Oryzon Genomics — Multiple milestones anticipated in H224

Oryzon’s lead central nervous system (CNS) programme is developing vafidemstat as a potential treatment for BPD. As part of its Q224 results, the company confirmed that it has been granted an EoP2 meeting with the FDA for a potential registrational Phase III programme, and the current strategic priority for management is focused on preparing for this meeting. While a precise date has not yet been disclosed, we anticipate a meeting in Q324, with an outcome to be reached before year-end (we project an outcome in Q424). As a reminder, the Phase IIb PORTICO trial concluded in January 2024, and while the study fell short of meeting its primary endpoint, nominal statistical significance was achieved in two key secondary endpoints, and vafidemstat was favoured over placebo in all efficacy measures. Oryzon has now completed the full data analysis and final data will be presented at the 37th European College of Neuropsychopharmacology annual conference in September 2024. We highlight that the FDA has in the past provided provisional support for Phase III study proposals in instances where there have been Phase II setbacks if the data is otherwise compelling on other parameters. This was recently exemplified with IRLAB Therapeutics (a Sweden-based company focused on CNS indications), which received the FDA green light for a Phase III programme to evaluate its lead asset for Parkinson’s disease levodopa-induced dyskinesias, despite it only meeting the secondary endpoint in its prior Phase IIb study. Given the unmet need in BPD, we remain optimistic on a meaningful discussion with the FDA at the EoP2 meeting. We also note that Oryzon recently received an ‘intention to grant’ communication from the Japanese Patent Office for vafidemstat as a potential method to treat BPD, providing protection in the Japanese market until at least 2040, contingent on successful clinical progression.

Vafidemstat is also being developed as a potential treatment for schizophrenia, and in its Q224 results, Oryzon stated that it has continued to enrol patients for the Phase IIb EVOLUTION study, which is partially funded by the Spanish Ministry of Science and Innovation. Specifically, this clinical trial has been designed to assess the effectiveness of vafidemstat in addressing negative symptoms (affective flattening, hedonia, avolition) and cognitive impairments (deficits in memory, attention, learning, executive function) associated with schizophrenia. We look forward to management sharing a timeline update within H224.

Beyond these clinical-stage programmes, management has also re-affirmed its plans to submit an investigational new drug (IND) application to the FDA for the planned Phase Ib/II HOPE study by end-2024. This will evaluate vafidemstat as a potential treatment for Kabuki syndrome, a rare congenital disorder characterised by a specific variant in the KMT2D gene, which Oryzon believes it can address through vafidemstat’s mechanism of LSD1 inhibition.

Oryzon has also continued to make headway in exploring iadademstat in haematological cancers during the quarter:

Beyond these programmes focused on blood cancers, Oryzon has several other ongoing and planned trials seeking to maximise the value proposition for iadademstat in oncology:

Throughout Q224 Oryzon has continued to advance its preclinical portfolio. ORY-4001 (an inhibitor of histone deacetylase 6, HDAC6) is being developed for the treatment of neurological conditions such as Charcot-Marie-Tooth disease and amyotrophic later sclerosis; it is progressing through IND-enabling studies in preparation for the clinical stages of development.

An overview of Oryzon’s active pipeline is shown in Exhibit 1.

Oryzon’s Q224 results broadly mirrored the performance in the previous quarter. R&D expenses continued to trend down following the completion of PORTICO in late-FY23 and came in at €2.2m, down c 44% from the Q223 figure of €3.9m. The expense run-rate was similar to Q124 (€2.4m). We note that €4.1m of the €4.6m R&D expenses in H124 have been capitalised, which management accounts for as other income in the profit and loss statement. With the FDA EoP2 meeting anticipated in H224, we expect any further development work on BPD to commence only from 2025, and therefore estimate the H224 spending to remain at similar levels to H124. Personnel expenses stayed largely unchanged year-on-year at €1.7m. Given that the company has capitalised the bulk of its R&D expenses in H124, operating loss for the period saw little fluctuation at €1.4m (vs €1.2m in Q223). Net loss was reported at €1.1m, a c 30% improvement over the Q123 figure of €1.6m. The free cash outflow for H124 was €8.1m, an improvement over the €10.0m recorded in H123. Based on the H124 R&D trend and expectation of a similar pace in H224, we have adjusted our R&D expense estimate for FY24 downwards to €9.0m (vs €12.3m previously). Accordingly, we have also reduced our estimate for other income to €8.6m, from €12.9m previously. Our other estimates remain largely unchanged. We now expect the FY24 operating loss to be €4.2m (vs €3.2m previously). The FY25 operating loss estimate stays put at €16.6m (€16.7m previously).

The company ended Q224 with net debt of €3.2m, including a €10.1m cash balance and €10.2m in short-term debt (bonds: €4.8m; credit institutions: €5.4) and €3.1m in long-term bank debt. The cash reserves were supported by another €4m in drawdowns (two tranches of €2m each) from the €45m convertible debt facility, announced in November 2023. As per our calculations, Oryzon has utilised €14m of the facility thus far, of which €11m (equivalent to 1,100 bonds) has been converted to equity to date (including €5.4m in H124) against the issue of 5.0m shares of common stock. Request for the conversion of a further 27 bonds (for 151.2k shares) was raised on 12 July and is pending execution.

Based on our projected burn rates (free cash outflow of €13.6m in FY24) we estimate the available cash balance (excluding upcoming debt repayments) to be sufficient to fund operations into FY25. Readers should note that our estimated burn rates for H224 (€5.5m) are lower than the €8.1m figure in H124 because we expect inflows from R&D tax credits (c €2m) in the second half of the year. This does not consider further drawdowns from the convertible debt facility, which we expect the company to continue to utilise in H224. We model Oryzon drawing down another €6m from the facility in H224, with the remaining €25m in FY25. We continue to reflect these capital infusions as illustrative debt in our model.

We have made minor adjustments to our near-term forecasts to reflect the H124 performance and run-rate, but have kept our long-term assumptions unchanged for now. We also incorporate the latest net debt figure and roll our model forward by a quarter. Our overall risk-adjusted net present value (rNPV) valuation goes up to €774.7m from €748.8m previously. However, the per share valuation remains unchanged at €12.1 given the higher number of shares outstanding following recent debt-to-equity conversions (shares outstanding have gone up to 64m vs 62m at end-Q124).

A breakdown of our rNPV is shown in Exhibit 2.

As indicated in our previous notes, our model reflects 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 continue to see the need to raise €45m in capital across FY26 and FY27 (modelled as illustrative debt) before becoming self-sustainable in FY28. Assuming all funding requirements across FY24–27 (c €76m) are realised through equity raises, Oryzon would have to issue 40.8m shares (assuming the current trading price of €1.86/share). Our per share valuation would be diluted to €8.1/share, from €12.1/share currently (shares outstanding would increase from 64m to 104.8m).