Prima BioMed — Update 3 January 2016

Prima has initiated the AIPAC (Active Immunotherapy PAClitaxel) Phase II trial of its lead compound IMP321 in patients with metastatic breast cancer (MBC) who are HER2 negative and therefore ineligible for treatment with Herceptin. The trial will recruit approximately 211 patients at 30 sites in six European countries. Four sites in Belgium and three sites in the Netherlands have already received ethics and competent authority approval.

The Phase II trial will begin with an open-label safety run-in stage consisting of 15 patients divided into in two cohorts to confirm the recommended Phase II dose (RPTD) of IMP321 to use in combination with paclitaxel. This will be followed by a randomized, placebo-controlled, double-blind stage where 196 patients will receive six months of treatment with paclitaxel plus either IMP321 or placebo. After six months, paclitaxel treatment will cease and responders and patients with stable disease will continue to receive either IMP321 or placebo monotherapy for a further 12 months. Initial safety and pharmacokinetic data generated during the open label run-in stage will be available in 2016.

The primary endpoint from the randomized stage of the trial is improvement in progression-free survival (PFS), while overall survival (OS) is a secondary endpoint; tumour biomarkers will also be monitored. The European regulator (EMA) has indicated that this trial could be sufficient to support a marketing authorisation if it achieves certain (undisclosed) clinical endpoints.

The company expects the trial to take about three years to complete, so results should be available around the end of 2018. This could potentially allow Prima to file for approval in Europe in 2019 with approval possible in 2020. US approval could potentially be achieved in in 2023 following a Phase III trial.

IMP321 is a soluble LAG-3 Ig fusion protein that activates antigen presenting cells (APCs), including myeloid dendritic cells. These activated APCs process tumour antigens, including those released from cells killed by chemotherapy, transport the antigens to lymph nodes and present the tumour antigens to T lymphocytes. This stimulates T-cell expansion and the proliferation of cytotoxic T-cells, as shown in Exhibit 1. In a previous Phase I/IIa study in MBC (n=30) conducted by lmmutep, administration of IMP321 the day after chemo induced a doubling of the tumour response rate to 50% vs 25% over six months (in comparison to a historical cohort of chemotherapy-only patients).

Prima has provided details about the forthcoming Phase I trial, which will test IMP321 in combination with an undisclosed immune checkpoint inhibitor (ICI) called TACTI-mel, short for Two ACTive Immunotherapies in melanoma. Ethics approval has already been obtained for the Greenslopes Private Hospital in Queensland, Australia and the trial is expected to begin in Q116. The trial will recruit 24 patients with metastatic melanoma who are being treated with an approved ICI. Patients will receive ascending subcutaneous doses of IMP321 up to 30mg per injection. The study will evaluate anti-tumour activity and the nature of the immune response at various doses, in addition to safety, pharmacokinetics and pharmacodynamics.

This study is of particular interest because it will combine the APC activation properties of IMP321, which helps to initiate an immune response, with ICI which ‘releases the brakes’ on the immune effector cells, enabling a stronger immune response. Prima has shown in preclinical studies that combining IMP321 with immune checkpoint inhibitors increased the strength of an anti-cancer immune response and the speed and level of tumour regression.

GSK dosed the first patient in a Phase I study of GSK2831781 anti-LAG-3 monoclonal antibody in autoimmune disease in January 2015 in patients with plaque psoriasis. GSK2831781, which aims to kill the few activated LAG-3 positive T-cells that are autoreactive in autoimmune disease, is derived from IMP731, which it in-licensed from Prima (Immutep) in 2011. In animal studies IMP731 was shown to target and selectively deplete LAG-3 marked T-cells, leaving normal T-cells intact. This offers an interesting new approach compared with standard treatments such as corticosteroids, which inhibit T-cells indiscriminately, suppressing immunity. The approach is potentially applicable to the wider autoimmune disease population; diseases such as multiple sclerosis and rheumatoid arthritis are associated with chronically stimulated T-cells.

At its R&D day in November GSK indicated that it expects to progress its anti-LAG-3 programme into Phase II trials in immuno-inflammatory disease in 2016, with the potential for a regulatory filing in a 2021-25 timeframe.

In December Prima announced further progress in its collaboration with Yamaguchi University and NEC Corporation in Japan, including a new material transfer agreement. The collaboration resulted from evidence that at low doses IMP321 can act as a T-cell adjuvant for cancer vaccines. Yamaguchi plans to initiate a Phase I trial of a peptide cancer vaccine combined with IMP321 in Q116.

The additional cash from the A$2m placement on 30 October (40m shares at 5c/share) sees our DCF valuation of Prima increase slightly to A$273m (previously A$271m) or 13c per share (undiluted, unchanged), based on a discount rate of 12.5%. On a fully diluted basis, our valuation is unchanged at 9c per share, after taking into account the options, warrants and convertible notes in issue. Our core valuation assumptions are unchanged. Exhibit 2 summarises the constituent parts of our valuation.

Exhibit 3 shows that in addition to the 2,058m Prima shares currently in issue, there are a further 1,375m potential shares that could be issued on the exercise of options, warrants and convertible notes, including 1,297m that would be in the money at our 13c per share undiluted valuation. Exhibit 3 shows that after taking into account these potential shares, our diluted valuation is 9c per share. Prima is likely to require additional funding to complete the IMP321 clinical trials; our diluted valuation of 9c per share does not take into account potential dilution from any future capital raising.

The breadth of the LAG-3 pipeline means there could be further upside if Prima or its partners launch additional products into the clinic or broaden the indications being studied.

We include risk-adjusted milestones payable by current partners GSK for IMP731 and Novartis for IMP701, plus milestones from prospective deals for IMP321 and for out-licensing CVac. Possible catalysts include launch of the Phase I trial of IMP321 in melanoma in combination with a checkpoint inhibitor, progression of the licensed anti-LAG-3 antibody into Phase II by GSK, or news on partnering, all of which could provide upside to our current valuation.

Prima acquired Immutep for A$26.3m in H115, including an upfront cash consideration of A$15.8m, A$4.8m of stock and deferred consideration of A$5.7m, which has since been paid out of the proceeds of a milestone payment received in H215 from GSK after the commencement of clinical trials in the IMP731 programme.

The company reported gross cash of A$24.4m at 30 September 2015. Since the end of Q116 (end 30 September), it has issued €1m (A$1.55m) of equity to Nyenburgh Investment Partners and A$2m of equity to an unnamed Australian institutional investor, taking pro forma gross cash to A$27.9m. We forecast A$10m R&D cost in FY16 and FY17. The company estimates that its operations are fully funded into 2017.

Prima is exposed to the same clinical, regulatory and commercialisation risks of all biotech companies. The key sensitivity is clinical progress of its pipeline of LAG-3 candidates, primarily the internally funded IMP321. While Prima has funding in place to cover planned IMP321 Phase I/II studies, including the Phase II study in MBC, it would require a partnership or alternative forms of funding to advance IMP321 further. Existing partnerships with big pharma reduce the financial and execution risk for IMP701 and IMP731; in addition, if the Phase I study of IMP701 reveals evidence of efficacy, this could lead GSK to extend the study to additional indications including RA and MS, which could increase the potential peak sales and therefore the value of the product. Separately, progress with CVac depends on Prima successfully out-licensing the product.