Nanobiotix — Update 2 February 2017

Nanobiotix is exploring the potential for its technology to be used in combination with immuno-oncology products, which we described in detail in our last report. The rationale is radiotherapy’s property for amplifying the immune system’s response to the tumour it targets. The core idea behind this is a so-called Immunogenic Cell Death (ICD) effect, which occurs after RT. When radiotherapy (RT) is applied to a tumour locally, the resulting cancerous cell death activates different chain reactions, which in turn amplify the immune system’s response to the tumour itself. In other words, by generating intratumoral ICD, radiotherapy can enhance a tumour’s immunogenicity. This effect is also visible in distant metastases outside the radiation field (abscopal effect). NBTXR3 can enhance the effect of radiation therapy, which theoretically should increase the ICD effect and a tumour’s immunogenicity.

Theoretically, a combination regimen of RT enhanced with Nanobiotix’s NBTXR3 and used alongside immuno-oncology treatment should have a number of synergies, including the fact that many tumours do not elicit an immune response, rendering the IO treatment ineffective. The ICD effect after RT and enhanced with NBTXR3 could potentially turn a ‘cold’ tumour into a ‘hot’ tumour, eliciting or increasing an immune response. Another potential synergy with IO product is the fact that RT is prescribed as early as front-line therapy in some cancers, while IO is still mostly reserved as a late-stage option. A successfully developed NBTXR3-IO product could reach larger populations.

In May and November 2016, Nanobiotix revealed a preclinical dataset demonstrating proof-of-concept in vitro and in vivo:

The successful advance of immuno-oncology products has given a whole new perspective on the ICD effect. A recent review published by Kang et al identified more than 90 ongoing clinical trials registered on clinicaltrials.gov that explore the combination of various immuno-oncology treatments and RT. In our view, this clearly shows recognition by the industry of the importance of RT, due not only to its conventional ‘mechanistic’ action against cancer, but also to its immunogenic effect. Since most of the trials are still early (Phase I/II), the final conclusions on how to position RT with IO products are still to come. Meanwhile, Nanobiotix’s new preclinical data indicate that, due to synergies, NBTXR3 could be a natural fit in the RT+IO setting. Nanobiotix has not disclosed further specific plans yet but, in our view, an obvious strategic direction could be early-stage R&D partnerships with companies involved in the immuno-oncology space. An attractive aspect of such a strategy is that these combination products would exploit the radiation therapy benefit and potentially allow for new patent applications, although so far RT has not been patentable.

In July 2016, Nanobiotix announced positive results from its Phase I/II trial with H&N cancer patients. This is now the second indication with clinical data for NBTXR3 and, importantly, demonstrates that NBTXR3’s effect seems to be transferable to other solid tumours given its mechanistic mode of action.

The trial was a Phase I/II prospective, open-label, non-randomised, multi-centre, dose escalation trial with H&N cancer patients who had locally advanced squamous cell carcinoma of the oral cavity, tongue or throat. Notably, these were frail and elderly patients with a poorer prognosis than the similar H&N cancer population and were not fit for standard of care with a combination treatment involving radiotherapy (RT) and chemotherapy, and therefore underwent RT only.

The trial enrolled 10 patients, seven of whom were evaluable (two were not evaluable and assessment of patient number 10 was ongoing at the time). Exhibit 4 shows the design of the Phase I/II H&N cancer trial. Initially, two administration routes were planned: intratumoral and selective intra-arterial (which feeds the tumour), but as the intratumoral injection was shown to be feasible, the intra-arterial route was not explored. The patients were administered with increasing dose levels from 5% to 22% of the tumour volume (the 10% dose was optimal in the lead Phase II/III trial for STS). After a single injection of NBTXR3, the patients received standard-of-care RT (70Gy divided into 35 daily fractions). After the patients accumulated c 70% (50Gy) of the total required radiation dose, the tumour reduction was assessed to decide whether continuing the RT was worthwhile (if tumour shrinkage was more than 50%) or, if the response was not sufficient, the patients were offered salvage surgery.

The safety profile (the primary endpoint) was excellent, with no adverse events related to NBTXR3, and only one patient experienced a grade 1 injection site reaction. Other adverse events were related to RT, the disease itself or comorbidities. The feasibility of the NBTXR3 injection was demonstrated with the first three dose levels, while the recruitment for the 22% level is ongoing. Importantly, no leakage to surrounding healthy tissue was observed.

Tumour response was a secondary endpoint, measured with changes in volume and the longest dimension on MRI scans (RECIST 1.1 criteria), which were evaluated after the patients received 50Gy and the full dose of 70Gy at the end of the treatment. Long-term secondary endpoints are overall survival (OS), local progression-free survival (LPFS) and progression-free survival (PFS). OS, PFS and LPFS will be established during a follow-up period.

Seven patients were evaluated, all of whom demonstrated a tumour response of 50% or greater, with two patients achieving complete or near-complete shrinkage. During the follow-up LPFS, PFS and OS will be established, which will allow a more detailed comparison with the historical data, but a complete response already looks promising. Adelstein et al.1 published results from one of the earlier clinical studies that sought to explore the effect of a combination treatment with radiotherapy and chemotherapy, which is standard of care now. In a standalone radiotherapy arm (n = 95) with the treatment schedule comparable to Nanobiotix’s study, a complete response was seen in 27.4% patients. Notably, these patients were eligible for chemotherapy treatment, thus were likely on average to be healthier than patients in the Nanobiotix trial. This, together with the fact that all treated patients in Nanobiotix’s study showed a tumour response, validates further exploration of NBTXR3 for H&N cancer, in our view.

Based on its positive Phase I/II study, Nanobiotix is now planning a Phase II/III study which, if positive, would allow for registration, which we assume in 2019 in our model. The details are yet to be announced.

As announced in October 2016, Nanobiotix’s partner PharmaEngine has launched a second clinical trial in Asia that will enrol H&N cancer patients (the seventh trial with NBTXR3 in total). The Asian partner is already running a Phase I/II in rectal cancer. The new H&N cancer trial will evaluate optimal dose and safety. While this follows the successful study conducted by Nanobiotix in Europe, PharmaEngine will target a larger H&N population, which will include all patients receiving both chemotherapy and radiotherapy. This will broaden the target population and should provide additional insights to Nanobiotix while it prepares for the registration Phase II/III trial in Europe.

In December 2016, Nanobiotix announced preliminary feasibility and safety data from Phase I/II trials in liver cancers (HCC and metastases). This is now a third indication with clinical data. While specific patient numbers were not disclosed, Nanobiotix confirmed that the dose of 10% of the tumour volume was feasible and safe including no changes in liver function in both HCC and metastasis patient populations. No leakage outside the tumour has been detected. The study is now recruiting patients for the higher dose arm, but the 10% dose level was described as the most optimal in terms of efficacy and local mass effect in the most advanced STS trial. Phase II part of the study will also explore initial efficacy, eg complete response rate, progression free survival and overall survival. To us, the importance of this preliminary analysis is that the findings were similar to the more advanced trials (STS and H&N cancer) and again supported the idea of NBTXR3’s effect being transferable to other solid tumours given its mechanistic mode of action.

Our risk-adjusted NPV valuation of Nanobiotix has increased to €738.3m or €47.2/share, from €543m or €34.8/share, due to an increased probability of success for the H&N cancer indication and rolling our model forward, somewhat offset by a lower net cash position. The main change is the increase in the probability of success for the H&N cancer indication from 45% to 60%, which reflects the likelihood of reaching the market, in line with the most advanced STS indication.

Previously PharmaEngine indicated that they could expand beyond rectal cancer, although did not disclose specific indications. At that time, we assumed four additional indications for PharmaEngine – STS, rectal, oesophageal and liver cancers – in our valuation. We replace the oesophageal cancer indication in our model with H&N cancer, as we see the expansion as in line with the original development plan. However, the valuation was not significantly affected due to a similar calculated market potential.

Currently NBTXR3 is being investigated for a total of six indications in seven clinical trials. Nanobiotix is running STS (Europe/Asia; Phase II/III; with PharmaEngine), prostate cancer (US, Phase I/II), liver cancers (Europe; HCC and metastases; Phase I/II), H&N cancer (Europe; Phase I/II), while PharmaEngine runs two more trials in Asia for rectal cancer (Phase I/II) and H&N cancer (Phase I/II).

In valuing Nanobiotix, we use an accelerated de-risking approach, which we discussed in detail in our previous report. H&N cancer is the second tumour type with positive Phase I/II clinical data, indicating that the effect of NBTXR3 is potentially transferable to other types of tumours due to the fact that this is simply a nanoparticle (coated hafnium oxide) injection. This leads us to increase the probabilities for other indications that are still in Phase I/II from 40% to 45% and results in subsequent increases in the rNPVs.

Nanobiotix posted its Q316 revenues with licence-related income of €1.0m for 9M16, while more detailed H116 results showed that total operating expenses were €13.1m, in line with our expectations. We estimate total opex of €22.5m for FY16. Nanobiotix received an interest-free loan, repayable from September 2019, of €2m from Bpifrance (formerly OSEO). Given the CE mark review timeline of at least nine months and a potential approval by mid-2017 in a best case scenario, we lower our expected 2017 sales in Europe and the associated marketing costs. By end-2016 we estimate total debt of €6.4m and net cash of €21.8m, significantly boosted by a fund-raise in March 2016, resulting in €22.2m gross. According to our model, cash should be sufficient to fund operations well into 2017, assuming that development continues in all planned indications. For the purpose of our model, we include illustrative long-term debt of c €11.9m, assuming that all projects can be fully supported with this in 2017.