NEW-HOPE trial recruiting rapidly

Quantum Genomics 4 April 2018 Update
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Quantum Genomics

NEW-HOPE trial recruiting rapidly

Financial results

Pharma & biotech

6 April 2018

Price

€2.31

Market cap

€25m

Net cash (€m) at 31 December 2017

11.1

Shares in issue

11.0m

Free float

84.3%

Code

ALQGC

Primary exchange

Euronext Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

(10.3)

(25.6)

(55.2)

Rel (local)

(10.7)

(23.1)

(56.2)

52-week high/low

€8.1

€2.3

Business description

Quantum Genomics is a biopharmaceutical company developing QGC001, a brain aminopeptidase A inhibitor for the treatment of hypertension and heart failure. Its mechanism is implicated in the 25% of patients resistant to treatment.

Next events

Three-year strategic plan announcement

19 April 2018

Heart failure Phase IIa data

H218

NEW-HOPE data

H119

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Quantum Genomics is a research client of Edison Investment Research Limited

Quantum Genomics recently announced its 2017 results and updated the status of its NEW-HOPE study in 250 hypertensive overweight patients across 25 major hospitals in the US. According to the company, the study’s recruitment has been very rapid and exceeded initial projections. Final data are expected in H119. In the near term, the company is expected to announce a three-year strategic plan on 19 April.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/16

0.0

(6.2)

(0.60)

0.0

N/A

N/A

12/17

0.0

(10.3)

(0.93)

0.0

N/A

N/A

12/18e

0.0

(11.4)

(0.73)

0.0

N/A

N/A

12/19e

0.0

(16.2)

(1.00)

0.0

N/A

N/A

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

NEW-HOPE progress

In November, Quantum Genomics announced it had recruited the first patients into the NEW-HOPE trial in hypertensive overweight patients across 25 major US hospitals with a primary end point of change from baseline in office systolic blood pressure (SBP) at week eight. As of the end of March, recruitment is going very well, topping internal projections. Final data are expected in H119.

Trial enriched with patients most likely to respond

One of the core premises of QGC001 is that it targets the brain renin-angiotensin system, which is specifically implicated in certain forms of resistant primary hypertension. One such class is the so-called low renin subtype, which is present in 25% of American hypertensive patients and 52% of hypertensive African Americans. NEW-HOPE is enriched with those patients who are expected to respond and have the highest unmet medical need.

QGC001 has potential in heart failure

Hypertension is significantly comorbid with heart failure, and virtually every drug used to treat the former is also approved for the latter. Quantum Genomics has an ongoing study in 75 patients, although recruitment has been slow. The trial protocol was amended in January 2018 to expand the patient profile, including raising the age and body mass index (BMI) limits, to accelerate recruitment. We had previously expected data in H118 but now expect them in the second half of the year.

Valuation: €201m or €18.31 per share

We have adjusted our valuation of Quantum Genomics to €201m or €18.31 per share, from €195m or €17.79 per share. The valuation increase is due to advancing our NPVs, which was partially offset by a lower cash balance. In March, the company announced an equity line of credit with Kepler Cheuvreux, which could raise €24m over three years in four tranches. The initial tranche of €6m does not require shareholder approval, but the final three will be subject to a vote at the next meeting of shareholders later this year.

NEW-HOPE doing well

Quantum Genomics has announced that the NEW-HOPE trial is enrolling very rapidly and has exceeded its projections. As a reminder, the NEW-HOPE trial is on 250 hypertensive overweight (BMI 25-45kg/m2) patients, with a primary end point of change from baseline in office SBP at week eight. SBP at screening will have to be 145-170mmHg if previously untreated, or 130-150mmHg if treated. Following a two-week run-in period in which there would be no treatment, SBP would need to be 145-170mmHg. Patients will start off on 250mg twice a day (BID) for two weeks and then either continue at that dose or increase to 500mg BID for another two weeks. Following that, patients would either be on 250mg BID, 500mg BID or 500mg BID with 25mg of hydrochlorothiazide (HCT), an often-used diuretic, added in.

The company expects that at least 50% of patients will be self-identified as African American or Hispanic. African Americans have a higher prevalence of hypertension compared to other groups, but also, along with Hispanics, are less likely to have their hypertension under control compared to their white counterparts.

These patients are also more likely to have low renin primary hypertension (52% in African Americans compared to 25% in the broader population), which is characterised by resistance to ACE inhibitors, ARBs and beta-blockers, commonly used classes of hypertension medications.1 The targeting of the renin-angiotensin by QGC001 could be especially helpful in these patients.

  Bühler FR, et al. (1984) Renin profiling to select antihypertensive baseline drugs. Renin inhibitors for high-renin and calcium entry blockers for low-renin patients. Am. J. Med. 77, 36.

QGC001 in heart failure

Quantum Genomics is also investigating QGC001 for the treatment of heart failure. Hypertension has an exceptionally high comorbidity with heart failure and virtually every drug approved for the former is also approved for the latter. However, the heart failure (HF) development pathway has significant advantages over hypertension. First, HF drugs command significantly higher prices at approximately $4,000-5,000 per year, compared to approximately $1,000 for the highly genericised hypertension market. Additionally, clinical trials for HF require significantly fewer patients.

The company initiated its heart failure programme in 2016 with a 75-person Phase II clinical trial in Europe. The trial is enrolling patients with diagnosed worsening heart failure and the primary end points for the study are a decrease in N-terminal pro b-type natriuretic peptide, a key marker of heart dysfunction, as well as lower blood pressure. Enrolment in the trial has been slow and the company made a number of inclusion/exclusion criteria changes in January (including raising the age and BMI requirements) to accelerate enrolment. We had previously expected data in H118 but now expect them in the second half of the year.

Valuation

We have adjusted our valuation of Quantum Genomics to €201m or €18.31 per share, from €195m or €17.79 per share. The valuation increase is due to advancing our NPVs, which was partially offset by a lower cash balance relative to our previous valuation. We expect to update our valuation with the release of data from the Phase IIa heart failure trial in H218.

Exhibit 1: Quantum Genomics valuation table

Product

Main indication

Local

Status

Probability of success

Launch year

Peak sales ($m)

Patent protection

rNPV
(€m)

QGC001

Hypertension

US

Phase Il

15%

2023

$1,110

2031

€118.27

QGC001

Hypertension

Europe

Phase Il

15%

2023

$959

2031

€100.33

QGC001

Development costs

 

 

 

 

(€124.76)

QGC101

Heart failure

US

Phase IIa

15%

2023

$574

2031

€75.27

QGC101

Heart failure

Europe

Phase IIa

15%

2023

$687

2031

€89.31

QGC101

Development costs

(€68.31)

Total

 

 

 

 

 

 

 

€190.10

Cash and cash equivalents (31 December 2017) (€m)

€11.09

Total firm value (€m)

€201.19

Total shares (m)

10.99

Value per basic share (€)

€18.31

Source: Edison Investment Research

Financials

Quantum Genomics reported an operational loss of €10.3m in 2017 compared to €6.2m in 2016, with the increase primarily driven by the advancement of the clinical programmes in both hypertension and heart failure. We are maintaining our 2018 estimates for the most part and have introduced 2019 numbers. The company ended 2017 with €11.1m in cash and investments. In March, the company announced an equity line of credit with Kepler Cheuvreux, which could raise €24m over three years in four tranches. The initial tranche of €6m does not require shareholder approval but the final three will be subject to a vote at the next meeting of shareholders later this year (in 2017, the shareholder meeting occurred in June). The company has stated it believes that if the equity line is approved by shareholders that it would be funded through the end of 2020. This will be somewhat dependent on whether additional trials are conducted by the company or a partner. As late-stage cardiovascular trials are extremely expensive to conduct, we expect further development to be financed via a partnership.

Exhibit 2: Financial summary

€000s

2015

2016

2017

2018e

2019e

Year end 31 December

PCG

PCG

PCG

PCG

PCG

PROFIT & LOSS

Revenue

 

 

144

0

0

0

0

Cost of Sales

(0)

0

0

0

0

Gross Profit

144

0

0

0

0

EBITDA

 

 

(4,310)

(6,216)

(10,292)

(10,948)

(14,792)

Operating Profit (before amort. and except.)

(4,310)

(6,216)

(10,292)

(10,948)

(14,792)

Intangible Amortisation

0

0

0

0

0

Other

0

1

0

0

0

Exceptionals

0

0

0

0

0

Operating Profit

(4,310)

(6,216)

(10,292)

(10,948)

(14,792)

Net Interest

(222)

0

0

(481)

(1,440)

Other

54

18

(176)

0

0

Profit Before Tax (norm)

 

 

(4,503)

(6,216)

(10,292)

(11,429)

(16,232)

Profit Before Tax (FRS 3)

 

 

(4,479)

(6,198)

(10,468)

(11,429)

(16,232)

Tax

714

958

1,150

1,486

2,110

Deferred tax

0

0

0

0

0

Profit After Tax (norm)

(3,789)

(5,258)

(9,142)

(9,943)

(14,122)

Profit After Tax (FRS 3)

(3,765)

(5,240)

(9,318)

(9,943)

(14,122)

Average Number of Shares Outstanding (m)

6.9

8.7

9.9

13.6

14.1

EPS - normalised (€)

 

 

(0.55)

(0.60)

(0.93)

(0.73)

(1.00)

EPS - FRS 3 (€)

 

 

(0.54)

(0.60)

(0.95)

(0.73)

(1.00)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

520

701

439

434

431

Intangible Assets

108

142

91

91

91

Tangible Assets

54

60

52

48

44

Other

358

500

296

296

296

Current Assets

 

 

10,020

13,809

13,478

15,540

13,422

Stocks

14

1,011

189

189

189

Debtors

1,354

1,599

2,197

2,197

2,197

Cash

8,652

11,198

11,089

13,151

11,033

Other

0

1

3

3

3

Current Liabilities

 

 

(2,128)

(3,481)

(4,572)

(4,572)

(4,572)

Creditors

(2,128)

(3,480)

(4,571)

(4,571)

(4,571)

Short term borrowings

(1)

(1)

(1)

(1)

(1)

Long Term Liabilities

 

 

(390)

(506)

(474)

(6,474)

(18,474)

Long term borrowings

(78)

(18)

(19)

(6,019)*

(18,019)*

Other long term liabilities

(312)

(488)

(454)

(454)

(454)

Net Assets

 

 

8,022

10,524

8,871

4,929

(9,193)

CASH FLOW

Operating Cash Flow

 

 

(3,142)

(5,531)

(7,977)

(9,931)

(14,110)

Net Interest

0

0

0

0

0

Tax

0

0

0

0

0

Capex

(72)

(66)

32

(8)

(8)

Acquisitions/disposals

0

0

0

0

0

Financing

12,150

7,744

7,733

6,000

0

Dividends

0

0

0

0

0

Other

(296)

399

104

0

0

Net Cash Flow

8,640

2,546

(108)

(3,939)

(14,118)

Opening net debt/(cash)

 

 

(5)

(8,573)

(11,179)

(11,069)

(7,131)

HP finance leases initiated

0

0

0

0

0

Exchange rate movements

0

0

0

0

0

Other

-72

60

-2

0

0

Closing net debt/(cash)

 

 

(8,573)

(11,179)

(11,069)

(7,130)

6,988

Source: Quantum Genomics accounts, Edison Investment Research. Note: *We assume €24m additional financing, the amount of the equity credit line, €18m of which is shown as debt for the purpose of our model.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Quantum Genomics and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Limited (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Quantum Genomics and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Limited (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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