Oryzon Genomics — Doubling down on clinical activity in 2024

Oryzon Genomics (BME: ORY)

Last close As at 12/07/2024

EUR1.82

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Research: Healthcare

Oryzon Genomics — Doubling down on clinical activity in 2024

Oryzon’s Q124 results emphasised the company’s focus on advancing and expanding its CNS and oncology pipelines, driven by its core assets, vafidemstat and iadademstat. Operating performance was in line, with the lower opex (37% y-o-y decline to €3.2m) driven by reduced R&D spending following completion of the Phase IIb PORTICO trial. Notwithstanding the mixed PORTICO results in borderline personality disorder (BPD), we expect clinical activity to pick up in the coming months, with the initiation of the iadademstat combination studies in first-line AML (Phase Ib) and SCLC (Phase Ib/II) in Q224, and the planned end of Phase II (EoP2) meeting with the FDA in BPD. We also expect interim readouts from the Phase Ib FRIDA study in advanced AML (to be presented at the European Hematology Association conference in June this year). We keep our assumptions broadly unchanged and incorporate the latest net debt figure (€3.7m at end-Q124) in our estimates. Our valuation adjusts to €12.1/share.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

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Healthcare

Oryzon Genomics

Doubling down on clinical activity in 2024

Q124 results

Pharma and biotech

8 May 2024

Price

€1.95

Market cap

€122m

Net debt (€m) at 31 March 2024

3.7

Shares in issue

62.0m

Free float

82%

Code

ORY

Primary exchange

Madrid Stock Exchange

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.7)

4.4

(8.8)

Rel (local)

(7.1)

(6.9)

(24.7)

52-week high/low

€2.29

€1.60

Business description

Oryzon Genomics is a Spanish biotech focused on epigenetics. Iadademstat is being explored for acute leukaemias, small-cell lung cancer and neuroendocrine tumours. Vafidemstat, its central nervous system asset, has completed several Phase IIa trials and a Phase IIb trial in borderline personality disorder (now the lead study), and is in a Phase IIb trial in schizophrenia.

Next events

EoP2 meeting request (BPD)

Q324

FRIDA trial interim data

June 2024

HOPE trial initiation

2024

EVOLUTION trial timeline update

2024

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Oryzon Genomics is a research client of Edison Investment Research Limited

Oryzon’s Q124 results emphasised the company’s focus on advancing and expanding its CNS and oncology pipelines, driven by its core assets, vafidemstat and iadademstat. Operating performance was in line, with the lower opex (37% y-o-y decline to €3.2m) driven by reduced R&D spending following completion of the Phase IIb PORTICO trial. Notwithstanding the mixed PORTICO results in borderline personality disorder (BPD), we expect clinical activity to pick up in the coming months, with the initiation of the iadademstat combination studies in first-line AML (Phase Ib) and SCLC (Phase Ib/II) in Q224, and the planned end of Phase II (EoP2) meeting with the FDA in BPD. We also expect interim readouts from the Phase Ib FRIDA study in advanced AML (to be presented at the European Hematology Association conference in June this year). We keep our assumptions broadly unchanged and incorporate the latest net debt figure (€3.7m at end-Q124) in our estimates. Our valuation adjusts to €12.1/share.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

15.7

(6.3)

(0.07)

0.0

N/A

N/A

12/23

14.2

(6.0)

(0.06)

0.0

N/A

N/A

12/24e

12.9

(4.1)

(0.03)

0.0

N/A

N/A

12/25e

33.7

15.4

0.29

0.0

N/A

N/A

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

2024 to be a meaningful year for CNS pipeline

Full analysis of the PORTICO data is ongoing (although more protracted than anticipated), and we now expect the FDA EoP2 meeting to take place in Q324 with an outcome by end-2024, a key catalyst for investor attention. The IND submission for the HOPE trial in Kabuki syndrome remains on track for 2024, which we see as another inflection point, given the unmet need. The EVOLUTION Phase IIb trial in schizophrenia continues to recruit patients and we expect a timeline update in the near term. Oryzon’s IP position, while already strong (patent protection to 2037), should be bolstered with additional patents to be granted in the EU and South Korea.

Oncology pipeline continues to make progress

Iadademstat, Oryzon’s oncology asset, is being tested in several ongoing and planned trials as a combination treatment in both haematological and solid cancers. We expect the 2024 focus to be on the Phase Ib FRIDA trial in relapsed/refractory (r/r) acute myeloid leukaemia (AML), where a third cohort (6–7 patients) is currently being recruited, as well as the planned launch of the CRADA-MSKCC trial in first-line small-cell lung cancer (SCLC), a precursor to the larger, randomised STELLAR trial.

Valuation: Adjusts to €748.8m or €12.1 per share

We have made minor adjustments to our estimates for the Q124 performance, rolled forward our model and updated the latest net debt figure; however, our underlying long-term assumptions remain unchanged. Our valuation adjusts slightly to €748.8m or €12.1/share (€732.6m or €11.8/share previously). Based on the period-end gross cash of €10.7m, and our burn rate projections, we continue to estimate that the company is funded into FY25 (excluding debt repayments), past key regulatory and clinical milestones.

Clinical action expected to take wing in 2024

Oryzon’s Q124 results summarised an active period focused on advancing and expanding the company’s development programmes for central nervous system (CNS) and oncology indications. The company has a broad pipeline of programmes, underscored by its focus on Lysine-specific histone demethylase 1 (LSD1) inhibition, a validated therapeutics target in both CNS and oncology. Clinical assets include vafidemstat for CNS conditions, and iadademstat as a potential treatment for haematological and solid cancers. The company’s ongoing programmes are a mix of self-funded, investigator-sponsored and collaborative studies. We expect the remainder of 2024 to be eventful for the company in terms of pipeline advancements, and note the following as the key upcoming milestones:

EoP2 meeting with the FDA for vafidemstat as a treatment for BPD (following the results of PORTICO announced in January 2024) – Oryzon’s most clinically advanced programme is evaluating vafidemstat as a treatment for BPD. PORTICO, a Phase IIb study, was not able to meet its primary endpoint (refer to our note for more details); however, two key secondary endpoints showed statistically significant improvements, indicating potential benefit, especially in light of the unmet need in the space (as there are no approved drugs specifically for BPD). Oryzon is in the process of conducting a full data analysis with plans to subsequently approach the FDA for an EoP2 meeting to discuss the data and design for a potentially registrational Phase III trial. While we were previously expecting this meeting to take place in Q224, additional time may be required, and we now estimate the meeting to take place in Q324. We expect the EoP2 results (which we anticipate by Q424 at the latest) to be one of the most significant upcoming catalysts for the company, which if positive, could potentially enhance partnering discussions.

CRADA-MSKCC study – A key development post-period was the FDA clearance for the investigational new drug (IND) application for a Phase I/II clinical trial to evaluate iadademstat in combination with checkpoint inhibitors for first-line, extensive-stage SCLC. This trial will be conducted under the cooperative research and development agreement (CRADA) signed with the National Cancer Institute (NCI) in the US. The trial will be sponsored by the NCI, and is due to commence in Q224 (45–50 patients expected to be recruited). The data from this study will refine the design for the larger, randomised Phase Ib/II STELLAR trial (sponsored by Oryzon), which will evaluate the same drug in the same indication. We see merit in employing this strategy, given that it de-risks the company’s development plan. Moreover, preliminary data from the study may allow Oryzon to directly move the STELLAR trial to Phase II, foregoing the need for the Phase Ib dose finding and tolerability study. Management asserts that STELLAR could support an accelerated approval application, and plans to submit an IND application by end-2024.

Interim data from the FRIDA study – Another catalyst, in our opinion, will be the interim data readout from the ongoing FRIDA study, which continues to enrol patients. This Phase Ib study is assessing iadademstat in combination with gilteritinib as a potential treatment for r/r AML in patients harbouring the FLT3 mutation. The study aims to recruit c 45 patients, of which 13 (across two cohorts) have completed the study, showing desirable safety and antileukemic activity, according to management. A third cohort is currently being recruited. Based on the results, Oryzon plans to discuss next steps with the FDA. We look forward to the interim data from the study, which management has indicated will be presented at the European Hematology Association conference to be held between 13 and 16 June 2024.

In addition to the self-sponsored FRIDA study, iadademstat is also being evaluated in combination with venetoclax and azacitidine in first-line AML patients under an investigator-sponsored Phase Ib trial, led by Oregon Health & Science University (OHSU). The company expects to commence patient enrolment in Q224. Furthermore, Oryzon is also in the process of refining the final design the Phase I/II HOPE trial in Kabuki syndrome (a rare congenital disorder), with plans for IND application submission within 2024, with the trial potentially launching by end-2024. This trial will also be self-sponsored.

Financials: No surprises in Q124

Oryzon’s Q124 results were broadly in line with expectations. R&D expenses, which account for the lion’s share of the operating costs, declined materially to €2.4m (vs €3.8m in Q123). This was primarily attributed to the completion of the PORTICO trial in late-2023. R&D as a percentage of opex declined to 75% (vs 78.7% in Q123). Personnel expenses remained broadly flat at €0.87m (vs €0.85m in Q123). We note that Oryzon capitalises its R&D investments, reflecting this as other income to offset the R&D expenses booked in the income statement. As a result, other income for the period declined to €2.2m (vs €3.8m in Q123), mirroring the decline in R&D expenses. Net loss was reported at €1.1m, a c 30% improvement over the Q123 figure of €1.6m. While the company has not provided a cash flow statement with the Q124 release, we roughly calculate the Q124 free cash outflow to be c €3.2m (vs c €5m in Q123). Given the in-line performance, our FY23 and FY24 estimates remain largely unchanged.

At end-Q124, Oryzon had net debt of €3.7m. This includes €10.7m in cash and cash equivalents, €10.4m in short-term debt (bonds – €4.3m; credit institutions – €6.1m) and €4.1m in long-term bank debt. We remind that in November 2023, Oryzon had raised €45m in convertible debt (4,500 bonds worth €10,000 each; 48-month maturity), of which €10m has been drawn down to date (two €4m tranches disbursed in November and December 2023 and an additional €2m tranche in February 2024). Of the 1,000 bonds issued, 736 have been converted to equity as of 23 January 2024, against an issue of 3.05m shares of common stock. We note that there have been no further debt-to-equity conversions since January 2024, and hence, the number of shares outstanding remains unchanged at 62.0m.

Based on our projected cash burn rates (free cash outflow of €3.6m per quarter in FY24), we estimate the gross cash balance (excluding upcoming debt repayments) will support operations into FY25. We reiterate the upcoming bank debt maturing in FY24 (€5.6m), and estimate that the company will draw down a further €10m from the €45m financing facility during 2024 (c €2m drawn in February 2024). We also expect the remaining €25m of the facility to be utilised in FY25. We currently reflect these capital infusions as illustrative debt in our model.

Valuation

We presented our updated assumptions and valuation drivers in a previous note, and these remain unchanged following the Q124 results. We have made only minor tweaks to our estimates to reflect the Q124 trend and have incorporated the latest net debt figure. This, along with rolling forward our model, results in our valuation adjusting slightly to €748.8m or €12.1 per share, from €732.6m or €11.8/share previously. A breakdown of our risk-adjusted net present value (NPV) valuation is shown in Exhibit 1.

Exhibit 1: Valuation of Oryzon

Product

Indication

Launch

Peak sales (US$m)

Value
(€m)

Probability

rNPV
(€m)

NPV/share (€/share)

Iadademstat

2L AML

2029

555

527.7

30%

150.8

2.4

1L SCLC

2030

720

617.9

20%

116.7

1.9

Vafidemstat

BPD

2028

1,625

803.7

20%

234.6

3.8

Schizophrenia, negative symptoms

2029

702

566.3

15%

117.5

1.9

Aggression related to AD

2029

911

666.5

15%

132.9

2.1

Net debt at end-March 2024

(3.7)

100%

(3.7)

(0.1)

Valuation

 

 

 

3,178.5

748.8

12.1

Source: Edison Investment Research

We assume licensing deals in FY25 and FY26, associated with cash inflows that should support break-even in FY26. If Oryzon does not finalise a partnership deal, and self-commercialises all programmes, we estimate the need to raise a further €45m in funds across FY26 and FY27 (modelled as illustrative debt) before becoming self-sustainable in FY28. Assuming all funding requirements across FY24–27 (c €80m) are realised through equity raises, Oryzon would have to issue 41m shares (assuming the current trading price of €1.952/share). Our per share valuation would be diluted to €8.0/share, from €12.1/share currently (shares outstanding would increase from 62m to 103.0m).

Exhibit 2: Financial summary

Accounts: Spanish GAAP. Year end 31 December (€000s)

2021

2022

2023

2024e

2025e

INCOME STATEMENT

 

 

 

 

 

Total revenues

10,615

15,698

14,192

12,933

33,650

Cost of sales

(746)

(464)

(244)

(317)

(333)

Gross profit

9,869

15,234

13,948

12,617

33,317

Gross margin %

93%

97%

98%

98%

99%

SG&A (expenses)

(3,782)

(3,163)

(3,390)

(3,424)

(3,458)

R&D costs

(9,746)

(13,681)

(12,177)

(12,318)

(13,000)

Other income/(expense)

(3,203)

(3,714)

(2,777)

70

0

Exceptionals and adjustments

(4)

0

0

0

0

Reported EBITDA

(6,866)

(5,323)

(4,396)

(3,055)

16,859

Depreciation and amortisation

(144)

(167)

(153)

(129)

(111)

Reported EBIT

(7,011)

(5,490)

(4,549)

(3,185)

16,748

Finance income/(expense)

(169)

(1,067)

(1,555)

(912)

(1,352)

Other income/(expense)

0

0

0

0

0

Reported PBT

(7,180)

(6,557)

(6,104)

(4,097)

15,396

Income tax expense (includes exceptionals)

2,493

2,325

2,751

2,538

2,645

Reported net income

(4,687)

(4,231)

(3,353)

(1,559)

18,040

Basic average number of shares, m

53.1

53.3

57.6

61.6

62.0

Basic EPS (€)

(0.09)

(0.08)

(0.06)

(0.03)

0.29

Adjusted EBITDA

(6,862)

(5,323)

(4,396)

(3,055)

16,859

Adjusted EBIT

(7,007)

(5,490)

(4,549)

(3,185)

16,748

Adjusted PBT

(6,896)

(6,320)

(6,004)

(4,097)

15,396

Adjusted EPS (€)

(0.08)

(0.07)

(0.06)

(0.03)

0.29

Adjusted diluted EPS (€)

(0.08)

(0.07)

(0.06)

(0.03)

0.29

BALANCE SHEET

 

 

 

 

 

Property, plant and equipment

682

611

481

379

298

Intangible assets

60,254

75,843

89,895

102,802

116,421

Investments

29

31

26

26

26

Deferred tax assets

1,812

2,050

2,222

2,222

2,222

Total non-current assets

62,778

78,535

92,624

105,428

118,967

Cash and equivalents

28,725

21,317

12,257

4,098

30,504

Trade and other receivables

3,645

3,709

1,909

2,809

2,359

Inventories

104

10

6

6

6

Other current assets

132

129

104

104

104

Total current assets

32,606

25,165

14,276

7,017

32,973

Deferred tax liabilities

1,812

2,050

2,222

2,222

2,222

Long term debt

13,354

10,346

6,335

3,172

3,148

Other non-current liabilities

285

0

155

155

155

Total non-current liabilities

15,451

12,396

8,711

5,549

5,525

Trade and other payables

3,518

5,742

4,210

4,976

4,593

Short term debt

4,306

12,920

12,194

19,914

41,776

Other current liabilities

847

70

11

11

11

Total current liabilities

8,672

18,732

16,414

24,901

46,379

Equity attributable to company

71,262

72,572

81,775

81,996

100,036

CASH FLOW STATEMENT

 

 

 

 

 

Profit before tax

(7,180)

(6,557)

(6,104)

(4,097)

15,396

Cash from operations (CFO)

(3,626)

(1,848)

(575)

(1,563)

18,218

Capex

(175)

(76)

0

0

0

Acquisition of intangible assets

(11,586)

(14,195)

(14,503)

(12,933)

(13,650)

Other investing activities

37

(1)

(1)

0

0

Cash used in investing activities (CFIA)

(11,724)

(14,271)

(14,504)

(12,933)

(13,650)

Net proceeds from issue of shares

0

(932)

(1,880)

0

0

Movements in debt

4,123

9,642

7,901

6,338

21,838

Other financing activities

0

0

0

0

0

Cash from financing activities (CFF)

4,123

8,710

6,021

6,338

21,838

Increase/(decrease) in cash and equivalents

(10,880)

(7,408)

(9,060)

(8,159)

26,406

Currency translation differences and other

348

1

(3)

0

0

Cash and equivalents at start of period

39,605

28,725

21,317

12,257

4,098

Cash and equivalents at end of period

28,725

21,317

12,257

4,098

30,504

Net (debt)/cash

11,065

(1,948)

(6,272)

(18,988)

(14,420)

Free cash flow (CFO + net capex + Intangible assets)

(15,388)

(16,118)

(15,078)

(14,496)

4,568

Source: company reports, Edison Investment Research

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

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

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.

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London, WC1R 4PS

United Kingdom

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Research: Industrials

AVAX — Strong pipeline reaffirmed

AVAX’s FY23 results highlight the group’s progress domestically as the market improved, more than offsetting the weaker international performance at the top-line and EBITDA level. We have downgraded our 2024 EPS estimates to reflect guidance on continued construction project delays. However, our forecasts incorporate a substantial y-o-y increase in profits, with both PBT and net income more than doubling, bolstered by a record order book of €3.3bn. Our fair value stands at €3.0/share (€3.2/share previously), indicating more than 100% upside potential.

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