghi (Elsa)

0.26%

Companies named in this report

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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

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NSW 2000, Australia

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