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ASLAN Pharmaceuticals — Additional clinical support for varlitinib

ASLAN Pharmaceuticals — Additional clinical support for varlitinib

ASLAN presented data at ASCO from a Phase Ib dosing study examining varlitinib in combination with carboplatin, paclitaxel and Herceptin. Patients were enrolled across a range of cancers, but the majority (20/37) were HER2+ metastatic breast cancer patients. The drug demonstrated efficacy across the study and the addition of Herceptin at the optimal dose did not induce toxicity, suggesting the potential of future combinations.

Analyst avatar placeholder

Written by

ASLAN Pharmaceuticals

Additional clinical support for varlitinib

Clinical update

Pharma & biotech

7 June 2018

Price

$9.86

Market cap

$324m

NT$30.06/US$

Net cash ($m) at March 2018 + IPO + greenshoe

70.2

ADSs in issue

32.9

Free float

67%

Code

ASLN

Primary exchange

Taipei

Secondary exchange

NASDAQ

Share price performance

%

1m

3m

12m

Abs

N/A

N/A

N/A

Rel (local)

N/A

N/A

N/A

52-week high/low

N/A

N/A

Business description

ASLAN Pharmaceuticals is a Singapore-based drug developer targeting Asia-prevalent diseases. It has varlitinib in pivotal clinical trials for biliary tract cancer and gastric cancer, and will be advancing ASLAN003 to Phase II trials for acute myeloid leukaemia.

Next events

ASLAN004 Phase I initiation

Q318

Varlitinib first-line BTC results

Late 2018

Varlitinib GC interim results

H218

Varlitinib Chinese BTC results

Late 2018

Analysts

Nathaniel Calloway

+1 646 653 7036

Maxim Jacobs

+1 646 653 7027

ASLAN Pharmaceuticals is a research client of Edison Investment Research Limited

ASLAN presented data at ASCO from a Phase Ib dosing study examining varlitinib in combination with carboplatin, paclitaxel and Herceptin. Patients were enrolled across a range of cancers, but the majority (20/37) were HER2+ metastatic breast cancer patients. The drug demonstrated efficacy across the study and the addition of Herceptin at the optimal dose did not induce toxicity, suggesting the potential of future combinations.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/16

11.5

(7.6)

(0.07)

0.0

N/A

N/A

12/17

0.0

(38.8)

(0.31)

0.0

N/A

N/A

12/18e

0.0

(38.9)

(0.25)

0.0

N/A

N/A

12/19e

0.7

(62.0)

(0.35)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Note the functional currency of the company is US dollars.

Tolerable dose combination with Herceptin found

The study examined 37 patients with a median three prior therapies. It was structured as a dose de-escalation study, so the rate of dose-limiting toxicities were high by design, but largely in line with other chemotherapy combination regimens. These events included neutropenia and electrolyte disorders. Carboplatin combinations were not tolerated, but Herceptin had no effect in the arm in which it was tested.

More evidence of varlitinib efficacy

The evaluation of efficacy in this study is difficult given the advanced stage of these patients and the high degree of variability in the study protocol. However, a disease control rate (stable disease + partial response + complete response) of 81% in evaluable patients and 56% on an intent to treat basis was observed. Among the patients with HER2+ breast cancer, six were able to be controlled on single agent varlitinib for a median of seven months, which is comparable to the progression free survival seen with Herceptin + paclitaxel in the front line (7.1 months).

ASLAN uplists to NASDAQ

In May 2018, ASLAN completed an offering of 6m ADSs (each representing five ordinary shares) on NASDAQ at a price of $7.03. Proceeds were $42.2m gross/$36.8m net and an additional 0.9m ADSs will be offered in the underwriter’s greenshoe. We expect this to provide a runway through the major clinical catalysts of 2018 and 2019.

Valuation: Increased to $364m from $308m

We have increased our valuation to $364m (NT$11.0bn) from $308m (NT$9.3bn), although it is lower on a per-share basis: $11.04 per ADS (NT$66.68 per ordinary share) compared to $11.83 (NT$71.85) previously. We arrive at estimated net cash (Q118 + offering + greenshoe) of $70.2m. We expect the company to require $60m in additional capital to reach profitability in 2021.

New data presented at ASCO

The company presented two posters at the American Society of Clinical Oncology (ASCO) annual conference in June 2018. The first was a description of the company’s ongoing pivotal TREETOP study of varlitinib in biliary tract cancer (BTC), which did not provide any new clinical data. However, the company also presented data from an ongoing Phase Ib varlitinib combination dosing study. The trial is designed to examine varlitinib with and without Herceptin (trastuzumab, Roche) in combination with carboplatin and paclitaxel. The combination of Herceptin with a platinum drug and a dose of Taxol (such as carboplatin and paclitaxel respectively) is a common treatment for HER2+ breast cancer, which formed the majority of patients (20/37) in the study.

Interpreting the results of the study is complex given the multiple doses and four different active molecules being studied (Exhibit 1). The study was structured as a dose de-escalation, such that initial cohorts were at drug concentrations that were likely to cause dose limiting toxicities (DLTs). These DLTs included neutropenia (febrile and otherwise), as well as a number of electrolyte disorders (hypophosphatemia, hyponatremia and hypokalemia) among others. The latter are not uncommon in cancer patients undergoing chemotherapy, but are typically secondary to gastrological distress (vomiting, diarrhea, etc). Diarrhea (of any grade) was the most common adverse event (69%), followed by fatigue (67%). The study identified 300mg dosed twice a day, intermittently (four days on, three days off) in combination with paclitaxel as the optimal dose combination and that addition of Herceptin did not increase toxicity.

Exhibit 1: Safety results from Phase 1b dosing study

Varlitinib dosing

Other drugs

N

DLT

500mg BD cont.

CP

3

3

400mg BD cont.

CP

5

3

400mg BD int.

CP

4

2

300mg BD int.

CP

6

2

300mg BD int.

P

6

0

400mg BD int.

P

4

2

300mg BD cont.

P

6

4

300mg BD int.

PT

3

0

Source: ASCO abstracts. Notes: cont.=continuous dosing, int.=intermittent dosing, C=carboplatin, P=paclitaxel, T=trastuzumab, DLT=dose limiting toxicity, PR=partial response, SD=stable disease.

These data build on the previously available evidence that varlitinib is clinically active in a range of tumor types. 26 of the 37 patients were evaluable for efficacy of which there was one complete response (CR), nine partial response (PR) and eleven stable diseases (SD). The disease control rate (CR+PR+SD) across among these was 81%, and 57% on an intent to treat basis. Two partial responses and two stable diseases were seen at the optimal dose (out of six). For comparison, disease control using Herceptin and paclitaxel in the first line is 79%,1 so we find the results from this study to be a compelling response given the number of prior therapies in these patients (median three), and the general variability in the study protocol. The company also noted that of the 10 breast cancer patients that achieved disease control, six maintained it with varlitinib alone for a median of seven months. This is comparable to the progression-free survival seen with Herceptin and paclitaxel in the first line (7.1 months). Varlitinib was not found to be tolerable in the triple combination including carboplatin, which further improves PFS in the Herceptin combination (to 10.7 months), although we do not find this immediately limiting given the multiplicity of treatment options. However, it does speak to the differences between varlitinib and Herceptin, which is generally tolerable in this combination. The ability to combine varlitinib with Herceptin opens up a range of different potential treatment algorithms to be explored, although at this time more data are needed to draw any conclusions.

Robert N, et al. (2004) Randomized Phase III Study of Trastuzumab, Paclitaxel, and Carboplatin Compared With Trastuzumab and Paclitaxel in Women With HER-2–Overexpressing Metastatic Breast Cancer. J Clin. Onccol. 24, 2786-2792.

ASLAN uplists to NASDAQ

In March 2018, ASLAN announced the intent to uplist to the NASDAQ exchange, and subsequently in May priced an offering of ADSs: 6m ADSs (each representing five ordinary shares) at an offering price of $7.03, for proceeds of $42.2m gross/$36.8m net. An additional 0.9m ADSs will be offered in the underwriter’s greenshoe (and we have included this in our valuation, see Exhibit 3) . The proceeds will be used to support the ongoing clinical development of varlitinib, ASLAN003 and ASLAN004. The current financing should allow the company to progress through all its major clinical catalysts in 2018 and 2019.The company provided an updated timeline for these events, largely in line with our estimates (Exhibit 2).

Exhibit 2: Clinical catalyst timing

Drug

Program

Catalyst

Timing

Varlitinib

Second-line BTC

Pivotal top-line data

2019

China pivotal top-line data

Late 2018

First-line BTC

Phase I/II data

Late 2018

Gastric cancer

Phase II top-line data

H218

ASLAN003

AML

Interim data

H218

ASLAN004

Asthma

IND

Q318

Atopic dermatitis

IND

Q318

Source: ASLAN

Valuation

We have increased our valuation to $364m (NT$1.0bn) from $308m (NT$9.5bn), although it is lower on a per share basis: $11.04 per ADS (NT$66.68 per ordinary share) compared to $11.83 ($71.85) previously, as result of dilution from the recent NASDAQ IPO. The increase in the total valuation is driven by increased cash following the IPO (estimated $42m net including the greenshoe bringing total cash to $70m), as well as advancing our model to the most recent period.

Exhibit 3: Valuation of ASLAN

Program

Indication

Region

Clinical stage

Prob. of success

Launch year

Peak sales ($m)

Margin/Royalties

rNPV ($m)

Varlitinib

Second line BTC

US + Europe

Phase II/III

30%

2020

277

59%

121.6

East Asia

Phase II/III

30%

2019-2020

195

53-58%

73.9

R&D

-7.2

First line GC

US + Europe

Phase II/III

20%

2021

182

57%

31.8

East Asia

Phase II/III

20%

2021

302

54-60%

51.5

R&D

-7.7

Upfront and sales milestones payable

-9.5

ASLAN003

First line AML

US + Europe

Phase II ready

10%

2022

308

59%

38.0

R&D

-4.0

ASLAN002 royalties

First line BC + GC

US + Europe

Phase II

15%

2022

909

5%

16.9

Unallocated costs

-11.8

Total

293.4

Net cash and equivalents (Q118+ IPO + greenshoe) ($m)

70.2

Total firm value ($m)

363.7

Total basic ADSs (m)

32.9

Value per ADS ($)

11.04

Source: ASLAN reports, Edison Investment Research

Financials

The company reported a loss of $8.6m (NT$255m) from Q118, of which $5.1m was attributable to R&D spending. We forecast R&D spending of $30.5m for the year, increasing to $34.3m in 2019 with the advancement of the ongoing clinical programs. The company recorded a $12m payment in the first quarter for the new license agreement with Array Pharma for varlitinib, and it will owe another $12m on the first anniversary. The company ended Q118 with $27.9m in cash. If we include expected net proceeds from the NASDAQ IPO including the greenshoe ($42.3m), we arrive at an estimated net cash of $70.2m. We expect the company to require additional capital in 2019 to finance the launch of varlitinib, which we record as $60m in illustrative debt (Exhibit 4).

Exhibit 4: Financial summary

$’000s

2016

2017

2018e

2019e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

11,547

0

0

743

Cost of Sales

(125)

0

0

(111)

Gross Profit

11,422

0

0

631

R&D

(13,165)

(30,001)

(30,526)

(34,313)

SG&A

(6,956)

(9,139)

(10,966)

(31,260)

EBITDA

 

 

(7,204)

(37,803)

(38,308)

(61,613)

Normalised operating profit

 

 

(7,280)

(38,013)

(38,533)

(61,837)

Amortisation of acquired intangibles

0

0

0

0

Exceptionals

0

0

0

3

Share-based payments

(1,420)

(1,127)

(2,959)

(3,107)

Reported operating profit

(8,700)

(39,140)

(41,492)

(64,941)

Net Interest

(477)

(54)

(198)

(124)

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

127

(699)

(197)

0

Profit Before Tax (norm)

 

 

(7,629)

(38,765)

(38,929)

(61,960)

Profit Before Tax (reported)

 

 

(9,049)

(39,892)

(41,888)

(65,065)

Reported tax

0

0

0

0

Profit After Tax (norm)

(7,629)

(38,765)

(38,929)

(61,960)

Profit After Tax (reported)

(9,049)

(39,892)

(41,888)

(65,065)

Minority interests

0

0

0

0

Discontinued operations

0

0

0

0

Net income (normalised)

(7,629)

(38,765)

(38,929)

(61,960)

Net income (reported)

(9,049)

(39,892)

(41,888)

(65,065)

Basic average number of shares outstanding (m)

105

124

157

175

EPS - basic normalised ($)

 

 

(0.07)

(0.31)

(0.25)

(0.35)

EPS - diluted normalised ($)

 

 

(0.07)

(0.31)

(0.25)

(0.35)

EPS - basic reported ($)

 

 

(0.09)

(0.32)

(0.27)

(0.37)

Dividend ($)

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

593

689

21,615

19,561

Intangible Assets

84

84

21,053

18,999

Tangible Assets

384

444

405

405

Investments & other

125

161

158

158

Current Assets

 

 

53,121

50,645

41,128

34,137

Stocks

0

0

0

27

Debtors

1,294

0

0

122

Cash & cash equivalents

51,737

50,573

41,047

33,905

Other

90

72

82

82

Current Liabilities

 

 

(3,804)

(5,979)

(14,608)

(7,078)

Creditors

(3,804)

(5,979)

(14,608)

(7,078)

Tax and social security

0

0

0

0

Short term borrowings

0

0

0

0

Other

0

0

0

0

Long Term Liabilities

 

 

(8,336)

(9,841)

(10,524)

(70,966)

Long term borrowings

(8,336)

(9,679)

(10,099)

(70,541)

Other long term liabilities

0

(162)

(425)

(425)

Net Assets

 

 

41,575

35,513

37,611

(24,346)

Minority interests

0

0

0

0

Shareholders' equity

 

 

41,575

35,513

37,611

(24,346)

CASH FLOW

Op Cash Flow before WC and tax

(7,204)

(37,803)

(38,308)

(61,613)

Working capital

1,524

3,274

(2,325)

4,122

Exceptional & other

(109)

(5)

1,320

1,933

Tax

0

0

0

0

Net operating cash flow

 

 

(5,789)

(34,534)

(39,313)

(55,558)

Capex

(374)

(291)

(195)

(224)

Acquisitions/disposals

(81)

(9)

(11,801)

(11,801)

Net interest

0

0

0

0

Equity financing

31,364

33,061

42,320

0

Dividends

0

0

0

0

Other

(68)

(36)

0

0

Net Cash Flow

25,052

(1,809)

(8,989)

(67,583)

Opening net debt/(cash)

 

 

0

(25,052)

(22,544)

(12,598)

FX

0

0

(979)

0

Other non-cash movements

0

(699)

22

0

Closing net debt/(cash)

 

 

(25,052)

(22,544)

(12,598)

54,985

Source: ASLAN reports, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by ASLAN Pharmaceuticals and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie without taking into account the particular financial situation or goals of any person). 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Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by ASLAN Pharmaceuticals and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. 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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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Snakk Media — Loss significantly reduced to near breakeven

The restructuring initiated in FY17 started to benefit the group in Q218 and Snakk Media finally returned to profit in its second half. Revenues for FY18 were close to the prior year at NZ$10.3m (NZ$10.6m), with increased self-service mobile advertising revenues offset by a decline in business in Southeast Asia (where overheads have been pared back). The cost base in FY19e will be lower with the full-year benefit. The group had year-end cash of NZ$1.1m, just below the current market capitalisation of NZ$1.3m.

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