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Research: Healthcare
Quantum Genomics recently announced it has signed a licensing and collaboration agreement with Orient Europharma (OEP) to develop and commercialise firibastat for hypertension in South East Asia, Australia and New Zealand. As part of the agreement, Quantum Genomics will receive US$19m in upfront and milestone payments as well as double-digit royalties. Additionally, OEP will fund part of the Phase III FRESH study in difficult to treat/resistant hypertension patients in Taiwan.
Written by
Maxim Jacobs
Quantum Genomics |
An additional firibastat partnership |
Financial update |
Pharma & biotech |
5 October 2020 |
Share price performance
Business description
Next events
Analysts
Quantum Genomics is a research client of Edison Investment Research Limited |
Quantum Genomics recently announced it has signed a licensing and collaboration agreement with Orient Europharma (OEP) to develop and commercialise firibastat for hypertension in South East Asia, Australia and New Zealand. As part of the agreement, Quantum Genomics will receive US$19m in upfront and milestone payments as well as double-digit royalties. Additionally, OEP will fund part of the Phase III FRESH study in difficult to treat/resistant hypertension patients in Taiwan.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
0.0 |
(13.6) |
(0.94) |
0.0 |
N/A |
N/A |
12/19 |
0.0 |
(10.8) |
(0.53) |
0.0 |
N/A |
N/A |
12/20e |
0.0 |
(15.6) |
(0.64) |
0.0 |
N/A |
N/A |
12/21e |
0.0 |
(21.6) |
(0.85) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
An established pharma chosen as partner
Quantum Genomics’ new partner for South East Asia, Australia and New Zealand, OEP, was founded in 1982 and publicly listed on the Taiwan exchange in 2003. OEP has over 1,000 worldwide employees and had revenues of NT$6.1bn (over US$200m) in 2019.
Phase III FRESH study on track
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 continue to be expected in H221, although are likely closer to the end of that period.
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. The company expects to complete enrolment by the end of the year, a slight delay mainly due to COVID-19. Based on this we now expect results in H121 (previously H220).
Valuation: €1,028m or €47.63 per share
We have adjusted our valuation to €1,028m or €47.63 per share from €963m or €51.74 per share. The total value increased due to rolling forward our NPVs, while the per-share value falls due to a higher number of shares.
H120 update and a new partnership
Quantum Genomics recently announced it has signed a licensing and collaboration agreement with OEP to develop and commercialise firibastat for difficult to treat/resistant hypertension in South East Asia (specifically, Taiwan, Malaysia, the Philippines, Singapore, Vietnam, Indonesia, Myanmar and Cambodia), Australia and New Zealand. As part of the agreement, Quantum Genomics will receive US$19m in upfront and milestone payments (the precise split was not disclosed) as well as double digit royalties. Additionally, OEP will fund part of the Phase III FRESH study in difficult to treat/resistant hypertension patients in Taiwan. OEP seems to be a good choice of partner for Quantum Genomics as it is an established company with decades of experience. Additionally, OEP has over 1,000 employees worldwide (40% of which are outside of Taiwan) and had revenues of NT$6.1bn (over US$200m) in 2019.
Previously, in December 2019, Quantum Genomics had announced it has licensed firibastat for the treatment of hypertension 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 were around US$600m, according to the licensing agreement press release. As part of the agreement, Biolab Sanus is obligated to pay US$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 are expected to account for around 20% of the patients enrolled in the Phase III FRESH trial.
Clinical trial updates
Quantum Genomics launched its Phase III programme for firibastat for the treatment of difficult-to-treat or resistant hypertension patients, enrolling the first patient in July. The FRESH study is 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, once all sites are online, is expected to be conducted in approximately 70 hospitals in total across Europe (especially France, Germany, Poland, Spain and the Czech Republic), Canada, the United States and Latin America (primarily Brazil and Mexico). The primary endpoint will be a change from baseline in systolic AOBP. Data continue to be expected in H221, although are likely closer to the end of that period.
In terms of the heart failure programme, Quantum Genomics is continuing to enrol 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 the company expects to complete enrolment by the end of the year, a slight delay mainly due to COVID-19. Based on this we now expect results in H121 (previously H220).
Valuation
We have adjusted our valuation to €1,028m or €47.63 per share from €963m or €51.74 per share. The total value increased due to rolling forward our NPVs, while the per-share value falls due to a higher number of shares (shares increased from 18.6m to 21.6m since our last update).
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 III |
50% |
2023 |
$1,110 |
2031 |
€ 526.69 |
Firibastat (QGC001) |
Hypertension |
Europe |
Phase III |
50% |
2023 |
$959 |
2031 |
€ 446.86 |
Firibastat (QGC001) |
Development costs |
|
|
|
|
-€ 164.06 |
||
Firibastat (QGC001) |
Heart failure |
US |
Phase IIb |
20% |
2023 |
$574 |
2031 |
€ 134.49 |
Firibastat (QGC001) |
Heart failure |
Europe |
Phase IIb |
20% |
2023 |
$687 |
2031 |
€ 159.57 |
Firibastat (QGC001) |
Development costs |
-€ 88.61 |
||||||
Total |
|
|
|
|
|
|
|
€ 1,014.94 |
Pro-forma Net Cash (30 June 2020 + financing) (€m) |
€ 13.43 |
|||||||
Total firm value (€m) |
€ 1,028 |
|||||||
Total shares (29 September 2020) (m) |
21.59 |
|||||||
Value per basic share (€m) |
€ 47.63 |
Source: Edison Investment Research
Financials
The company reported an operational loss of €6.0m in H120 compared to €5.3m in H119. Due to a lower than expected run rate, we have reduced our estimated FY20 operating loss to €15.6m from €20.7m. We continue to expect an acceleration in spending due to the FRESH study and estimate an operating loss of €21.6m in FY21.
Quantum had €13.2m in cash and investments and €2.4m in debt at the end of H120. The company raised €1.7m through an equity line of credit with Kepler Cheuvreux in March and €6m through its Negma Group financing arrangement in the first half. It raised an additional €2m from Negma after the end of H120, bringing the total raised from that financial group to €8m. The Negma financings are loans that are repaid with warrants that are then exercised by Negma. At the end of September, only €1.7m of the €8.0m had yet to be repaid. Additionally, Quantum Genomics has decided not to renew the agreement with Negma so while it could have potentially raised up to €24m from the group, the total amount actually raised from the facility will not exceed €8m. While facilities such as Negma’s do help fund the company, the shares made as payment are almost immediately sold on the market as they are not long-term investors. The company has stated it has cash to Q321. We forecast €28m in additional financing to the end of 2021 (previously €36m), which we model as illustrative debt. The need for additional funding past this point will depend on the FRESH data and the company’s ability to sign other regional partnerships in difficult to treat and resistant hypertension.
Exhibit 2: Financial summary
€000s |
2018 |
2019 |
2020e |
2021e |
||
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 |
|
|
(13,598) |
(10,760) |
(15,617) |
(21,572) |
Operating Profit (before amort. and except.) |
|
|
(13,598) |
(10,760) |
(15,617) |
(21,572) |
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Other |
0 |
(0) |
15 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Operating Profit |
(13,598) |
(10,760) |
(15,617) |
(21,572) |
||
Net Interest |
0 |
0 |
0 |
0 |
||
Other |
150 |
134 |
17 |
0 |
||
Profit Before Tax (norm) |
|
|
(13,598) |
(10,760) |
(15,617) |
(21,572) |
Profit Before Tax (FRS 3) |
|
|
(13,448) |
(10,626) |
(15,601) |
(21,572) |
Tax |
1,458 |
1,547 |
2,028 |
2,804 |
||
Deferred tax |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(12,140) |
(9,213) |
(13,589) |
(18,768) |
||
Profit After Tax (FRS 3) |
(11,990) |
(9,078) |
(13,572) |
(18,768) |
||
Average Number of Shares Outstanding (m) |
12.8 |
17.5 |
21.2 |
22.1 |
||
EPS - normalised (€) |
|
|
(0.94) |
(0.53) |
(0.64) |
(0.85) |
EPS - FRS 3 (€) |
|
|
(0.94) |
(0.52) |
(0.64) |
(0.85) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
626 |
884 |
968 |
960 |
Intangible Assets |
0 |
360 |
360 |
360 |
||
Tangible Assets |
24 |
27 |
107 |
99 |
||
Other |
602 |
497 |
501 |
501 |
||
Current Assets |
|
|
17,855 |
14,222 |
18,922 |
20,162 |
Stocks |
422 |
333 |
1,070 |
1,070 |
||
Debtors |
2,636 |
2,486 |
3,163 |
3,163 |
||
Cash |
14,797 |
11,164 |
14,456 |
15,696 |
||
Other |
0 |
239 |
232 |
232 |
||
Current Liabilities |
|
|
(5,764) |
(4,061) |
(6,757) |
(5,057) |
Creditors |
(5,762) |
(4,060) |
(5,057) |
(5,057) |
||
Short term borrowings |
(2) |
(1) |
(1,700) |
0 |
||
Long Term Liabilities |
|
|
(849) |
(874) |
(8,755) |
(28,755) |
Long term borrowings |
(12) |
(6) |
(8,061) |
(28,061) |
||
Other long term liabilities |
(837) |
(869) |
(695) |
(695) |
||
Net Assets |
|
|
11,868 |
10,171 |
4,378 |
(12,690) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(10,901) |
(10,665) |
(14,324) |
(18,742) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(16) |
(118) |
(18) |
(18) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
15,071 |
7,382 |
5,293 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(446) |
(232) |
(9) |
0 |
||
Net Cash Flow |
3,708 |
(3,633) |
(9,058) |
(18,760) |
||
Opening net debt/(cash) |
|
|
(11,069) |
(14,783) |
(11,157) |
(4,696) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
||
Other |
6 |
7 |
2596 |
1700 |
||
Closing net debt/(cash) |
|
|
(14,783) |
(11,157) |
(4,696) |
12,364 |
Source: Quantum Genomics, Edison Investment Research
|
|
Research: Healthcare
On the back of a crystal-clear R&D strategy, to conduct a proof-of-concept study and then seek a partnership deal, RhoVac completed a successful fundraise in June 2019 and started enrolling patients in the Phase IIb BRaVac study in November 2019. Due to the COVID-19 pandemic full enrolment is now expected by end-2020 vs the original target of Q320. In our view the delay is modest and easily covered by the existing budget. Clinical trial centres are up and running, including in the US, and treatment results are still expected by the end of 2021. So overall, this shows good execution in what has been a challenging period for the whole industry. Our updated valuation is SEK1.18bn or SEK61.8/share.
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