Metastatic breast cancer: Potential third application
The research study took metastatic biopsy samples from a variety of different locations: skin, pleural and pericardial effusion (fluid around the lungs and the heart), breast, cerebrospinal fluid and bone tissue. Cancers have the ability to spread to many different parts of the body, but typically spread to certain locations more than others. In addition, they can metastasise to many target organs or just a few. Breast cancer tends to spread to a number of organs; the most common ones are bone, brain, liver, lung, adrenal glands and pleura. 1,2 Therefore the consistent results when comparing Parsortix versus biopsy from different tissues in various locations adds robustness to the study.
Positioning in the clinic
More data is needed to better understand the positioning of Parsortix in the management of breast cancer patients. However, if the efficacy is replicated in future clinical studies, Parsortix could potentially replace tissue biopsy. Non-invasive, blood-based tests offer many advantages over tissue biopsy with the most important being patient comfort, ability to follow up during the treatment and cost. In addition, it is not always possible to access a metastatic lesion.
Historically initial treatment decisions were based on the biology of the primary tumour, when the patient is first diagnosed with the disease. However, growing evidence suggest that the cancerous tissue may change its biological properties as it spreads, meaning that initial treatment may no longer be optimal. Recently updated American Society of Clinical Oncology (ASCO) guidelines recommend a biopsy of a metastatic site to guide the decision for treatment.3
Typically tissue biopsy is used to obtain breast tumour biomarkers (oestrogen and progesterone receptors, HER2 oncogene) to decide on the most suitable therapy. While there a number of ways to assess the biomarkers, the USC researchers were able to demonstrate similarly significant correlation of expression of clinically actionable genes comparing CTCs to tissue biopsy samples. These genes code targets, for which a drug is already available or in late-stage development, therefore could be used in guiding the treatment for the patients.
Breast cancer is the most common cancer among women
We keep our valuation of Angle unchanged at $136m or $23.0/share. Although we can see a substantial opportunity for Parsortix in metastatic breast cancer, this application is still at an early stage, but yesterday’s news is a clear initial proof of concept, in our view. We believe that Angle will provide more details about the development strategy in this direction in the upcoming months. When more information becomes available, we will revisit our forecasts and valuation model. As a reminder, this is a third clinical application gaining momentum. The trial with Parsortix helping to triage women with ovarian masses before surgery is due to start in partnership with the Medical University of Vienna in H116 (our expectation). Recently, another KOL, Barts Cancer Institute (BCI), published initial evidence demonstrating that Parsortix potentially performs as well as or better than current standard of care in terms of detecting early-stage prostate cancer and assessing its severity.
In our valuation, we continue to include only the sales of the Parsortix system for use in research and clinical sales in ovarian mass triaging for operation. For comparison, we estimate c 600 thousand women underwent an operation due to adnexal masses globally. The metastatic breast cancer population is substantially larger with c 247 thousand new invasive breast cancer cases in the US alone each year, of which an estimated 20-30% can become metastatic (cancer.org, Metastatic Breast Cancer Network).
Key assumptions |
NPV ($m) |
Free cash flow model FY16-25e |
25.6 |
Tapering growth free cash flows FY26-35e |
52.0 |
Terminal value (2% growth rate assumed) |
50.1 |
Total NPV |
127.6 |
Net cash (Oct 31 2015) |
8.3 |
Valuation ($m) |
135.9 |
Valuation/share ($) |
23.0 |
Discount rate |
10% |
Tax rate |
20% |
Key assumptions |
Free cash flow model FY16-25e |
Tapering growth free cash flows FY26-35e |
Terminal value (2% growth rate assumed) |
Total NPV |
Net cash (Oct 31 2015) |
Valuation ($m) |
Valuation/share ($) |
Discount rate |
Tax rate |
NPV ($m) |
25.6 |
52.0 |
50.1 |
127.6 |
8.3 |
135.9 |
23.0 |
10% |
20% |
Source: Edison Investment Research
Exhibit 2: Financial summary
US$:GBP |
1.43 |
$000s |
2013 |
2014 |
2015 |
2016e |
2017e |
Year-end April |
|
|
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
|
|
|
|
|
|
|
Revenue |
|
|
1,386 |
0 |
0 |
487 |
3,126 |
Cost of Sales |
|
|
0 |
0 |
0 |
(146) |
(927) |
Gross Profit |
|
|
1,386 |
0 |
0 |
341 |
2,198 |
Research and development |
|
|
(429) |
(1,287) |
(2,288) |
(4,404) |
(3,515) |
EBITDA |
|
|
(964) |
(2,851) |
(4,936) |
(7,283) |
(4,375) |
Operating Profit (before amort. and except.) |
(991) |
(2,933) |
(5,095) |
(7,516) |
(4,653) |
Intangible Amortization |
|
|
(440) |
(142) |
(292) |
(512) |
(541) |
Share-based payments |
|
|
(102) |
(87) |
(159) |
(498) |
(686) |
Other |
|
|
0 |
0 |
0 |
0 |
0 |
Operating Profit |
|
|
(1,533) |
(3,162) |
(5,546) |
(8,526) |
(5,880) |
Net Interest |
|
|
59 |
19 |
13 |
47 |
21 |
Pre-tax Profit (norm) |
|
|
(932) |
(2,914) |
(5,082) |
(7,469) |
(4,632) |
Pre-tax Profit (FRS 3) |
|
|
(1,474) |
(3,143) |
(5,533) |
(8,479) |
(5,859) |
Tax |
|
|
0 |
0 |
0 |
286 |
286 |
Discontinued operations |
|
|
0 |
1,373 |
(25) |
0 |
0 |
Net Income (norm) |
|
|
(932) |
(1,542) |
(5,108) |
(7,183) |
(4,346) |
Net Income (FRS 3) |
|
|
(1,474) |
(1,770) |
(5,558) |
(8,193) |
(5,573) |
|
|
|
0 |
0 |
0 |
0 |
0 |
Average Number of Shares Outstanding (m) |
|
41 |
45 |
48 |
59 |
59 |
Average Number of ADRs Outstanding (m) |
|
4 |
5 |
5 |
6 |
6 |
EPS - normalized ($) |
|
|
(0.02) |
(0.03) |
(0.11) |
(0.12) |
(0.07) |
EPS - normalized and fully diluted ($) |
|
(0.02) |
(0.03) |
(0.11) |
(0.12) |
(0.07) |
EPS - (IFRS) ($) |
|
|
(0.04) |
(0.04) |
(0.12) |
(0.14) |
(0.09) |
Earnings per ADS - normalized ($) |
|
|
(0.23) |
(0.34) |
(1.07) |
(1.22) |
(0.73) |
Earnings per ADS - normalized and fully diluted ($) |
(0.23) |
(0.34) |
(1.07) |
(1.22) |
(0.73) |
Earnings per ADS - (IFRS) ($) |
|
|
(0.36) |
(0.39) |
(1.17) |
(1.39) |
(0.94) |
Dividend per ADS ($) |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
N/A |
N/A |
N/A |
70.0 |
70.3 |
EBITDA Margin (%) |
|
|
N/A |
N/A |
N/A |
N/A |
N/A |
Operating Margin (before GW and except.) (%) |
|
N/A |
N/A |
N/A |
N/A |
N/A |
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
Fixed Assets |
|
|
5,118 |
2,692 |
2,248 |
1,816 |
1,343 |
Intangible Assets |
|
|
1,544 |
1,633 |
1,643 |
1,285 |
872 |
Tangible Assets |
|
|
198 |
199 |
605 |
531 |
472 |
Investments |
|
|
3,376 |
859 |
0 |
0 |
0 |
Current Assets |
|
|
5,451 |
6,118 |
13,797 |
6,541 |
2,582 |
Stocks |
|
|
89 |
74 |
282 |
280 |
357 |
Debtors |
|
|
649 |
469 |
1,441 |
695 |
856 |
Cash |
|
|
2,614 |
5,574 |
12,073 |
5,566 |
1,369 |
Other |
|
|
2,099 |
0 |
0 |
0 |
0 |
Current Liabilities |
|
|
(864) |
(922) |
(1,617) |
(1,335) |
(1,790) |
Creditors |
|
|
(864) |
(922) |
(1,617) |
(1,335) |
(1,790) |
Short term borrowings |
|
|
0 |
0 |
0 |
0 |
0 |
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Long term borrowings |
|
|
0 |
0 |
0 |
0 |
0 |
Other long term liabilities |
|
|
0 |
0 |
0 |
0 |
0 |
Net Assets |
|
|
9,705 |
7,887 |
14,427 |
7,022 |
2,136 |
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
(1,931) |
(2,716) |
(4,881) |
(6,482) |
(4,158) |
Net Interest |
|
|
157 |
(6) |
7 |
47 |
21 |
Tax |
|
|
0 |
0 |
0 |
215 |
286 |
Capex |
|
|
(199) |
(119) |
(465) |
(160) |
(219) |
Acquisitions/disposals |
|
|
220 |
6,186 |
180 |
0 |
0 |
Financing |
|
|
2,953 |
(386) |
11,657 |
0 |
0 |
Dividends |
|
|
0 |
0 |
0 |
0 |
0 |
Net Cash Flow |
|
|
1,200 |
2,960 |
6,499 |
(6,381) |
(4,070) |
Opening net debt/(cash) |
|
|
(1,414) |
(2,614) |
(5,574) |
(12,073) |
(5,566) |
HP finance leases initiated |
|
|
0 |
0 |
0 |
0 |
0 |
Other |
|
|
0 |
0 |
0 |
(127) |
(127) |
Closing net debt/(cash) |
|
|
(2,614) |
(5,574) |
(12,073) |
(5,566) |
(1,369) |
Source: Company accounts, Edison Investment Research. Note: Historic reported revenues relate to the legacy business which has now been divested. FY14 has been restated to exclude discontinued operations.
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