SymBio Pharmaceuticals — Preparing to establish own sales organization

SymBio acquired the rights to develop and commercialize Treakisym from Astellas in Japan (2005) and subsequently in China/Hong Kong, Korea, Taiwan and Singapore (April 2007). Treakisym is approved in Japan for the treatment of the hematological cancers chronic lymphocytic leukemia (CLL) and low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma (lg NHL/MCL). Orphan exclusivity on the currently-marketed freeze dried powder (FD) Treakisym product expires in October 2020.

Treakisym is marketed by Eisai in Japan, Singapore and South Korea under a business partnership agreement that expires in December 2020.

In September 2017, SymBio in-licensed two liquid formulations of bendamustine HCl (Treakisym) from Eagle Pharmaceuticals (Eagle). The new formulations are protected by patents that extend to 2031, which will add around 10 years to the Treakisym product lifecycle compared to the company’s marketed FD powder Treakisym product. The new formulations are more convenient for healthcare workers and for patients, which will be important advantages as SymBio seeks to switch users away from the FD formulation.

The extended period of patent protection for the liquid formulations has made investment in a Phase III study of Treakisym in the DLBCL indication an attractive proposition for SymBio. DLBCL comprises around 45% of NHL cases in Japan, and we estimate that approval in this indication could double the sales potential of Treakisym.

Taken together, the patented liquid formulations and the DLCBL Phase III justify SymBio investing in establishing its own sales organization to market Treakisym and other drugs such as rigosertib (if approved), in our view. We estimate that SymBio could earn an operating profit margin of 50% of net sales of Treakisym under a self-commercialization model, compared to an estimated margin of 10–12% of in-market top-line sales under the arrangement with Eisai.

SymBio has noted that having its own sales organization in place will enable it to better understand and respond to market needs, positioning it to deliver the benefits of Treakisym to healthcare providers and patients. Treakisym is used in the hematology departments of approximately 900 institutions across Japan, with the top 400 institutions accounting for ~90% of sales. If rigosertib is approved for treating MDS, the top 400 institutions would similarly be expected to account for the majority of use. Therefore, SymBio would be in a position to market rigosertib (if approved) through its own sales organization for minimal additional cost. The same operation leverage would apply were SymBio to in-license or develop other hematological drugs. Establishing its own sales organization will be an important step towards achieving SymBio’s vision of establishing itself as a leading specialty pharma company.

Exhibit 1 summarizes the status of SymBio’s product pipeline. The main areas of focus are:

Key news anticipated for SymBio in 2019 includes:

The new liquid formulations of Treakisym that SymBio in-licensed from Eagle are more convenient for healthcare workers and for patients.

The first in-licensed product is an RTD liquid formulation that will significantly reduce dose preparation time, making it easier and safer for health professionals. This compares to the FD Treakisym, which has to be reconstituted before administration, a time-consuming process that carries the risk of exposing healthcare workers to cytotoxic powders and vapors.

The second in-licensed product is a rapid-infusion (RI) formulation that will cut drug infusion time to 10 minutes from 60 minutes for the current Treakisym product (and the RTD formulation).

Exhibit 2 illustrates the differences in use between the current FD Treakisym and the new liquid RTD and RI formulations.

We expect the approval pathway for the RTD Treakisym formulation to be relatively straightforward, as the same dose of drug is administered to patients in the same way, with the only difference being the way the dose is prepared. SymBio is aiming to launch the RTD product in H121, which would allow it to be well established in the marketplace before the expected entry of the first FD generics in 2022.

The RI product represents a greater change to the current treatment protocols, so approval of this product is expected to take longer – we model a 95% chance of a launch by the start of 2023. Given the greater convenience for patients of the rapid 10-minute infusion with the RI formulation, we expect over 95% of patients to be switched to this product.

SymBio is seeking to add another indication for the treatment of r/r DLBCL, an intermediate or high-risk form of NHL, with Treakisym. It commenced a Phase III trial to confirm the safety and efficacy of Treakisym plus rituximab in r/r DLBCL in August 2017. SymBio’s mid-range plan aims to file an NDA in H120. We model Phase III costs of $18m and a potential launch in H221.

DLBCL is a rapidly growing, intermediate or high-risk form of NHL, in contrast to the slower-growing indolent or low-risk lymphomas that are included in the current approvals for Treakisym. There is currently no standard chemotherapy for the treatment of DLBCL.

DLBCL is the most common form of NHL and is estimated to represent 45% of NHL cases in Japan1. Based on epidemiology studies1 and Globocan data, we estimate there will be 35,500 new cases of NHL and 16,000 new cases of DLBCL in Japan in 2020. Assuming that 70% of DLBCL patients progress to receive second-line therapy, we forecast a target market of 11,200 second-line (r/r) DLBCL patients per year in Japan by 2020.

The patient market of 11,200 r/r DLBCL patients in Japan is almost as large as the combined market of ~12,500 patients for the currently approved indications for Treakisym in CLL and first-line and r/r low-grade NHL and MCL patients. Given the high unmet need for this patient group, we model a 50% market penetration and peak sales (net sales after discounts) of $85m for DLBCL vs $84m for the currently approved indications.

SymBio in-licensed rigosertib (iv and oral formulations, Japan and Korean rights) from Onconova in 2011 for MDS, a rare blood cancer. SymBio is contributing patients from Japan to the global Phase III INSPIRE trial of iv rigosertib for the treatment of second-line higher-risk MDS (HR-MDS); as of end of July 2018 it had already enrolled 36 patients in the study.

Onconova announced in January 2018 that it is moving forward with the study as it had been cleared to continue following an interim analysis by the independent data monitoring committee (DMC). Following a pre-planned sample size re-estimation conducted by the DMC as part of the interim analysis, the target enrolment was expanded from 225 to 360 patients, with the aim of increasing the power of the trial. SymBio will continue to collaborate with Onconova on the study and plans to increase the total enrolment in Japan to 40 patients. Onconova is guiding for top-line results of the overall survival analysis after 288 events to be available in 2019. SymBio aims to file for approval in 2021.

Onconova raised $28.8m in May and had a cash balance of $22.4m at 30 September 2018. With operating expenses currently averaging ~$6m per quarter, it should have sufficient funds to report top-line data from the INSPIRE trial.

We have rolled our valuation model forward in time, which increased our valuation of SymBio to ($225m) (¥25,469m), based on a risk-adjusted NPV analysis. We use a 10% discount rate for approved products and 12.5% elsewhere. The additional 20m shares in issue following the exercise of the 45th stock acquisition rights (raising $22.9m) sees value per share decline to $2.9/ADR (vs $3.6/ADR). Our valuation includes Treakisym approved indications and the r/r DLBCL indication, plus rigosertib. Our valuation assumptions and financial forecasts are unchanged. Our main assumptions are summarized in Exhibit 3 below.

We model a 95% likelihood that the RI Treakisym formulation will be launched by the start of 2023, thereby minimizing the penetration of generic copies of the FD Treakisym formulation. We model branded Treakisym market share gradually declining from 96% in 2022 to 75% in 2031, followed by a more rapid decline from 2032 after the liquid formulation patents expire.

Our Treakisym valuation assumes that SymBio earns an average net margin of 10–12% on top-line reported Treakisym sales until 2020. We assume that after 2020 the net operating margin gradually increases to reach 50% in 2024 and subsequent years as SymBio switches to self-commercialization of Treakisym via its own salesforce and the liquid formulations in-licensed from Eagle gain market share vs powder formulations.

We model $13m of development costs to achieve approval for the RTD and RI liquid formulations of Treakisym. We estimate that a salesforce of 60 would be needed to market Treakisym in Japan. At a fully-loaded cost of $250,000 per person, this would cost $15m per year.

In a scenario where the Treakisym market share declines to 50% by 2031 (vs 75% for the base case), our valuation would fall by around $18M ($0.2/ADR) to around $207m ($2.7/ADR).

We currently assume stable Treakisym pricing apart from a 5% price cut in 2022 when FD powder generics are expected to enter the market. However, should Treakisym be subject to an additional price cut in the future, this could represent downside to our forecasts; a 10% price cut in 2019 would remove around $22M from our Treakisym rNPV, or $0.3/ADR.