AdAlta — Preliminary Part A results

AdAlta (AU: 1AD)

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Research: Healthcare

AdAlta — Preliminary Part A results

Part A of the AD-214 Phase I has been completed in 42 healthy volunteers who received a single dose of either AD-214 or placebo. There were no dose limiting or serious adverse events and no concerning clinical laboratory results. Additionally, AD-214 pharmacokinetics increased proportionally with the dose with evidence seen of CXCR4 engagement and high sustained receptor occupancy. AdAlta will now be investigating dosing every two weeks for AD-214 in the Part B portion of the study.

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Healthcare

AdAlta

Preliminary Part A results

Development update

Pharma & biotech

15 March 2021

Price

A$0.19

Market cap

A$45m

A$1.30/US$

Net cash (A$m) at 31 December 2020

8.1

Shares in issue

245.2m

Free float

95.1%

Code

1AD

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

15.6

48.0

136.4

Rel (local)

16.7

45.3

81.0

52-week high/low

A$0.20

A$0.04

Business description

AdAlta is an Australian healthcare company focused on using its proprietary i-body discovery platform to target diseases, with an initial focus on conditions involving fibrosis. Its lead programme is AD-214 for the treatment of idiopathic pulmonary fibrosis, currently in Phase I. AdAlta has also licensed its platform to GE Healthcare for the purpose of diagnostic imaging.

Next events

AD-214 Phase I Part B initiation

Q2 CY21

AD-214 Phase Ib initiation

Q3 CY21

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

AdAlta is a research client of Edison Investment Research Limited

Part A of the AD-214 Phase I has been completed in 42 healthy volunteers who received a single dose of either AD-214 or placebo. There were no dose limiting or serious adverse events and no concerning clinical laboratory results. Additionally, AD-214 pharmacokinetics increased proportionally with the dose with evidence seen of CXCR4 engagement and high sustained receptor occupancy. AdAlta will now be investigating dosing every two weeks for AD-214 in the Part B portion of the study.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(A$)

DPS
(A$)

P/E
(x)

Yield
(%)

06/19

3.5

(5.9)

(0.05)

0.0

N/A

N/A

06/20

3.8

(5.9)

(0.04)

0.0

N/A

N/A

06/21e

3.2

(6.1)

(0.02)

0.0

N/A

N/A

06/22e

3.3

(6.2)

(0.02)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Remainder of Phase I programme redesigned

Following the Part A results, AdAlta has redesigned the remainder of the Phase I programme, forgoing a single ascending dose study in interstitial lung disease (ILD) and idiopathic pulmonary fibrosis (IPF) patients in favour of a multiple ascending dose (MAD) study in healthy volunteers (Part B) and a concurrently run (starting in Q3 CY21) separate Phase Ib in patients with IPF/ILD and other fibrotic diseases.

Phase II IND-ready data package as early as H1 CY22

Part B of the redesigned Phase I will be a blinded, placebo-controlled MAD study in 12–24 patients dosed at 5–15mg/kg every two weeks. This data should be available as early as H1 CY22 and will enable an IND filing to begin the Phase II programme. Additionally, this safety package would cover all intravenous indications for AD-214.

A busy remainder to CY21

Besides progressing through the Phase I programme, AdAlta is currently also expecting GE Healthcare to commence pre-clinical development of an i-body against granzyme B, a known marker of T-cell activation, in Q2 CY21. Additionally, the company is expecting a second external partnership to be announced, around the middle of the year, and two new internal targets in discovery.

Valuation: A$70m or A$0.29 per basic share

We have increased our valuation for AdAlta to A$70m (or A$0.29 per share), from A$60m (or A$0.25 per basic share) previously, due to an increase in the probability of success for AD-214 from 12.5% to 15% following the release of the preliminary Part A data and our increased confidence that the programme will progress. Note that we only attribute value to AD-214 as it is the only programme in human clinical trials, though this could change once trials in additional indications are commenced. The company had A$8.1m in cash at 31 December 2020 and we estimate will likely need to raise an additional A$11m through the end of FY23, barring additional licensing deals.

AD-214 trial update

AdAlta recently announced preliminary results from Part A of the Phase I programme for AD-214 n 42 healthy volunteers who received either a single dose of AD-214 or placebo. AD-214 was very well tolerated in single doses up to 20mg/kg. There were no dose limiting or serious adverse events (adverse events were mostly mild with three grade 2 adverse events) and no concerning clinical laboratory results. Additionally, AD-214 pharmacokinetics increased proportionally with the dose and there was high sustained receptor occupancy (see Exhibits 1 and 2). There was also evidence of CXCR4 engagement through transient increases of white blood cell and stem cell increases (signs of CXCR4 inhibition) as well as transient increases in SDF-1 (a natural ligand of CXCR4).

Exhibit 1: AD-214 pharmacokinetics

Exhibit 2: AD-214 receptor occupancy

Source: AdAlta

Source: AdAlta

Exhibit 1: AD-214 pharmacokinetics

Source: AdAlta

Exhibit 2: AD-214 receptor occupancy

Source: AdAlta

Due to these results, the company has re-designed its Phase I programme. Initially, Part A was to be followed by Part B, a single-dose study in ILD/IPF patients that was then to be followed by Part C, studying weekly dosing in ILD/IPF patients over four weeks. Now Part B will be a blinded, placebo-controlled MAD study in 12–24 healthy volunteers dosed at 5–15mg/kg every two weeks. This study should be completed by year-end CY21, with data available as early as H1 CY22, which will enable an IND filing to begin the Phase II programme. Additionally, this safety package would cover all intravenous indications for AD-214.

Concurrent with Part B, the company expects to commence a separate two-arm Phase Ib study in Q3 of CY21, which will seek to demonstrate AD-214 distribution and CXCR4 receptor occupancy in patients with fibrotic disease, as well as seeking initial indications of efficacy (which could help open the partnership window). The first arm will feature a radio-labelled version of AD-214 for positron emission tomography (PET) imaging and will have approximately 12 patients with fibrotic disease (including around six with IPF/ILD). The second arm will test a maximum of six doses of 5–10mg/kg over 18 weeks in six IPF/ILD patients with and without PET imaging. Both arms will be open-label and on top of standard of care. As a reminder, preclinical studies indicated a target human therapeutic dose of 10mg/kg given intravenously either weekly or every other week.

Valuation

We have increased our valuation for AdAlta to A$70m or A$0.29 per share, from A$60m or A$0.25 per basic share previously, due to an increase in the probability of success for AD-214 from 12.5% to 15% following the release of the preliminary Part A data and our increased confidence that the programme will progress. Note that we only attribute value to AD-214 as it is the only programme in human clinical trials, though this could change once trials in additional indications are commenced.

Exhibit 3: AdAlta valuation table

Product

Main indication

Status

Probability of successful commercialisation

Approval year

Peak sales (A$m)

Economics

rNPV
(A$m)

AD-214

IPF

Phase I

15%

2028

718

100.0%

62.4

Total

 

 

 

 

 

 

62.4

Net cash (as of 31 December 2020)

8.1

Total firm value (A$)

70

Total basic shares (m)

245.2

Value per basic share (A$)

0.29

Options (m)

30.2

Total number of shares (m)

275.4

Diluted value per share (A$)

0.26

Source: Edison Investment Research

Financials

AdAlta reported A$8.1m in cash on its balance sheet at the end of December 2020. Historically, the company has had a relatively low burn rate in terms of operating cash flow, of about A$5.9m in FY20 and A$5.8m in FY19. In H1 of FY21, the burn rate was only A$0.8m, benefiting from the receipt of a A$3.1m R&D tax incentive refund for FY20. We estimate AdAlta will likely need to raise an additional A$11m through the end of FY23 (at which point AD-214 should be in the midst of Phase II testing), which we model as illustrative long-term debt, barring additional licensing deals.

Exhibit 4: Financial summary

A$000s

2019

2020

2021e

2022e

Year end 30 June

AIFRS

AIFRS

AIFRS

AIFRS

PROFIT & LOSS

Revenue

 

 

3,539

3,828

3,244

3,276

Cost of Sales (including R&D)

(7,354)

(7,012)

(7,082)

(7,153)

Gross Profit

(3,815)

(3,185)

(3,838)

(3,877)

Sales, General and Administrative Expenses

(1,315)

(1,265)

(1,316)

(1,368)

EBITDA

 

 

(5,957)

(5,798)

(5,920)

(6,011)

Operating Profit (before amort. and except.)

 

 

(5,989)

(5,840)

(5,961)

(6,052)

Intangible Amortisation

0

0

0

0

Other

(827)

(1,348)

(766)

(766)

Exceptionals

20

(70)

0

0

Operating Profit

(5,969)

(5,910)

(5,961)

(6,052)

Net Interest

51

(96)

(100)

(104)

Other

0

0

0

0

Profit Before Tax (norm)

 

 

(5,938)

(5,936)

(6,062)

(6,157)

Profit Before Tax (FRS 3)

 

 

(5,918)

(6,006)

(6,062)

(6,157)

Tax

0

0

0

0

Deferred tax

(0)

(0)

(0)

(0)

Profit After Tax (norm)

(5,938)

(5,936)

(6,062)

(6,157)

Profit After Tax (FRS 3)

(5,918)

(6,006)

(6,062)

(6,157)

Average Number of Shares Outstanding (m)

118.4

164.0

250.0

252.5

EPS - normalised (c)

 

 

(5.02)

(3.62)

(2.42)

(2.44)

EPS - Reported ($)

 

 

(0.05)

(0.04)

(0.02)

(0.02)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

141

177

164

166

Intangible Assets

0

0

0

0

Tangible Assets

138

99

86

88

Other

3

78

78

78

Current Assets

 

 

9,169

6,731

6,945

6,466

Stocks

0

0

0

0

Debtors

3,613

3,364

3,364

3,364

Cash

5,556

3,367

3,580

3,102

Other

0

0

0

0

Current Liabilities

 

 

(1,819)

(3,205)

(1,125)

(1,125)

Creditors

(1,819)

(1,014)

(1,125)

(1,125)

Short term borrowings

0

(2,191)

0

0

Long Term Liabilities

 

 

0

0

0

(5,000)

Long term borrowings

0

0

0

(5,000)

Other long term liabilities

0

0

0

0

Net Assets

 

 

7,491

3,702

5,984

507

CASH FLOW

Operating Cash Flow

 

 

(5,816)

(5,889)

(5,295)

(5,476)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(171)

(2)

(2)

(3)

Acquisitions/disposals

0

0

0

0

Financing

9,237

1,626

7,796

0

Dividends

0

0

0

0

Other

0

0

0

0

Net Cash Flow

3,250

(4,265)

2,498

(5,479)

Opening net debt/(cash)

 

 

(2,306)

(5,556)

(1,175)

(3,580)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

0

-116

-93

0

Closing net debt/(cash)

 

 

(5,556)

(1,175)

(3,580)

1,898

Source: Company reports, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by AdAlta and prepared and issued by Edison, in consideration of a fee payable by AdAlta. Edison Investment Research standard fees are £49,500 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

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

General disclaimer and copyright

This report has been commissioned by AdAlta and prepared and issued by Edison, in consideration of a fee payable by AdAlta. Edison Investment Research standard fees are £49,500 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

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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