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Treakisym label expansion submitted

SymBio Pharmaceuticals 19 May 2020 Update
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SymBio Pharmaceuticals

Treakisym label expansion submitted

Earnings and
regulatory update

Pharma & biotech

19 May 2020

Price

¥434

Market cap

¥14.8bn

¥110/US$

Net cash (¥m) at 31 March 2020 + subsequent exercises

5,584

Shares in issue

34.1m

Free float

92.5%

Code

4582

Primary exchange

TYO

Secondary exchange

OTC US

Share price performance

%

1m

3m

12m

Abs

29.6

(24.8)

(40.1)

Rel (local)

28.1

(14.1)

(36.2)

52-week high/low

¥791

¥264

Business description

SymBio Pharmaceuticals is a Japanese specialty pharma company with a focus on oncology and hematology. The Treakisym powder formulation was in-licensed from Astellas in 2005; liquid Treakisym was in-licensed from Eagle Pharmaceuticals in 2017. Rigosertib was in-licensed from Onconova. And brincidofovir was licensed from Chimerix in 2019.

Next events

Rigosertib Phase III results

H220

Treakisym RTD approval decision

October 2020

Analyst

Nathaniel Calloway

+1 646 653 7036

SymBio Pharmaceuticals is a research client of Edison Investment Research Limited

SymBio announced on 11 May 2020 that it submitted an application to expand the label for Treakisym in Japan to include the treatment of relapsed and refractory diffuse large B-cell lymphoma (DLBCL) in combination with rituximab. This follows the positive results seen in the Phase III study for the combination reported in November 2019. We expect this label expansion to more than double the sales potential for the drug.

Year end

Revenue (¥m)

PBT*
(¥m)

EPS*
(¥)

DPS
(¥)

P/E
(x)

Yield
(%)

12/18

3,836

(2,749)

(166)

0

N/A

N/A

12/19

2,838

(4,377)

(189)

0

N/A

N/A

12/20e

2,608

(5,256)

(181)

0

N/A

N/A

12/21e

9,228

1,090

19

0

22.8

N/A

Note: *PBT and EPS are adjusted, excluding D&A and exceptional items.

DLBCL key to future growth

Treakisym (bendamustine) is currently approved in Japan for low-grade non-Hodgkin lymphoma (NHL) or mantle cell lymphoma and chronic lymphocytic leukemia. We estimate the label expansion would approximately double the target market with 11,200 second-line DLBCL patients. While the company did not publish detailed results from its Phase III study, it reported that it met its primary endpoints and the combination has established efficacy in the literature.

Label expansion part of multi-pronged strategy

The label expansion is one aspect of the company’s ongoing strategy to reach profitability. The drug is currently sold by Eisai, with SymBio regaining full control at the end of 2020, after which the product will be sold by an internal salesforce. The company has also licensed the rights to two proprietary formulations of bendamustine from Eagle Pharmaceuticals and plans to convert providers to the new, more convenient formulations prior to the October 2020 loss of exclusivity for the current formulation.

Supply issues continue to affect sales, margins

The company reported with Q120 results that quality control issues of Treakisym sourced from Astellas have continued to affect the ability of the company to deliver product to Eisai. This problem has persisted since mid-2019. The company reported revenue of ¥551m for the quarter, down from ¥1,611m for Q119, and a gross profit of ¥128m (down from ¥609m), citing lack of inventory as the cause.

Valuation: Increased to ¥39.0bn

We have increased our valuation to ¥39.0bn ($354m) from ¥37.2bn ($338m) previously, although it is lower on a per share basis: ¥1,144 ($10.40) from ¥1,351 ($12.28). We estimate a cash balance of ¥5.58bn following multiple recent rights exercises (¥1.71bn raised since Q120 cash of ¥3.88bn). We expect this to be sufficient for the company to deliver on its strategy to reach profitability in 2021.

Treakisym DLBCL label expansion submitted

SymBio announced in May 2020 that it had completed and submitted its application to the PMDA to expand the addressable indications for Treakisym to include relapsed and refractory DLBCL (in combination with rituximab). SymBio previously announced that it had met is primary endpoint in its Phase III study of Treakisym (bendamustine). The primary endpoint was overall response rate, with progression free survival and overall survival as secondary endpoints, but a detailed report was not presented. The study was open label and single arm, but this may be able to support a label expansion for the drug to this indication considering the well-demonstrated activity in other studies. Although bendamustine is not approved explicitly for DLBCL in the US (although it is approved for indolent NHL), it has been demonstrated to have activity when combined with rituximab,1 similar to the company’s pivotal study. The company previously announced an overall response rate (ORR) of 62.7% and complete response (CR) of 37.3% was observed in the earlier Phase II study. We estimate a target market of 11,200 second-line DLBCL patients in Japan, which would approximately double the current addressable market. We expect an approval decision from the PMDA within 12 months.

  Arcari A. et al. (2014) Safety and Efficacy of Rituximab Plus Bendamustine in Relapsed or Refractory Diffuse Large B-Cell Lymphoma Patients. Blood 124, 3074.

Frustrating quality control issues continue

The quality control issues the company has experienced with shipments of bendamustine from its supplier Astellas continue unabated. This has significantly affected the ability of the company to deliver drug to Eisai and the associated revenue from that agreement. The company reported revenue of ¥551m for Q1 (Q119: ¥1,611m), and a gross profit of ¥128m (Q119: ¥609m).

This has been an issue since mid-2019, which the company first identified quality issues in shipments of drug from Astellas. SymBio has repeatedly sought to resolve the issue, but apparently to no effect. We have lost confidence that this issue can be resolved in a timely manner and have reduced our forecasted revenue for 2020 to ¥2,608m from ¥3,433m previously, and our gross profit to ¥652m from ¥1,030m.

However, the company has planned to transition to using the formulations licensed from Eagle once they are approved. We expect a decision on the approval of the ready-to-dilute (RTD) formulation by the end of September 2020.

Valuation

We have increased our valuation to ¥39.0bn ($354m) from ¥37.2bn ($338m) previously, although it is lower on a per share basis: ¥1,144 ($10.40) from ¥1,351 ($12.28). The increase in total valuation is from rolling forward our NPVs. Although we now forecast lower revenue in 2020 than previously, this impact is limited to the current year (FY20), dampening the overall effect on the valuation. The increase in shares outstanding is driven by the recent large rights exercises in the ongoing rights offering: 5.61m new shares to date in April and May, bringing the total outstanding to an estimated 34.1m. We expect to update our valuation with the top-line results from the Phase III study of rigosertib (in development at and licensed from Onconova) expected in H220 (delayed from H120 previously).

Exhibit 1: Valuation of SymBio

Product

Indication

Launch

Peak sales (¥m)

NPV
(¥m)

Probability

rNPV (¥m)

rNPV/share (¥/share)

Treakisym

Low grade NHL/MCL (r/r and 1st line); CLL

2010

8,600

19,571

100–95%

18,724

549.8

Treakisym (DLCBL)

r/r DLBCL

2021

9,600

13,383

90%

11,975

351.6

Rigosertib (IV)

r/r HR-MDS

2023

3,800

2,909

50%

1,365

40.1

Rigosertib (oral)

LR-MDS (mono) or First-line HR-MDS (combo)

2025

7,500

4,302

15%

436

12.8

Brincidofovir

vHC

2025

4,200

3,383

30%

882

25.9

Net cash (March 2020 + subsequent exercises)

5,584

100%

5,584

164.0

Valuation

 

 

 

49,132

 

38,967

1,144.2

Source: SymBio Pharmaceuticals reports, Edison Investment Research

Financials

The company ended the quarter with ¥3.88bn and subsequently raised ¥1.71bn in equity through rights exercises. We expect this to be sufficient cash for the company to continue its commercial buildout in preparation for the 2021 relaunch of Treakisym, and we expect sustained profitability thereafter. We previously included ¥607m in additional capital needed to provide a cash buffer going into the launch, which has been removed given the raised cash. Other changes to our forecasts (besides those described above) include adjusting 2020 SG&A spending (¥3,325m from ¥3,525m), other minor changes to reflect Q120 results, and an update to our tax treatment to align better with Japanese GAAP and tax law changes. We have slightly increased 2021 expected revenue (¥9,228m from ¥9,159m) to reflect warehoused patients unable to get treatment with the current supply issues.

Exhibit 2: Financial summary

Accounts: JPN GAAP, year-end: 31 Dec, ¥m

 

 

2016

2017

2018

2019

2020e

2021e

2022e

2023e

2024e

2025e

Total revenues

 

 

2,368

3,444

3,836

2,838

2,608

9,228

11,484

12,769

14,048

15,395

Cost of sales

 

 

(1,464)

(2,413)

(2,663)

(1,973)

(1,956)

(1,619)

(2,261)

(1,904)

(2,097)

(2,299)

Gross profit

 

 

904

1,031

1,173

865

652

7,609

9,223

10,864

11,951

13,096

SG&A (expenses)

 

 

(1,364)

(1,961)

(1,996)

(2,725)

(3,325)

(5,772)

(6,397)

(7,542)

(7,440)

(8,005)

R&D costs

 

 

(1,667)

(3,018)

(1,833)

(2,442)

(2,603)

(765)

(1,040)

(1,815)

(1,547)

(866)

Other income/(expense) included in adjusted

 

 

0

0

0

0

0

0

0

0

0

0

Other income/(expense) excluded from adjusted

 

 

0

0

0

0

0

0

0

0

0

0

Reported EBIT

 

 

(2,127)

(3,947)

(2,656)

(4,302)

(5,276)

1,072

1,786

1,507

2,964

4,226

Finance income/(expense)

 

 

5

3

1

0

20

19

28

57

96

177

Other income/(expense) included in adjusted

 

 

7

3

(0)

4

0

0

0

0

0

0

Other income/(expense) excluded from adjusted

 

 

(195)

(33)

(93)

(75)

0

0

0

0

0

0

Reported PBT

 

 

(2,309)

(3,974)

(2,749)

(4,372)

(5,256)

1,090

1,814

1,564

3,061

4,403

Income tax expense

 

 

(4)

(4)

(4)

(4)

(4)

(437)

(571)

(555)

(801)

(1,024)

Reported net income

 

 

(2,313)

(3,978)

(2,753)

(4,376)

(5,260)

653

1,243

1,008

2,259

3,379

Average number of shares - basic (m)

 

 

9.8

12.5

16.6

23.2

29.0

34.1

34.1

34.1

34.1

34.1

Basic EPS (¥)

 

 

(235.27)

(319.14)

(165.54)

(189.03)

(181.42)

19.17

36.47

29.59

66.30

99.16

Adjusted EBITDA

 

 

(2,101)

(3,917)

(2,621)

(4,264)

(5,179)

1,165

1,883

1,613

3,081

4,356

Adjusted EBIT

 

 

(2,127)

(3,947)

(2,656)

(4,302)

(5,276)

1,072

1,786

1,507

2,964

4,226

Adjusted PBT

 

 

(2,317)

(3,977)

(2,749)

(4,377)

(5,256)

1,090

1,814

1,564

3,061

4,403

Adjusted EPS (¥)

 

 

(236.02)

(319.35)

(165.54)

(189.22)

(181.42)

19.17

36.47

29.59

66.30

99.16

Adjusted diluted EPS (¥)

 

 

(236.02)

(319.35)

(165.54)

(189.22)

(181.42)

18.94

36.03

29.23

65.50

97.96

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

75

47

57

75

80

136

201

263

323

380

Goodwill

 

 

0

0

0

0

0

0

0

0

0

0

Intangible assets

 

 

42

69

71

241

211

191

178

169

163

159

Other non-current assets

 

 

77

100

73

70

70

70

70

70

70

70

Total non-current assets

 

 

193

216

201

386

362

398

449

503

557

609

Cash and equivalents

 

 

5,719

2,947

4,821

3,911

1,875

1,855

2,801

3,812

5,824

8,970

Inventories

 

 

273

363

534

0

220

182

254

214

236

258

Trade and other receivables

 

 

487

490

412

549

286

1,011

1,258

1,399

1,540

1,687

Other current assets

 

 

205

237

272

427

427

427

427

427

427

427

Total current assets

 

 

6,685

4,037

6,038

4,887

2,808

3,476

4,741

5,852

8,027

11,343

Non-current loans and borrowings

 

 

450

0

0

0

0

0

0

0

0

0

Trade and other payables

 

 

0

0

0

0

0

0

0

0

0

0

Other non-current liabilities

 

 

1

1

1

2

2

2

2

2

2

2

Total non-current liabilities

 

 

451

1

1

2

2

2

2

2

2

2

Trade and other payables

 

 

322

604

726

121

479

530

603

760

729

718

Current loans and borrowings

 

 

0

0

0

0

0

0

0

0

0

0

Other current liabilities

 

 

620

407

610

751

751

751

751

751

751

751

Total current liabilities

 

 

942

1,011

1,336

872

1,231

1,281

1,355

1,512

1,480

1,470

Equity attributable to company

 

 

5,485

3,239

4,902

4,400

1,937

2,591

3,833

4,842

7,101

10,481

Non-controlling interest

 

 

0

0

0

0

0

0

0

0

0

0

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

 

(2,309)

(3,974)

(2,749)

(4,372)

(5,256)

1,090

1,814

1,564

3,061

4,403

Depreciation and Amortisation

 

 

26

30

35

38

97

93

98

106

117

130

Share based payments

 

 

137

121

148

0

0

0

0

0

0

0

Other adjustments

 

 

197

42

61

229

(20)

(19)

(28)

(57)

(96)

(177)

Movements in working capital

 

 

(13)

(35)

184

(242)

402

(637)

(246)

56

(193)

(181)

Interest paid / received

 

 

6

3

1

1

20

19

28

57

96

177

Income taxes paid

 

 

(4)

(4)

(4)

(4)

(4)

(437)

(571)

(555)

(801)

(1,024)

Cash from operations (CFO)

 

 

(1,960)

(3,817)

(2,325)

(4,351)

(4,761)

110

1,095

1,171

2,183

3,329

Capex

 

 

(28)

(57)

(40)

(217)

(72)

(129)

(149)

(160)

(171)

(183)

Acquisitions & disposals net

 

 

0

0

0

 

 

 

 

 

 

 

Other investing activities

 

 

(16)

(20)

14

0

0

0

0

0

0

0

Cash used in investing activities (CFIA)

 

 

(44)

(78)

(26)

(216)

(72)

(129)

(149)

(160)

(171)

(183)

Net proceeds from issue of shares

 

 

3,226

1,164

4,272

3,738

2,797

0

0

0

0

0

Movements in debt

 

 

450

0

0

0

0

0

0

0

0

0

Other financing activities

 

 

(18)

0

0

2

0

0

0

0

0

0

Cash from financing activities (CFF)

 

 

3,658

1,164

4,272

3,740

2,797

0

0

0

0

0

Currency translation differences and other

 

 

(196)

(42)

(47)

(83)

0

0

0

0

0

0

Increase/(decrease) in cash and equivalents

 

 

1,458

(2,772)

1,874

(911)

(2,036)

(20)

946

1,011

2,012

3,146

Opening net (debt)/cash

4,261

5,719

2,947

4,821

3,911

1,875

1,855

2,801

3,812

5,824

Cash and equivalents at end of period

 

 

5,719

2,947

4,821

3,911

1,875

1,855

2,801

3,812

5,824

8,970

Net (debt)/cash

 

 

5,269

2,947

4,821

3,911

1,875

1,855

2,801

3,812

5,824

8,970

Movement in net (debt)/cash over period

 

 

1,008

(2,322)

1,874

(911)

(2,036)

(20)

946

1,011

2,012

3,146

Source: SymBio Pharmaceuticals reports, Edison Investment Research

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This report has been commissioned by SymBio Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by SymBio Pharmaceuticals. 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.

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General disclaimer and copyright

This report has been commissioned by SymBio Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by SymBio Pharmaceuticals. 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 research department of Edison 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.

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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.

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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

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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