Oryzon Genomics — Q323 recap ahead of key clinical stages

Oryzon Genomics (BME: ORY)

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Research: Healthcare

Oryzon Genomics — Q323 recap ahead of key clinical stages

Oryzon’s Q323 results recapped the clinical progression across its drug development pipeline. The company continues to develop therapies that address unmet needs related to the central nervous system (CNS) and oncology. As noted previously, an important development was the positive safety data for the PORTICO trial, assessing vafidemstat in patients with borderline personality disorder (BPD). Oryzon continues to enrol patients for its lead oncology trial (FRIDA), investigating iadademstat as a potential treatment for acute myeloid leukaemia (AML) and an update is expected in Q224. Based on current visibility, we have adjusted our FY23 operating loss estimates to €5.4m (vs €3.8m previously). Top-line data from PORTICO and FRIDA are expected to be the next key catalysts. Gross cash at the end of Q323 stood at US$8.8m (€8.4m), down from US$14.6m in H123, which we anticipate should fund the company’s operations into Q124. We value Oryzon at €900.3m or €15.4/share (up from €874.1m or €15.6/share).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Oryzon-Genomics_resized

Healthcare

Oryzon Genomics

Q323 recap ahead of key clinical stages

Q323 update

Pharma and biotech

6 November 2023

Price

€2.00

Market cap

€117m

Gross cash balance (€m) at end-September 2023

8.4

Shares in issue

58.6m

Free float

80%

Code

ORY

Primary exchange

Madrid Stock Exchange

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.0

(1.0)

(1.9)

Rel (local)

(0.4)

(0.8)

(17.0)

52-week high/low

€2.88

€1.97

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 (now the lead study), but Oryzon is rapidly expanding its CNS R&D pipeline.

Next events

PORTICO BPD study top-line results

Q124

FRIDA AML study update

Q224

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Oryzon Genomics is a research client of Edison Investment Research Limited

Oryzon’s Q323 results recapped the clinical progression across its drug development pipeline. The company continues to develop therapies that address unmet needs related to the central nervous system (CNS) and oncology. As noted previously, an important development was the positive safety data for the PORTICO trial, assessing vafidemstat in patients with borderline personality disorder (BPD). Oryzon continues to enrol patients for its lead oncology trial (FRIDA), investigating iadademstat as a potential treatment for acute myeloid leukaemia (AML) and an update is expected in Q224. Based on current visibility, we have adjusted our FY23 operating loss estimates to €5.4m (vs €3.8m previously). Top-line data from PORTICO and FRIDA are expected to be the next key catalysts. Gross cash at the end of Q323 stood at US$8.8m (€8.4m), down from US$14.6m in H123, which we anticipate should fund the company’s operations into Q124. We value Oryzon at €900.3m or €15.4/share (up from €874.1m or €15.6/share).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

10.6

(7.2)

(0.09)

0.0

N/A

N/A

12/22

15.7

(6.4)

(0.07)

0.0

N/A

N/A

12/23e

15.9

(6.6)

(0.07)

0.0

N/A

N/A

12/24e

19.0

(10.0)

(0.13)

0.0

N/A

N/A

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

Favourable safety data in PORTICO Phase II

Oryzon continues to progress its Phase IIb PORTICO trial in BPD. Positive aggregated, blinded safety data based on the initial 198 randomised patients (data cut-off of 23 August 2023) were reported in October 2023, confirming a favourable safety profile for vafidemstat (in a blinded analysis), consistent with seven prior completed clinical trials investigating the drug. In our view, PORTICO represents a potentially significant commercial opportunity for Oryzon as there are currently no FDA-approved treatments for BPD. As the PORTICO trial is now fully recruited (n=210), we await top-line data in Q124, which we consider an important catalyst.

Cash runway into Q124

At end-Q323, Oryzon had a gross cash position of €8.4m. Based on the latest cash burn rate in Q323, we estimate that the company has a cash runway into Q124, excluding upcoming debt obligations. However, we note that the company has an opportunity to raise €8m in convertible bonds, which if executed could extend the runway further to Q224. We estimate the need to raise a total of €50m through FY23–25, shown as illustrative debt in our model.

Valuation: €900.3m or €15.4 per share

We value Oryzon at €900.3m, up from €874.1m previously. The increased valuation comes from the combined effect of rolling our model forward and updating to an estimated net debt balance of €6.6m from a net cash balance of €0.9m previously. However, our per-share valuation declines to €15.4 from €15.6 previously due to the increased number of shares outstanding (58.6m).

Upcoming readouts remain key catalysts

Management recapped on Oryzon’s clinical progression across its ongoing activities in the Q323 release. It reaffirmed the company’s plans to share important readouts in H124, while it is also preparing for new clinical programmes to supplement its active pipeline focused on lead assets vafidemstat (for CNS) and iadademstat (for oncology), see Exhibit 1. A key highlight remains the recent favourable blinded safety data from the PORTICO Phase IIb trial shared in October 2023 and we await top-line data in early 2024. Oryzon remains on track for its clinical activities in terms of patient recruitment for other ongoing trials (ie EVOLUTION for schizophrenia and FRIDA for AML). Additionally, it is strengthening the pipeline further by advancing its preclinical portfolio, for example ORY-4001 (a selective histone deacetylase 6 inhibitor), which has recently been nominated for clinical development for the treatment of neurological diseases such as Charcot-Marie-Tooth disease and amyotrophic lateral sclerosis.

Vafidemstat in CNS

The company’s lead study in the CNS space is PORTICO, a multicentre, double-blind, randomised, placebo-controlled Phase IIb clinical trial evaluating the efficacy and safety of vafidemstat in patients with BPD. The two independent primary objectives for the trial are improvements in agitation and aggression, and overall improvement in BPD severity. Encouraging safety data for this fully enrolled study were reported in October (see our previous note for details). The last patient is due to be dosed by the end of 2023 and top-line results are expected in Q124, consistent with prior guided timelines.

Oryzon has also made steady progress enrolling patients for the EVOLUTION trial. This is a Phase IIb study assessing vafidemstat as a potential treatment for negative symptoms (affective flattening, anhedonia and avolition) and cognitive impairment (deficits in memory, attention, learning and executive function) in patients with schizophrenia. We note that there has not been much progress in the field of treatments for schizophrenia since the development of typical antipsychotics (dopamine type 2 receptor antagonists, eg chlorpromazine, haloperidol, pimozide and loxapine) in the 1950s and atypical antipsychotics (which target serotonergic receptors 5-HT2A, eg clozapine, olanzapine, risperidone and quetiapine) in the 1970s. While these drugs have been effective for positive symptoms (hallucinations, delusions) of the condition, they have limited efficacy against negative and cognitive symptoms. Therefore, we believe there is a significant opportunity for Oryzon to address this unmet need and we anticipate an update on this study in 2024.

Management continues to prepare an investigational new drug (IND) application for the planned Phase I/II HOPE trial in Kabuki Syndrome, a rare congenital disorder. Notably, this will be Oryzon’s first clinical effort in developing a precision medicine approach tackling a monogenic CNS indication, meaning a disease known to be caused by a single genetic abnormality. With the clinical successes observed in targeting monogenic diseases in the field of CNS (further information is included in our neuroscience sector report) and potential upside from pursuing an orphan indication, this represents a significant opportunity for Oryzon, in our view. Management is in the process of finalising the design of this trial with the FDA and is targeting the IND application submission in 2024 with the intention of initiating the trial in the same year.

Iadademstat in oncology

For iadademstat in oncology, Oryzon has continued to enrol patients in the FRIDA study in Q323, and a new cohort was initiated in the quarter. This is an open-label, multicentre Phase Ib trial assessing iadademstat in combination with gilteritinib as a potential treatment for relapsed/refractory (r/r) AML patients harbouring the FLT3 mutation. The primary objectives include an assessment of safety and tolerability, and establishing the recommended Phase II dose for this drug combination. Oryzon aims to recruit a total of c 45 patients to the FRIDA trial. We note that the company is targeting the second-line setting in AML, which may expedite the route to market for iadademstat, in our view. We expect updates from this study in Q224.

The Phase II basket trial of iadademstat in combination with paclitaxel in platinum r/r small cell lung cancer (SCLC) and extrapulmonary high-grade neuroendocrine tumours (NET) has also continued to enrol patients across the period. This is being carried out in collaboration with the Fox Chase Cancer Center (FCCC). As part of this collaborative agreement, the FCCC will conduct various combination trials with iadademstat and Oryzon is responsible for the funding, as well as providing technical expertise. Study updates are due to be shared in H224.

Management is also preparing for the Phase Ib/II STELLAR trial. This will be a randomised, multicentre study to investigate iadademstat in combination with an immune checkpoint inhibitor (ICI) for the treatment of extensive-stage SCLC in the first-line setting. In our view, ICI combination approaches are critical in the development of new oncology treatment regimes, and hence we believe this represents a sensible strategy for Oryzon. Furthermore, management believes that STELLAR could support an accelerated approval application. The IND application is in preparation and due to be submitted in 2024.

Exhibit 1: Oryzon’s clinical pipeline

Source: Oryzon website

Financials

During Q323, R&D expenses (accounting for c 85% of total operating expenses) were down at US$3.8m from US$4.3m in Q322. However, year-to-date total R&D expenses for FY23 were higher at US$12.2m versus US$11.9m in 9M22. Lower amounts of ‘other income’ were recorded at US$3.7m in Q323 (vs US$4.2m in Q322), which is usually capitalised R&D expense, mirroring the reduced R&D expense during the quarter. Gross cash stood at US$8.8m at end Q323 compared to US$14.6m at H123, indicating a total cash burn of US$5.8m during the quarter.

Based on year-to-date results and visibility of Q423, we have made some adjustments to our FY23 estimates. Overall, we expect Oryzon to continue its R&D activities in Q423 at a similar pace. Hence, based on the Q323 run rate for operating expenses, we have slightly decreased our FY23 R&D and SG&A expense estimates to €15.6m (€17.0m previously) and €3.2m (€3.5m previously), respectively. As Oryzon capitalises its R&D expenses and offsets it as other income, we have also slightly lowered our other income estimate to €15.9m from €17.3m previously. These modifications have translated to an increase in our FY23 free cash outflow estimate to €18.7m compared to €14.5m previously. Our FY24 estimates remain essentially unchanged.

Valuation higher as we approach key milestones

Our valuation for Oryzon increases to €900.3m from €874.1m previously, mainly reflecting rolling forward our model by six months, which more than offsets the impact of the above-mentioned changes in estimates and increased net debt balance. As we move closer to the anticipated product launches (iadademstat in 2026 and vafidemstat in 2027) and expected milestones, our discounted valuation increases, while our long-term term assumptions are unchanged. However, the per-share valuation declines to €15.4 compared to €15.6 previously due to an increased total number of shares outstanding (58.6m in Q323 vs 56.2m in Q123). Based on gross cash of US$8.8m (€8.4m) in Q323 and the latest cash burn rate of US$5.8m (€5.5m) in Q323, we estimate that Oryzon has a cash runway to Q124, excluding debt repayment obligations in FY23. We also note that the company has the optionality to raise €8m in convertible bonds in two tranches as part of its €20m convertible bond programme. This could extend the company’s cash runway to Q224.

The estimated Q323 net debt balance of €6.6m includes gross cash of €8.4m at end Q323 and the H123 gross debt balance (€15.0m), which is the most recent debt figure the company has reported. Considering the anticipated debt repayments due in H223 (c €2.3m) and debt maturity schedule, we estimate the need to raise a total of €50m through FY23–25, shown as illustrative debt in our model. Alternatively, if the funding is realised through an equity issue instead (assuming at the current trading price of €2.00/share), Oryzon would need to issue 25.0m shares, resulting in our per-share valuation decreasing to €11.4 from €15.4 currently (the number of shares outstanding would increase from 58.6m to 83.6m). A breakdown of our risk-adjusted net present value (NPV) valuation is shown in Exhibit 2.

Exhibit 2: Valuation of Oryzon

Product

Indication

Launch

Peak sales (US$m)

Value
(€m)

Probability

rNPV
(€m)

NPV/share (€/share)

Iadademstat

2L AML

2026

510

810.9

30%

239.9

4.1

Iadademstat

1L SCLC

2026

740

858.2

25%

210.9

3.6

Vafidemstat

BPD

2027

1,640

1,340.5

20%

260.1

4.4

Vafidemstat

Schizophrenia, negative symptoms

2027

710

674.5

15%

94.5

1.6

Vafidemstat

Aggression in AD

2028

920

716.7

15%

101.4

1.7

Estimated net debt at end Q323

(6.6)

100%

(6.6)

(0.1)

Valuation

 

 

 

4,394.2

900.3

15.4

Source: Edison Investment Research

Exhibit 3: Financial summary

Accounts: Year end 31 December (€000s)

2021

2022

2023e

2024e

INCOME STATEMENT

 

 

 

 

Total revenues

10,615

15,698

15,855

18,995

Cost of sales

(746)

(464)

(487)

(512)

Gross profit

9,869

15,234

15,368

18,483

Gross margin %

93%

97%

97%

97%

SG&A (expenses)

(3,782)

(3,163)

(3,194)

(3,827)

R&D costs

(9,746)

(13,681)

(15,600)

(23,975)

Other income/(expense)

(3,203)

(3,714)

(1,820)

0

Exceptionals and adjustments

(4)

0

0

0

Reported EBITDA

(6,866)

(5,323)

(5,246)

(9,318)

Depreciation and amortisation

144

167

149

131

Reported EBIT

(7,011)

(5,490)

(5,396)

(9,450)

Finance income/(expense)

(169)

(871)

(1,219)

(579)

Other income/(expense)

0

(195)

0

0

Reported PBT

(7,180)

(6,557)

(6,615)

(10,029)

Income tax expense (includes exceptionals)

2,493

2,325

2,409

2,367

Reported net income

(4,687)

(4,231)

(4,206)

(7,662)

Basic average number of shares, m

53.1

55.6

58.2

58.6

Basic EPS (€)

(0.09)

(0.08)

(0.07)

(0.13)

Adjusted EBITDA

(6,862)

(5,323)

(5,246)

(9,318)

Adjusted EBIT

(7,007)

(5,490)

(5,396)

(9,450)

Adjusted PBT

(7,176)

(6,361)

(6,615)

(10,029)

Adjusted EPS (€)

(0.09)

(0.07)

(0.07)

(0.13)

Adjusted diluted EPS (€)

(0.09)

(0.07)

(0.07)

(0.13)

BALANCE SHEET

 

 

 

 

Property, plant and equipment

682

611

538

482

Intangible assets

60,254

75,843

89,320

101,786

Investments

29

31

31

31

Deferred tax assets

1,812

2,050

2,050

2,050

Total non-current assets

62,778

78,535

91,938

104,348

Cash and equivalents

28,725

21,317

925

1,269

Trade and other receivables

3,645

3,709

3,677

3,693

Inventories

104

10

10

10

Other current assets

132

129

129

129

Total current assets

32,606

25,165

4,741

5,102

Deferred tax liabilities

1,812

2,050

2,050

2,050

Long term debt

13,354

10,346

14,486

36,877

Other non-current liabilities

285

0

0

0

Total non-current liabilities

15,451

12,396

16,536

38,927

Trade and other payables

3,518

5,742

4,630

5,186

Short term debt

4,306

12,920

7,077

4,562

Other current liabilities

847

70

70

70

Total current liabilities

8,672

18,732

11,777

9,818

Equity attributable to company

71,262

72,572

68,367

60,705

CASH FLOW STATEMENT

 

 

 

 

Profit before tax

(7,180)

(6,557)

(6,615)

(10,029)

Cash from operations (CFO)

(3,626)

(1,848)

(5,136)

(6,991)

Capex

(175)

(76)

(76)

(76)

Acquisitions & disposals net

0

0

0

0

Acquisition of intangible assets

(11,586)

(14,195)

(13,477)

(12,466)

Other investing activities

37

(1)

0

0

Cash used in investing activities (CFIA)

(11,724)

(14,271)

(13,553)

(12,542)

Net proceeds from issue of shares

0

(932)

0

0

Movements in debt

4,123

9,642

(1,703)

19,877

Other financing activities

0

0

0

0

Cash from financing activities (CFF)

4,123

8,710

(1,703)

19,877

Increase/(decrease) in cash and equivalents

(10,880)

(7,408)

(20,392)

344

Currency translation differences and other

348

1

0

0

Cash and equivalents at start of period

39,605

28,725

21,317

925

Cash and equivalents at end of period

28,725

21,317

925

1,269

Net (debt) cash

14,954

3,975

(7,320)

(1,874)

Free cash flow (CFO+ Net capex on tangible assets)

(15,388)

(16,118)

(18,689)

(19,532)

Source: Company reports, Edison Investment Research


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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.

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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.

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.

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London, WC1R 4PS

United Kingdom

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With its focus on high-quality omnichannel supermarkets, Supermarket Income REIT (SUPR) is very well positioned to benefit from strong growth trends in the grocery sector, supportive of its income proposition and capital values. The company is confident that the targeted FY24 DPS of 6.06p (+1%) will be fully covered as adjusted earnings benefit from rental growth, cost efficiency and fixed debt costs.

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