Preclinical data support new PQ912 application
Probiodrug’s preclinical data revealed that PQ912 demonstrated efficacy in HD in a well characterised model. BACHD mice with human gene coding mutant protein huntingtin (mHTT), a hallmark of the disease, were used in the study. Probiodrug will present the results at the 12th Annual HD Therapeutics Conference of the CHDI Foundation on 23 April in Malta; the headline findings include:
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mHTT levels in the brain were reduced by around 30% after treating the mice for 18 weeks with PQ912.
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The mHTT reduction was associated with improvement in the pathophysiology of the disease:
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reduction of inflammation marker the GFAP-protein;
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normalisation of abnormal body weight gain; and
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normalisation of several mRNA markers coding heat shock proteins, which can prevent the accumulation of misfolded mHTT and thus its toxicity.
Probiodrug hypothesised that these effects may result from an inhibition of similar molecular mechanisms that were already well explored in AD. While encouraging, this is still the first preclinical data set released, so it is not clear whether this would translate to clinical efficacy. The company has not revealed further development strategy yet; in our view, much will depend on the outcome of the SAPHIR trial due shortly. Since PQ912 has already established safety data (short term in humans and long-term toxicity data in animals), we believe that the drug candidate could be fast-tracked to studies with HD patients. This means that Probiodrug would not be a single indication company anymore, which we believe would be a welcome diversification. The company also communicated that it is exploring PQ912’s potential in other conditions, such as Down’s syndrome.
HD is an incurable, inherited disorder associated with a loss of neurons in specific locations, resulting in symptoms such as involuntary movements (chorea), dementia and behavioural changes. Estimated prevalence is 4.1-8.4 per 100,000 people, translating to a patient population in the range of 13-27k (source: Huntington Disease, Medscape). HD is a progressive disease with onset in 30-40-year-olds and patients surviving 10-25 years on average. There is currently no disease modifying therapy for this condition, only various treatment options to alleviate symptoms such as chorea or improve patients’ quality of life. Therefore, the progress of the disease cannot be stopped.
According to EvaluatePharma, tetrabenazine (Xenazine) is notable among the branded drugs used to alleviate chorea in HD. Xenazine is a monoamine inhibitor, which depletes neurotransmitters dopamine, noradrenaline and serotonin, altering transmission of electric signals from the brain that control movement. Marketed by Lundbeck in the US, Xenazine had $317m in peak sales in 2015, which then fell to $233m in 2016 after the introduction of the first generic versions. Notably, such sales were achieved with only a symptomatic drug, while a disease modifying drug would very likely achieve much higher levels, in our view.
R&D spend in FY16 was €11.0m, in line with our €11.1m. G&A expenditure of €2.9m was lower than our €3.3m estimate for FY16, indicating good cost management. We keep our FY17 R&D cost estimate of €7.7m unchanged in line with Probiodrug’s guidance that 2017 net loss may be lower than in 2016, as the SAPHIR trial is winding down. We slightly lower our FY17 G&A costs expectations to €3.1m from €3.4m and subsequently expect the 2017 EPS loss at €1.30, an improvement from our previous loss of €1.35 (Exhibit 1).
Probiodrug reported cash of €21.9m at end FY16, which included a capital raise of €14.9m in October 2016. Our post-FY16 model suggests that this should be sufficient to fund operations into 2019. If the company is required to repay tax provisions of €2.6m (originating from 2002-2005 and with no court decision yet), then the cash reach could be to Q418.
We continue to project that if the Phase IIa trial results are positive, a licensing deal in 2017 is likely given the high profile of Probiodrug’s R&D programme among the larger players in the AD field. Although our valuation includes a risk-adjusted milestone (€25m) from a partner for PQ912 that could be triggered by licensing (more details in our initiation report) our financial forecasts do not include any such income.
Exhibit 1: Summary of the main changes to our Probiodrug financial forecasts
€m |
2016 |
2017e |
2018e |
|
Estimate |
Actual |
% change |
Old |
New |
% change |
New |
Revenues |
0.000 |
0.000 |
N/A |
0.000 |
0.000 |
N/A |
0.000 |
Gross profit |
0.000 |
0.000 |
N/A |
0.000 |
0.000 |
N/A |
0.000 |
Research and development costs |
(11.105) |
(10.951) |
-1% |
(7.669) |
(7.669) |
+0% |
(5.669) |
Selling, general and administration costs |
(3.279) |
(2.909) |
-11% |
(3.443) |
(3.054) |
-11% |
(3.207) |
EBITDA |
(14.285) |
(13.680) |
-4% |
(11.018) |
(10.508) |
-5% |
(8.632) |
Operating profit (reported) |
(14.342) |
(13.777) |
-4% |
(11.070) |
(10.640) |
-4% |
(8.793) |
Profit before tax (rep) |
(14.220) |
(13.891) |
-2% |
(11.053) |
(10.623) |
-4% |
(8.793) |
Profit after tax (rep) |
(14.220) |
(13.891) |
-2% |
(11.053) |
(10.623) |
-4% |
(8.793) |
EPS (€, rep) |
(1.82) |
(1.82) |
+0% |
(1.35) |
(1.30) |
-4% |
(1.07) |
Source: Edison Investment Research, Probiodrug accounts
