Kazia Therapeutics — Multiple paxalisib data points expected in Q4

Paxalisib is a PI3K and mTOR inhibitor being studied in a number of clinical trials involving cancer in the brain. The drug is in a 30-patient Phase II study of patients with newly diagnosed GBM and unmethylated MGMT promotor, with final data expected in Q4 CY21. Paxalisib is being used as an adjuvant following initial resection, radiation treatment and temozolomide.

Previously announced interim results have been consistently positive, with the drug demonstrating PFS of 8.4 months and OS of 17.5 months (Exhibits 1 and 2) in 29 patients.

These values compare favourably to historical controls using temozolomide alone in a similar patient population (Exhibit 3). Patients with an unmethylated MGMT promoter are more resistant to temozolomide. It is difficult to draw definitive conclusions using historical controls given the variability between patient populations, so these data should be interpreted with some caution, but they are what is expected with an active drug.

As a reminder, GBM is the most common and aggressive brain tumour and accounts for approximately half of all gliomas.1 According to the National Cancer Institute, there are approximately 23,820 cases per year of brain and other nervous system cancers in the US, and another 64,600 in Europe according to the International Agency for Research on Cancer. We estimate around 12,000 of these are GBM in the US, with another 32,000 in Europe. The survival rate of GBM is especially poor with a five-year survival rate of only 5.1% and a median OS of 10 months.2

Therapeutic options are limited. Since 2005, only three new treatments have been approved for GBM: temozolomide, bevacizumab and tumour-treating fields. The standard of care for newly diagnosed GBM is a combination of surgery, radiation and temozolomide with recurrence occurring due to resistance to temozolomide.

Paxalisib is also the subject of three ongoing investigator-sponsored studies of BMs that are expected to provide readouts in the coming months (although as they are being led by investigators rather than the company, the precise timing of when each study will release data is unclear). BMs are a major cause of mortality in metastatic cancer patients because the blood brain barrier limits the effectiveness of many treatments that work at other metastasis sites. According to the US National Cancer Institute, there are 1.9m new cases of all cancers per year and BM are estimated to present at diagnosis at 2.0% of these.3 This indicates an incidence of around 38,000 at diagnosis, with a much higher number likely over the course of a patient’s battle with cancer.

Paxalisib could be well positioned to provide a benefit to these patients as a targeted cancer treatment designed to cross the blood brain barrier. As a reminder, paxalisib was specifically designed in order to achieve high concentrations in the central nervous system4 and was shown in preclinical studies to cross the blood-brain barrier freely while demonstrating a pharmacodynamic effect. The earliest-stage programme is a Phase I study at Memorial Sloan-Kettering investigating paxalisib in combination with radiotherapy for any primary tumour type as long as it has PI3K pathway mutations. This study has targeted enrolment of 36 and we expect the main readout to be on the safety of the combination treatment. Another programme in Phase II sponsored by the Alliance Group is also investigating BMs from any primary solid tumour. This programme is also investigating the CDK4/6 inhibitor Verzenio (abemaciclib, Eli Lilly) and the TRK inhibitor Vitrakvi (entrectinib).

Finally, we are expecting a readout from the Phase II BCBM study being performed at Dana-Farber. This study is investigating the drug in combination with Herceptin (trastuzumab) in HER2+ breast cancer patients. One retrospective study of patients in Belgium found that among HER2+ breast cancer patients, 10.8% had BMs at their initial screening and 41.7% developed BMs within their lifetime.5 Survival of these metastatic breast cancer patients was significantly reduced, from 46.7 months for those with no central nervous system involvement to 20.8 months for those with BMs.

In April 2021 Kazia announced that it licensed the compound EVT801 from Evotec. The deal included €1m upfront for Evotec, up to €308m in milestones and tiered single-digit royalties. Kazia expects to initiate the Phase I programme by the end of the year. The Phase I will enrol up to 90 patients with advanced solid tumours that are resistant to existing therapies. Expectations are for the focus of development to be renal cell carcinoma (RCC), hepatocellular carcinoma and soft tissue sarcoma.

EVT801 is an inhibitor of VEGFR3. This family of proteins (VEGFR) and their ligands (VEGF) have been successfully targeted by a number of anti-cancer therapeutics. Avastin (bevacizumab, Genentech) was the first drug approved to specifically target this signalling pathway. It is a ligand trap for VEGF-A that depletes this growth factor from the blood and prevents activation of the VEGFR family of receptors. Additionally, proteins of the VEGFR family are frequent targets for so-called multi-tyrosine kinase inhibitors. VEGFR proteins are members of the receptor tyrosine kinase class along with other growth factor receptors such as EGFR and FLT3. These other growth factors are also important for tumorigenesis and multi-tyrosine kinase inhibitors such as Nexavar (sorafenib, Bayer) inhibit a wide number of these receptors to varying degrees and achieve their efficacy by this combined effect.

Historically, the VEGFR family has been targeted to prevent the formation of new blood vessel (angiogenesis) in a tumour. By preventing the generation of new blood vessels, the tumours can be starved of nutrients and oxygen. Avastin is a so-called angiogenesis inhibitor. However, the specific isoform VEGFR3 is associated with the formation of lymphatic vessels (as opposed to blood vessels). Therefore, the specific inhibition of this protein may have a different activity profile from other drugs that target this VEGFR class. The lymphatic system is the primary route of metastasis for many tumour types.

One feature highlighted by Evotec is that EVT801 can shift the balance of immune cells in a tumour, which may be an advantage if EVT801 is combined with immunotherapy such as checkpoint inhibitors.

We have increased our valuation to A$375m or A$2.83 per basic share from A$346m or A$2.68 per basic share mainly due to rolling forward our NPV. This was partially offset by lower net cash and slightly higher expense expectations.

Kazia reported revenue for FY21 (ending 30 June 2021) of A$15.2m, stemming from licensing agreements such as the Oasmia deal for cantrixil and the Simcere licensing of the Greater China rights for paxalisib. R&D increased to A$14.5m from A$9.5m the year before due to the advancement of the clinical trial programmes. G&A also increased from A$3.7m to A$7.0m. The net loss for the year was A$8.4m compared to A$12.5m in FY20. Based on these results, we have increased our FY22 revenue estimate by A$0.6m due to a higher expected R&D rebate (due to higher R&D spending). We have also increased our R&D estimate for FY22 by A$0.4m, although we have decreased our G&A estimate by A$2.2m as much of the spending in FY21 was transaction related and one-time (non-recurring). Additionally, we are introducing our FY23 estimates, which feature R&D spending of A$13.2m (down from the current level as we believe much of the pivotal trial spending is front-end loaded) and G&A of A$6.1m.

The company reported net cash of A$27.6m as of 30 June 2021. Our estimated financing requirement for the company is A$60m (including A$30m in FY23) up from A$50m previously due to higher R&D spending as well as to provide a higher cushion for working capital needs.