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Phase IIb trial of APC activator underway

Prima BioMed 4 January 2016 Update

Prima BioMed

Phase IIb trial of APC activator underway

Pipeline update

Pharma & biotech

 

4 January 2016

Price

A$0.05

Market cap

A$103m

US$0.72=A$1

Net cash (A$m) at June 2015

5.3

Shares in issue

2,058m

Free float

92%

Code

PRR

Primary exchange

ASX

Secondary exchange

NASDAQ

Share price performance

%

1m

3m

12m

Abs

0.0

(12.1)

54.5

Rel (local)

(0.6)

(15.4)

55.8

52-week high/low

A$0.16

A$0.02

Business description

Prima BioMed is an ASX-listed biotechnology company focused on cancer immunotherapy. Its pipeline is based on three products using LAG-3 immune control system, IMP321 for cancer chemo-immunotherapy and partnered products IMP731 (GSK) and IMP701 (Novartis). It also has a Phase II asset, CVac, an autologous dendritic cell vaccine.

Next events

Initiate IMP321/ICI combo trial in melanoma

Q116

First clinical data from AIPAC

H216

GSK to initiate Phase II LAG-3 trial in autoimmune disease

2016

Analysts

Dennis Hulme

+61 (0)2 9258 1161

Christian Glennie

+44 (0)20 3077 5727

Prima BioMed is a research client of Edison Investment Research Limited

Prima BioMed has initiated a Phase IIb study of IMP321 in metastatic breast cancer, marking the start of a period of expected strong newsflow from its in-house and partnered LAG-3 programmes in cancer and autoimmune diseases. The trial represents the return to the clinic of IMP321, a soluble LAG-3 fusion protein that doubled the tumour response rate vs chemo alone in Phase IIa, which was acquired with the other LAG-3 programmes with the purchase of Immutep in late 2014. The proceeds of the recent capital raise increase our valuation to A$273m (vs A$271m).

Year end

Revenue (A$m)

PBT* (A$m)

EPS* (c)

DPS (c)

P/E (x)

Yield (%)

06/14

2.0

(13.3)

(1.09)

0.00

N/A

N/A

06/15

1.3

(12.9)

(0.86)

0.00

N/A

N/A

06/16e

1.1

(14.5)

(0.81)

0.00

N/A

N/A

06/17e

1.2

(14.4)

(0.70)

0.00

N/A

N/A

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

IMP321: Phase IIb underway, combo trial to start Q116

Prima has initiated the AIPAC Phase IIb study of IMP321 in MBC, with the first patient expected to be dosed in early 2016. The trial plans to recruit ~211 patients across 30 sites in six European countries. The first clinical data (safety/ pharmacokinetics) are expected before the end of 2016, while the trial is expected to take around three years to complete. A separate Phase I study of IMP321 plus an anti-PD1 checkpoint inhibitor in melanoma is expected to commence in Q116. The combination led to higher response rates in preclinical studies.

Partnered programmes making significant progress

Partnered programmes are also expected to reach notable milestones in the coming year. GSK expects to move its licensed anti-LAG-3 antibody programme into Phase II in autoimmune/inflammatory disease in 2016; we expect to see confirmation in the new year that Novartis has initiated an additional Phase I study of LAG525 in combination with a PD1 inhibitor in solid tumours, while NEC/Yamaguchi plan to move a peptide vaccine combined with IMP321 into the clinic in Q116.

LAG-3: An APC activator and checkpoint inhibitor

The partnered programmes exploit the immune checkpoint inhibitor function of membrane-bound LAG-3 to either stimulate (Novartis) or inhibit (GSK) immune responses, while the in-house programmes exploit the separate capacity of soluble LAG-3 to activate antigen presenting cells to initiate an immune response. The prominent mention given to partnered LAG-3 programmes by GSK and Novartis in their investor presentations underlines the significant potential of the programmes.

Valuation: Increased to A$273m, 13c per share

The A$2m placement on 30 October increases our valuation to A$273m (previously A$271m). Our valuation is equal to 13c per share on an undiluted basis or 9c per share after accounting for dilution from options, warrants and convertible notes (both unchanged).

AIPAC Phase II trial in MBC underway

Prima has initiated the AIPAC (Active Immunotherapy PAClitaxel) Phase II trial of its lead compound IMP321 in patients with metastatic breast cancer (MBC) who are HER2 negative and therefore ineligible for treatment with Herceptin. The trial will recruit approximately 211 patients at 30 sites in six European countries. Four sites in Belgium and three sites in the Netherlands have already received ethics and competent authority approval.

The Phase II trial will begin with an open-label safety run-in stage consisting of 15 patients divided into in two cohorts to confirm the recommended Phase II dose (RPTD) of IMP321 to use in combination with paclitaxel. This will be followed by a randomized, placebo-controlled, double-blind stage where 196 patients will receive six months of treatment with paclitaxel plus either IMP321 or placebo. After six months, paclitaxel treatment will cease and responders and patients with stable disease will continue to receive either IMP321 or placebo monotherapy for a further 12 months. Initial safety and pharmacokinetic data generated during the open label run-in stage will be available in 2016.

The primary endpoint from the randomized stage of the trial is improvement in progression-free survival (PFS), while overall survival (OS) is a secondary endpoint; tumour biomarkers will also be monitored. The European regulator (EMA) has indicated that this trial could be sufficient to support a marketing authorisation if it achieves certain (undisclosed) clinical endpoints.

The company expects the trial to take about three years to complete, so results should be available around the end of 2018. This could potentially allow Prima to file for approval in Europe in 2019 with approval possible in 2020. US approval could potentially be achieved in in 2023 following a Phase III trial.

IMP321 is a soluble LAG-3 Ig fusion protein that activates antigen presenting cells (APCs), including myeloid dendritic cells. These activated APCs process tumour antigens, including those released from cells killed by chemotherapy, transport the antigens to lymph nodes and present the tumour antigens to T lymphocytes. This stimulates T-cell expansion and the proliferation of cytotoxic T-cells, as shown in Exhibit 1. In a previous Phase I/IIa study in MBC (n=30) conducted by lmmutep, administration of IMP321 the day after chemo induced a doubling of the tumour response rate to 50% vs 25% over six months (in comparison to a historical cohort of chemotherapy-only patients).

Exhibit 1: IMP321 LAG-3 fusion protein activates antigen presenting cells

Source: Prima AGM presentation 2015

Phase I immuno-oncology combination study to start in Q116

Prima has provided details about the forthcoming Phase I trial, which will test IMP321 in combination with an undisclosed immune checkpoint inhibitor (ICI) called TACTI-mel, short for Two ACTive Immunotherapies in melanoma. Ethics approval has already been obtained for the Greenslopes Private Hospital in Queensland, Australia and the trial is expected to begin in Q116. The trial will recruit 24 patients with metastatic melanoma who are being treated with an approved ICI. Patients will receive ascending subcutaneous doses of IMP321 up to 30mg per injection. The study will evaluate anti-tumour activity and the nature of the immune response at various doses, in addition to safety, pharmacokinetics and pharmacodynamics.

This study is of particular interest because it will combine the APC activation properties of IMP321, which helps to initiate an immune response, with ICI which ‘releases the brakes’ on the immune effector cells, enabling a stronger immune response. Prima has shown in preclinical studies that combining IMP321 with immune checkpoint inhibitors increased the strength of an anti-cancer immune response and the speed and level of tumour regression.

GSK plans to move its LAG-3 programme into Phase II in 2016

GSK dosed the first patient in a Phase I study of GSK2831781 anti-LAG-3 monoclonal antibody in autoimmune disease in January 2015 in patients with plaque psoriasis. GSK2831781, which aims to kill the few activated LAG-3 positive T-cells that are autoreactive in autoimmune disease, is derived from IMP731, which it in-licensed from Prima (Immutep) in 2011. In animal studies IMP731 was shown to target and selectively deplete LAG-3 marked T-cells, leaving normal T-cells intact. This offers an interesting new approach compared with standard treatments such as corticosteroids, which inhibit T-cells indiscriminately, suppressing immunity. The approach is potentially applicable to the wider autoimmune disease population; diseases such as multiple sclerosis and rheumatoid arthritis are associated with chronically stimulated T-cells.

At its R&D day in November GSK indicated that it expects to progress its anti-LAG-3 programme into Phase II trials in immuno-inflammatory disease in 2016, with the potential for a regulatory filing in a 2021-25 timeframe.

NEC/Yamaguchi collaboration expanded

In December Prima announced further progress in its collaboration with Yamaguchi University and NEC Corporation in Japan, including a new material transfer agreement. The collaboration resulted from evidence that at low doses IMP321 can act as a T-cell adjuvant for cancer vaccines. Yamaguchi plans to initiate a Phase I trial of a peptide cancer vaccine combined with IMP321 in Q116.

Valuation

The additional cash from the A$2m placement on 30 October (40m shares at 5c/share) sees our DCF valuation of Prima increase slightly to A$273m (previously A$271m) or 13c per share (undiluted, unchanged), based on a discount rate of 12.5%. On a fully diluted basis, our valuation is unchanged at 9c per share, after taking into account the options, warrants and convertible notes in issue. Our core valuation assumptions are unchanged. Exhibit 2 summarises the constituent parts of our valuation.

Exhibit 2: DCF valuation of Prima BioMed

Value driver

Launch date

Likelihood of success

Peak sales (US$m)

Royalty

Value(A$)

Value per share (A$)

IMP321-MBC

2020 (EU), 2023 (US)

35%

971

17.5%

173.3

0.09

IMP321+anti-PD1 ICI-melanoma

2024

15%

480

17.5%

24.0

0.01

IMP321 milestones - assume partnered post PII in MBC

US$225 estimated risk-adjusted milestones from out-licensing North American and European rights.

46.1

0.02

IMP731-autoimmune disease

2022

15%

1079

8%

34.0

0.02

Potential IMP731 milestones from GSK

US$90m of total US$100m in risk-adjusted milestones from GSK

17.3

0.01

IMP701-solid tumours (lung cancer)

2024

15%

2440

5%

33.7

0.02

Potential IMP701 milestones from Novartis

US$20m in risk-adjusted milestones from Novartis

2.9

0.00

CVac-ovarian cancer

2020

30%

343

12%

32.3

0.02

Potential milestones CVac

US$100m estimated risk-adjusted milestones from out-licensing North American and European rights.

11.9

0.01

Grants

0.0

0.00

R&D expenses

(16.1)

(0.01)

Admin expenses

(11.0)

(0.01)

Capex

(0.2)

(0.00)

Tax

(86.8)

(0.04)

Net cash

End December 2015 forecast net cash

11.6

0.00

Total

273.1

0.13

Source: Edison Investment Research

Exhibit 3 shows that in addition to the 2,058m Prima shares currently in issue, there are a further 1,375m potential shares that could be issued on the exercise of options, warrants and convertible notes, including 1,297m that would be in the money at our 13c per share undiluted valuation. Exhibit 3 shows that after taking into account these potential shares, our diluted valuation is 9c per share. Prima is likely to require additional funding to complete the IMP321 clinical trials; our diluted valuation of 9c per share does not take into account potential dilution from any future capital raising.

Exhibit 3: Potential further dilution and value per share

Average exercise price (A$)

m

Current number of shares

2,058

Ridgeback convertible note potential shares

0.020

688

Ridgeback warrants

0.024

380

Listed options

0.200

77

Unlisted options

0.052

151

Performance rights

0.000

79

Total in-the-money potential shares

1,297

Total potential diluted number of shares

3,355

Net cash raised from options and CN exercise

A$30

Valuation (above plus additional cash)

A$303

Diluted value per share

A$0.09

Source: Edison Investment Research

The breadth of the LAG-3 pipeline means there could be further upside if Prima or its partners launch additional products into the clinic or broaden the indications being studied.

We include risk-adjusted milestones payable by current partners GSK for IMP731 and Novartis for IMP701, plus milestones from prospective deals for IMP321 and for out-licensing CVac. Possible catalysts include launch of the Phase I trial of IMP321 in melanoma in combination with a checkpoint inhibitor, progression of the licensed anti-LAG-3 antibody into Phase II by GSK, or news on partnering, all of which could provide upside to our current valuation.

Financials

Prima acquired Immutep for A$26.3m in H115, including an upfront cash consideration of A$15.8m, A$4.8m of stock and deferred consideration of A$5.7m, which has since been paid out of the proceeds of a milestone payment received in H215 from GSK after the commencement of clinical trials in the IMP731 programme.

The company reported gross cash of A$24.4m at 30 September 2015. Since the end of Q116 (end 30 September), it has issued €1m (A$1.55m) of equity to Nyenburgh Investment Partners and A$2m of equity to an unnamed Australian institutional investor, taking pro forma gross cash to A$27.9m. We forecast A$10m R&D cost in FY16 and FY17. The company estimates that its operations are fully funded into 2017.

Sensitivities

Prima is exposed to the same clinical, regulatory and commercialisation risks of all biotech companies. The key sensitivity is clinical progress of its pipeline of LAG-3 candidates, primarily the internally funded IMP321. While Prima has funding in place to cover planned IMP321 Phase I/II studies, including the Phase II study in MBC, it would require a partnership or alternative forms of funding to advance IMP321 further. Existing partnerships with big pharma reduce the financial and execution risk for IMP701 and IMP731; in addition, if the Phase I study of IMP701 reveals evidence of efficacy, this could lead GSK to extend the study to additional indications including RA and MS, which could increase the potential peak sales and therefore the value of the product. Separately, progress with CVac depends on Prima successfully out-licensing the product.

Exhibit 4: Financial summary

A$'000s

2014

2015

2016e

2017e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,020

1,336

1,119

1,240

Cost of Sales

0

0

0

0

Gross Profit

2,020

1,336

1,119

1,240

EBITDA

 

 

(14,003)

(13,345)

(14,611)

(14,665)

Operating Profit (before GW and except.)

 

(14,395)

(13,671)

(14,649)

(14,709)

Intangible Amortisation

(54)

(1,015)

(3,256)

(2,894)

Exceptionals

0

(18,338)

0

0

Operating Profit

(14,450)

(33,024)

(17,905)

(17,604)

Other

407

538

0

0

Net Interest

713

192

194

359

Profit Before Tax (norm)

 

 

(13,275)

(12,940)

(14,455)

(14,351)

Profit Before Tax (IFRS)

 

 

(13,330)

(32,294)

(17,711)

(17,245)

Tax

(14)

142

0

0

Profit After Tax (norm)

(13,289)

(12,798)

(14,455)

(14,351)

Profit After Tax (IFRS)

(13,343)

(32,152)

(17,711)

(17,245)

Average Number of Shares Outstanding (m)

1,220.1

1,490.1

1,790.6

2,058.3

EPS - normalised (c)

 

 

(1.1)

(0.9)

(0.8)

(0.7)

EPS - IFRS (c)

 

 

(1.1)

(2.2)

(1.0)

(0.8)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

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

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

694

22,960

19,668

16,846

Intangible Assets

117

22,662

19,296

16,402

Tangible Assets

577

298

372

444

Other

0

0

0

0

Current Assets

 

 

24,684

8,023

19,190

4,767

Stocks

0

0

0

0

Debtors

196

315

315

315

Cash

23,200

6,760

17,927

3,503

Other

1,287

948

948

948

Current Liabilities

 

 

(2,771)

(4,380)

(2,872)

(2,872)

Creditors

(2,669)

(2,791)

(2,791)

(2,791)

Short term borrowings

0

(1,508)

(0)

(0)

Short term leases

0

0

0

0

Other

(102)

(80)

(80)

(80)

Long Term Liabilities

 

 

(15)

(1,914)

(15,665)

(15,665)

Long term borrowings incl. conv. note

0

0

(13,751)

(13,751)

Long term leases

0

0

0

0

Other long term liabilities

(15)

(1,914)

(1,914)

(1,914)

Net Assets

 

 

22,592

24,690

20,322

3,076

CASH FLOW

Operating Cash Flow

 

 

(14,908)

(7,785)

(14,693)

(14,665)

Net Interest

705

0

194

359

Tax

(24)

(2)

0

0

Capex

(104)

(49)

(112)

(117)

Acquisitions/disposals

0

(20,913)

0

0

Financing

6,845

7,745

13,535

0

Dividends

0

0

0

0

Other

(158)

(164)

0

0

Net Cash Flow

(7,643)

(21,168)

(1,076)

(14,423)

Opening net debt/(cash)

 

 

(30,023)

(23,200)

(5,251)

(4,175)

HP finance leases initiated

0

0

0

0

Other

820

3,220

0

0

Closing net debt/(cash)

 

 

(23,200)

(5,251)

(4,175)

10,248

Source: Company accounts, Edison Investment Research

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