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Research: Healthcare
On 24 September 2020 Telix announced it had submitted its NDA to the FDA for approval of TLX591-CDx, its positron emission tomography (PET) imaging agent targeting prostate-specific membrane antigen (PSMA). The agency has a statutory 12 months to complete its assessment (two to accept the application and 10 to review). TLX591-CDx would be the company’s first approved product and it is in preparations to be ready to launch the product in 2021, which includes establishing distribution and supply-chain relationships.
Written by
Telix Pharmaceuticals |
TLX591-CDx NDA submitted |
Regulatory update |
Healthcare equipment & services |
28 September 2020 |
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Business description
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Telix Pharmaceuticals is a research client of Edison Investment Research Limited |
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On 24 September 2020 Telix announced it had submitted its NDA to the FDA for approval of TLX591-CDx, its positron emission tomography (PET) imaging agent targeting prostate-specific membrane antigen (PSMA). The agency has a statutory 12 months to complete its assessment (two to accept the application and 10 to review). TLX591-CDx would be the company’s first approved product and it is in preparations to be ready to launch the product in 2021, which includes establishing distribution and supply-chain relationships.
Year end |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
10.3 |
(15.7) |
(6.8) |
0.0 |
N/A |
N/A |
12/19 |
15.2 |
(31.1) |
(11.9) |
0.0 |
N/A |
N/A |
12/20e |
15.0 |
(29.9) |
(11.8) |
0.0 |
N/A |
N/A |
12/21e |
97.8 |
54.5 |
21.7 |
0.0 |
7.8 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Clinical data package on over 600 patients
The company’s NDA includes data on over 600 patients from multiple clinical studies. This includes efficacy data from over 400 patients gathered by Memorial Sloan Kettering Cancer Center, as well as safety data on over 200 patients from a clinical study performed by Endocyte and Novartis, which used TLX591-CDx to screen patients for their PSMA targeted therapeutic. Additionally, the package includes independent data from the landmark proPSMA study (and other literature), which provides substantial evidence of the utility of PSMA PET imaging.
Getting ready for launch
In addition to the current application, the company also submitted an MAA in April 2020. Telix is preparing for the commercial launch of the product and has established distribution agreements with PharmaLogic and Cardinal Health. It recently expanded this footprint with a newly announced agreement with IRE Elit for distribution in France. Additionally, Telix has acquired a radiopharmaceutical manufacturing facility in Seneffe, Belgium, to support its European isotope supply requirements (as well as R&D needs).
Valuation: A$567m or A$2.23 per share
Our valuation remains unchanged at A$567m or A$2.23 per share. The company reported A$23.3m net cash at the end of Q220, which we assume will be sufficient to reach the approval decision for TLX591-CDx.
US marketing application submitted
The submission of the NDA in the US is a major milestone for Telix as it approaches the potential commercial launch of its first approved medical product. The product is currently available in the US and Europe for research use only and the company has seen steadily increasing sales in these channels, which we hope will translate to increased interest in the product if it is approved.
According to Telix’s press release, the application is being submitted ‘for the imaging of prostate cancer using PET’. We previously speculated over the precise indications for which the product would be submitted and, based on this language, we assume it has been submitted for the broadest label of simply ‘prostate imaging’, which would encompass any imaging need. This includes imaging after biochemical recurrence (which we consider to be the most well supported indication), as well as initial staging, and tracking drug response. We expect the agency to evaluate each of these scenarios and for it to be a matter of review. Our estimates conservatively include imaging after biochemical recurrence, but we may expand this later based on FDA feedback.
Both the current NDA and the previously submitted MAA are being made using a collection of prospective and retrospective clinical data. This includes a large data set (n>400) gathered by researchers at Memorial Sloan Kettering Cancer Center, as well as imaging data gathered in the VISION study (n>200) performed by Endocyte/Novartis to support approval of their product 177Lu-PSMA-617, a PSMA targeted radiotherapeutic similar to Telix’s therapeutic TLX591. Telix granted Endocyte access to the TLX591-CDx kit to screen patients for the study. Telix previously met with the FDA in a pre-NDA meeting in February 2020 and reported that ‘The FDA has provided detailed feedback on the clinical briefing package for the efficacy data, which the company expects to be able to satisfy, based on the planned submission dataset’. Moreover, no safety red flags were raised. The company has not released specific feedback on its discussions with European regulators, but we expect the process to be similar.
Telix has also been laying the groundwork to support the commercialisation of TLX591-CDx, including the necessary infrastructure and logistics. The company has previously signed distribution agreements with PharmaLogic and Cardinal Health. The last is significant because Cardinal is the largest distributor of nuclear medicine products in the US, with access to 80% or more of the US market (according to Telix). Telix also recently announced signing an agreement with IRE Elit for distribution in France.
Additionally, in April 2020 Telix announced it had completed the acquisition of a radiopharmaceutical manufacturing facility in Seneffe, Belgium, from Eckert & Ziegler Strahlen und Medizintechnik. The company stated that isotopes generated at this site will support the commercial sales of TLX591-CDx and TLX250-CDx in Europe following their launches, although it will not be limited to these products and will be able to supply a range of isotope needs. More generally, the acquisition will allow Telix to expand its R&D footprint.
Valuation
Our valuation remains unchanged at A$567m or A$2.23 per share. The current application does alter any of our assumptions, but we may reconsider the precise market for TLX591-CDx based on feedback from the FDA.
Exhibit 1: Valuation of Telix
|
Peak sales (US$m) |
Likelihood (%) |
rNPV (A$m) |
rNPV/share (A$) |
|
TLX250-CDx kidney cancer imaging: |
80 |
85% |
93.6 |
$0.37 |
|
TLX250 kidney cancer therapeutic: |
500 |
20% |
74.4 |
$0.29 |
|
TLX591-CDx prostate cancer imaging |
180 |
80% |
211.7 |
$0.83 |
|
TLX591 prostate cancer therapeutic: |
1,090 |
20% |
153.2 |
$0.60 |
|
TLX101 brain cancer therapeutic |
510 |
10% |
51.8 |
$0.20 |
|
SG&A |
(41.0) |
($0.16) |
|||
Portfolio total |
543.6 |
$2.14 |
|||
Net cash (Q220) |
23.3 |
$0.09 |
|||
Enterprise total |
567.0 |
$2.23 |
Source: Telix reports, Edison Investment Research
Financials
Our financial forecasts remain unchanged. Telix reported A$23.3m in net cash at the end of Q220, which we assume will be sufficient to reach the approval decision for TLX591-CDx.
Exhibit 2: Financial summary
|
A$'000s |
|
2018 |
2019 |
2020e |
2021e |
Year end 31 December |
AASB |
AASB |
AASB |
AASB |
||
PROFIT & LOSS |
||||||
Sales, royalties, milestones |
195 |
3,485 |
3,630 |
97,773 |
||
Other (includes R&D tax rebate) |
10,142 |
11,693 |
11,400 |
0 |
||
Revenue |
|
|
10,337 |
15,178 |
15,030 |
97,773 |
R&D expenses |
(18,692) |
(21,162) |
(21,750) |
(21,250) |
||
SG&A expenses |
(9,150) |
(15,800) |
(16,274) |
(16,762) |
||
Other |
0 |
0 |
0 |
0 |
||
EBITDA |
|
|
(17,505) |
(24,327) |
(25,643) |
59,761 |
Operating Profit (before amort. and except.) |
|
(18,992) |
(24,078) |
(26,023) |
58,692 |
|
Intangible Amortisation |
0 |
(4,236) |
(4,309) |
(4,309) |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Operating Profit |
(18,992) |
(28,314) |
(30,332) |
54,383 |
||
Net Interest |
304 |
(2,310) |
446 |
79 |
||
Profit Before Tax (norm) |
|
|
(15,714) |
(31,122) |
(29,886) |
54,462 |
Profit Before Tax (reported) |
|
|
(15,714) |
(31,122) |
(29,886) |
54,462 |
Tax benefit |
1,884 |
3,255 |
0 |
707 |
||
Profit After Tax (norm) |
(13,830) |
(27,867) |
(29,886) |
55,169 |
||
Profit After Tax (reported) |
(13,830) |
(27,867) |
(29,886) |
55,169 |
||
Average Number of Shares Outstanding (m) |
202.1 |
233.4 |
253.5 |
253.8 |
||
EPS - normalised (c) |
|
|
(6.84) |
(11.94) |
(11.79) |
21.74 |
EPS - diluted (c) |
|
|
(6.84) |
(11.94) |
(11.78) |
21.21 |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
40,852 |
43,928 |
43,062 |
38,155 |
Intangible Assets |
39,451 |
41,948 |
37,638 |
33,329 |
||
Tangible Assets |
226 |
1,899 |
5,341 |
4,744 |
||
Investments |
1,175 |
82 |
82 |
82 |
||
Other |
||||||
Current Assets |
|
|
35,856 |
58,679 |
21,848 |
87,862 |
Stocks |
643 |
542 |
446 |
446 |
||
Debtors |
8,436 |
12,071 |
11,778 |
378 |
||
Cash |
25,771 |
44,598 |
7,865 |
85,279 |
||
Other |
1,007 |
1,468 |
1,759 |
1,759 |
||
Current Liabilities |
|
|
(8,242) |
(10,625) |
(3,224) |
(7,932) |
Creditors |
(6,893) |
(9,218) |
(181) |
(4,889) |
||
Short term borrowings |
(1,133) |
(490) |
(489) |
(489) |
||
Other |
(216) |
(917) |
(2,554) |
(2,554) |
||
Long Term Liabilities |
|
|
(15,562) |
(21,902) |
(19,875) |
(19,875) |
Long term borrowings |
(596) |
(1,641) |
(666) |
(666) |
||
Other long-term liabilities |
(14,966) |
(20,261) |
(19,209) |
(19,209) |
||
Net Assets |
|
|
52,904 |
70,080 |
41,810 |
98,211 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(21,065) |
(23,314) |
(37,021) |
77,099 |
Net Interest |
316 |
(19) |
446 |
79 |
||
Tax |
0 |
0 |
0 |
707 |
||
Capex |
0 |
(403) |
(644) |
(471) |
||
Acquisitions/disposals |
(2,693) |
(65) |
0 |
0 |
||
Equity Financing |
0 |
43,890 |
419 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
(218) |
0 |
||
Net Cash Flow |
(23,442) |
20,089 |
(37,018) |
77,414 |
||
Opening net debt/(cash) |
|
|
(48,414) |
(24,042) |
(42,467) |
(6,710) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(929) |
(1,664) |
1,261 |
0 |
||
Closing net debt/(cash) |
|
|
(24,042) |
(42,467) |
(6,710) |
(84,124) |
Source: Telix, Edison Investment Research
|
|
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