Presence at ASCO 2018

Oncology Venture 11 June 2018 Update
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Oncology Venture

Presence at ASCO 2018

Financial update

Pharma & biotech

11 June 2018

Price

SEK17.40

Market cap

SEK240m

US$0.12/SEK

Net cash (SEKm) as of 31 March 2018

40.1

Shares in issue

13.8m

Free float

67%

Code

OV.SS

Primary exchange

AktieTorget

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.5

2.7

(50.6)

Rel (local)

10.0

1.6

(44.5)

52-week high/low

SEK33.6

SEK15.5

Business description

Oncology Venture is a Denmark-based biopharmaceutical company focused on oncology. Its patent-protected mRNA-based drug response predictor platform enables the identification of patients with gene expression highly likely to respond to treatment. To date the company has in-licensed six drug candidates with the intent to conduct focused Phase II clinical trials and then out-licence the revamped drugs.

Next events

Phase II 2X-121 trial initiation

2018

Randomised Phase II LiPlaCis trial initiation

2018

Phase II LiPlaCis top-line data

H119

Analysts

Nathaniel Calloway

+1 646 653 7036

Maxim Jacobs

+1 646 653 7027

Oncology Venture is a research client of Edison Investment Research Limited

Oncology Venture (OV) attended the annual American Society of Clinical Oncology (ASCO) in June with three abstracts. Results from a Phase I study of 2X-121, a dual PARP-1/2 and TNKS-1/2 inhibitor, as a single agent in patients with solid tumours were presented along with data on the development of the 2X-121 drug response predictor (DRP) algorithm. OV also provided supplementary data supporting the LiPlaCis and APO010 programmes at the conference. In late May, OV announced the merger between OV and the Medical Prognosis Institute (MPI) was approved by the board of directors.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/16

1.3

(40.5)

(3.33)

0.0

N/A

N/A

12/17

2.1

(64.9)

(5.28)

0.0

N/A

N/A

12/18e

1.7

(121.8)

(7.47)

0.0

N/A

N/A

12/19e

1.0

(238.5)

(13.92)

0.0

N/A

N/A

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

2X-121 data detailed in ASCO presentation

OV presented data from the 41-patient Phase I study of 2X-121as a single agent in patients with advanced solid tumours, along with data on the development and preliminary testing of the 414-gene 2X-121 DRP algorithm in 13 patients. The responders and non-responders were identified with median overall survival of more than 800 days and 208 days, respectively. The company expects to initiate the focused Phase II trial this year.

Merger between OV and MPI approved

On 30 May 2018, OV announced that its board of directors approved the merger plan between itself and the MPI, which was first proposed in March this year. Post-merger, the combined entity will comprise 50.3m shares and current OV shareholders will own 51% of the new company. Information about the closing date of this transaction has not yet been released.

Potential increase in stake of dovitinib to 75%

On 31 May 2018, OV announced it has the option to acquire 35% of the shares in OV-SPV2 (~40% owned by OV, 10% owned by MPI, 50% owned by Sass & Larsen Aps) for $3.5m before 31 August 2018 from Sass & Larsen. This transaction may increase OV’s stake in the dovitinib programme (from 40% to 75%), a tyrosine kinase inhibitor (TKI) that was in-licensed from Novartis in January this year.

Valuation: SEK830.2m or SEK60.02 per share

We have slightly increased our valuation of OV to SEK830.2m or SEK60.02 per share from SEK823.8m or SEK59.56 per share. This increase is primarily driven by rolling forward our NPVs and is partially offset by offset by lower net cash. Our valuation may change to reflect the potential increase of OV’s stake in dovitinib via a 35% share buy-back option of OV-SPV2 for $3.5m.

2X-121 presentation at ASCO 2018

On 1 June 2018, OV presented results from a 41-patient open-label Phase I study of 2X-121 as a single agent in patients with advanced solid tumours (including pancreatic, ovarian, breast, colorectal, lung and other cancers). As a reminder, 2X-121 is an orally bioavailable small molecule and a dual PARP-1/2 and TNKS-1/2 inhibitor (previously named E7449, in-licensed from Eisai in July 2017). PARP enzymes repair single-strand DNA breaks; as a result, PARP inhibition causes double strand breaks, which require BRCA1/2 for repair.1 Thus, PARP inhibition is particularly lethal in cancers containing BCRA1/2 mutations. It is important to note this trial included cancers without regard to BRCA mutation status where PARP inhibitors are more active. BRCA status was only known in six patients in this study (three with ovarian cancer; two breast cancer; one pancreatic cancer).

  Dziadkowiec, K.N. (2016). PARP inhibitors: review of mechanisms of action and BRCA1/2 mutation targeting. PrzMenopauzalny 15(4), 215-219.

In total, 28 patients were administered 2X-121 orally, once daily at six dose levels in 28-day treatment cycles (Exhibit 1). Out of the 25 evaluable patients, the maximum tolerated dose was found to be 600mg, which was limited by fatigue, and this cohort was expanded to include 21 patients in total. PK were dose proportional and 2X-121 was absorbed rapidly at 1.5 hours with a half-life of eight hours (Exhibit 2). All dose levels demonstrated PARP inhibition, while the 600mg daily dose demonstrated maintained inhibition at approximately 90% (Exhibit 3).

Exhibit 1: Dose escalation in 25 evaluable patients

Dose cohort (no. patients treated)

No. evaluable patients

Median no. cycles received (range)

No. patients with DLT

50 mg (3)

3

6 (1-8)

0

100 mg (3)

3

2 (2-14)

0

200 mg (4)

4

3 (1-4)

0

400 mg (4)

3

5 (0-10)

0

600 mg (8) *

6

2 (0-13)

1

800 mg (6)

6

2 (0-11)

4

Source: 2X Oncology and Oncology Venture at ASCO 2018. Notes: *Maximum tolerated dose; DLT= dose limiting toxicities.

Exhibit 2: 2X-121 rapidly absorbed

Exhibit 3: PARP inhibition at all dose levels

Source: 2X Oncology and Oncology Venture at ASCO 2018. Notes: Serum samples collected for PK analysis.

Source: 2X Oncology and Oncology Venture at ASCO 2018. Notes: Peripheral blood mononuclear cell (PBMC) isolation used for PARP activity.

Exhibit 2: 2X-121 rapidly absorbed

Source: 2X Oncology and Oncology Venture at ASCO 2018. Notes: Serum samples collected for PK analysis.

Exhibit 3: PARP inhibition at all dose levels

Source: 2X Oncology and Oncology Venture at ASCO 2018. Notes: Peripheral blood mononuclear cell (PBMC) isolation used for PARP activity.

Two patients achieved partial response, both with ovarian cancer, while 13 patients demonstrated stable disease. Eight of the 13 patients maintained stable disease for over 24 weeks, and seven out of eight of these patients had pancreatic cancer. It is important to note there are no PARP inhibitors approved for the treatment of pancreatic cancer. The Abramson Cancer Centre of the University of Pennsylvania is recruiting 42-patients with BRCA1/2 or PALB2 mutated advanced pancreatic cancer to participate in an open-label Phase II trial investigating the use of Rubraca (rucaparib, Clovis Oncology). Top-line data from this trial are expected in 2021.

This presentation also described OV’s 2X-121 DRP that was developed to identify drug responders and non-responders. The 2X-121 DRP, which is a biomarker based on mRNA expression of 414 genes from 61 cell lines, was tested in a small 13 patient blinded retrospective trial using biopsy materials (formalin fixed paraffin-embedded samples) from this dataset provided by Eisai. From the 13 available patient samples, the DRP correctly distinguished two patients who achieved partial responses from non-responders (ie stable disease and disease progression) (Exhibit 4). Moreover, the DRP separated the patients into two groups: those sensitive to treatment (six responders) and those resistant (seven non-responders). The difference between median time to progression among the responders and non-responders was minimal (p=0.14). However, median overall survival was greater than 800 days for the predicted sensitive/responder group and 208 days for the non-responder group, respectively (HR=0.26, p=0.07) (Exhibit 5).

Exhibit 4: 2X-121 DRP identifies two partial responders

Exhibit 5: Overall survival of the two groups

Source: 2X Oncology and Oncology Venture at ASCO 2018

Source: 2X Oncology and Oncology Venture at ASCO 2018

Exhibit 4: 2X-121 DRP identifies two partial responders

Source: 2X Oncology and Oncology Venture at ASCO 2018

Exhibit 5: Overall survival of the two groups

Source: 2X Oncology and Oncology Venture at ASCO 2018

Although the results are supportive of clinical activity, the real value is in the ability of the DRP to identify responders, which will need to be tested prospectively. It is also important to note the possibility of overtraining the 2X-121 DRP model, which can negatively affect performance on new data. Because the DRP makes use of 414 genes, which may include irrelevant data and noise, and was tested only a small dataset (13 patient samples), we expect the DRP to require further testing and validation.

As a reminder, OV plans to use its 2X-121 DRP to select the top 10% patients with metastatic breast cancer (mBC) and relapsed ovarian cancer highly likely to respond to the drug. OV is in possession of 13,000 capsules for initial studies. The laboratory in Europe is established with approximately 1,400 DRP screened patients with breast cancer whereas the US lab is undergoing Clinical Laboratory Improvement Amendments validation. The study is expected to begin this year and should be complete after approximately 12 months.

LiPlaCis Phase II mBC trial update on 12 patients

OV provided an update on its ongoing single-arm, open-label focused Phase II study investigating LiPlaCis in heavily pre-treated mBC patients via an electronically published abstract at ASCO in June. As a reminder, patients are administered 75mg LiPlaCis, which is liposomal version of cisplatin, intravenously (IV) in three-week cycles on day one and on day eight with efficacy evaluation every six weeks.

In total, 12 out of 20 evaluable patients selected from the DRP screening programme, which is used to classify tissue as highly likely to respond (high, top two-thirds) or less likely to respond (low, bottom one-third) from more than 1,400 mBC patients have been enrolled to date. Objective response rate (ORR) in the intention to treat group (from the top two-thirds) was 17%. However, two patients died before completing the treatment cycle and, according to the company and a safety committee, the deaths were unrelated to LiPlaCis. LiPlaCis was the median eighth line of treatment for this cohort.

Moreover, six out of the remaining 10 patients evaluable for response had a DRP score in the top third and four had a DRP score in the middle third. Out of the 10 patients, two patients achieved partial remission, while five and three experienced stable disease and progressive disease, respectively. Also, five out of the six patients with a DRP score in the top third were platinum-naïve and experienced a median progression free survival (PFS) of 25 weeks, which was significantly greater than a median PFS of eight weeks demonstrated by the two platinum-naïve patients with a DRP score in the middle third (p=0.008). This focused Phase II trial remains ongoing and, according to the company, depending on the required length of treatment, top-line results are expected by year-end 2018.

Resistance to APO010 in human myeloma cell lines

OV also published an electronic abstract at ASCO 2018 detailing the characterisation of resistance to APO010, a synthetic hexameric formulation of natural Fas ligands that targets first apoptosis signal receptors (Fas, also known as apoptosis antigen 1 or cluster differentiation 95 [CD95]) on cancer cells to potentially induce caspase-dependent apoptosis and antineoplastic activity,2 in human myeloma cell lines.

  Villunger, A., et al. (1997). Constitutive Expression of Fas (Apo-1/CD95) Ligand on Multiple Myeloma Cells: A Potential Mechanism of Tumor-Induced Suppression of Immune Surveillance. Blood, 90(1), 12-20.

OV developed APO010-resistent variants of four human myeloma cell lines (LP1, Raji, MOLP-8, and KMS-12-BM) by exposing cells to increasing concentrations of APO010 over six months to one year. The developed APO010-resistant cell lines showed increased resistance to APO010 and Fas-receptor downregulation in comparison to the non-manipulated cell lines. According to the company, post-transcriptional or post-translational modification of the Fas-receptor is likely responsible for APO010 resistance. Describing the molecular mechanism of resistance to the drug may identify predictive biomarkers of APO010 in multiple myeloma (MM) treatment.

As a reminder, OV is investigating APO010 in a focused Phase Ib/II trial for the treatment of relapsed or refractory MM. OV is targeting enrolment of 15 patients most likely to respond to APO010 out of approximately 150 patient DRP screenings (using the 160-gene APO010 DRP). The company first aims to demonstrate effective APO010 monotherapy and follow-up with combination trials with other agents such as PD-1 inhibitors. The Phase I dose escalation portion of this trial is ongoing. The company may increase patient enrolment to include 30 patients in dose escalation, and if that is the case, the company expects to complete enrolment by H119.

Valuation

We have slightly increased our valuation of OV to SEK830.2m or SEK60.02 per share from SEK823.8m or SEK59.56 per share derived from a risk-adjusted NPV analysis on the future earnings of six active clinical programmes, and as standard practice, this includes costs associated with each asset (Exhibit 6). This increase is primarily driven by rolling forward our NPVs, offset by lower net cash. Our valuation may change in accordance with OV’s decision to buy back shares in its incorporated subsidiary OV-SPV2 (~40% owned by OV, 10% owned by MPI, 50% owned by Sass & Larsen Aps). Announced in late May, OV has the option to acquire 35% of the shares in OV-SPV2 for $3.5m before 31 August 2018, which may increase OV’s stake in the programme (from 40% to 75%) and should provide significant upside to the valuation.

Exhibit 6: Valuation of OV

Development Program

Indication

Clinical stage

Prob. of success

Launch year

Launch pricing

Peak sales ($m)

rNPV (mSEK)

% owned by OV

OV rNPV (mSEK)

LiPlaCis

Metastatic breast cancer

Phase II

25%

2023

$91,000

190.6

388.8

29%

112.7

Irofulven

Prostate cancer

Phase Ib/II

20%

2023

$129,000

52.6

52.4

100%

52.4

APO010

Multiple myeloma

Phase Ib/II

20%

2023

$143,000

80.9

81.7

100%

81.7

2X-121

mBC and ovarian cancer

Phase Ib/II

25%

2023

$132,000

116.4

144.7

92%

133.1

2X-111

Glioblastoma and brain metastases from breast cancer

Phase Ib/II

25%

2024

$169,000

212.6

272.3

92%

250.5

Dovitinib

Renal and liver cancer

Phase Ib/II

35%

2024

$145,000

152.0

399.0

40%

159.6

Total

 

 

 

 

 

 

 

 

790.1

Net cash and equivalents (as of 31 March 2018) (mSEK)

40.1

Total firm value (mSEK)

830.2

Total shares (m)

13.8

Value per basic share (SEK)

60.02

Source: Edison Investment Research

Financials

OV’s Q118 post-tax loss was SEK14.4m (Q117: loss of SEK11.6m), which was primarily attributable to costs associated with production (SEK1m), preparing and running clinical trials (SEK5m), and sales and marketing activities (SEK1m).

OV ended the period with SEK40.1m in cash and equivalents. As a standalone company, our forecasts model a total of SEK610m (SEK60m in 2018, SEK300m in 2019, and SEK250m in 2020) in R&D expenditure, which we record as illustrative debt, to bring all six of its anticancer programmes to Phase III out-licensing (Exhibit 7). However, following the merger, we expect MPI’s cash (DKK3.3m at end FY17) to partially offset this funding requirement. Such financial requirements may be offset further via the selling or outlicensing of Phase III-ready drugs. These estimates are based on expected cost per patient (ie $100,000 per patient) and Phase II clinical trial size.

Our combined R&D forecasts remain unchanged with SEK74m in 2018 and SEK194m in 2019 primarily associated with the advancement of the LiPlaCis programme into Phase IIb, ongoing irofulven and APO010 Phase IIa clinical trials, as well as 2X Oncology’s 2X-121 and 2X-111 development programmes, which are expected to initiate this year.

Due to the forthcoming merger between OV and MPI, which was approved by the board of directors in late May, we expect these financials to change to reflect the new entity.

Exhibit 7: Financial summary

SEK'000s

2016

2017

2018e

2019e

Year end 31 December

Swedish GAAP

Swedish GAAP

Swedish GAAP

Swedish GAAP

PROFIT & LOSS

Revenue

 

 

 

1,305

2,091

1,727

978

Cost of Sales

0

0

0

0

Gross Profit

1,305

2,091

1,727

978

EBITDA

 

 

 

(43,408)

(81,001)

(127,386)

(250,200)

Operating Profit (before amort. and except.)

 

(40,874)

(67,462)

(124,367)

(247,181)

Intangible Amortisation

0

0

0

0

Exceptionals/Other

0

0

0

0

Operating Profit

(40,874)

(67,462)

(124,367)

(247,181)

Net Interest

346

2,588

2,562

8,674

Other (change in fair value of warrants)

0

0

0

0

Profit Before Tax (norm)

 

 

 

(40,528)

(64,874)

(121,804)

(238,507)

Profit Before Tax (IFRS)

 

 

 

(40,528)

(64,874)

(121,804)

(238,507)

Tax

6,985

7,114

13,357

26,154

Deferred tax

0

0

0

0

Profit After Tax (norm)

(33,543)

(57,760)

(108,448)

(212,353)

Profit After Tax (IFRS)

(33,543)

(57,760)

(108,448)

(212,353)

Average Number of Shares Outstanding (m)

10.1

10.9

14.5

15.3

EPS - normalised (ore)

 

 

 

(332.94)

(527.74)

(746.66)

(1,392.43)

EPS - IFRS (SEK)

 

 

 

(3.33)

(5.28)

(7.47)

(13.92)

Dividend per share (ore)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

 

19,767

45,384

44,517

42,784

Intangible Assets

18,885

44,633

43,766

40,747

Tangible Assets

624

485

467

1,753

Other

258

266

284

284

Current Assets

 

 

 

38,450

33,830

34,777

142,882

Stocks

316

9,149

10,540

10,540

Debtors

6,841

2,593

4,868

9,533

Cash

18,872

11,978

10,417

113,857

Other

12,421

10,110

8,952

8,952

Current Liabilities

 

 

 

(11,820)

(32,461)

(38,901)

(56,600)

Creditors

(11,820)

(32,461)

(38,901)

(56,600)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

 

0

0

(60,256)

(361,282)

Long term borrowings

0

0

(60,256)

(361,282)

Other long term liabilities

0

0

0

0

Net Assets

 

 

 

46,397

46,753

(19,864)

(232,217)

CASH FLOW

Operating Cash Flow

 

 

 

(36,066)

(48,216)

(98,463)

(195,273)

Net Interest

346

0

0

0

Tax

0

0

(1,682)

0

Capex

882

(8)

(2,557)

(1,286)

Acquisitions/disposals

(2,296)

(19,943)

0

0

Financing

39,523

60,702

39,457

0

Dividends

0

0

0

0

Other

0

0

0

0

Net Cash Flow

2,389

(7,465)

(63,245)

(196,560)

Opening net debt/(cash)

 

 

 

(16,786)

(18,872)

(11,978)

51,664

HP finance leases initiated

0

0

0

0

Exchange rate movements

(303)

571

(397)

0

Other

0

0

0

799

Closing net debt/(cash)

 

 

 

(18,872)

(11,978)

51,664

247,425

Source: Company reports, Edison Investment Research. Note: financial summary reflects Oncology Venture as a single entity, ahead of proposed merger with MPI.

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 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 Oncology Venture 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 Ltd (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.
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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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