Oryzon Genomics — Positive ALICE readouts pave way in AML

Oryzon Genomics (BME: ORY)

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Research: Healthcare

Oryzon Genomics — Positive ALICE readouts pave way in AML

Oryzon Genomics has presented the top-line results of its Phase IIa ALICE trial investigating its lead oncology LSD1 inhibitor iadademstat in combination with azacitidine for the treatment of acute myeloid leukaemia (AML) in newly diagnosed elderly/unfit patients. The study met its primary endpoints of safety and tolerability with no major non-haematological or organ related toxicities reported. Notably, iadademstat also displayed an encouraging efficacy profile, achieving an objective response rate (ORR) of 81% and median overall survival (mOS) of 11.1 months, significantly higher than previously reported values for azacitidine monotherapy (ORR: c 30%; mOS: c 7–8 months). We believe these positive results clearly demonstrate the clinical utility of iadademstat and provide important proof of concept for the drug’s use in the AML setting. We value Oryzon at €847m or €15.5 per share.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Oryzon Genomics

Positive ALICE readouts pave way in AML

Clinical trial update

Pharma and biotech

13 December 2022

Price

€2.11

Market cap

€115m

US$1.06/€

Net cash (€m) at end-September 2022

9.7

Shares in issue

54.7m

Free float

80%

Code

ORY

Primary exchange

Madrid Stock Exchange

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.8)

(13.6)

(23.5)

Rel (local)

(4.7)

(14.3)

(22.6)

52-week high/low

€3.21

€2.06

Business description

Oryzon Genomics is a Spanish biotech focused on epigenetics. Iadademstat is being explored for acute leukaemias, small-cell lung cancer and neuroendocrine tumours. Vafidemstat, its central nervous system (CNS) asset, has completed several Phase IIa trials and a Phase IIb trial in borderline personality disorder is now the lead study, but Oryzon is rapidly expanding its CNS R&D pipeline.

Next events

Phase II PORTICO interim data

Q123

Phase II ALICE final readout

Q422

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Adam McCarter

+44 (0)20 3077 5700

Oryzon Genomics is a research client of Edison Investment Research Limited

Oryzon Genomics has presented the top-line results of its Phase IIa ALICE trial investigating its lead oncology LSD1 inhibitor iadademstat in combination with azacitidine for the treatment of acute myeloid leukaemia (AML) in newly diagnosed elderly/unfit patients. The study met its primary endpoints of safety and tolerability with no major non-haematological or organ related toxicities reported. Notably, iadademstat also displayed an encouraging efficacy profile, achieving an objective response rate (ORR) of 81% and median overall survival (mOS) of 11.1 months, significantly higher than previously reported values for azacitidine monotherapy (ORR: c 30%; mOS: c 78 months). We believe these positive results clearly demonstrate the clinical utility of iadademstat and provide important proof of concept for the drug’s use in the AML setting. We value Oryzon at €847m or €15.5 per share.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/20

9.5

(4.8)

(0.07)

0.0

N/A

N/A

12/21

10.6

(7.2)

(0.09)

0.0

N/A

N/A

12/22e

14.4

(5.0)

(0.05)

0.0

N/A

N/A

12/23e

15.9

(5.8)

(0.06)

0.0

N/A

N/A

Note: *PBT and EPS is normalised, excluding amortisation of acquired intangibles, other income and exceptional items

FRIDA next on the horizon in second-line AML

With the conclusion of the ALICE study, Oryzon intends to keep up the clinical pace of iadademstat in AML with the initiation of the Phase Ib FRIDA study in relapsed/refractory (r/r) FLT3+ AML patients, which is anticipated in Q422. While the AML market is highly competitive, second-line treatment options in r/r FLT3+ AML remain limited and suboptimal, so we view management’s pursuit of this setting as a sensible clinical strategy to maximise the potential opportunity for iadademstat. Additionally, FLT3+ patients in the ALICE study all showed a response to treatment, providing encouraging signs for this AML sub-population in FRIDA.

Recent transactions put LSD1 in the spotlight

The positive readouts from the ALICE trial could not have been more timely, coinciding with some notable deal activity in the LSD1 inhibitor space. In November 2022 Merck announced it would acquire Imago BioSciences for US$1.35bn; Imago BioSciences’ lead clinical asset, LSD1 inhibitor bomedemstat, is being investigated in Phase II studies for the treatment of haematological disorders. While Imago and Oryzon’s pipelines may not directly correlate, we believe such a transaction is a positive development for LSD1 clinical programmes in general, highlighting big pharma’s interest and enhancing their clinical reputation.

Valuation: €847m or €15.5/share

We value Oryzon at €847m or €15.5/share (previously €861m or €16.2/share). The valuation has been affected by our model rolling forward and the update of our exchange rate assumption to $1.06/€ (from $1.01/€), but our underlying long-term assumptions remain unchanged.

ALICE signs off with positive results

The Phase IIa ALICE study represented one of Oryzon’s most advanced clinical oncology programmes. The 48-month open-label study assessed the safety, tolerability, efficacy and optimal dosing of iadademstat in combination with azacitidine as a first-line therapy in adult patients with AML. Being open label, Oryzon was able to provide rolling updates from the trial every six months, consistently displaying impressive response rates in patients, and the latest top-line data did not deviate from this pattern (see Exhibit 1):

Exhibit 1: Evolution of Phase IIa ALICE trial efficacy data

Phase IIa ALICE trial
(iadademstat + azacitidine)

Venetoclax
+ azacitidine or decitabine

Azacitidine

Update/publication

EHA 2019

ASH 2019

EHA 2020

ASH 2020

EHA 2021

ASH 2021

EHA 2022

ASH 2022

DiNardo et al, 2019

Dombret et al, 2015

Enrolment

17% (6/36)

36% (13/36)

50% (18/36)

50% (18/36)

75% (27/36)

100% (n=36)

100% (n=36)

100% (n=36)

-

-

Evaluable patients

5 patients

8 patients

13 patients

13 patients

18 patients

27 patients

27 patients

27 patients

145 patients

241 patients

ORR (CR, CRi, PR)

80% (4/5)

75% (6/8)

77% (10/13)

85% (11/13)

83% (15/18)

78% (21/27)

81%

(22/27)

81%

(22/27)

68% (99/145)

31% (75/241)

Source: Edison Investment Research, Oryzon Genomics

Of the 27 evaluable patients, 22 (81%) achieved an ORR, comprising 14 complete responses (CR) or complete responses with incomplete haematologic recovery (CRi), and eight partial responses (PR). Notably, 10 CR/CRi patients (71%) achieved transfusion independence for red blood cells and platelets, a result that we believe may elicit a positive impact on overall patient compliance for future studies. Nine out of 11 evaluable CR/CRi patients were also shown to be measurable residual disease negative.

The time to response (TTR) was rapid: 19 of 22 ORR patients (86%) responded after two 28-day cycles of treatment; and durable, as 36% of patients responded for more than 12 months and 30% for more than 18 months. Short treatment TTRs are of particular importance for older AML patients and, due to the aggressive nature of chemotherapy treatment, many patients are unable to complete the minimum recommended four cycles of hypomethylating agent (HMA) monotherapy treatment, such as azacitidine, required to achieve a beneficial response. A TTR of 86% achieved by the iadademstat/azacitidine combination after two treatment cycles is therefore clinically significant, in our view.

Finally, an mOS of 11.1 months was reported from the ALICE study, a significant improvement over azacytidine monotherapy, which has reported mOS in the range of 7–8 months. The mOS consisted of the combined results from two dosed patient cohorts of 60μg/m2/day (13 patients) and 90μg/m2/day (14 patients) with mOS of 8.1 and 12.3 months respectively. While Oryzon is not looking to pursue iadademstat/azacitidine in first-line AML, we believe these results still provide valuable and highly encouraging clinical proof of concept.

Paving the route to market with FRIDA

In our view, a potentially significant result from the ALICE study, and one that may provide insight into the upcoming Phase Ib FRIDA trial, was the observation that those evaluable AML patients (n = 3) possessing an FLT3 mutation (FLT3+) all responded to iadademstat treatment. FRIDA will investigate iadademstat in combination with Astella’s FDA-approved FLT3 inhibitor gilteritinib (Xospata) for patients with relapsed/refractory (r/r) FLT3+ AML in a second-line setting. Approximately 50% of patients relapse after first-line AML treatment and 30% possess an FLT3 mutation. Xospata was approved by the FDA in 2018 as a monotherapy treatment for adults with r/r FLT3+ AML and is anticipated to dominate the FLT3+ AML inhibitor market, with sales of the drug expected to reach US$977m by 2028 (see Exhibit 2):

Exhibit 2: Estimated global sales of FLT3+ inhibitors in AML (US$m)

Source: EvaluatePharma, Edison Investment Research

Additionally, the mOS for Xospata monotherapy treatment is 9.3 months and, in our view, combinational treatments may provide scope for further improvements. In our recent Oncology ABCs report, we discussed combination therapies being critical for developing new efficacious treatment regimens in oncology and, should similar positive synergistic effects from iadademstat/Xospata be observed in patients enrolled in FRIDA, we believe this could represent a significant market opportunity for Oryzon.

Having received IND approval, Oryzon has communicated that it expects the first patient to be recruited (FPI) in FRIDA in Q422.

Heightened interest in targeting LSD1

As a reminder, iadademstat is being developed as an inhibitor of the epigenetic target Lysine specific demethylase 1 (LSD1). LSD1 is a gene expression regulator, dysregulation of which has been shown to play a key role in the development of a variety of cancers. With LSD1 contributing to broad, dynamic gene regulation, Oryzon has viewed this as a prime therapeutic target for small molecule inhibition across multiple indications in oncology. Indeed, LSD1 has been identified as a target of interest by both peer biotechs and big pharma. Notably, Merck recently announced that it would acquire the LSD1 focused biotech Imago Biosciences for US$1.35bn ($36.00 per share in cash), news that saw Imago’s stock jump by c 100%. Following closure of the deal (expected in Q123), Oryzon will become one of the most advanced independent LSD1 inhibitor players, as shown in Exhibit 3. Overall, we view the Merck/Imago deal as a highly encouraging precedent transaction in the LSD1 space. Additionally, with the global AML market expected to reach US$10.2bn by 2028 (EvaluatePharma) we see this as a potentially attractive opportunity that may trigger renewed interest from further big pharma players.

Exhibit 3: LSD1 targeting oncology pipeline

Company

Drug

Phase

Indication/s

Notes

Oryzon

Iadademstat

Phase II

Phase I

Phase II

1st line AML

r/r FLT3+ AML

Neuroendocrine cancers

Phase Ib FRIDA study in r/r FLT3+ AML expected to initiate in Q422

Phase II study in neuroendocrine cancers in combination with paclitaxel expected to initiate in Q422

Preparing new Phase Ib/II trial (STELLAR) in metastatic small cell lung cancer

Imago Biosciences (Merck)*

Bomedemstat

Phase II Phase II

Essential thrombocythemia myelofibrosis

Trial readouts expected by end CY22. Merck announced acquisition of Imago for US$1.35bn

Jubilant Therapeutics

JB-802

Phase I/II

Advanced solid tumours

Targets both LSD1 and HDAC6

Salarius Pharmaceuticals

Seclidemstat

Phase I

Ewing sarcoma

Study currently on hold due to patient death classified as a suspected unexpected serious adverse reaction

Bristol Myers Squibb / Celgene

Pulrodemstat

Phase I

Solid tumours and non-Hodgkin lymphomas

In combination with either an antibiotic (Rifampin) or antifungal (Itraconazole)

Otsuka Pharmaceuticals (Astex Pharmaceuticals)

TAS1440

Phase I

r/r AML

In combination with all-trans retinoic acid

Source: EvaluatePharma Note: *Merck acquisition announced on 21 November and expected to close in Q1 CY23.

Valuation

We value Oryzon at €847m or €15.5/share, based on a risk-adjusted NPV analysis using a 12.5% discount rate and Q322 net cash of c €9.7m. Our underlying long-term assumptions remain unchanged, and we roll our model forward in time by four months. We have also updated our exchange rate assumption to $1.06/€ (from $1.01/€), which had a c 3% negative impact on our valuation. Our model includes five rNPV projects (Exhibit 4; for more details see our Outlook note).

Exhibit 4: Valuation of Oryzon

Product

Indication

Launch

Peak sales ($m)

Value
(€m)

Probability

rNPV
(€m)

NPV/share (€/share)

Iadademstat

2L AML

2026

500

756.9

30%

221.2

4.0

1L SCLC

2026

730

800.2

25%

193.8

3.5

Vafidemstat

BPD

2027

1,610

1,251.0

20%

239.7

4.4

Schizophrenia, negative symptoms

2027

700

629.1

15%

86.3

1.6

Aggression in Alzheimer’s disease

2028

910

671.0

15%

96.0

1.8

Net cash end Q322

9.7

100%

9.7

0.2

Valuation

 

 

 

4,118.0

846.7

15.5

Source: Edison Investment Research. Note: SCLC: small-cell lung cancer.

Exhibit 5: Financial summary

Accounts: Year end 31 December (€000s)

2019

2020

2021

2022e

2023e

INCOME STATEMENT

 

 

 

 

 

Total revenues

10,278

9,521

10,615

14,418

15,860

Cost of sales

(430)

(526)

(746)

(473)

(497)

Gross profit

9,847

8,995

9,869

13,945

15,363

Gross margin %

96%

94%

93%

97%

97%

SG&A (expenses)

(2,983)

(3,541)

(3,782)

(3,513)

(3,864)

R&D costs

(11,322)

(11,075)

(13,023)

(15,403)

(16,975)

Other income/(expense)

779

1,476

73

6

6

Exceptionals and adjustments

(11)

(5)

(4)

0

0

Reported EBITDA

(3,690)

(4,149)

(6,866)

(4,965)

(5,470)

Depreciation and amortisation

150

145

144

180

179

Reported EBIT

(3,839)

(4,294)

(7,011)

(4,784)

(5,291)

Finance income/(expense)

(737)

(485)

(169)

(236)

(511)

Other income/(expense)

0

0

0

0

0

Reported PBT

(4,576)

(4,779)

(7,180)

(5,020)

(5,802)

Income tax expense (includes exceptionals)

892

1,379

2,493

2,138

2,316

Reported net income

(3,685)

(3,400)

(4,687)

(2,882)

(3,486)

Basic average number of shares, m

41.6

49.2

53.1

53.6

54.7

Basic EPS (€)

(0.09)

(0.07)

(0.09)

(0.05)

(0.06)

 

 

 

 

 

 

Adjusted EBITDA

(3,679)

(4,145)

(6,862)

(4,965)

(5,470)

Adjusted EBIT

(3,829)

(4,290)

(7,007)

(4,784)

(5,291)

Adjusted PBT

(4,566)

(4,774)

(7,176)

(5,020)

(5,802)

Adjusted EPS (€)

(0.09)

(0.07)

(0.09)

(0.05)

(0.07)

Adjusted diluted EPS (€)

(0.09)

(0.07)

(0.09)

(0.05)

(0.07)

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

Property, plant and equipment

631

644

682

677

674

Intangible assets

39,938

49,216

60,254

70,811

81,216

Investments

67

66

29

29

29

Deferred tax assets

1,721

1,803

1,812

1,812

1,812

Total non-current assets

42,357

51,729

62,778

73,330

83,731

Cash and equivalents

35,111

39,605

28,725

15,598

9,558

Trade and other receivables

2,071

2,351

3,645

2,998

3,321

Inventories

289

317

104

104

104

Other current assets

267

105

132

132

132

Total current assets

37,738

42,377

32,606

18,833

13,116

Deferred tax liabilities

1,721

1,803

1,812

1,812

1,812

Long term debt

6,699

8,680

13,354

13,354

21,354

Other non-current liabilities

0

0

285

285

285

Total non-current liabilities

8,420

10,483

15,451

15,451

23,451

Trade and other payables

4,000

2,839

3,518

3,179

3,349

Short term debt

6,547

4,854

4,306

4,306

4,306

Other current liabilities

0

0

847

847

847

Total current liabilities

10,546

7,693

8,672

8,332

8,502

Equity attributable to company

61,129

75,931

71,262

68,380

64,894

 

0

0

0

0

0

CASH FLOW STATEMENT

 

 

 

 

 

Profit before tax

(4,576)

(4,779)

(7,180)

(5,020)

(5,802)

Cash from operations (CFO)

(3,934)

(4,817)

(3,626)

(2,394)

(3,461)

Capex*

(9,585)

(9,223)

(11,761)

(10,732)

(10,580)

Acquisitions & disposals net

0

0

0

0

0

Acquisition of intangible assets

(9,469)

(9,070)

(11,586)

(10,557)

(10,404)

Other investing activities

8

142

37

0

0

Cash used in investing activities (CFIA)

(19,046)

(18,152)

(23,310)

(21,289)

(20,984)

Net proceeds from issue of shares

18,374

18,181

0

0

0

Movements in debt

(4,112)

200

4,123

0

8,000

Other financing activities

0

0

0

0

0

Cash from financing activities (CFF)

14,262

18,382

4,123

0

8,000

Increase/(decrease) in cash and equivalents

791

4,494

(10,880)

(13,126)

(6,041)

Currency translation differences and other

40

11

348

0

0

Cash and equivalents at start of period

34,320

35,111

39,605

28,725

15,598

Cash and equivalents at end of period

35,111

39,605

28,725

15,598

9,558

Net (debt) cash

21,866

26,071

11,065

(2,061)

(24,102)

Source: Oryzon Genomics, Edison Investment Research. Note: Oryzon reports in Spanish GAAP. *Includes cash outflows related to development costs that were capitalised.

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General disclaimer and copyright

This report has been commissioned by Oryzon Genomics and prepared and issued by Edison, in consideration of a fee payable by Oryzon Genomics. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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