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Research: Healthcare
Quantum Genomics recently announced a regional licensing agreement for firibastat for the treatment of hypertension in Latin America with Biolab Sanus Pharmaceutical, one of the largest Brazilian pharmaceutical companies, for $21.2m in upfront and milestones as well as royalties. In addition, the company announced the initiation of the pivotal Phase III FRESH study in 500 difficult-to-treat and resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes. Data are expected in H221.
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Quantum Genomics |
A deal and a Phase III initiation |
Development update |
Pharma & biotech |
6 January 2020 |
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Quantum Genomics is a research client of Edison Investment Research Limited |
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Quantum Genomics recently announced a regional licensing agreement for firibastat for the treatment of hypertension in Latin America with Biolab Sanus Pharmaceutical, one of the largest Brazilian pharmaceutical companies, for $21.2m in upfront and milestones as well as royalties. In addition, the company announced the initiation of the pivotal Phase III FRESH study in 500 difficult-to-treat and resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes. Data are expected in H221.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.0 |
(10.3) |
(0.93) |
0.0 |
N/A |
N/A |
12/18 |
0.0 |
(13.6) |
(0.94) |
0.0 |
N/A |
N/A |
12/19e |
0.0 |
(17.0) |
(0.87) |
0.0 |
N/A |
N/A |
12/20e |
0.0 |
(22.6) |
(1.11) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Licensing agreement with Biolab Sanus
The company announced that it has licensed firibastat for the treatment of hypertension (but not for the heart failure indication, which can be licensed separately) to Biolab Sanus covering the Latin American region. As part of the agreement, Biolab Sanus is obligated to pay $21.2m in upfront and milestone payments as well as royalties. Additionally, Biolab Sanus will be responsible for clinical trial costs in Latin America, which is expected to account for around 20% of the patients enrolled in the trial.
Phase III FRESH study initiated
The pivotal FRESH study is a three-month, 500-patient study comparing firibastat to placebo in difficult-to-treat or resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes (firibastat and placebo will be added on top of the current treatment), yet still have systolic automated office blood pressure (AOBP) above 140mmHg. The primary endpoint will be a change from baseline in systolic AOBP. Data are expected in H221.
Phase IIb QUORUM study enrolment ongoing
The Phase IIb QUORUM study is enrolling 294 subjects from 40 centres in the US and Europe within 72 hours of suffering acute myocardial infarction (AMI), commonly referred to as a heart attack. The primary endpoint will be the change from baseline in the left ventricular ejection fraction (LVEF) after a three-month treatment. Results are expected in H220.
Valuation: €909m or €51.80 per share
Our valuation is €909m or €51.80 per share compared to €909m or €53.01 per share previously. We have not adjusted our model following the Biolab Sanus collaboration as the breakout of upfront versus milestone payments was not disclosed. Our per-share value fell slightly due to a higher number of shares.
A strong finish to the year
Quantum Genomics announced that it has licensed firibastat for the treatment of hypertension (but not for the heart failure indication, which can be licensed separately) to Biolab Sanus covering the Latin American region. Biolab Sanus is one of the largest pharmaceutical companies in Brazil, with over 140 products and 3,200 employees and 2019 revenues expected to be around $600m, according to the licensing agreement press release. Importantly, it is also a leader in cardiology and hypertension in Brazil, with more than a 15% market share in that category.
As part of the agreement, Biolab Sanus is obligated to pay $21.2m in upfront and milestone payments as well as royalties (though the precise rate is undisclosed). Additionally, Biolab Sanus will be responsible for clinical trial costs in Latin America, which are expected to account for around 20% of the patients enrolled in the Phase III FRESH trial.
Quantum Genomics also announced the initiation of its Phase III programme for firibastat for the treatment of difficult-to-treat or resistant hypertension patients. The FRESH study will be a three-month, 500-patient study comparing firibastat (at a dose of 500mg twice a day) to placebo in difficult-to-treat or resistant hypertension patients who are already on treatments from two or three anti-hypertensive classes (firibastat and placebo will be added on top of the current treatment), yet still have systolic AOBP above 140mmHg. The trial is expected to be conducted in approximately 70 hospitals across Europe (especially France, Germany, Poland, Spain and the Czech Republic), Canada, the US and Latin America (primarily Brazil and Mexico). The primary endpoint will be a change from baseline in systolic AOBP. Data are expected in H221.
Based on feedback from the FDA, two studies will be required for approval, one focused on efficacy (FRESH) and one focused on safety. The safety study will enrol 750 patients, with 650 staying on the drug for six months and 100 staying on it for a year. Precise timing for the initiation of the safety study has not been announced.
In terms of the heart failure programme, Quantum Genomics is continuing to enrol patients in the QUORUM study, which is assessing the safety and efficacy of Quantum’s drug firibastat compared to ramipril, an angiotensin-converting enzyme inhibitor, in 294 subjects enrolled within 72 hours of suffering AMI, who were treated with primary percutaneous coronary intervention and have reduced LVEF. There are three arms in this randomised, double-blind, active-controlled study with patients receiving either 100mg of firibastat twice a day, 500mg of firibastat twice a day or 5mg of ramipril twice a day. The primary endpoint is the change from baseline in LVEF after a three-month treatment. Secondary endpoints will include cardiac events, functional status and change in heart failure biomarkers. The subjects will be recruited from 40 centres in the US and Europe and trial results are expected in H220. We expect potential partnership discussions for firibastat in heart failure to intensify once the QUORUM study results are out. We do not believe that licensing agreements for hypertension will necessarily preclude separate agreements for heart failure, as the product may have different formulations and dosages in the two indications.
Valuation
Our valuation is €909m or €51.80 per share compared to €909m or €53.01 per share previously. We have not adjusted our model following the Biolab Sanus collaboration as the breakout of upfront versus milestone payments was not disclosed. Our per-share value fell slightly due to a higher number of shares.
Exhibit 1: Quantum Genomics valuation
Product |
Main indication |
Local |
Status |
Prob. of success |
Launch year |
Peak sales ($m) |
Patent protection |
rNPV |
||||||
Firibastat (QGC001) |
Hypertension |
US |
Phase IlI |
50% |
2023 |
1,110 |
2031 |
468.17 |
||||||
Firibastat (QGC001) |
Hypertension |
Europe |
Phase IlI |
50% |
2023 |
959 |
2031 |
397.21 |
||||||
Firibastat (QGC001) |
Development costs |
|
|
|
|
(148.70) |
||||||||
Firibastat (QGC001) |
Heart failure |
US |
Phase IIb |
20% |
2023 |
574 |
2031 |
119.54 |
||||||
Firibastat (QGC001) |
Heart failure |
Europe |
Phase IIb |
20% |
2023 |
687 |
2031 |
141.84 |
||||||
Firibastat (QGC001) |
Development costs |
(80.82) |
||||||||||||
Total |
|
|
|
|
|
|
|
897.25 |
||||||
Net cash (30 June 2019) (€m) |
11.57 |
|||||||||||||
Total firm value (€m) |
908.82 |
|||||||||||||
Total shares (30 November 2019) (m) |
17.54 |
|||||||||||||
Value per basic share (€m) |
51.80 |
|||||||||||||
Source: Edison Investment Research
Financials
Quantum had €11.6m in cash and investments at the end of H119. In March 2018, it announced an equity line of credit with Kepler Cheuvreux and has approximately €5.8m of the original €24m line remaining after drawing down an additional €3.4m during the first half of the year. The company stated in October that it believes its available cash and equity line will be enough to fund the company for the next 12 months. We model (as illustrative long-term debt) that the company will have used the remainder of the available credit line in 2019 and will raise an additional €17.5m in 2020 (which we have not reduced following the Biolab Sanus partnership as the upfront payment was not disclosed).
Exhibit 2: Financial summary
€000s |
2017 |
2018 |
2019e |
2020e |
||
Year end 31 December |
PCG |
PCG |
PCG |
PCG |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
||
EBITDA |
|
|
(10,292) |
(13,598) |
(16,507) |
(20,704) |
Operating Profit (before amort. and except.) |
|
|
(10,292) |
(13,598) |
(16,507) |
(20,704) |
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
6 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Operating Profit |
(10,292) |
(13,598) |
(16,507) |
(20,704) |
||
Net Interest |
0 |
0 |
(468) |
(1,868) |
||
Other |
(239) |
150 |
310 |
0 |
||
Profit Before Tax (norm) |
|
|
(10,292) |
(13,598) |
(16,976) |
(22,572) |
Profit Before Tax (FRS 3) |
|
|
(10,531) |
(13,448) |
(16,666) |
(22,572) |
Tax |
1,150 |
1,458 |
2,167 |
2,934 |
||
Deferred tax |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(9,142) |
(12,140) |
(14,809) |
(19,638) |
||
Profit After Tax (FRS 3) |
(9,381) |
(11,990) |
(14,499) |
(19,638) |
||
Average Number of Shares Outstanding (m) |
9.9 |
12.8 |
17.0 |
17.7 |
||
EPS - normalised (€) |
|
|
(0.93) |
(0.94) |
(0.87) |
(1.11) |
EPS - FRS 3 (€) |
|
|
(0.95) |
(0.94) |
(0.85) |
(1.11) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
439 |
626 |
940 |
961 |
Intangible Assets |
91 |
0 |
260 |
260 |
||
Tangible Assets |
52 |
24 |
34 |
55 |
||
Other |
296 |
602 |
646 |
646 |
||
Current Assets |
|
|
13,478 |
17,855 |
11,070 |
8,912 |
Stocks |
189 |
422 |
422 |
422 |
||
Debtors |
2,197 |
2,636 |
3,461 |
3,461 |
||
Cash |
11,089 |
14,797 |
7,055 |
4,897 |
||
Other |
3 |
0 |
132 |
132 |
||
Current Liabilities |
|
|
(4,572) |
(5,764) |
(4,577) |
(4,577) |
Creditors |
(4,571) |
(5,762) |
(4,576) |
(4,576) |
||
Short term borrowings |
(1) |
(2) |
(1) |
(1) |
||
Long Term Liabilities |
|
|
(474) |
(849) |
(6,705) |
(24,205) |
Long term borrowings |
(19) |
(12) |
(5,853) |
(23,353) |
||
Other long term liabilities |
(454) |
(837) |
(852) |
(852) |
||
Net Assets |
|
|
8,871 |
11,868 |
729 |
(18,909) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(7,977) |
(10,901) |
(16,774) |
(19,630) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
32 |
(16) |
(29) |
(29) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
7,733 |
15,071 |
3,360 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
104 |
(446) |
(99) |
0 |
||
Net Cash Flow |
(108) |
3,708 |
(13,542) |
(19,659) |
||
Opening net debt/(cash) |
|
|
(11,179) |
(11,069) |
(14,783) |
(1,201) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
||
Other |
(2) |
6 |
(40) |
0 |
||
Closing net debt/(cash) |
|
|
(11,069) |
(14,783) |
(1,201) |
18,457 |
Source: Quantum Genomics accounts, Edison Investment Research
|
|
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