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Prescient Therapeutics
Initiation of coverage
No time like the Pres(ci)ent
Pharma & biotech
29 April 2015
Prescient acquired two promising cancer compounds that target major
tumour survival pathways in 2014. The most advanced compound, PTX200, is in Phase Ib/II trials in breast and ovarian cancers; interim data from
the breast cancer study are expected in early 2016. Three additional Phase
Price
Ib/II trials are scheduled to start by June 2016, subject to funding. We value
Prescient at A$35m or A$0.66 per share.
Net cash (A$m) at 31 December 2014
Year end
06/13
06/14
06/15e
06/16e
Revenue
(A$m)
2.2
0.0
0.0
0.0
PBT*
(A$m)
1.8
(1.3)
(2.6)
(7.1)
EPS*
(c)
15.1
(5.2)
(5.1)
(13.2)
DPS
(c)
0.0
0.0
0.0
0.0
P/E
(x)
N/A
N/A
N/A
N/A
Yield
(%)
N/A
N/A
N/A
N/A
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items
and share-based payments.
A$0.08
Market cap
A$4m
US$0.80/A$
Shares in issue
2.3
52.7m
Free float
64%
Code
PTX
Primary exchange
ASX
Secondary exchange
N/A
Share price performance
PTX-200: Breast and ovarian Phase I/II ongoing
PTX-200 (formerly TCN-P) inhibits Akt, a key component of signalling pathways
known to promote cancer cell growth and resistance to chemotherapy. A US openlabel Phase Ib/II study is evaluating PTX-200 in breast cancer; 15 patients had
been treated at end-November 2014, and the Phase II component is expected to
start in H215. The first patients have been treated in a Phase Ib trial in ovarian
cancer and a Phase Ib/II study in acute myeloid leukaemia is planned for H215.
PTX-100: Phase I/II breast and myeloma planned
PTX-100 (formerly GGTI-2418) is being developed for the treatment of multiple
myeloma, breast and pancreatic cancer. PTX-100 is expected to enter Phase Ib/IIa
clinical trials in myeloma in H215 and breast cancer in H116. PTX-100 blocks the
cancer growth enzyme geranylgeranyltransferase-1, which is part of the Ras
oncogene signalling pathway. A Phase I study showed that ~30% of patients with
advanced solid tumours had stable disease following PTX-100 therapy. In February
2015 Prescient in-licensed the p27 biomarker for use as a companion diagnostic.
Patients with low levels of p27 are more likely to respond to PTX-100 therapy.
Funding required to unlock pipeline value
Prescient needs additional capital to fully fund its clinical trial programme and we
estimate it will require ~A$6m to conduct the planned Phase Ib/IIa trials of PTX-100
in breast cancer and multiple myeloma and PTX-200 in AML. PTX-200 was
acquired for ~A$1m (shares/cash) from AKTivate Therapeutics (November 2014)
and PTX-100 for ~A$0.5m (all shares) from Pathway Oncology (May 2014).
Valuation: A$35m or A$0.66 per share
%
1m
3m
12m
Abs
2.4
(20.0)
(58.0)
Rel (local)
1.9
(25.5)
(60.9)
52-week high/low
0.22
0.08
Business description
Prescient Therapeutics (previously Virax) is an
ASX-listed biotechnology company focused on
developing novel products for the treatment of
cancer. It has two products, PTX-100 and PTX-200
in clinical development for a range of cancers.
Next events
Additional Phase Ib/II trials to begin
H215
PTX-200 breast cancer interim data
H116
Analysts
Dr Dennis Hulme
+61 (0)2 9258 1161
Dr Mick Cooper
+44 (0)20 3077 5734
[email protected]
Edison profile page
We value Prescient at A$35m or A$0.66 per share, compared to its market
capitalisation of A$4m. Taking into account 14m potential deferred acquisition
shares and 6.4m options we calculate a diluted value of A$0.48 per share (this
does not account for any dilution from additional ~A$6m funding we estimate may
be required in FY16).
Prescient Therapeutics is a research client of Edison Investment Research Limited
Investment summary
Company description
Prescient Therapeutics is a Melbourne-based oncology firm that acquired exclusive global licences
for two clinical-stage cancer compounds in 2014. The upfront acquisition cost of the two
compounds was modest – ~A$0.5m in cash and shares for PTX-100, and ~A$1m in shares for
PTX-200. In exchange for the modest upfront cost, the vendors and the owners of the IP will share
in the upside if the products are successful. Prescient was created through the recapitalisation of
the ASX-listed company Virax (ASX:VHL), which was in voluntary administration from August 2012
to November 2013. Prescient raised A$2.5m at A$0.10/sh in November 2013, and a further A$3m at
A$0.20/sh in March 2014 (total A$5.08m after costs).The company underwent a 20-to-one share
consolidation and changed its name to Prescient Therapeutics in December 2014.The company’s
most advanced anti-cancer compound, PTX-200, is in Phase Ib/II trials in breast and ovarian
cancers, while a Phase Ib trial in acute myeloid leukaemia is planned for H215. Interim data from
the breast cancer study are expected to report in H116. Two Phase Ib/II trials of the company’s
other drug candidate, PTX-100, are also scheduled to start in H115, subject to funding. The
products have both completed Phase I trials, so the challenges of manufacturing scale-up and initial
safety studies are behind them. Our rNPV valuation is A$35m (A$0.66/share).
Our valuation model is based on a risk-adjusted NPV of Prescient’s key projects and indications,
applying our standard 12.5% discount rate. Our valuation also includes risk-adjusted milestone
payments from potential licensing deals for PTX-100 and PTX-200. Our model suggests that
Prescient is worth A$35m, compared to its market capitalisation of A$6m. On a per share basis
using the basic number of shares on issue, of 52.7m, we derive a value of A$0.66 per share. If we
assume that the 9m Pathway deferred acquisition shares and the 5m AKTivate deferred acquisition
shares will all be issued, and the 6.4m options on issue will be exercised, we calculate a diluted
value of A$0.48 per share.
Sensitivities: Development and funding risks
Prescient is subject to typical biotech company development risks, including the unpredictable
outcome of trials, the success of competitors, financing and commercial risks. Key sensitivities
specific to Prescient’s investment case mainly relate to the ongoing breast and ovarian cancer
clinical trials for PTX-200 and the company’s ability to secure funding to conduct additional clinical
studies of PTX-100 and PTX-200. There is additional risk in the company’s ability to secure
licensing deals if the Phase II trials are successful, a key component of its current strategy. The
small market cap brings the risk of significant dilution if Prescient raises additional capital to fund
clinical trials. For example, if Prescient was to raise A$6m at A$0.075/sh (a 10% discount to the
current share price), the additional stock would lower the diluted value from A$0.48/sh to A$0.27/sh.
Financials: Additional funding required for clinical trials
Prescient had A$2.3m cash on 31 December 2014, and the cash burn rate in FY H115 was
A$1.1m. We expect the burn rate to increase in H215 following the acquisition of AKTivate
Therapeutics in December 2014. The investigator-initiated Phase Ib/IIa trial of PTX-200 in breast
cancer is funded by a non-dilutive grant from the US NIH. We expect Prescient will require A$6m in
financing by FY16, and a further A$11m in FY17. At this early stage we show the financing as longterm debt, acknowledging that it could also be achieved by an equity issue or via licensing
agreements.
Prescient Therapeutics | 29 April 2015
2
Overview – Prescient Therapeutics
Prescient is developing two anti-cancer compounds targeting major tumour survival pathways. The
first compound, PTX-100 (formerly GGTI-2418) blocks the important cancer growth enzyme
geranylgeranyltransferase-1 (GGT1), which performs an essential step in the activation of many of
the downstream signalling proteins in the Ras pathway. A Phase I trial reported that PTX-100 was
well tolerated in 13 patients with advanced solid tumours. The most advanced compound, PTX-200,
is a specific inhibitor of Akt, a key component of signalling pathways known to promote cancer cell
growth and resistance to chemotherapy. PTX-200 is in Phase Ib/II trials in breast and ovarian
cancers; interim data from the breast cancer study are expected to report in CY H116. Two
additional Phase Ib/II trials are scheduled to begin in H215 and one in H116, subject to funding.
Prescient retains a legacy programme from the old Virax – the Co-Ex-Gene platform. In March
2007 the company licensed the technology to the French biotechnology company Transgene.
However, the first A$7.8m of revenue from this programme is payable to the Creditors Trust set up
by the Virax Administrators. We do not attribute any value to the Co-Ex-Gene platform.
Exhibit 1: Prescient Therapeutics’ product pipeline
Drug
PTX-200
PTX-100
Indication
Breast cancer
Ovarian cancer
Acute myeloid leukaemia
Breast cancer
Multiple myeloma
Development-stage
Phase Ib/II
Phase Ib/II
Phase I
Phase I
Phase I
Next steps
15 patients treated in Phase Ib arm. Phase II expected to begin in H115. Interim data: H215.
First patients treated in Phase Ib arm. Phase II component expected to start in H115.
Phase Ib/II to start in H215
Re-opening of IND. Phase Ib/II scheduled to start in H116
Allowance of IND. Phase Ib/II scheduled to start in H215
Source: Edison Investment Research
Pathway Oncology acquisition
Prescient acquired an exclusive worldwide licence to PTX-100 from Yale University and the
University of South Florida through the purchase of Pathway Oncology in May 2014.The upfront
acquisition cost was ~A$0.5m (A$25k cash plus 3m Prescient shares – see Exhibit 2). The Pathway
vendors may also qualify for contingent consideration totalling 9m shares (~A$1m at the current
share price) if the following clinical milestones are met: i) 4.5m shares if the US FDA allows an IND
for PTX-100 by November 2015; and 4.5m shares if the first patient is dosed with PTX-100 in a
Phase Ib/II trial by March 2017.
In addition to the Pathway acquisition cost, Prescient must pay Yale modest minimum yearly
payments, lump-sum milestone payments upon achieving clinical development and regulatory
approval milestones, and net sales revenue royalties.
Exhibit 2: Upfront and deferred consideration for Pathway and AKTivate acquisitions
Acquisition
Pathway (PTX-100)
- upfront
- deferred (IND)
- deferred (start Phase Ib)
- Pathway total
AKTivate (PTX-200)
- upfront
- deferred (positive Phase IIa)
- AKTivate total
Acquisitions grand total
Cash
(A$m)
Shares
(m)
% of Prescient shares on
issue as at 23 Feb 2015
% of Prescient shares if all deferred
acquisition shares issued
0.025
3.0
4.5
4.5
12.0
6%
9%
9%
23%
18%
6.7
5.0
11.7
23.7
13%
9%
22%
45%
18%
36%
0.025
0.300
0.300
0.325
Source: Edison Investment Research
Executive director Paul Hopper was appointed a director at the completion of the Pathway
acquisition. Mr Hopper and associated parties owned 59.4% of Pathway prior to the transaction,
and will be entitled to 59.4% of the contingent acquisition shares if the milestones are met. As Mr
Hopper was not a director at the time of the acquisition it was not a related party transaction.
Prescient Therapeutics | 29 April 2015
3
AKTivate Therapeutics acquisition
Prescient acquired an exclusive global licence to PTX-200 through the acquisition of AKTivate
Therapeutics in November 2014. The upfront consideration was US$0.3m cash plus 6.7m Prescient
shares (total value ~A$1m). Prescient will issue a further 5m shares (~A$0.5m) to the vendors if
PTX-200 meets at least one of the following milestones by November 2016:

an overall response rate of at least 30% in the on-going Phase Ib/II ovarian cancer trial;

a Pathologic Complete Response rate of at least 50% in the Phase Ib/II breast cancer trial; or

an overall response rate of at least 40% in a leukaemia trial.
AKTivate was a related party of director Paul Hopper, and had acquired the technology from
Cahaba Pharmaceuticals several months earlier. Of the AKTivate acquisition consideration, 2.1m
Prescient shares and the US$300k cash went to Cahaba Pharmaceuticals and the inventors Sebti
and Howlett. The Hopper parties, who were shareholders of AKTivate, received 4.6m (68.4%) of the
upfront acquisition shares and will receive 100% of the milestone shares if they are issued.
Separate to the AKTivate acquisition consideration, additional milestone payments of up to
US$19m are potentially payable to Cahaba – US$10m for clinical progress and US$9m for first FDA
approval. If Prescient sublicenses the technology before paying the milestones, Cahaba will receive
10-25% of the sublicensing revenue, or 3.5% of net sales, whichever is greater.
Ras signalling pathways have been successfully targeted
The 3 Ras genes in humans (HRAS, KRAS and NRAS) are the most common oncogenes in human
cancer; mutations that permanently activate Ras are found in 20-25% of all human tumours. This
has pinpointed the Ras signalling pathways as promising targets for anticancer drug development.
The main signalling pathways that are activated by Ras are shown in Exhibit 3.
Exhibit 3: Ras signalling pathways
Source: Berndt et al 2011. Nature reviews 11 p777
The first drug licensed to act on a downstream Ras pathway is sorafenib (Nexavar, Amgen/Bayer),
which inhibits RAF kinase (shown on the left-hand side in Exhibit 3) as well as a number of other
receptor tyrosine kinases involved in signalling pathways. Sorafenib recorded global sales of
US$980m in 2014. More recently, the BRAF inhibitors vemurafinib (Zelboraf, Daiichi
Sankyo/Roche) and dabrafenib (Tafinlar, GlaxoSmithKline) have been approved for the treatment of
melanoma patients with tumours that carry the BRAF V600E mutation. The MEK inhibitor trametinib
(Mekinist, GlaxoSmithKline) is approved for use in patients with BRAF mutations as a single agent
or in combination with dabrafenib.
Prescient Therapeutics | 29 April 2015
4
PTX-100: Phase I/II trials in breast cancer and myeloma planned
PTX-100 (GGTI-2418) blocks the cancer growth enzyme geranylgeranyltransferase-I (GGT1),
which is required for the full function of the Ras oncogene signalling pathway. Many of the proteins
in signal transduction pathways require a special lipid to be attached before the protein can move to
its proper cellular location and become fully active. There are two enzymes that can attach these
special lipids – either GGT1 or farnesyltransferase (FT). Some signalling proteins can only be
modified by GGT1, some only by FT, and others can be activated by either enzyme. Four FT
inhibitors (FTI) have been tested in clinical trials: tipifarnib (J&J); lonafarnib (Merck & Co);
BMS-214662 (Bristol-Myers Squibb); and L-778123 (Merck & Co). However, despite promising
results in animal models they did not show efficacy in clinical trials.
A number of components of the Ras signalling pathway, including Rho and RaI (Exhibit 3), need to
have a geranylgeranyl (GG) lipid attached by GGT1 before they can become fully active and
transmit a ‘cancer-causing’ signal. PTX-100 inhibits GGT1 and stops RaI and Rho being activated.
1
According to the BioCentury drug pipeline database and a scientific review article, PTX-100 is the
only GGT1 inhibitor that has entered clinical development.
PTX-100 produced encouraging results in mouse models. Firstly, the two doses tested inhibited
tumour growth by 94% and 74% in a breast cancer xenograft mouse model (Exhibit 4). Secondly,
treatment with PTX-100 caused an average 60% shrinkage in breast cancer tumours in ErbB2
transgenic mice that are genetically modified to have a strong disposition to develop breast cancer.
2
Finally, PTX-100 inhibited tumour regrowth in a breast cancer stem cell mouse model.
Subsequently, in a Phase I trial in 13 patients with advanced solid tumours, PTX-100 was well
tolerated up to the maximum tolerated dose of 2060mg/m2. Patients received a 30-minute infusion
on days one to five of a 21-day cycle. No tumour responses were observed, but 4 out of 13 patients
3
had stable disease for between three and seven cycles of treatment. The company proposes to
initiate Phase Ib/IIa trials of PTX100 in multiple myeloma in H215 and breast cancer in H116.
Exhibit 4: PTX-100 (GGTI-2418) inhibits tumour growth in breast cancer mouse model
Source: Kazi et al 2009. Molecular and Cellular Biology; 29(8) 2254-2263, p2261
P27 cancer biomarker may identify PTX-100 responders
Prescient has in-licensed exclusive global rights to the cancer biomarker p27 for use as a
companion diagnostic to identify cancer patients who are more likely to respond to PTX-100
therapy. PTX-100 inhibits the activation of the signalling protein Rho, which is part of the Ras
oncogene pathway and requires activation by GGT1. In normal cells p27 acts as a brake on cell
multiplication, but in cancer cells overactive Rho lowers the level of p27, releasing the brake on the
1
2
3
Berndt et al 2011. Nature reviews 11 p775-791.
Genestier et al 2010. Stem Cells 30:1327-1337.
O’Dwyer et al 2010. Ann. Oncol. 21, ii42.
Prescient Therapeutics | 29 April 2015
5
cell cycle. By selecting patients on the basis of low levels of p27, which indicates overactive Rho,
the diagnostic test may identify patients who are most likely to respond to PTX-100 treatment.
PTX-200: A second lease of life as an Akt inhibitor
PTX-200 (formerly known as TCN-P or triciribine) is a purine analogue that was originally tested as
an anticancer agent in the 1990s in trials targeting its properties as a nucleoside analogue, which
inhibits DNA and protein synthesis. In the higher dosing regimens used to inhibit DNA synthesis in
some of those trials it had unacceptable toxic effects.
In 2004 PTX-200 was shown to be a specific inhibitor of Akt (protein kinase B), a serine/threonine
kinase that is a key component of signalling pathways known to promote cancer cell growth and
resistance to chemotherapy and radiotherapy. Akt is a key component of one of the Ras signalling
pathways (shown in blue in Exhibit 3), as well as pathways activated by growth and survival factors
such as IGF1, TGFα and EGF (Exhibit 5). Activation of Akt has been detected in prostate, breast,
ovarian, colorectal, pancreatic, and hematologic cancers. Conversely, Akt inhibition has been
shown to cause apoptosis (cell death) in cancer cells.
Exhibit 5: Overview of signal transduction pathways
Source: Hanahan and Weinberg 2000. Cell, Vol. 100, 57-70
Mechanism of action and preclinical studies suggest significant
potential for PTX-200 in combination therapy
PTX-200 has shown modest anticancer efficacy as a single agent in Phase I and II clinical trials to
date; clinical benefit has mainly consisted of stable disease or reductions in tumour burden that did
not meet the standard criteria for an objective clinical response. However, a number of factors
suggest it is likely to be much more effective when used in combination with other drugs.
2
While the intensive dosing regimens (35-40mg/m /day by continuous infusion over five consecutive
days every six weeks) used in the initial clinical trials of PTX-200 in the 1990s led to unacceptable
2
toxicity, more recent Phase I trials of intermittent dosing (45-55mg/m on days 1, 8, 15 of a 28-day
4
cycle) have shown the drug to be safe and well tolerated at doses that inhibit the activation of Akt.
4
Garret et al 2011 Invest New Drugs 29:1381-1389; Sampath et al 2013 Leukemia Research 37 1461-1467.
Prescient Therapeutics | 29 April 2015
6
In a Phase I trial in advanced haematological malignancies, mainly acute myeloid leukaemia (AML)
17 out of 32 evaluable patients had stable disease after one cycle of treatment. Three patients with
AML achieved >50% bone marrow blast reduction. A fourth patient with chronic myelomonocytic
leukaemia had marked spleen reduction and a return to a normal white blood cell count.
PTX-200 is expected to make chemotherapy drugs more effective
5
Most chemotherapy drugs kill cancer cells by inducing apoptosis (programmed cell death). The
upregulation of Akt has been associated with resistance to chemotherapy-induced apoptosis.
Researchers have shown that that inhibition of Akt selectively sensitises tumour cells, but not
6
normal cells, to apoptotic stimuli. Furthermore, Akt activation increases expression of multidrug
7
resistance-associated protein 1 (MRP1) and chemoresistance.
A number of preclinical studies have demonstrated synergistic inhibition of cancer cell growth when
8
PTX-200 and other Akt inhibitors were combined with other anticancer drugs. Gloesenkamp et al
studied the combination of PTX-200 with other anticancer drugs in pancreatic cancer cell lines.
They examined two cytostatic drugs, and reported slight synergistic growth inhibition for PTX-200
plus Doxorubicin and moderate to strong synergistic inhibition when combined with 5-fluorouracil
(5-FU, Exhibit 6). They also examined two drugs that target signalling pathways, reporting
moderate synergy when PTX-200 was combined with the mTOR inhibitor everolimus (Afinitor,
Novartis) and strong synergy with the experimental IGF-1R inhibitor NVP-AEW541 (Exhibit 7).
Exhibit 6: PTX-200 shows moderate to
strong synergy with 5-fluorouracil
Exhibit 7: PTX-200 strongly synergistic with
the IGF-1R inhibitor NVP-AEW541
Source: Gloesenkamp et al 2012. Note: The height of each bar shows the growth of the pancreatic cancer cell
line as a percentage of the untreated control. The solid bars show the effect of the individual drugs, while the
black and white striped bars show the synergistic inhibition of combining the two drugs. Triciribine is PTX-200.
Researchers from the Moffitt Cancer Center reported that combining PTX-200 with the FTI tipifarnib
resulted in synergistic inhibition of cell lines from breast and lung cancer, leukaemia, and multiple
myeloma. PTX-200 plus tipifarnib induced tumour regression in an erbB2 breast cancer mouse
model, compared to tumour stabilisation with either drug on its own (Exhibit 8).
Exhibit 8: Strong synergy between PTX-200 and tipifarnib in a breast cancer mouse model
Source: Balassis et al 2011; Clin Cancer Res; 17(9):2852-62. Note: The RHS graph shows that the synergistic
combination of PTX-200 (TCN-P) with tipifarnib causes significant tumour regression.
5
6
7
8
Kim 2005. Cancer; 103: 1551-1560.
DeFeo-Jones et al 2005. Molecular Cancer Therapeutics; 4(2), 271-279.
Tazzari et al 2007. Leukemia 21; 427-438.
Gloesenkamp et al 2012. International Journal of Oncology 40: 876-888.
Prescient Therapeutics | 29 April 2015
7
Given that the GGTI PTX-100 acts in a similar way to tipifarnib, there may be a synergistic benefit
from combining PTX-200 with PTX-100.
PTX-200: Breast and ovarian Phase I/II ongoing, AML Phase Ib
planned
Breast cancer – A US NIH-funded open-label Phase Ib/II study is evaluating PTX-200 in HER2negative breast cancer patients; 15 patients had been treated by November 2014 and interim data
are expected in H116. The Phase II component, to start in H215, will treat breast cancer patients in
a neoadjuvant setting where patients undergo chemo prior to surgery. Patients will be treated for 12
weeks with a combination of paclitaxel and PTX-200. In the Phase II component these patients then
undergo eight weeks of treatment with doxorubicin and cyclophosphamide followed by surgery to
remove the tumour. The efficacy endpoint is the proportion of patients who are free of disease at
the time of surgery – known as a pathological compete response (pCR). The paclitaxel-doxorubicincyclophosphamide treatment regimen on its own would be expected to produce a pCR of ~25% in
9
this patient population. The AKTivate vendors qualify for the deferred acquisition consideration if
the pCR is 50% or greater, a response rate that would mark the trial as a success.
Ovarian cancer – The first patients have been treated in a Phase Ib trial of PTX-200 plus
carboplatin in ovarian cancer at the Moffitt Cancer Center in Florida. Ovarian cancer patients with a
high level of phosphorylated BCL-2 (BAD), a downstream product of Akt, may qualify for the study.
The trial is recruiting patients with recurrent or persistent, platinum resistant epithelial ovarian
cancer. This trial has been partly funded by a US Department of Defense grant, which has recently
come to an end. The hurdle for additional vendor consideration is an overall response rate of 30%
or greater.
AML – A Phase Ib/II study of the PTX-200 in acute myeloid leukaemia is planned for H215.
Merck, Genentech and GSK also targeting Akt
A number of Pharma companies are developing small molecule inhibitors of Akt in a range of solid
tumours and haematological cancers (Exhibit 9). Akt Inhibitors have shown modest efficacy as
single agents, with most ongoing trials focusing on combination therapies.
The Akt inhibitor perifosine failed to demonstrate superior efficacy to control treatments in Phase III
trials in colon cancer and multiple myeloma, conducted by Aeterna Zentaris and former partner
Keryx. Aeterna has ceased internal development of perifosine, but partner Yakult Honsha is
conducting Phase II trials in brain cancer and paediatric solid tumours.
The most active development programme is Merck’s MK-2206, which is undergoing Phase II trials
10
in six different cancers, including a Phase II breast cancer trial under the I-Spy 2 collaboration.
IP protection to 2030
Prescient has licences to patents in the US and elsewhere that cover the use of PTX-200 for the
treatment of a range of cancers, with patent expiry dates between 2025 and 2030. The latest-dated
patents cover the treatment of oesophageal cancer, while the US ovarian cancer patent 8,906,869
expires in September 2028.
For PTX-100 Prescient has licensed a granted patent that expires in 2023, and a patent application
which, if granted, would expire in 2030.
9 Based on control arm efficacy rates in the I-Spy 2 trial http://www.pumabiotechnology.com/pr20140407.html.
10 Barker et al 2009. Clinical pharmacology & Therapeutics; 86 (1) pp97-100.
Prescient Therapeutics | 29 April 2015
8
Exhibit 9: Akt inhibitors in Phase II or later
Product
perifosine
Aeterna Zentaris/
Yakult Honsha
MK-2206
Merck & Co
Indication
Colon cancer, multiple
myeloma, glioblastoma
ipatasertib
Genentech/Array Biopharma
afuresertib
GlaxoSmithKline/Novartis
AZD5363
AstraZeneca/
Otsuka Pharmaceutical
Archexin
Rexahn Pharmaceuticals
PTX-200
Prescient Therapeutics
Stage
Phase III
Comment
Phase III combo with capecitabine in colon cancer failed June 2012. Phase III combo
with Velcade and Dexamethasone in myeloma discontinued in March 2013. Yakult
Honsha has Phase II trials ongoing in Glioblastoma and paediatric solid tumours.
Breast, Colorectal, lung,
Phase II Phase I AML – response rate 1/18 (6%). Phase II lymphoma response rate 14%.
pancreatic, and prostate cancer,
Phase II in Gastroesohpageal cancer 1.5% response rate. Phase II underway in
and lymphoma
ovarian, breast, colorectal, lung and prostate cancers and in lymphoma.
Prostate, breast and gastric or Phase II Phase II trials are ongoing in castration-resistant prostate cancer (260pt, plus
gastroesophageal junction
abiraterone), triple negative breast cancer (120pt and 130pt, plus paclitaxel), and
cancer
gastric or gastroesophageal cancer (120pt, plus FOLFOX6).
Ovarian cancer, multiple
Phase II Three out of 34 MM patients had partial responses in Phase I, plus another three had
myeloma, chronic lymphocytic
minor responses. Ongoing Phase II trials in MM and CLL (plus Arzerra). Phase I/II in
leukaemia.
ovarian cancer (plus Carboplatin and Paclitaxel) – completion: Sept 2015.
Breast, prostate and ovarian
Phase II Two out of 92 patients achieved partial responses in Phase I trials as a single agent
cancers
Phase II trials underway in breast (plus docetaxel) and lung (plus pemetrexed/
erlotinib) cancers; Phase I/II in prostate (plus docetaxel) and ovarian (plus olaparib).
Renal cancer
Phase I/II Antisense inhibitor of Akt1. Phase I/II in renal cancer (plus everolimus). Phase IIa in
pancreatic cancer (plus gemcitabine) completed in 2012 – PFS 9.1 months.
Breast and ovarian cancer,
Phase I/II Ongoing Phase I/II trials in breast and ovarian cancer.
acute myelogenous leukemia
Source: BioCentury, clinicaltrials.gov, Edison Investment Research
Valuation
We currently value Prescient at A$0.66/sh (undiluted) and A$0.48/sh (diluted) based on a riskadjusted discounted cash flow model, which includes our estimates of the future milestone
payments and royalty streams for the four most valuable programmes in Prescient’s portfolio,
namely PTX-100 in breast cancer and multiple myeloma, and PTX-200 in breast and ovarian
cancers. We have extended our cash-flow forecasts out to 2032 but have not included any terminal
valuation. We assume a long-term exchange rate of US$0.80/A$ and apply a 12.5% discount rate.
To calculate the diluted NPV/share we assume that the 14m potential deferred acquisition shares
listed in Exhibit 2 will all be issued and the 6.4m options will be exercised (exercise price 10-14c).
Our standard practice is to assume a probability of success between 10% and 20% for Phase I
trials. For PTX-100 and PTX-200 we apply a 15% probability, at the midpoint of this range.
Our model includes risk-adjusted upfront payments and clinical/regulatory milestones (but not sales
milestones) from a potential licensing deal, based on average Phase II deal metrics from
BioCentury (US$25m upfront payment, US$240m total milestones – we assume half of those
milestone payments [US$120m] are for clinical and regulatory milestones). We assume that both
PTX-100 and PTX-200 are sub-licensed to separate marketing partners at the completion of Phase
IIb trials, and that each of the two licence deals each include a US$20m upfront payment and
US$120m in clinical and regulatory milestone payments.
We also assume that each PTX-100 Phase Ib/IIa trial costs US$3m (PTX-200 Ph Ib/IIa trials largely
grant-funded) and a Ph IIb trial costs US$5m. Phase IIb trial costs are risk-adjusted to 70%.
Exhibit 10 shows our market assumptions for PTX-100 and PTX-200 and the contribution of product
royalties and milestone payments to the rNPV. We have offset the risk adjusted trial cost against
royalty income for each disease indication, rather than the milestone revenue. This overstates the
contribution of the milestone payments to the rNPV and understates the contribution of royalties,
resulting in an apparent negative rNPV for PTX-100 in multiple myeloma.
The right-hand column of figures of Exhibit 10 illustrates the potential value uplift if each of the four
programmes successfully completes Phase Ib/II trials and progresses to a Phase IIb trial with a
25% likelihood of approval. In this scenario the overall portfolio NPV would increase by 79% to
A$58m from A$32m under our base case. Investors would need to take into account the potential
dilution if Prescient was to raise ~US$20m to fund four Phase IIb trials in this scenario.
Prescient Therapeutics | 29 April 2015
9
Exhibit 10: Prescient sum-of-the-parts DCF, plus Phase IIb-ready scenario
Base case
likelihood
rNPV
(A$m)
rNPV/sh
(A$)
1. Breast cancer
PTX-200
15%
12.0
0.23
2. Ovarian cancer
PTX-200
15%
3.9
0.07
3. Breast cancer
PTX-100
4. Multiple Myeloma
PTX-100
15%
4.1
0.08
15%
(0.5)
(0.01)
5. PTX-200
milestones
12.2
0.23
6. PTX-100
milestones
13.0
0.25
(12.4)
32.3
2.3
34.6
(0.24)
0.61
0.04
0.66
7. SG&A to 2022
Portfolio total
Cash
Enterprise total
Phase IIrNPV at Assumptions
ready start Phase
likelihood
IIb (A$m)
25%
20.9 Global peak sales of US$550m assuming annual US incidence of
233k, 15% of patients candidates for neoadjuvant therapy and 63% of
these are HER2 negative; 25% penetration; pricing of US$50k. Global
sales 2x US sales; launch 2023; assume receives 15% royalty on net
sales, pays away 25% of licensing revenue to Cahaba.
25%
7.4 Global peak sales of US$250m assuming annual US incidence of 22k,
45% of patients receive third line therapy at 25% penetration; price
US$50k. Global sales 2x US sales; launch 2023; assume receives
15% royalty on net sales, pays away 25% of revenue to Cahaba.
25%
8.8 Global peak sales of US$550m as per PTX-200; launch 2024; assume
net royalty of 8% of sales after pay-aways to Yale.
25%
1.1 Global peak sales of US$250m assuming annual US incidence of 24k,
40% of MM patients receive fourth-line therapy and 25% penetration;
pricing of US$50k; Global sales 2x US sales; launch 2024; assume net
royalty of 8% after pay-aways to Yale.
15.3 Assumes potential licensing upfront and milestones total US$120m
(US$31m after risk adjustment); assume 15% of upfront payment and
25% of milestones paid away to Cahaba.
16.6 Assumes potential licensing upfront and milestones total US$120m
(US$31m after risk adjustment); assume milestones potentially paid
away to Yale total US$5m (unrisked), US$1.2m risk adjusted.
(12.4)
57.7
Source: Edison Investment Research
Sensitivities
Drug development risk. Prospective cancer treatments have a high hurdle rate to reach approval,
including lengthy and costly development programmes and high rates of failure.
Partnership/transactional risk. The timing for PTX-100 and PTX-200 development will depend on
Prescient’s ability to secure a development partner or acquirer at favourable terms, as we do not
expect it to independently develop or fund PTX-100 or PTX-200 at Phase III. Commercial success
will also depend on the marketing capabilities of the potential partner.
Deferred acquisition consideration totalling 14m shares (27% of current issued capital) are
payable if all clinical hurdles are met.
Financing risk. Prescient has limited sources of non-dilutive funding and challenges in obtaining
funding on desirable terms for future studies could lead to programme delays or unfavourable
dilution to equity holders. We estimate that the company may require A$6m of funding in FY16 and
A$11m in FY17, and this is not reflected in our diluted valuation of A$0.48/sh.
Trial timelines. The entry on clinicaltrials.gov for the PTX-200 ovarian cancer trial (NCT01690468)
indicates that recruitment of patients is suspended. Prescient advises us that the suspension is due
to a change of principal investigator and that the trial is expected to resume recruiting in the next
few weeks. The company is in the process of transferring this investigator-led trial into the
company’s name.
Financials
Prescient has an EV of ~A$2m (based on A$2.3m cash at 31 December 2014). The grant funding
means that PTX is funded to the interim readout from the Phase I/II PTX-200 breast cancer trial.
However, the start of additional trials is dependent on the company raising sufficient funds.
Prescient Therapeutics | 29 April 2015
10
Exhibit 11: Financial summary
A$'000s
Year end 30 June
PROFIT & LOSS
Revenue
Cost of Sales
Gross Profit
EBITDA
Operating Profit (before GW and except.)
Intangible Amortisation
Exceptionals
Other (includes R&D tax credit)
Operating Profit
Net Interest
Profit Before Tax (norm)
Profit Before Tax (FRS 3)
Tax benefit
Profit After Tax (norm)
Profit After Tax (FRS 3)
Average Number of Shares Outstanding (m)
EPS - normalised (c)
EPS - FRS 3 (c)
Dividend per share (A$)
BALANCE SHEET
Fixed Assets
Intangible Assets
Tangible Assets
Investments
Current Assets
Stocks
Debtors
Cash
Other
Current Liabilities
Creditors
Short term borrowings
Other
Long Term Liabilities
Long term borrowings
Other long term liabilities
Net Assets
CASH FLOW
Operating Cash Flow
Net Interest
Tax
Capex
Acquisitions/disposals
Financing
Dividends
Other
Net Cash Flow
Opening net debt/(cash)
HP finance leases initiated
Other
Closing net debt/(cash)
2013
AASB
2014
AASB
2015e
AASB
2016e
AASB
2017e
AASB
2018e
AASB
2,240
0
2,240
1,791
1,787
0
0
0
1,787
0
1,787
1,787
0
1,787
1,787
0
0
0
(1,305)
(1,305)
0
0
0
(1,305)
8
(1,297)
(1,297)
0
(1,297)
(1,297)
0
0
0
(2,766)
(2,766)
(134)
0
0
(2,900)
152
(2,613)
(2,748)
0
(2,613)
(2,748)
0
0
0
(7,171)
(7,179)
(121)
0
400
(6,900)
41
(7,138)
(6,859)
0
(6,938)
(6,859)
0
0
0
(12,957)
(12,971)
(109)
0
2,000
(11,080)
10
(12,961)
(11,070)
0
(11,961)
(11,070)
0
0
0
(1,576)
(1,595)
(98)
0
3,950
2,257
11
(1,584)
2,268
0
391
2,268
11.8
15.11
15.11
0.0
24.8
(5.24)
(0.03)
0.0
51.7
(5.06)
(0.04)
0.0
52.7
(13.15)
(0.10)
0.0
52.7
(22.68)
(0.17)
0.0
52.7
0.74
0.01
0.0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,344
1,344
0
0
3,935
0
127
3,809
0
(253)
(253)
0
0
0
0
0
5,027
1,250
1,210
40
0
1,029
0
0
1,029
0
0
0
0
0
0
0
0
2,279
1,161
1,089
72
0
259
0
0
259
0
0
0
0
0
(6,000)
(6,000)
0
(4,580)
1,078
980
98
0
273
0
0
273
0
0
0
0
0
(17,000)
(17,000)
0
(15,649)
1,000
882
118
0
3,681
0
1,594
2,087
0
(1,063)
(1,063)
0
0
(17,000)
(17,000)
0
(13,382)
(29)
0
0
0
0
0
0
0
(29)
(29)
0
0
0
(1,135)
8
0
0
(144)
5,080
0
0
3,809
0
0
0
(3,809)
(2,892)
152
0
(40)
0
0
0
0
(2,779)
(3,809)
0
0
(1,029)
(6,771)
41
0
(40)
0
0
0
0
(6,770)
(1,029)
0
0
5,741
(10,957)
10
0
(40)
0
0
0
0
(10,986)
5,741
0
(0)
16,727
1,843
11
0
(40)
0
0
0
0
1,814
16,727
0
0
14,913
Source: Prescient accounts, Edison Investment Research
Prescient Therapeutics | 29 April 2015
11
Contact details
Revenue by geography
Level 2 Riverside Quay
1 Southbank Boulevard
Southbank Vic 3003
Australia
+61 (0)3 9982 4563
prescienttherapeutics.com
N/A
CAGR metrics
Profitability metrics
EPS 12-16e
EPS 14-16e
EBITDA 12-16e
EBITDA 14-16e
Sales 12-16e
Sales 14-16e
N/A
N/A
N/A
N/A
N/A
N/A
ROCE 15e
Avg ROCE 12-16e
ROE 15e
Gross margin 15e
Operating margin 15e
Gr mgn / Op mgn 15e
Balance sheet metrics
N/A
N/A
N/A
N/A
N/A
N/A
Gearing 15e
Interest cover 15e
CA/CL 15e
Stock days 15e
Debtor days 15e
Creditor days 15e
Sensitivities evaluation
N/A
N/A
N/A
N/A
N/A
N/A
Litigation/regulatory
Pensions
Currency
Stock overhang
Interest rates
Oil/commodity prices






Management team
CEO: Dr Robert Crombie
Chairman: Steve Engle
Appointed June 2014. Previously held senior management roles at Arana
Therapeutics and Evogenix. As head of Melbourne Operations for antibody drug
development company Arana therapeutics, Rob played a key role on Arana’s
success, from its start-up phase as Evogenix, merger with Peptech to form
Arana, and culminating in Arana’s A$318m acquisition by Cephalon. Dr Crombie
has also worked in the UK biotechnology sector, helping transition Cobra
Therapeutics into drug delivery company ML Laboratories (now Vectura Group).
Mr Engle was formerly chairman and CEO of XOMA (NASDAQ:XOMA), a
developer of monoclonal antibody therapeutics, which is currently in Phase III
studies for uveitis, and inflammatory eye disease. Before that he was
chairman and CEO of La Jolla Pharmaceutical (NASDAQ:LJPC), which
discovered the biology of B cell tolerance and developed the first B cell toleragen
for lupus. Mr Engle has a record of achieving partnering with big pharma and has
overseen multiple drug filings with the FDA.
Executive director: Paul Hopper
Mr Hopper is a Los Angeles based biotechnology executive with more than 20
years’ experience in international public company markets, primarily in the life
sciences sector. He is an adviser to the Los Angeles-based investment bank
Capello Group, and he is chairman of the California Chapter of the American
Australian Association. Mr Hopper is executive chairman of Imugene and
chairman of Viralytics.
Principal shareholders
(%)
Kilinwata Investments
Paul Hopper (executive director)
Jaclyn Stojanovski
Moreglade
Andrew Millen
4.94%
4.41%
2.84%
2.72%
2.37%
Companies named in this report
Merck (MRK); Roche/Genentech (RHHBY); GlaxoSmithKline (GSK); AEterna Zentaris (AEZS); Transgene SA (TRGNF)
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Frankfurt +49 (0)69 78 8076 960
Schumannstrasse
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Prescient Therapeutics
60325 Frankfurt
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London +44 (0)20 3077 5700
280 High
Holborn
| 29
April
2015
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United Kingdom
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