Pluristem Therapeutics — FDA gives two programs the green light with IND

Pluristem Therapeutics — FDA gives two programs the green light with IND

In April 2018, Pluristem announced that the FDA had given two pipeline programs IND clearance: PLX-PAD for femoral neck fracture (FNF) healing and PLX-R18 for acute radiation syndrome (ARS). The company plans to initiate the Phase III trial investigating PLX-PAD for FNF healing later this year. IND approval of the PLX-R18 program allows for potential use of the product in the event of radiological emergencies for investigational purposes, which could provide in-human data.

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Pluristem Therapeutics

FDA gives two programs the green light with IND

Earnings update

Pharma & biotech

29 May 2018

Price*

US$1.34

NIS4.83

Market cap

US$148m

NIS532

*Priced as at 25 May 2018

NIS3.57/$

Net cash ($m) at end Q318

34.07

Shares in issue

110.1m

Free float

93%

Code

PSTI

Primary exchange

NASDAQ

Secondary exchange

TASE

Share price performance

%

1m

3m

12m

Abs

8.1

(6.3)

(3.6)

Rel (local)

3.1

(2.0)

(15.1)

52-week high/low

US$2.0

US$1.1

Business description

Pluristem Therapeutics is a biotech company, headquartered in Israel, focused on the development of cell-based therapeutics derived from placenta. The company is advancing PLX-PAD for critical limb ischemia (CLI) in Phase III and has a Phase III study planned for hip fracture. PLX-R18 is being advanced for acute radiation syndrome (ARS) and hematopoietic cell transplant.

Next events

IC Phase II top-line results

June 2018

Initiate ARS Phase III study

Year-end 2018

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

In April 2018, Pluristem announced that the FDA had given two pipeline programs IND clearance: PLX-PAD for femoral neck fracture (FNF) healing and PLX-R18 for acute radiation syndrome (ARS). The company plans to initiate the Phase III trial investigating PLX-PAD for FNF healing later this year. IND approval of the PLX-R18 program allows for potential use of the product in the event of radiological emergencies for investigational purposes, which could provide in-human data.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

06/16

2.8

(20.2)

(0.25)

0.0

N/A

N/A

06/17

0.0

(24.2)

(0.28)

0.0

N/A

N/A

06/18e

0.0

(19.7)

(0.19)

0.0

N/A

N/A

06/19e

0.0

(43.9)

(0.38)

0.0

N/A

N/A

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

Plans to initiate PLX-PAD FNF trial in 2018

The company recently announced that the FDA has granted IND approval for the Phase III clinical trial investigating the use of PLX-PAD cell therapy for the treatment of FNF healing. The randomized, double-blind, placebo-controlled trial will enrol 240 patients undergoing hip arthroplasty across the US and Europe. Pluristem remains in discussions with the EU regarding clinical trial approval; however, the company anticipates enrolling patients in both regions later this year.

PLX-R18 IND approval for investigational purposes

IND approval for the PLX-R18 cell therapy program for ARS allows for the treatment of victims who may have been exposed to acute high-dose radiation due to radiological emergencies such as either industrial accidents or nuclear weapons devices. However, given the limited occurrence of these events, we do not expect this to alter the clinical development path or need for non-human primate studies.

Indiana University collaboration agreement

In April 2018, the company announced that the NIH had awarded $2.5m to Indiana University to study survival efficacy in geriatric and pediatric populations treated with the PLX-R18 cell therapy. As per this five-year agreement, Pluristem will be reimbursed for supplying the PLX-R18 cells for use in these studies. The company plans to use the first year of data to support its BLA filing for marketing approval.

Valuation: $212m or $1.92 per basic share

We have slightly increased our valuation to $212m or $1.92 per basic share from $208m or $1.89 per share. This increase is driven by advancing our NPVs to the most recent period, which is partially offset by cash expenditure. We expect Pluristem to need $50m in financing to reach profitability in 2020.

PLX-PAD for FNF Phase III study is a “go” in the US

The company recently announced that the FDA has approved the IND for a Phase III study of PLX-PAD cell therapy for the treatment of muscle injury following hip arthroplasty due to femoral neck fracture (FNF). The Phase III trial will enrol 240 patients across the US and Europe who will receive an intramuscular (IM) injection of 150m PLX-PAD cells (or placebo treatment, allocated at a ratio of 1:1) during an arthroplasty procedure. The study will be randomized, double-blind and placebo-controlled. The primary endpoint will be change in the Short Physical Performance Battery (SPPB) at 6.5 months following treatment. The SPPB is a series of physical tests of the lower extremities that mimic the physical requirements of daily activity that is typically used to assess geriatric patients. The battery is semi-quantitative and composed of three sections measuring different aspects of function: balance, gait speed, and getting into and out of a chair (Exhibit 1). Each test is scored objectively on a scale ranging from zero to four, where a score of zero indicates the subject is unable to perform the task. The company plans to begin enrolment some time in 2018 in both regions.

Exhibit 1: SPPB assessment

Function

Test

Standing balance

Feet in a side-by-side position for 10 seconds

Gait speed

Timed 8-foot (2.4-meter) walk

Getting into and out of a chair

Five timed, repetitive chair stands

Function

Standing balance

Gait speed

Getting into and out of a chair

Test

Feet in a side-by-side position for 10 seconds

Timed 8-foot (2.4-meter) walk

Five timed, repetitive chair stands

Source: Multiple sources.

FDA accepts PLX-R18 IND for the treatment of ARS

In April 2018, the FDA accepted the company’s IND application for PLX-R18 for acute radiation syndrome (ARS) allowing for the treatment of victims who may have been exposed to acute high-dose radiation, potentially attributable to either industrial accidents or nuclear weapons devices, which could provide in-human data for investigational purposes. This radiation can cause DNA damage, which can have devastating effects on rapidly dividing cells such as those in the bone marrow. PLX-R18 is derived from placenta donated after delivery from a fraction of cells existing at the interface between the maternal and fetal tissue that secretes growth factors encouraging hematopoiesis. Therefore, the company hopes to use these properties of the treatment to encourage the recovery of bone marrow cells and the immune system after they are killed with radiation. Following this clearance, the company has stated that it will begin the necessary preparations for accumulating an emergency inventory of PLX-R18 in case of radiological emergencies. It is important to note that this product is being developed via the FDA animal rule, which allows for approval based on animal studies for conditions such as ARS that cannot be feasibly studied in human clinical trials. We therefore assume that the completion of the non-human primate trial and human/animal dose conversion study are both pivotal to its clinical advancement, and essential for obtaining emergency use authorization (EUA) and an eventual Strategic National Stockpile (SNS) contract.

Furthermore, the National Institute of Allergy and Infectious Disease (NIAID) department of the NIH recently granted $2.5m to Indiana University to study survival efficacy in geriatric and pediatric populations treated with the PLX-R18 cell therapy, as well as to compare effectiveness and analyze drug-drug interactions. According to this agreement, Pluristem will be reimbursed for supplying the PLX-R18 cells for these studies. The company plans to use the first year of this five-year research collaboration to support its BLA filing for marketing approval.

Valuation

We have slightly increased our valuation to $212m or $1.92 per basic share from $208m or $1.89 per share. This increase is driven by advancing our NPVs to the most recent period, which is partially offset by the lower cash position. Our assumptions remain unchanged. We expect to update our valuation with the results from the Phase II IC study, which we believe will have implications for this program and provide insight into the CLI program.

Exhibit 2: Valuation of Pluristem

Development program

Prior data

Clinical stage

Prob. of success

Launch year

Launch pricing ($)

Peak sales ($m)

Patent/exclusivity protection

Royalty/
margin

rNPV ($m)

CLI, US

2x Phase I

Phase III

10%

2021

22,500

235

2036

63%

45.90

CLI, Europe

2x Phase I

Phase III

10%

2021

13,500

247

2036

59%

43.56

CLI, Japan

2x Phase I

Phase I/II

20%

2021

22,500

76

2036

27%

10.13

CLI, development costs

(19.51)

FNF (US and Europe)

Phase I for THR

Phase III ready

15%

2021

22,100

171

2036

55%

18.29

ARS

Primate Studies

Pivotal Primate Study

10%-20%

2020

N/A

155/
contract

2036

77%

37.96

IC, US

N/A

Phase II

7.5%

2022

11,500

443

2036

57%

39.41

IC, Europe

N/A

Phase II

7.5%

2022

6,900

466

2036

50%

34.95

IC, Japan

N/A

Phase II

15%

2022

11,500

144

2036

20%

7.43

IC, development costs

(32.29)

HCT (US and Europe)

Mouse Studies

Phase I

5%

2023

29,300

239

2036

61%

8.62

Unallocated costs

(16.71)

Total

 

 

 

 

 

 

 

 

177.76

Net cash and equivalents (Q318) ($m)

34.07

Total firm value ($m)

211.82

Total basic shares (m, Q318)

110.1

Value per basic share ($)

1.92

Dilutive warrants

7.62

Diluted firm value ($m)

222.49

Value per diluted share ($)

$1.89

Source: Pluristem Therapeutics reports, Edison Investment Research

Financials

Pluristem ended its fiscal Q318 in 31 March 2018 with an operating loss of $9.0m. R&D spending was the company’s major expense at $6.4m, which was slightly up from previous quarters (Q218: $5.6m, Q118: $4.6m). We assume this increase is associated with the advancement of the Phase III CLI and preparations for the Phase III FNF trial. Our FY18 R&D and SG&A estimates remain unchanged at $22.8m and $10.2m, respectively. We expect the company to require $50m in additional capital ($20m in FY18, $30m in FY19, recorded as illustrative debt) to reach profitability in 2020.

Exhibit 3: Financial summary

$'000s

2015

2016

2017

2018e

2019e

Year end 30 June

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

379

2,847

0

50

0

Cost of Sales

(13)

(100)

0

(2)

0

Gross Profit

366

2,747

0

48

0

Research and development

(19,173)

(19,580)

(21,092)

(22,754)

(36,267)

Selling, general & administrative

(6,460)

(6,486)

(6,927)

(10,215)

(10,726)

EBITDA

 

 

(27,341)

(25,469)

(30,196)

(34,872)

(48,165)

Operating Profit (before amort. and except.)

(25,267)

(23,319)

(28,019)

(32,878)

(46,993)

Intangible Amortization

0

0

0

0

0

Exceptionals/Other

0

0

0

0

0

Operating Profit

(25,267)

(23,319)

(28,019)

(32,878)

(46,993)

Financing income

590

73

205

6,668

(3,475)

Other (change in fair value of warrants)

0

0

0

0

0

Profit Before Tax (norm)

 

 

(20,625)

(20,173)

(24,152)

(19,684)

(43,941)

Profit Before Tax (IFRS)

 

 

(24,677)

(23,246)

(27,814)

(26,211)

(50,468)

Tax

0

0

0

0

0

Deferred tax

0

0

0

0

0

Profit After Tax (norm)

(20,625)

(20,173)

(24,152)

(19,684)

(43,941)

Profit After Tax (IFRS)

(24,677)

(23,246)

(27,814)

(26,211)

(50,468)

Average Number of Shares Outstanding (m)

70.3

79.5

87.4

105.9

114.5

EPS - normalized (c)

 

 

(29.35)

(25.36)

(27.63)

(18.58)

(38.38)

EPS - IFRS ($)

 

 

(0.35)

(0.29)

(0.32)

(0.25)

(0.44)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

11,287

10,345

8,518

6,854

10,885

Intangible Assets

0

0

0

0

0

Tangible Assets

10,173

9,216

7,277

5,546

9,577

Other

1,114

1,129

1,241

1,308

1,308

Current Assets

 

 

56,868

35,596

29,016

47,145

31,993

Stocks

0

0

0

0

0

Debtors

1,691

2,228

1,036

596

596

Cash

53,119

32,750

26,665

45,503

30,351

Other

2,058

618

1,315

1,046

1,046

Current Liabilities

 

 

(6,183)

(5,775)

(5,414)

(6,269)

(9,090)

Creditors

(6,183)

(5,775)

(5,414)

(6,269)

(9,090)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(3,829)

(2,010)

(1,869)

(21,936)

(51,936)

Long term borrowings

0

0

0

(20,000)

(50,000)

Other long term liabilities

(3,829)

(2,010)

(1,869)

(1,936)

(1,936)

Net Assets

 

 

58,143

38,156

30,251

25,794

(18,147)

CASH FLOW

Operating Cash Flow

 

 

(20,605)

(18,522)

(21,611)

(24,084)

(39,948)

Net Interest

0

0

0

0

0

Tax

0

0

0

0

0

Capex

(831)

(1,750)

(378)

(292)

(5,204)

Acquisitions/disposals

0

0

0

0

0

Financing

17,201

807

15,728

17,314

0

Dividends

0

0

0

0

0

Other

0

0

0

0

0

Net Cash Flow

(4,235)

(19,465)

(6,261)

(7,062)

(45,152)

Opening net debt/(cash)

 

 

(58,819)

(53,119)

(32,750)

(26,665)

(25,503)

HP finance leases initiated

5

0

0

0

0

Exchange rate movements

0

0

0

0

0

Other

(1,470)

(904)

176

5,900

0

Closing net debt/(cash)

 

 

(53,119)

(32,750)

(26,665)

(25,503)

19,649

Source: Company accounts, Edison Investment Research

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Israel

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

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60

Herzilya Pituach, 46766

Israel

Research: Consumer

La Doria — Strength in a tough environment

La Doria has delivered a strong set of results despite the challenging economic backdrop in its key markets. Organic growth was an impressive 8.4%, which was mainly volume-driven and broad-based across categories. EBITDA margins were down 30bps due to continued pressure from the supermarkets, mainly in the UK. Management is committed to remaining cost competitive and to shifting the business mix towards the faster-growing, more profitable areas. The new industrial plan, announced in March, should deliver this over the next four years, and targets c 3% revenue and 7% EBITDA CAGR FY17-21.

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