Paxalisib trial still on track for H220 start

Kazia Therapeutics 31 March 2020 Update
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Kazia Therapeutics

Paxalisib trial still on track for H220 start

Paxalisib update

Pharma & biotech

31 March 2020

Price

A$0.39

Market cap

A$28m

US$0.76/A$

Cash (A$m) at 31 December 2019

6.4

Shares in issue

72.17m

Free float

91%

Code

KZA

Primary exchange

ASX

Secondary exchange

Nasdaq

Share price performance

%

1m

3m

12m

Abs

(34.7)

(35.8)

(16.3)

Rel (local)

(18.2)

(14.5)

0.9

52-week high/low

A$0.74

A$0.32

Business description

Kazia Therapeutics is an ASX and Nasdaq-listed biotechnology company. It is developing the PI3K/mTOR inhibitor paxalisib for drug-resistant brain cancer and Cantrixil for ovarian cancer.

Next events

Update on paxalisib Phase II

Q220

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Kazia Therapeutics is a research client of Edison Investment Research Limited

In the current viral pandemic, it is worth recalling that brain cancers will arise during and after the epidemic. The core business case for Kazia remains strong as it is developing the only brain penetrating PI3K inhibitor agent in trials to treat glioblastoma. In the current Phase II, the 21-patient expansion cohort was fully recruited in February. No hospitalisation is needed to continue with this study; it is oral dosing. The potentially pivotal Phase III using the AGILE trial network is on track for an H220 start. H120 results showed cash of A$6.4m. Our indicative value remains A$137m.

Year
end

Revenue
(A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/18

2.9

(11.0)

(22.2)

0.0

N/A

N/A

06/19

1.5

(7.7)

(12.9)

0.0

N/A

N/A

06/20e

1.5

(8.7)

(12.6)

0.0

N/A

N/A

06/21e

1.5

(11.1)

(15.4)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding exceptionals and share-based payments.

Phase II enrolment completed

In the ongoing paxalisib (GDC-0084) Phase II, the last enrolled patient started dosing on 27 February after surgery, TMZ chemotherapy and radiotherapy (Stupp regimen). This means Kazia is accumulating a further 21 patients’ worth of data in this expansion cohort. This formally tests the effects of food on paxalisib (GDC-0084) absorption (1:1 fed: fasted) and provides survival data. Patients continue the study until disease progression or unacceptable toxicity. Note that Kazia has sufficient supplies of paxalisib to continue this trial. It plans a further update in April. Kazia presented a poster on initial Phase IIa (NCT03522298) data in November 2019. If hospital visits for trial monitoring become difficult or impossible due to the COVID-19 virus, online monitoring is possible.

Progression to Phase III on track for H220

In the 20 February H120 results statement, the potentially pivotal study (AGILE) was scheduled for an H220 start. AGILE is a US study so might be restricted by the coronavirus pandemic if viral cases occupy the intensive care unit space and if it proves dangerous to conduct brain surgery. Currently, the AGILE study remains on track for a H220 start. New glioblastoma patients will continue to present and desperately need treatment options. In case the study is affected, given the US virus response is still patchy and limited, we have also modelled a scenario in which the trial effectively starts in H121. This would still make a 2025 launch after accelerated FDA review feasible and a deal in 2023–24 possible.

Valuation: Core value remains A$137m

Kazia is aiming for a 2024 paxalisib US launch and, assuming no trial delay, our valuation remains unchanged. In a possible six-month delay scenario, we assume 2020 cost reductions and estimate a slightly reduced value of A$130m. We note that scientific and clinical paxalisib fundamentals remain strong and Kazia quickly completed the current expansion cohort recruitment. Kazia had A$6.4m cash at 31 December 2019 and may conserve cash in the short term if needed. New Cantrixil data might be released by mid-2020; progression for this programme is assumed to require a partner. If the AGILE study runs as planned, Kazia will need further capital by H121.

Exhibit 1: Financial summary

Year end 30 June (A$000s)

2018

2019

2020e

2021e

PROFIT & LOSS

Sales, royalties, milestones

693

34

0

0

Other (includes R&D tax rebate)

2,200

1,431

1,500

1,500

Revenue

 

 

2,893

1,465

1,500

1,500

R&D expenses

(9,774)

(6,476)

(7,200)

(9,100)

SG&A expenses

(4,051)

(2,594)

(3,000)

(3,500)

Other

0

0

0

0

EBITDA

 

 

(10,932)

(7,604)

(8,700)

(11,100)

Operating Profit (before amort. and except.)

 

 

(11,142)

(7,711)

(8,700)

(11,100)

Intangible Amortisation

(1,336)

(1,084)

(1,000)

(1,000)

Exceptionals

8,411

0

0

0

Operating Profit

(6,687)

(10,568)

(9,700)

(12,100)

Net Interest

119

0

0

0

Profit Before Tax (norm)

 

 

(11,023)

(7,711)

(8,700)

(11,100)

Profit Before Tax (reported)

 

 

(6,344)

(10,568)

(9,700)

(12,100)

Tax benefit

305

298

0

0

Profit After Tax (norm)

(10,718)

(7,413)

(8,700)

(11,100)

Profit After Tax (reported)

(6,039)

(10,270)

(9,700)

(12,100)

Average Number of Shares Outstanding (m)

48.4

57.5

68.9

72.20

EPS - normalised (c)

 

 

(22.2)

(12.9)

(12.6)

(15.4)

EPS - diluted

 

 

(21.1)

(12.4)

(12.2)

(14.9)

EPS - reported

 

 

(12.5)

(17.9)

(14.1)

(16.8)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

18,915

13,662

12,662

11,662

Intangible Assets

14,579

13,494

12,494

11,494

Tangible Assets

1

0

0

0

Investments

4,335

168

168

168

Current Assets

 

 

9,260

7,514

2,614

2,514

Stocks

0

0

0

0

Debtors

2,535

1,711

1,711

1,711

Cash

5,956

5,433

533

433

Other

768

370

370

370

Current Liabilities

 

 

(3,888)

(1,900)

(1,900)

(1,900)

Creditors

(2,067)

(1,764)

(1,764)

(1,764)

Short term borrowings

0

0

0

0

Other

(1,821)

(136)

(136)

(136)

Long Term Liabilities

 

 

(5,046)

(5,081)

(5,081)

(16,081)

Long term borrowings

0

0

0

(11,000)

Other long term liabilities

(5,046)

(5,081)

(5,081)

(5,081)

Net Assets

 

 

19,242

14,195

8,295

(3,805)

 

CASH FLOW

 

Operating Cash Flow

 

 

(8,780)

(6,714)

(8,700)

(11,100)

Net Interest

119

0

0

0

Tax

0

0

0

0

Capex

0

0

0

0

Acquisitions/disposals

150

2,359

0

0

Equity Financing

0

3,816

4,000

0

Dividends

0

0

0

0

Other

0

0

(200)

0

Net Cash Flow

(8,511)

(539)

(4,900)

(11,100)

Opening net debt/(cash)

 

 

(14,455)

(5,956)

(5,433)

(533)

HP finance leases initiated

0

0

0

0

Other

13

16

0

0

Closing net debt/(cash)

 

 

(5,956)

(5,433)

(533)

10,567

Source: Kazia Therapeutics accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Kazia Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Kazia Therapeutics. Edison Investment Research standard fees are £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 Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

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

General disclaimer and copyright

This report has been commissioned by Kazia Therapeutics and prepared and issued by Edison, in consideration of a fee payable by Kazia Therapeutics. Edison Investment Research standard fees are £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 Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

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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