Clal Biotechnology Industries — Portfolio progress continues

In May, MediWound announced that it is now engaged in discussions with multiple third parties interested in a strategic transaction. According to the company, these additional approaches are preliminary, while advanced discussions and mutual due diligence are ongoing with the initial third party, which approached in March. Again, the exact nature of these proposed transactions was not disclosed, but could include anything from a product out-licensing to the acquisition of all of MediWound. If it does involve licensing the rights to a MediWound product, we believe it would likely be for EscharEx, which has a larger addressable market than NexoBrid. It is important to note that we do not currently include any upfront or milestone payments in our EscharEx model, so a licensing agreement could have significant impact on our valuation of the product. Discounting any additional interest, MediWound expects to provide more details regarding the path forward in the coming months. We will update our model once an agreement, if any, is finalised.

In terms of the underlying business, MediWound recently reported its Q118 results. Revenues, which are based on NexoBrid sales in the EU were $0.5m, in line with Q117. According to the company, all clinical development will continue to progress independently of such strategic discussions. The 175-patient US NexoBrid Phase III trial is likely to complete enrolment by mid-2018 with top-line results expected around year-end. The company plans to file a BLA in H219 with these data and further supplement the application with 12-month follow-up data during FDA review. Additionally, the company expects to initiate enrolment for the 160-paedatric patient Phase III NexoBrid study in the US following IRB approval, which is expected in Q218. In June, MediWound received authorisation from South Korea’s Ministry of Health to market and distribute NexoBrid via the BL&H Company as an exclusive distributor. The company intends to launch NexoBrid in South Korea in H218.

With regards to EscharEx, the company expects to submit the Phase III protocol to the FDA in H218, with the actual initiation of the study likely sometime around the end of 2018 or the beginning of 2019. Also, the company announced that after speaking with regulatory experts, it believes the Phase III programme might only need 500 patients across two studies (250 each study), 200 fewer than the previous expectations of 700 (350 each study). If the FDA agrees, this could lead to significant R&D cost savings for the EscharEx programme.

Furthermore, the company announced the opening of a new NexoBrid development programme for the treatment of skin injuries caused by chemical warfare agents, such as sulphur mustard. Exposure to sulphur mustard liquid can cause skin blistering as well as second- and third-degree burns.1 Preliminary results from porcine studies were presented at the European Burn Association Congress in September 2017. This product will likely be developed via the FDA animal rule, which allows for approval based on animal studies for conditions that cannot feasibly be studied in human clinical trials. The company expects to solidify a development plan following FDA guidance and we will update our model to include this programme at that time.

In April, BioCanCell announced the signing of a $22.9m private equity investment in the company. The financing was led by Shavit Capital, an Israeli private equity fund, and was joined by CBI ($3.0m) as well as other new and existing US and Israeli investors. In order to meet TASE regulations, CBI sold approximately 7.5m shares in BioCanCell for NIS8m to Yelin Lapidot, an Israeli institutional investor. Following this transaction, CBI’s ownership of BioCanCell has decreased to 36% (from 44%). CBI also provided BioCanCell with a $3m bridge loan to be repaid when the deal closes. Furthermore, CBI will invest $5m in the private equity investment and upon completion CBI’s ownership will fall to 30%. BioCanCell intends to use these funds to initiate two registrational studies for its lead programme, BC-819 in non-muscle invasive bladder cancer (NMIBC).

As a reminder, BioCanCell plans to initiate two pivotal clinical trials in 2018. BC-204 will be an open-label, Phase II single-arm trial in 140 patients who are unresponsive to Bacillus Calmette-Guerin (BCG) therapy and the primary end point is durable response rate (either partial or complete) at 12 months. It is expected to begin in H118. BC-301 will be an open-label, Phase III trial in approximately 495 patients of BC-819 in combination with BCG versus BCG alone and is expected to begin in H218. The BC-301 trial has been granted a special protocol assessment by the FDA and the primary end point is median time to recurrence. The BC-301 trial will be the first comparative study and we expect the results to elucidate the clinical value of BC-819 for NMIBC.

In May, Biokine’s (27%-owned by CBI) partner, BioLineRx, reported partial results from its 24-donor/recipient patient pair single-arm Phase II trial to evaluate BKT-140/BL-8040 as monotherapy for mobilisation of HSPCs for allogenic transplantation. For the first part of the study, HLA-identical donors received a single dose of 1 mg/kg of BL-8040. Of the 21 evaluable donors that have been enrolled to date, 11 out of 13 donors achieved the primary end point, which was HSPC collection of ≥2×106 CD34 cells/kg of recipient weight in up to two leukapheresis sessions. For the second half of the study, which remains ongoing and includes HLA-identical pairs as well as haploidentical pairs (ie not fully matched), donors were treated with 1.25 mg/kg of BL-8040. Eight out of 8 donors reached the primary end point and this part of the trial remains ongoing. In both cases, BL-8040 was determined to be safe and well tolerated, while adverse events included injection site reactions and transient systemic reactions, which have since been resolved. Thirteen of the 19 successful transplanted recipients reached the secondary end point, which was 100 days post-transplant. The company expects to report on the full effect of BL-8040 on graft-versus-host disease (GVHD) when the data become available at a later date.

BioLineRx also reported top-line results from its 42-patient single-arm Phase IIa clinical trial evaluating BL-8040 in combination with HiDAC in patients with relapsed/refractory AML. The study was divided into a dose-escalation cohort (0.5–2.0 mg/kg) and a dose-expansion cohort (1.5mg/kg) and patients were treated with BL-8040 monotherapy for two days followed by combination BL-8040 and HiDAC therapy (select end points illustrated in Exhibit 1). These early data will also support its ongoing Phase I/IIa trial collaboration with Genentech, investigating the combination of BL-8040 with Tecentriq (atezolizumab), the anti-PDL1 immunotherapy for AML. BioLineRx will present data from the two studies at a European medical conference in June.

Neon (5% owned by CBI) released interim results from the NT-001 trial, a single-arm Phase Ib trial investigating the safety and immunogenicity of NEO-PV-01, a personalised cancer vaccine, in combination with Bristol-Myers Squibb’s Opdivo (nivolumab), a PD-1 immune checkpoint inhibitor, for the treatment of metastatic melanoma, non-small cell lung cancer (NSCLC) and bladder cancer. Neon has reduced target enrolment to 45 patients (from 90 patients) and expects more than half to be melanoma patients. As a reminder, patients will be administered Opdivo at a dose of 240mg by intravenous infusion over 30 minutes every two weeks for 12 weeks. Regardless of disease status, all patients will receive NEO-PV-01 + adjuvant administered subcutaneously in up to four sites (extremity or flanks) while continuing with Opdivo treatment, again for 12 weeks, after which Opdivo therapy will continue until disease progression. As of 31 March 2018, NEO-PV-01 dosing has been initiated in 31 patients and no serious adverse events were observed. Of the 19 patients who have completed the full vaccination course, 10 patients (eight melanoma, one NSCLC, and one bladder cancer) had partial response and three patients (melanoma) achieved stable disease (RECIST criteria). In all three tumour types, administration of NEO-PV-01 was associated with de novo immune responses to approximately 60% of immunising peptides. Additionally, in seven of the 11 patients where biopsies were available, no histologic evidence of tumour was observed in post-vaccine biopsies. The company expects to report one-year follow-up results in H119.

Neon also announced that it has initiated a 15-patient, open-label single-arm Phase Ib for NEO-PV-01 in combination with Merck’s KEYTRUDA (pembrolizumab), a PD-1 immune checkpoint modulator in patients with previously untreated or advanced non-squamous non-small cell lung cancer. One-year follow-up results are expected in H219. The company also plans to initiate the Phase Ib trial investigating NEO-PV-01 in combination with Apexigen’s anti-CD40 antibody (APX005M) or a CTLA-4 antagonist in patients with metastatic melanoma in H218.

Furthermore, the company plans to file an application in Europe in H119 to conduct a trial in patients with solid tumours with their T-cell based therapy, NEO-PTC-01. Additionally, Neon expects to file an IND in H119 to investigate NEO-SV-01, an off-the-shelf peptide vaccine, in the treatment of oestrogen-receptor positive (ER+) breast cancer in the US. And lastly on 31 May 2018, Neon filed a draft prospectus with the SEC detailing an IPO expected to raise ~$100m on the NASDAQ under the symbol NTGN. Morgan Stanley, Bank of America/Merrill Lynch and Mizuho are acting as joint book-running managers.

In March, Gamida Cell (18% owned by CBI) presented data on immune reconstitution (IR) from a random cohort of 22 patients (median age 41.5 years) with hematologic malignancies from its Phase I/II study of NiCord as a graft after myeloablative chemotherapy at the meeting of the European Society for Blood and Marrow Transplantation. Delayed IR following cord blood transplantation is associated with significant morbidity (ie increased risks of infections, relapse, development of secondary malignancies) and mortality.2, 3 IR is affected by human leukocyte antigen (HLA) discrepancy between donor and host, GVHD, preparative radiation/chemotherapy regimens and age-related thymic involution.4 Data from this cohort were compared to subgroups of patients with hematologic malignancies receiving non-manipulated cord blood transplantation (n=27, median age 15.4 years) and T-cell-replete, unrelated bone marrow transplantation (n=20, median age 14.3 years). More than 90% of the patients achieved the primary end point, which was defined as successful CD4+ IR (>50×106/L) within the first 100 days following NiCord transplantation. The secondary end points were IR of CD4+, CD8+, natural killer (NK) cells, B-cells and monocytes during the first year after transplantation. The study found that IR of NK cells (p<0.001), B-cells (p=0.026) and monocytes (p<0.001) after NiCord transplantation was faster in comparison to the other subgroups.

Furthermore, Pi-Cardia recently announced the initiation of its first in-human study with its lead product, Leaflex. The device is a low-profile catheter to treat aortic stenosis without replacing the valve that uses mechanical energy to create fractures in valve calcifications. thereby increasing the orifice area.

We are decreasing our valuation to NIS958m or NIS6.13 per share from NIS1,011m or NIS6.46 per share. This was mainly due to the lower value of the BioCanCell stake (from 44% to 36%), which fell from $62.4m to $51.1m following the April 2018 private equity investment in the company and the decrease in CBI’s cash position at the corporate level. We expect to update our valuation of MediWound further once we get more information about the discussions with the potential strategic partners. We also note that our valuation may change as a result of CBI’s potential participation in future tranches of BioCanCell’s ongoing funding round.

As a reminder, due to significant ownership stakes, CBI consolidates the financials of several of its investments (MediWound, Vedantra, CureTech and the Anatomy fund) and on this basis, it had NIS140.1m ($40.0) in cash, cash equivalents and bank deposits as of Q118. CBI’s cash position at the corporate level (excluding consolidation) was NIS15.2m ($4.3m) at 31 March 2018. We also note that CBI provided BioCanCell with a $3m bridge loan ($2m paid by 31 March 2018), which will be repaid at the closing of the private equity transaction.

Total consolidated revenues of NIS2.2m ($0.6m) were generated through the sales of MediWound’s NexoBrid in Europe, Israel and Argentina, licensing agreements and rent, in addition to NIS1.6m ($0.5m) from the decrease of equity interest in associates in Q118.

Substantial investment was made into the development of underlying technologies and products of CBI’s material assets, as indicated by R&D spend of NIS7.6m ($2.2m), which is down from NIS11.6m ($3.3m) for the same period in 2017. For the period, general and admin costs, which include payroll and related expenses, management fees, and marketing and advertising expenses on a consolidated basis, were NIS17.5m ($5.0m).

We outline historical financials in Exhibit 6; however, we are not providing forecasts at this time.