BerGenBio — Checking its course

BerGenBio (NO: BGBIO)

Last close As at 20/04/2024

6.12

−0.38 (−5.95%)

Market capitalisation

NOK532m

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Research: Healthcare

BerGenBio — Checking its course

With a new CEO at the helm, BGBIO has completed an internal review and outlined its strategic priorities for bemcentinib. Building on impressive Phase II BGBC003 data presented at both EHA and ASH in 2021, a randomised, placebo-controlled trial for second-line AML is due to start H222. We assume the trial will be registrational, but note this is subject to outcomes from its discussions with regulators. In NSCLC, data from the ongoing Phase II BGBC008 trial are expected during H122 and should provide a better picture of bemcentinib’s potential positioning in the second-line treatment setting. Additionally, the company will now also pursue a first-line NSCLC opportunity, focusing on patients with STK11 mutations, and will initiate a Phase Ib in H122. The COVID-19 opportunity remains and in H122 BGBIO will use the EU-SolidAct platform trial to confirm the initial efficacy signals. We value BGBIO at NOK55.7/share.

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Written by

Healthcare

BerGenBio

Checking its course

R&D update

Pharma & biotech

31 January 2022

Price

NOK22.9

Market cap

NOK2,011m

NOK8.50/US$

Net cash (NOKm) at 30 September 2021

508.4

Shares in issue

88.5m

Free float

60%

Code

BGBIO

Primary exchange

Oslo

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.0)

(4.3)

(45.8)

Rel (local)

(8.0)

(2.7)

(53.8)

52-week high/low

NOK35.4

NOK16.7

Business description

BerGenBio (BGBIO) is a clinical-stage biopharmaceutical company developing innovative drugs for aggressive diseases, including immune-evasive, drug-resistant and metastatic cancers. It focuses on AXL inhibitors bemcentinib (small molecule) and tilvestamab (mAb).

Next events

Phase II (BGBC008) data in 2L NSCLC (bemcentinib + pembro) and initiation of a Phase Ib trial for 1L STK11m NSCLC

H122

Initiation of a potentially registrational trial in 2L AML (bemcentinib + LDAC)

H222

Analysts

Dr Sean Conroy

+44 (0)20 3077 5700

Dr Jonas Peciulis

+44 (0)20 3077 5700

BerGenBio is a research client of Edison Investment Research Limited

With a new CEO at the helm, BGBIO has completed an internal review and outlined its strategic priorities for bemcentinib. Building on impressive Phase II BGBC003 data presented at both EHA and ASH in 2021, a randomised, placebo-controlled trial for second-line AML is due to start H222. We assume the trial will be registrational, but note this is subject to outcomes from its discussions with regulators. In NSCLC, data from the ongoing Phase II BGBC008 trial are expected during H122 and should provide a better picture of bemcentinib’s potential positioning in the second-line treatment setting. Additionally, the company will now also pursue a first-line NSCLC opportunity, focusing on patients with STK11 mutations, and will initiate a Phase Ib in H122. The COVID-19 opportunity remains and in H122 BGBIO will use the EU-SolidAct platform trial to confirm the initial efficacy signals. We value BGBIO at NOK55.7/share.

Year end

Revenue (NOKm)

PBT
(NOKm)

EPS*
(NOK)

DPS
(NOK)

P/E
(x)

Yield
(%)

12/19

8.9

(199.3)

(3.43)

0.0

N/A

N/A

12/20

0.6

(257.0)

(3.43)

0.0

N/A

N/A

12/21e

0.0

(322.1)

(3.67)

0.0

N/A

N/A

12/22e

0.0

(335.1)

(3.81)

0.0

N/A

N/A

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

AML data continue to impress

Data presented from the ongoing Phase II BGBC003 trial have been impressive. These have shown a median overall survival of 13.3 months for bemcentinib in combination with LDAC in elderly relapsed AML patients (Cohort B2/B5), more than doubling historical survival data. The regimen is well tolerated, and responses have been durable. BGBIO expects to go to regulators in early-2022 to discuss the design of a confirmatory trial, which it plans to start during H222. We believe this could be a registrational study and maintain our forecast launch in 2024.

STK11 a unique first-line opportunity

BGBIO will now additionally pursue a first-line opportunity in NSCLC, focusing on patients harbouring STK11 mutations. These are oncogenic, molecular drivers implicated as a potential cause of the poor responses occasionally observed to PD-(L)1 inhibitors. Initial data presented at SITC imply AXL is an important contributor of the immune suppression in STK11m NSCLC and bemcentinib could potentially restore therapeutic responses to PD-(L)1 inhibitors. Additional rights to pursue this opportunity have been secured and a Phase Ib trial will start in H122. Notably, the FDA has granted Fast Track designation to bemcentinib for use in this setting, providing strong external validation of the approach. BGBIO believes STK11m could occur in up to 20% of patients, so a potentially substantial opportunity.

Valuation: NOK4.93bn or NOK55.7/share

We value BGBIO at NOK4.93bn or NOK55.7/share, versus NOK4.91bn or NOK55.8/share previously. We have rolled forward our model, updated for shares in issue and net cash of NOK508.4m at 30 September 2021. We have pushed back our forecast launch in COVID-19 to 2023 (from 2022) given communicated timings but highlight this remains only a minor component of our valuation (NOK4.4/share).

Bemcentinib poised to progress on several fronts

BGBIO’s strategy is primarily focused on developing bemcentinib in oncology indications, with the aim of establishing efficacy in proof-of-concept studies for rapid regulatory approval and concurrently developing line extensions to eventually move higher up the treatment paradigms. We believe that commercial prospects for the AXL inhibitor class could be propelled from defined subsets in a handful of cancer types to broader use in AXL-positive tumours (diagnosed by companion drug testing or biomarkers), and potentially in an earlier line of therapy in combination with chemotherapy, immunotherapy or targeted therapies (due to its treatment-enhancing effects).

Survival data support progression for second-line AML

The ongoing BGBC003 study includes five cohorts in the Phase II expansion. The cohorts to focus on in the near term are Cohort B2: bemcentinib combination with low-dose cytarabine (LDAC) in newly diagnosed or relapsed acute myeloid leukaemia (AML); and Cohort B5: further expansion of the Cohort B2 LDAC combination in relapsed AML. The initial survival data coming out of these cohorts are impressive and will shape the subsequent Phase IIb/III clinical trial design and registration strategy. The FDA has granted bemcentinib both Fast Track and Orphan Drug designations in AML.

Data presented at both the European Hematology Association (EHA) and the American Society of Hematology (ASH) in 2021 from the ongoing Phase II BGBC003 trial have been impressive, in our view. These are immature, but suggest a median overall survival of 13.3 months for bemcentinib in combination with LDAC in elderly relapsed AML patients (Cohort B2/B5, n=18), which is more than double the survival benefit of historical data in this population (c 4.7 months), albeit we should caution the usual caveats apply when comparing data across trials. Complete responses (CR/CRi) have been achieved in 22% of patients, with a clinical benefit rate (CBR) of 72% and these have been durable (mDOR of 32.7 weeks). The regimen is generally well tolerated with anaemia (19%) and QTc prolongation (11%) the most common grade 3/4 treatment-related adverse events (TRAEs) observed, an important feature considering this is a frail patient population. Based on these data, BGBIO is now planning to conduct a randomised, placebo-controlled trial with this combination, which it expects to start H222. Feedback from regulators is expected in early 2022 and will help shape trial design, which we expect could potentially be registrational and enable launch in 2024.

Exhibit 1: Interim Phase II BGBC003 survival data

Source: BerGenBio. Note: Data presented are immature and based on 18 evaluable relapsed AML patients (Cohorts B2/B5).


STK11 presents a unique opportunity for first-line NSCLC

BGBIO will now additionally pursue a first-line opportunity in non-small cell lung cancer (NSCLC), focusing on patients harbouring STK11 mutations. Loss of function mutations occurring to STK11 (also known as LKB1) are oncogenic and have been associated with ‘cold’ tumour environment and inferior responses to immune checkpoint inhibitors (ICIs). Notably, this has been observed for several approved anti PD-(L)1 inhibitors in NSCLC; data that collectively looks compelling, in our view:

Pembrolizumab (Keytruda): based on registry data from NSCLC patients with STK11m (mutant, n=102) versus STK11wt (wild-type, n=275) treated with a standard of care first-line regimen of pembrolizumab plus platinum doublet chemo, significantly worse outcomes were observed for STK11m patients, including: median progression-free survival (mPFS) (4.8m vs 7.2m, HR 1.50, p=0.0063), median overall survival (mOS) (10.6m vs 16.7m, HR 1.58, p=0.0083) and objective response rate (ORR) (32.6% vs 44.7%, p=0.049).

Durvalumab (Imfinzi): based on an analysis of data from several clinical trials, treatment outcomes were worse for patients on monotherapy durvalumab, who harboured STK11m (n = 17) vs STK11wt (n=164), including: mOS (3.3m vs 13.6m, HR 2.83) and ORR (5.9% vs 19.2%). Likewise, a combination regimen of durvalumab plus tremelimumab (anti-CTLA-4) again resulted in worse outcomes for STK11m (n=26) vs STK11wt (n=95) on both mOS (7.5m vs 15.4m, HR 2.39) and ORR (3.8% vs 20.0%).

BGBIO has presented some initial data at the Society for Immunotherapy of Cancer (SITC), which imply that AXL could be an important contributor in STK11m NSCLC, and bemcentinib could potentially restore or enable therapeutic responses to PD-(L)1 inhibitors. These included preclinical data that indicate bemcentinib enables expansion of tumour-associated T cells (TCF1+ CD8+) and restored sensitivity to pembrolizumab in a mouse model for STK11m NSCLC. This was further supported by some preliminary, anecdotal data from the ongoing Phase II BGB008 trial, which highlighted clinical responses have been observed in all three patients identified with STK11m NSCLC who have received a regimen of bemcentinib plus pembrolizumab.

Additional rights to pursue this opportunity have now been secured from UT Southwestern Medical Center (deal terms undisclosed) and a Phase Ib trial is expected to start during H122. Notably, the FDA has now also granted Fast Track designation to bemcentinib in combination with an anti-PD-(L)1 for patients with STK11 altered NSCLC without other actionable mutations, providing strong external validation of this approach. BGBIO believes STK11m could occur in up to 20% of patients, making it a potentially substantial opportunity.

Significant opportunity remains in second-line NSCLC

NSCLC represents a significant opportunity from either a first-line or second-line perspective. Bemcentinib is still being evaluated for second-line use in the broad Phase II BGBC008 trial with several cohorts, including monotherapy and combinations with Keytruda. PD-(L)1s such as Keytruda are increasingly used as a first-line standard of care for NSCLC patients not harbouring a specific driver mutation (c 75% of patients). This has left a vacuum in the second-line setting, with limited treatment options (chemotherapy agents such as docetaxel or Taxol that achieve ORR <10% for a limited duration) creating a high unmet medical need and a large market potential.

Data from the ongoing BGBC008 trial are expected during H122 and should provide a better picture of bemcentinib’s potential positioning in second-line and its utility when combined with Keytruda. Until additional data emerge or additional trials in first-line start, we maintain our forecast $1.2bn worldwide peak sales for in NSCLC, which is only based on second-line use.

COVID-19 opportunity remains despite vaccination roll-out

BGBIO has presented encouraging combined data from two Phase II studies of bemcentinib in addition to standard of care in hospitalised COVID-19 patients at ECCMID. Post hoc analysis in a subgroup of patients with a higher disease severity (>60% of evaluable patients) showed a significantly reduced likelihood (69%) of progression to ventilation and significantly increased likelihood (88%) of shorter time to recovery or discharge. Treatment with bemcentinib also led to numerically fewer deaths and preclinical studies highlight potential continued efficacy against COVID-19 variants. As a next step, BGBIO has now announced it will use an EU-sponsored platform trial (EU-SolidAct) to confirm these initial efficacy signals, which we believe should enable better access to trial sites and patient recruitment at a reduced cost. This is a randomised, placebo-controlled Phase II/III trial and during H122 an additional arm for bemcentinib is expected to start enrolling patients hospitalised with COVID-19 (up to 500). We believe data generated from this trial could potentially enable approval and launch in 2023 (2022 previously).

The continued roll-out of COVID-19 vaccines programmes will likely lead to widespread vaccination and improved levels of immunity. However, this will continue take time on a global level and questions will likely persist on durability and the impact of mutagenicity, as evidenced by recent concerns stemming from the rise of the Omicron variant. From a global public health perspective, over the near term we believe there remains a need to develop a range of effective treatment options. Bemcentinib has presented a unique dual mechanism of action that could prevent viral intracellular entry and augment the type 1 interferon response (a key antiviral defence mechanism). It does not directly target the SARS-CoV-2 spike protein ACE2 interaction, an approach taken by the majority of vaccines, which could be a significant advantage given that the emergence of new variants with mutations of the spike protein have brought the efficacy and durability of these vaccines into question. Bemcentinib may therefore be variant (spike protein) agnostic and could even find use in combination with approved treatments.

Valuation

We value BGBIO at NOK4.93bn or NOK55.7/share, versus NOK4.91bn or NOK55.8/share previously. We have rolled forward our model in time, updated for shares in issue and net cash of NOK508.4m at 30 September 2021, which should provide a cash runway into 2023.

Exhibit 2: Sum-of-the-parts BerGenBio valuation

Product

Indication

Launch

Peak sales ($m)

NPV
(NOKm)

Probability of success

rNPV
(NOKm)

rNPV/share
(NOK)

Bemcentinib

2L AML

2024

598

3,321.9

35%

1,188.8

13.44

Bemcentinib

2L NSCLC

2025

1,183

8,224.2

35%

3,721.0

42.07

Bemcentinib

COVID-19

2023

300

3,068.0

15%

388.4

4.39

Payments to Rigel

(880.8)

(9.96)

Net cash at 30 Sep 2021

508.4

100%

508.4

5.75

Valuation

 

 

 

15,122.5

 

4,925.4

55.7

Source: Edison Investment Research. Note: WACC = 12.5%.

Our risk-adjusted NPV is primarily comprised of bemcentinib’s potential use across oncology indications and our assumptions remain unchanged. We forecast $1.2bn worldwide peak sales in second-line NSCLC (NOK42.1/share) and $600m worldwide peak sales in second-line AML (NOK13.4/share), both risk-adjusted to a 35% probability of success. The potential for bemcentinib to be used in early-lines of treatment, such as first-line STKm NSCLC, could provide additional upside but we have not yet incorporated this into our model, as clinical development in these settings has not yet initiated. We assume a licensing deal for bemcentinib (in all oncology) after registrational data in AML and include a pay away to Rigel Pharmaceuticals based on the original in-licensing deal. We have pushed back our forecast launch for COVID-19 to 2023 (from 2022) given communicated timings, but highlight this is remains only a minor component of our valuation (NOK4.4/share). We currently do not assign any value to tilvestamab.

Exhibit 3: Financial summary

Accounts: IFRS, year-end 31 December, NOK’000s

 

2018

2019

2020

2021e

2022e

PROFIT & LOSS

 

 

 

 

 

 

Operating revenues

 

2,335

8,900

601

0

0

Licensing revenues

 

2,335

8,900

601

0

0

Other revenues

 

0

0

0

0

0

Total operating expenses

 

(196,874)

(213,274)

(261,692)

(328,830)

(337,280)

Other operating expenses (R&D)

 

(133,699)

(141,630)

(163,442)

(228,819)

(233,395)

EBITDA (reported)

 

(194,335)

(203,589)

(260,365)

(328,002)

(336,724)

Depreciation and amortisation

 

(204)

(785)

(726)

(829)

(556)

Reported operating income

 

(194,539)

(204,374)

(261,091)

(328,830)

(337,280)

Operating margin %

 

N/A

N/A

N/A

N/A

N/A

Finance income/(expense)

 

2,793

5,096

4,062

6,775

2,176

Exceptionals and adjustments

 

 

0

0

0

0

Profit before tax (reported)

 

(191,746)

(199,278)

(257,029)

(322,056)

(335,104)

Income tax expense

 

0

0

0

0

0

Net income (reported)

 

(191,746)

(199,278)

(257,029)

(322,056)

(335,104)

Basic average number of shares (m)

 

53.3

58.0

74.9

87.8

88.0

Year-end number of shares (m)

 

54.7

61.1

87.3

88.0

88.0

Basic EPS (NOK)

 

(3.60)

(3.43)

(3.43)

(3.67)

(3.81)

Adjusted EPS (NOK)

 

(3.60)

(3.43)

(3.43)

(3.67)

(3.81)

Dividend per share (NOK)

 

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

 

 

 

 

 

 

Property, plant and equipment

 

581

974

2,332

1,570

1,081

Intangible assets

 

0

0

0

0

0

Total non-current assets

 

581

974

2,332

1,570

1,081

Cash and equivalents

 

360,414

253,586

721,641

422,577

90,787

Other current assets

 

17,831

15,818

14,228

15,023

14,626

Total current assets

 

378,245

269,404

735,869

437,600

105,412

Total non-current liabilities

 

0

0

1,367

1,367

1,367

Trade and other payables

 

23,939

26,746

22,550

33,841

35,668

Other current liabilities

 

12,875

21,803

38,046

38,585

39,185

Provisions

 

4,732

2,074

6,008

2,439

2,439

Total current liabilities

 

41,546

50,623

66,604

74,865

77,292

Equity attributable to company

 

337,280

219,754

670,229

362,937

27,833

CASH FLOW STATEMENT

 

 

 

 

 

 

Profit before taxes

 

(191,746)

(199,278)

(257,029)

(322,056)

(335,104)

Depreciation and amortisation

 

204

785

726

829

556

Share based payments

 

1,678

3,842

7,412

4,514

0

Other adjustments

 

1,712

(2,990)

4,644

(3,569)

0

Movements in working capital

 

1,446

13,164

13,572

11,620

3,410

Interest paid/received

 

0

(2,206)

(3,614)

0

0

Income taxes paid

 

0

0

0

0

0

Cash from operations (CFO)

 

(186,706)

(186,683)

(234,290)

(308,662)

(331,138)

Capex

 

(228)

0

(67)

(67)

(67)

Acquisitions & disposals net

 

0

0

0

0

0

Other investing activities

 

0

2,206

3,614

0

0

Cash used in investing activities (CFIA)

 

(228)

2,206

3,548

(67)

(67)

Net proceeds from issue of shares

 

176,998

77,910

700,092

10,250

0

Movements in debt

 

0

0

0

0

0

Other financing activities

 

0

(593)

(585)

(585)

(585)

Cash from financing activities (CFF)

 

176,998

77,317

699,507

9,665

(585)

Cash and equivalents at beginning of period

 

370,350

360,414

253,586

721,641

422,577

Increase/(decrease) in cash and equivalents

 

(9,936)

(107,160)

468,765

(299,064)

(331,790)

Effect of FX on cash and equivalents

 

0

332

(710)

0

0

Cash and equivalents at end of period

 

360,414

253,586

721,641

422,577

90,787

Net (debt)/cash

 

360,414

253,586

720,274

421,210

89,420

Source: Company accounts, Edison Investment Research


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This report has been commissioned by BerGenBio and prepared and issued by Edison, in consideration of a fee payable by BerGenBio. Edison Investment Research standard fees are £60,000 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 BerGenBio and prepared and issued by Edison, in consideration of a fee payable by BerGenBio. Edison Investment Research standard fees are £60,000 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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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

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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

1185 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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