Genticel — Update 7 June 2016

Genticel has two products: GTL001 and GTL002 (Exhibit 1). GTL001 is in the follow-up stage of a Phase II (topline 12-month primary endpoint data released) testing HPV 16 or 18 infected women with either no or only low-grade cervical cellular abnormalities. Infected women are at risk of progressing to high-grade, pre-cancerous cervical lesions. After three years, 25% develop cervical intraepithelial neoplasia (CIN) stage 2 or greater, potentially leading to cervical cancer. Genticel aims to find a partner to run the two Phase III studies needed for EMA and FDA approvals and to market globally. GTL002, in preclinical development, could expand the market by treating up to six HPV types including HPV 16 and 18. GTL001 was developed using CyaA vaccine technology licensed from Institut Pasteur in 2002; GTL002 uses enhanced CyaA technology (Vaxiclase).

In the Phase II trial (NCT01957878), about 75% of patients were women with abnormal cytology: ASCUS or LSIL, Exhibit 2 (see Exhibit 3 for terminology). These groups were overrepresented in the Phase II study, but in real life around 75% of women have normal cytology, in which GTL001 has shown statistically significant viral clearance vs placebo. However, as is usual for a Phase II proof-of-concept study, different subgroups are studied regardless of their representation in the overall population.

The intention-to-treat (ITT) population included 233 patients. Genticel did a randomised stratification on recruitment to get balanced numbers of treated and placebo patients by HPV type, age group and cytology. Two key pieces of new data will be response by HPV type and viral load levels. These may be available later.

Genticel has now segmented the 12-month data, Exhibit 3.

At Phase II, multiple tests are often used to maximise the data available to decide on a Phase III design. Two statistical tests were used: Fisher’s exact test in the overall population and the CMH test in the pre-specified or post-hoc subgroups, Exhibit 4.

The data comprised categories stratified by HPV, age and cytology status. Cytology was initially stratified into normal and the combined ASCUS and LSIL set. The abnormal group has now been separated into ASCUS and LSIL subgroups.

The Phase II primary endpoint ITT result was a 48.7% clearance rate vs 39.7% treated with placebo. This has a non-statistically significant result of p=0.188.

This subgroup of 62 women showed a good response, resulting in a CMH significance result of p=0.018. This is the main group Genticel aims to target; hence this statistically significant finding can be viewed positively.

This new data set of 65 patients, Exhibit 6, shows an overall CMH significance of p=0.067, which narrowly missed significance.

The pairing of normal and ASCUS patients looks strong, Exhibit 7, with a CMH result of p=0.003.

In this case, the CMH result was not shown to be significant (p=0.56). Despite this not being the population that GTL001 aims to treat, Genticel wanted to explore potential activity in this group.

Phase II is an exploratory stage to gain valuable additional data and is not a pivotal study. The Phase II will continue follow-up monitoring to 24 months to explore the maintenance of viral clearance in responders. Genticel expects that 18-month data will trigger Phase III preparation. The trial will achieve its objective once it enables a partnering deal.

A summary of the Edison analysis of these results is in Exhibit 9.

Given the non-achievement of the primary endpoint, in our last note we slightly reduced the probability of success in normal cytology infected women to 40% (from 45% on initiation in January 2016). In women with low-grade cytology (ASCUS and LSIL combined), the probability was reduced to 20% (from 45%). The model does not separate these categories.

Phase III has been assessed by Genticel management as costing between €100m and €150m to run with two 1,200-patient Phase III trials required. The overall cost will depend on the exact design and patient monitoring programme required. The Phase III will use a clinical endpoint, probably based on reducing the incidence of higher-grade lesions. Phase II is therefore indicative of the Phase III outcome, but not necessarily predictive. This strategy is similar to the development route used to gain approval of prophylactic vaccines.

We will wait for the18-month results before adjusting the market forecast further. GTL001 launch is now expected in 2022, as partnering is more likely in H217. Management has stated that Phase III product manufacturing will not start until there is longer-term data and a partner. This conserves cash but might delay launch until 2022. Exhibit 10 shows the non-risk-adjusted market projection for Europe and Exhibit 11 the US forecast. Note that these forecasts will be revised when 18-month data become available.

GTL001 could develop a new market, as a therapeutic vaccine that proves to be more socially acceptable and cost less than the prophylactic HPV vaccination of teenage girls. This could enable a premium price. The data in ASCUS alone appear promising but need confirmation. As cytology screening guidelines are progressively changing, the Genticel targeted normal cytology market becomes more apparent. Thus, a key assumption is that primary HPV screening is standard by 2022. GTL002 could expand the market further.

A continuing sensitivity is on a deal: Genticel remains confident but 18- and/or 24-month data needs to be supportive given the Phase III investment needed. Treatment guidelines after any GTL001 approval will need revising and adoption, which takes time. The launch date is uncertain.

Our valuation is unchanged but will be reviewed when 18-month data become available. It is based on the current two projects and an assumed partnering deal in H217 from which we assume a 15% royalty. Other projects targeting other viruses and cancer are not included in the NPV as they are early preclinical. Hence, only a basic cost level is assumed after the potential deal in 2017. In reality, Genticel will have administrative and R&D costs on other projects, but these expenses are not included as no revenues are attributed to them. The forecasts and valuation run to 2037 when GTL002 exclusivity expires. There is a royalty and deal fee share to the Institut Pasteur, which is undisclosed but we assume is 5%. On this basis, we estimate a risk-adjusted indicative value of about €89.4m, or €5.75 per share before dilution (€5.26 including dilution). Further cash may be needed after Q118, which may dilute this value.

The loss should reduce as the Phase II study is now in its follow-up phase with the small US study about to end. The assumption is that partner development funding starts from 2018. However, preclinical work on GTL002 might intensify and other development projects, for example in cancer, are ongoing and may gain a higher priority. Genticel had 2015 year-end cash of €16.7m plus €5m financial investments, taking the total to €21.7m. On 31 March 2016, this was €18.8m. The cash is probably sufficient to last until spring 2018, considering the Research Tax Credit for 2015 and 2016 (30% of research costs) and after reductions in spending and personnel. A deal with a substantial upfront or further funding will be needed by late 2017 to secure continued development. Our revised financial forecasts are summarised in Exhibit 12. Note that 2014 accounts were partly restated (note 2.2 in the 2015 annual report) leading to some non-material differences relative to our last note.