Company description: Focus on DNA damage repair
Onxeo is a French pure drug developer, which focuses on novel DNA damage repair inhibition technology. The technology came from the acquisition of DNA Therapeutics in March 2016, which brought the lead asset AsiDNA and a broad IP portfolio covering similar oligonucleotides that Onxeo organised into a platform technology called platON. Onxeo has one commercialised product, an HDAC inhibitor, belinostat, branded as Beleodaq in the US. AsiDNA is completing Phase Ib. Unlike similar class PARP inhibitors, AsiDNA is not dependent on specific gene mutations and therefore has broader application areas. In preclinical studies, Onxeo has shown that AsiDNA not only has synergistic potential in combinations with chemotherapeutic drugs that damage DNA (eg carboplatin), but also potentially has a unique feature to abrogate resistance to PARP inhibitors.
Valuation: Risk-adjusted NPV of €129m or €2.3/share
The main revision to our model is the AsiDNA potential. We now include two cancer indications (breast and ovarian cancer). AsiDNA’s potential is much broader in various other solid tumours and in combinations with different anticancer treatments including radiotherapy. For valuation purposes, we chose these two cancers, as they are of high priority in Onxeo’s near-term R&D plans. We assume Phase II development between 2020-2023, Phase III studies starting in 2023 and launch in 2026. We also assume that Onxeo will be able to partner AsiDNA after Phase II. We factor in R&D costs of €10m per cancer indication (the industry average for Phase II trials in oncology). This implies Onxeo will need to raise more funds, as the current cash reach is to Q320. We have used historical PARP inhibitor licensing deals as benchmark averages for our licensing model: total deal value of US$417m split into $40m upfront payment (roughly 10% of the total value) and the rest into R&D and commercial milestones (50:50) plus tiered 12–15% royalties.
Financials: Cash runway to Q320
Onxeo booked revenues of €6.1m in 2018, of which €2.3m were recurring Beleodaq sales. In June 2018, the company had effectively sold the Beleodaq royalties to SWK Holdings for US$7.5m upfront. Total operating costs were €9.7m in 2018 versus €28.7m in 2017. This fall was mainly due to lower R&D expenditure after the completion of the Phase III ReLive study in September 2017. For 2019 and 2020 we forecast total operating costs of €15.0m and €15.3m, respectively. Onxeo had a cash position of €6.3m at end-Q219. In June 2019, the company announced that it had renewed an equity financing line with Nice & Green, which based on the current share price level, would extend the cash reach to around Q320.
Sensitivities: Biotech risks apply
Onxeo is subject to the usual drug development risks, including clinical development delays or failures, regulatory risks, competitor successes, partnering setbacks and financing risks. The main sensitivities relate to the lead asset, AsiDNA. If Onxeo continues the development beyond the ongoing Phase Ib study it will require additional investment. The company aims to accumulate an attractive data package for the potential early out-licensing of AsiDNA (after Phase Ib). However, we believe that the value inflection that clinical trial readouts typically provide could be used to fund the Phase II studies, which would advance AsiDNA to late stage R&D and, presuming a successful clinical trial, would warrant much better licensing deal terms. Onxeo announced in October 2017 that the court’s decision in the litigation case was unfavourable and the company was ordered to pay €12m to SpeBio and other smaller charges to SpePharm/SpeBio for costs incurred to market Loramyc in Europe. Onxeo paid the required amount, but it owns a 50% stake in SpeBio, which is a joint venture with SpePharm, therefore the net impact is unclear at present, but Onxeo aims to claim back the proportional payment.
Outlook: Expanding DDR inhibitor R&D portfolio
Onxeo’s portfolio focuses on its novel platON platform; in early 2018 AsiDNA was the first product from the platform to enter clinical development (Exhibit 1). The compounds on platON belong to the DDR inhibitor class, which is vital in DNA repair regulation. This area is currently attracting significant attention from both large pharma and biotech. To date, the only approved drugs are commercially successful PARP (poly(ADP ribose) polymerase) inhibitors.
Belinostat, an HDAC inhibitor, is out-licensed and commercialised as Beleodaq for the second line treatment of peripheral T-cell lymphoma. It is approved and marketed in the US following conditional approval and the partner bears the responsibility for any subsequent required studies. As Onxeo’s business model focuses on value creation from bringing preclinical assets through to clinical mid-stage, it effectively sold the royalty stream to SWK Holdings for $7.5m upfront in June 2018, raising non-dilutive funds for the development of AsiDNA.
Exhibit 1: Onxeo R&D pipeline
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platON: Novel technology platform with AsiDNA first to Phase I
Lead asset AsiDNA – acquisition background
Onxeo gained access to the AsiDNA asset and the IP, around which the platON platform was formed, via the acquisition of DNA Therapeutics in February 2016 (€1.7m upfront, €1m on Phase II initiation: in total up to €25m per approved indication can be paid out). The most advanced asset is AsiDNA (formerly known as DT01), a novel clinical-stage compound. It had already been tested in clinical trials by DNA Therapeutics and showed positive safety/tolerability results and preliminary anti-tumour activity in a Phase I trial with melanoma patients when administered locally. The deal terms appeared attractive and back-loaded for an asset that had Phase I data and could address major cancer indications in broad settings. This was probably due to the following, in our view:
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the timing of the acquisition was very good, as the first approved PARP inhibitor, Lynparza (December 2014) had just finished its first year in the market generating sales of US$218m, therefore the R&D risk was somewhat lower, but the scale of the commercial success for this class of drugs was still not fully recognised (Lynparza is expected to generate US$1.1bn in sales in 2019 and the four approved (to date) PARP inhibitors are expected to generate total sales of US$1.6bn);
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at the time of the acquisition AsiDNA was being explored only as an intratumourally administered anticancer drug, which limited the number of cancer indications it could target (intratumoural injection may still be explored by Onxeo).
With the commercial success of the PARP inhibitors, there is now significant interest in the area from various players and Onxeo’s acquisition timing means that AsiDNA is at the forefront of the next wave entering mid-to-late stage development.
Evolution of platON platform
Onxeo recognised that the potential of the technology behind AsiDNA could be increased substantially with systemic administration. Following the acquisition Onxeo completed a preclinical programme and repositioned the asset for systemic use. Onxeo’s main focus was on advancing AsiDNA to clinical trials, but based on the preclinical data the company also recognised the potential in other analogue compounds. In October 2017, this was formally introduced as a proprietary platform – platON.
The second platON asset that Onxeo has chosen to progress is OX401, which is now in the proof-of-concept preclinical phase (results expected by Q419). OX401 is also an oligonucleotide decoy agonist targeting PARP proteins and the STING (STimulator of INterferon Genes) pathway. STING is a relatively novel research target in immunoncology, which positions OX401 as a potential combination partner with other immunoncology agents, such as checkpoint inhibitors. In addition to systemic use, Onxeo continues to explore its oligonucleotide decoy technology’s potential for intratumoural administration.
AsiDNA is a decoy oligonucleotide and is comprised of 64 nucleotides in two complementary strands (ie 32 nucleotides in each strand). In tumour cells AsiDNA acts as an agonist and interferes with the repair of tumour DNA by ‘distracting’ the tumour cell’s DNA repair mechanism. Decoy oligonucleotides are based on three components: double strand oligonucleotides, a linker (coupling agent) and a cellular uptake facilitator (Exhibit 2). Each of these compounds can be modified, resulting in different products, and the main mechanism of action is to act as a decoy and target the mechanisms of tumour DNA function regulation.
Exhibit 2: AsiDNA – first product from platON platform
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Source: Onxeo. Note: DNA-PK = DNA-dependent protein kinase.
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AsiDNA is now being tested in a Phase Ib trial in combination with classic chemotherapy agents (carboplatin + paclitaxel) in various solid tumours. Results are expected in Q419. Depending on available funding, near term development could include:
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Phase Ib/II trial to assess synergy with chemotherapy in selected indications.
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Phase Ib/II trial to assess the abrogation of resistance to PARP inhibitors, likely in maintenance treatment of advanced ovarian cancer.