Sunesis Pharmaceuticals — 300mg suggests activity, but higher doses needed

Sunesis Pharmaceuticals — 300mg suggests activity, but higher doses needed

Sunesis reported updated data from the dosing portion of its ongoing Phase Ib/II study of vecabrutinib for chronic lymphocytic leukemia (CLL) and other B-cell malignancies. The key data on the highest dosing cohort (300mg BID) showed stable disease (SD) in three of five patients, including one patient very close to a partial response (PR) at 40%. The company will need to escalate to higher doses (400mg is already enrolling), but we are encouraged by the activity seen here.

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Written by

Sunesis Pharmaceuticals

300mg suggests activity, but higher doses needed

Clinical update

Pharma & biotech

16 December 2019

Price

US$0.31

Market cap

US$35m

Net cash ($m) at Q319

32.8

Shares in issue

111.3m

Free float

98.38%

Code

SNSS

Primary exchange

NASDAQ

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(26.0)

(67.3)

(22.3)

Rel (local)

(27.7)

(69.0)

(35.0)

52-week high/low

US$1.74

US$0.24

Business description

Sunesis Pharmaceuticals is a pharmaceutical company focused on oncology. Its lead asset is vecabrutinib, a Bruton’s tyrosine kinase inhibitor for chronic lymphocytic leukemia for Imbruvica-refractory patients. The program is in a dose-escalation Phase Ib/II. It has also developed TAK-580 with partner Takeda, and the preclinical PDK1 inhibitor SNS-510.

Next events

Progress to Phase II

Upcoming

Analyst

Nathaniel Calloway

+1 646 653 7036

Sunesis Pharmaceuticals is a research client of Edison Investment Research Limited

Sunesis reported updated data from the dosing portion of its ongoing Phase Ib/II study of vecabrutinib for chronic lymphocytic leukemia (CLL) and other B-cell malignancies. The key data on the highest dosing cohort (300mg BID) showed stable disease (SD) in three of five patients, including one patient very close to a partial response (PR) at 40%. The company will need to escalate to higher doses (400mg is already enrolling), but we are encouraged by the activity seen here.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/17

0.7

(35.5)

(1.45)

0.00

N/A

N/A

12/18

0.2

(26.6)

(0.75)

0.00

N/A

N/A

12/19e

0.0

(24.0)

(0.21)

0.00

N/A

N/A

12/20e

0.0

(26.5)

(0.22)

0.00

N/A

N/A

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

Vecabrutinib dosing on the cusp

The company enrolled five patients into the 300mg cohort. Additionally, another patient from a previous dosing cohort who was escalated to 300mg also had an SD response. Two of these 300mg patients remain on the drug, including the 40% responder, who may further develop a PR. Although we would like to have seen a PR at this dosing level, the activity seen is suggestive of efficacy and we expect increasing activity at higher doses.

Cytokine biomarkers also suggestive of efficacy

To support the tumor response data, Sunesis also provided data on cytokine inhibition. Cytokine inhibition is an expected effect of an active BTK inhibitor, and the data provided on the 300mg cohort show definitively less production of cytokines CCL3 and CCL4 in those patients where it could be evaluated (although the company did not provide statistics). This also supports that the drug is active and potentially operating at sub-therapeutic levels.

No limits yet on further dose escalation

The safety profile of the drug remains consistent with previous reports, with the highest rates of drug-related adverse events for headache and nausea (10%). The drug did not reach a maximum tolerated dose (as we knew from the previously announced escalation to 400mg), and the pharmacokinetic data suggest that we have not reached the maximum drug exposure. We therefore see no limitation on further escalating the study until more robust responses are seen.

Valuation: Unchanged at $257m or $2.08/diluted share

Our valuation is unchanged at $257m or $2.08 per diluted share. We expect the study to arrive at a final dose most likely in the next six months, based on the current pace of enrolment and the current data. The current data do not present a significant delay in our models. We expect to update our model when more definitive data on the activity of vecabrutinib become available.

ASH update

Sunesis originally planned to release an update on its ongoing dose escalation study of vecabrutinib at the American Society of Hematology (ASH) conference on 8 December 2019. However, the poster that the company was intending to present became available online three days prior against management’s wishes, prompting the company to provide an update on these results. Vecabrutinib is a non-covalent inhibitor of Bruton’s tyrosine kinase (BTK) and is being examined in patients with CLL and other B-cell cancers that have been previously treated with another BTK inhibitor, such as Imbruvica (ibrutinib).

The data presented in the poster provide safety and efficacy data on all patients up through the 300mg BID cohort. As a reminder, Sunesis has already escalated to the 400mg cohort, but these data are not presented in the current release. The most highly anticipated data from this presentation are the efficacy assessment of patients in the 300mg cohort (Exhibit 1B). Scan data from four of the five patients (the fifth patient progressed prior to a scan) from the 300mg cohort taken at cycle 4 day 1 were presented, which showed three patients with SD. There was an additional patient (number 14) initially enrolled in the 100mg cohort, who was escalated to 200mg and then 300mg BID, who also had a SD response. The response being measured here is the percentage reduction in the sum of the product of the diameters (SPD) measure of patients’ lymph nodes, which is a proxy for their volume.

Exhibit 1: Vecabrutinib responses by dose

Source: Sunesis Pharmaceuticals. Note: A = Cohorts 1–5 (25–300mg BID), B = Cohort 5 (300mg BID).

Although we would like to have seen a PR in this cohort, we are nevertheless encouraged by the response rate. One patient in particular (number 28) had a 40% response, which is on the cusp of a PR (the cut-off being 50%). This patient may yet develop a PR at a later assessment. Undoubtedly, a higher dose will be needed to progress to the Phase II portion of the study, but these data are highly suggestive of drug activity, and appropriate for an intermediate dosing cohort. As mentioned above, Sunesis is already enrolling the 400mg cohort and may enroll a further 500mg cohort per protocol if needed, before moving to Phase II. Drug exposure continues to increase over the dose ranges examined, and the steady-state Cmin values (a measurement of the amount of drug in the blood before redosing) are highly linear, suggesting that we are not at the upper limit of drug absorption.

To support the conclusion that the drug is active and that these responses are a drug effect, the company also presented updated cytokine data. A reduction in cytokines is an expected consequence of BTK inhibition and drug activity. Although Sunesis did not present statistics on these data, there appears to be a clear trend for the 300mg cohort, especially for CCL4, where the most data are available.

Exhibit 2: Cytokine suppression as a function of vecabrutinib dose

Source: Sunesis Pharmaceuticals

The safety data provided in the poster are roughly similar to previous reports, with the most common drug-related treatment emergent adverse events (TEAEs) being headache and nausea (10% each), and most of the severe (grade 3 or higher) TEAE were hematologic in nature, which are generally expected in this patient population, especially with sub-therapeutic treatment. As we already know (from the previously announced escalation to 400mg), at 300mg dosing, the drug did not yet reach its maximum tolerated dose.

Roughly half of the patients that have been enrolled to date (11/23) have harbored the BTK C481S resistance mutation. These patients are of particular interest because the non-covalent mechanism of vecabrutinib can potentially address this resistance mechanism (see our 24 June 2019 Update note and 22 March 2019 Outlook report). We would like to have seen more of these patients to provide a better understanding of the drug activity in this subgroup but, given the study protocol, these patients cannot be preselected. The planned Phase II portion of the study will specifically enroll these patients.

Valuation

Our valuation is unchanged at $257m or $2.08 per diluted share. We expect the vecabrutinib study to progress to Phase II in the next six months with the coming dose escalations, which does not significantly alter our timeline. We find the data from the recent release encouraging but need a more definitive readout (positive or negative) to adjust our probabilities of success.

The value of this program and other non-covalent BTK inhibitors was recently demonstrated by the $2.7bn offer to buyout ArQule from Merck. ArQule presented the final results from its Phase I dosing study of ARQ 531 at the same ASH meeting, which (consistent with previous results) showed a strong response and 8/9 patients with a C481S mutation achieved a PR. The fact that Merck made such a high value offer at such an early stage also highlights the importance of these dosing studies, because we can have reasonable confidence that these early signs of efficacy can translate to later studies on account of the mechanism already being vetted. This is also the case for Sunesis, and we expect a major value inflection if the company can similarly prove that vecabrutinib can generate meaningful clinical responses.

Exhibit 3: Valuation of Sunesis

Development program

Clinical stage

Expected commercialization

Prob. of success

Launch year

Launch pricing ($)

Peak sales ($m)

Patent/exclusivity protection

Royalty/ margin

rNPV
($m)

TAK-580

Phase I/II

Licensed to Takeda

10%

2025

500,000

603

2032

15%

$21

Vecabrutinib

Phase Ib/II

Proprietary

20%

2024

152,000

666

2034

55%

$193

SNS-510

IND ready

Proprietary

10%

2025

130,000

344

2031

51%

$26

Unallocated costs (discovery programs, administrative costs, etc.)

($16)

Total

 

 

 

 

 

 

 

 

$224

Net cash and equivalents (Q319) ($m)

$32.8

Total firm value ($m)

$256.7

Total basic shares (m)

111.3

Value per basic share ($)

$2.31

Convertible Pref stock (m)

19.7

Total diluted shares (m)

131.0

Value per diluted share ($)

$2.08

Source: Sunesis reports, Edison Investment Research

Financials

Our financial forecasts remain unchanged at this time. We expect the company to require $100m in additional capital to reach profitability in 2024, which we include as illustrative debt ($20m in 2021, $40m in 2022 and $40m in 2023).

Exhibit 4: Financial summary

$'000s

2017

2018

2019e

2020e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

669

237

0

0

Cost of Sales

0

0

0

0

Gross Profit

669

237

0

0

Research and development

(21,540)

(14,615)

(13,709)

(15,574)

Selling, general & administrative

(13,548)

(11,332)

(10,199)

(10,505)

EBITDA

 

 

(34,428)

(25,719)

(23,917)

(26,088)

Operating Profit (before GW and except.)

(34,419)

(25,710)

(23,908)

(26,079)

Intangible Amortization

0

0

0

0

Exceptionals/Other

0

0

0

0

Operating Profit

(34,419)

(25,710)

(23,908)

(26,079)

Net Interest

(1,039)

(905)

(133)

(467)

Other (change in fair value of warrants)

0

0

0

0

Profit Before Tax (norm)

 

 

(35,458)

(26,615)

(24,041)

(26,545)

Profit Before Tax (IFRS)

 

 

(35,458)

(26,615)

(24,041)

(26,545)

Tax

0

0

0

0

Deferred tax

0

0

0

0

Profit After Tax (norm)

(35,458)

(26,615)

(24,041)

(26,545)

Profit After Tax (IFRS)

(35,458)

(26,615)

(24,041)

(26,545)

Average Number of Shares Outstanding (m)

24.5

35.6

113.5

118.7

EPS - normalised ($)

 

 

(1.45)

(0.75)

(0.21)

(0.22)

EPS - IFRS ($)

 

 

(1.45)

(0.75)

(0.21)

(0.22)

Dividend per share ($)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

1,401

124

2

0

Intangible Assets

0

0

0

0

Tangible Assets

20

11

2

0

Other

1,381

113

0

0

Current Assets

 

 

32,933

15,200

37,217

13,619

Stocks

0

0

0

0

Debtors

0

0

0

0

Cash

31,750

13,696

34,981

11,383

Other

1,183

1,504

2,236

2,236

Current Liabilities

 

 

(8,901)

(8,789)

(1,221)

(1,332)

Creditors

(1,697)

(1,393)

(1,221)

(1,332)

Short term borrowings

(7,204)

(7,396)

0

0

Long Term Liabilities

 

 

(112)

(8)

(5,474)

(5,474)

Long term borrowings

0

0

(5,466)

(5,466)

Other long term liabilities

(112)

(8)

(8)

(8)

Net Assets

 

 

25,321

6,527

30,524

6,813

CASH FLOW

Operating Cash Flow

 

 

(36,142)

(24,404)

(21,769)

(23,591)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(26)

0

0

(7)

Acquisitions/disposals

0

0

0

0

Financing

32,930

6,343

45,101

0

Dividends

0

0

0

0

Other

0

0

0

0

Net Cash Flow

(3,238)

(18,061)

23,332

(23,598)

Opening net debt/(cash)

 

 

(28,153)

(24,546)

(6,300)

(29,515)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

(369)

(185)

(117)

0

Closing net debt/(cash)

 

 

(24,546)

(6,300)

(29,515)

(5,917)

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Sunesis Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Sunesis Pharmaceuticals. Edison Investment Research standard fees are £49,500 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.

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Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Frankfurt +49 (0)69 78 8076 960

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Germany

London +44 (0)20 3077 5700

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New York +1 646 653 7026

1,185 Avenue of the Americas

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Sunesis Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Sunesis Pharmaceuticals. Edison Investment Research standard fees are £49,500 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.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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