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Onxeo — Phase I with AsiDNA iv starts; first data in H218

Onxeo (EU: ONXEO)

Last close As at 21/11/2024

EUR0.33

▲ −0.01 (−2.94%)

Market capitalisation

EUR37m

More on this equity

Research: Healthcare

Onxeo — Phase I with AsiDNA iv starts; first data in H218

On 24 April, Onxeo announced that the first patient had been treated with AsiDNA, a first-in-class DNA break repair inhibitor, via systemic administration in the Phase I trial. AsiDNA has already generated supportive data from a Phase I trial in melanoma using intratumoural injection. Alongside the Phase I trial Onxeo is conducting a broad preclinical programme that explores AsiDNA in various settings and combinations with other drugs. Two abstracts with preclinical data were presented at the American Association for Cancer Research conference in April potentially demonstrating unique characteristics of its mechanism of action. Our valuation is marginally higher at €221m or €4.4/sh.

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Written by

Healthcare

Onxeo

Phase I with AsiDNA iv starts; first data in H218

Company update

Pharma & biotech

27 April 2018

Price

€1.33

Market cap

€67m

Net cash (€m) at end Q417

14.1

Shares in issue

50.7m

Free float

80%

Code

ONXEO

Primary exchange

Euronext Paris

Secondary exchange

OMX Copenhagen

Share price performance

%

1m

3m

12m

Abs

(6.3)

(27.0)

(48.6)

Rel (local)

(12.3)

(25.9)

(50.5)

52-week high/low

€5.4

€1.0

Business description

Onxeo is focused on orphan cancer indications, specialising in epigenetics and DNA break repair inhibition. Beleodaq, an HDAC inhibitor, is approved for PTCL in the US and partnered with Spectrum Pharmaceuticals. AsiDNA, a novel DNA break repair inhibitor from Onxeo’s platON platform, is in a Phase I trial with interim data expected in 2018.

Next events

Interim data from the DRIIV trial

H218

AsiDNA + HDACi Phase I start

2018

AsiDNA + PARPi Phase I start

2018

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Alice Nettleton

+44 (0)20 3077 5700

Onxeo is a research client of Edison Investment Research Limited

On 24 April, Onxeo announced that the first patient had been treated with AsiDNA, a first-in-class DNA break repair inhibitor, via systemic administration in the Phase I trial. AsiDNA has already generated supportive data from a Phase I trial in melanoma using intratumoural injection. Alongside the Phase I trial Onxeo is conducting a broad preclinical programme that explores AsiDNA in various settings and combinations with other drugs. Two abstracts with preclinical data were presented at the American Association for Cancer Research conference in April potentially demonstrating unique characteristics of its mechanism of action. Our valuation is marginally higher at €221m or €4.4/sh.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/16

4.4

(20.4)

(0.45)

0.0

N/A

N/A

12/17

9.5

(19.7)

(0.24)

0.0

N/A

N/A

12/18e

2.6

(12.2)

(0.24)

0.0

N/A

N/A

12/19e

3.9

(11.2)

(0.22)

0.0

N/A

N/A

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

First patient recruited to Phase I with AsiDNA

The new Phase I study is exploring AsiDNA via intravenous administration for the first time. The study, now introduced as DNA Repair Inhibitor administered IntraVenously (DRIIV), will enrol patients with various advanced solid cancers with the goal of evaluating the safety profile, establishing the clinical dose and determining the active dose at the tumour level. Onxeo is also exploring various biomarkers that might help to stratify patients in later trials. AsiDNA is part of the proprietary, novel platON platform, a major R&D expansion announced in October 2017, and is based on decoy oligonucleotides. The platON platform belongs to the so-called DNA damage response (DDR) technology, a domain to which recently marketed PARP inhibitors also belong (for detailed analysis, see our outlook report, published in November 2017). Interim results from the DRIIV trial are expected in H218. The final results and the findings from Onxeo’s broad preclinical programme will help to inform further R&D strategy.

Fresh preclinical data at AACR

Onxeo presented two abstracts in a poster session at the AACR’s annual meeting on 14-18 April 2018 in Chicago, Illinois. The new data added to the growing body of evidence backing AsiDNA’s potential and, surprisingly, revealed a potentially new mechanism of action. According to this evidence, unlike the majority of drugs in oncology that develop resistance, the tumour cell’s sensitivity to AsiDNA could actually increase as the treatment progresses. If confirmed in future studies, it could be the first known drug with such an effect.

Valuation: Marginally up to €221m or €4.4/share

Our valuation is €221m or €4.4/share, marginally higher than our previous value of €218m, or €4.3/share, mainly due to rolling our model forward, which was partly offset by lower cash. Interim data from the DRIIV trial and the potential start of other clinical trials with AsiDNA are catalysts for the share price in the near term.

Cross-potentiation between AsiDNA and belinostat

One of the abstracts summarised the data of AsiDNA administered in combination with belinostat (Beleodaq), Onxeo’s HDAC inhibitor, in several tumour cell lines. The results showed:

■

Belinostat treatment caused DNA break accumulation and genetic instability in tumour cells.

■

Importantly, AsiDNA increased belinostat’s activity on its targets. AsiDNA increased histone acetylation by belinostat, and prevented DNA repair mechanisms in the tumour cells that would otherwise be activated on DNA damage by belinostat. This cross-potentiation between the two drugs resulted in high synergistic anti-tumour efficacy (Exhibit 1).

■

While repeated treatments with belinostat alone caused drug resistance, this was not seen in the combination treatment with AsiDNA, indicating the combination’s potential to prevent the tumour from developing resistance to treatment.

Exhibit 1: Efficacy of AsiDNA + belinostat combination indicated by survival of tumour cell line MDAMB-231 compared with MCF10A, a non-tumour cell line

Source: Jdey et al. AsiDNATM and HDAC inhibitors: a cross-potentiation team working to kill tumor cells. Poster presentation at AACR, 14-18 April 2018.

AsiDNA causes tumour cell “autosensitization”

The second abstract described the in vitro data for a study that explored AsiDNA’s effects in six different tumour cell lines. Cells were treated with AsiDNA and various targeted therapy agents, namely imatinib (original brand Glivec, Novartis), olaparib (Lynparza, AstraZeneca) and 6-thioguanine. The results showed for the first time that long-term treatment with AsiDNA increases the sensitivity of tumour cells to AsiDNA itself. All six cell lines tested became more sensitive to AsiDNA and did not develop resistance. This is a unique feature in oncology, as tumours developing resistance to drugs is an almost universal problem. All tumour cell lines developed some resistance to other targeted therapy agents. In addition, normal cells were not affected by the standalone treatment with AsiDNA.

Exhibit 2: AsiDNA causes “autosensitization” (A and B), but no drug resistance (C)

Source: Kozlack et al. Evolution of tumor cells under Dbait (AsiDNA) treatment results in “autosensitization”. Poster presentation at AACR, 14-18 April 2018. Dbait – AsiDNA technology

Next steps

While the new publications describe early in vitro data, in our view, the unique value lies in the identification of a potentially new mechanism of action of AsiDNA, which Onxeo has termed autosensitization. If the findings are replicated in further trials, AsiDNA could potentially be the first known drug with this effect.

Onxeo believes that the synergistic potential of AsiDNA with belinostat is sufficient to investigate the combination treatment further. However, this is only one of the potential R&D directions. The company’s ongoing broad preclinical programme explores AsiDNA’s potential in various combinations including with PARP inhibitors and conventional established chemotherapy drugs, or even standalone. The final results from the DRIIV study and the findings from Onxeo’s preclinical programme will help inform further R&D strategy. Onxeo also believes the broad data package will be a key component in future discussions with potential partners.

Financials

Onxeo recently reported its FY17 results. The top line figure of €9.5m was close to our estimate of €10.2m and consisted of €3.0m in recurring revenues. This came from royalties on Beleodaq (belinostat) sales and sales of now-divested Loramyc/Sitavig. The remaining €6.5m was one-off income, mainly comprising of €4m after the divestment of the aforementioned products to Vectans Pharma in July 2017 and €0.8m in upfront fees after out-licensing the non-core product, Validive, to Monopar Therapeutics.

Operating costs were €28.7m, up 4% y-o-y, largely in line with our expectations. Onxeo also reported €47.2m in non-recurring costs. Of that amount, €38.1m was an impairment of R&D assets related to belinostat, which led to a reduction in deferred tax liability and a tax income of €7.8m in the P&L. R&D assets were acquired through the merger with Topotarget in 2014. According to Onxeo, the impairment was required after a routine test to reflect a change in market dynamics for Beleodaq, namely increased competition in the peripheral T-cell lymphoma market. We revised our projections for royalty income from Beleodaq previously and for the time being make no changes to our top-line estimates. Another non-recurring expense was €9.2m put in an escrow account after the Commercial Court of Paris ordered the company to pay following its dispute with SpeBio/SpePharm. Onxeo appealed the decision and the outcome is uncertain, partly due to the fact that Onxeo owns 50% of SpeBio.

We have already reflected the divestment in our top-line projections and have revised our operating cost projections downwards as Onxeo indicated that it will aim to implement cost reduction measures. Overall, opex will be substantially lower in 2018 after completion of the Phase III trial with Livatag. The company expects cash reach to mid-2019, largely in line with our expectations.

Exhibit 3: Key changes to our financial forecasts

€m

2017

2018e

2019e

Est.

Act.

Change

Old

New

Change

New

Revenue

10.248

9.505

-7%

2.623

2.623

+0%

3.898

Operating profit (normalised))

(17.160)

(19.189)

+12%

(15.672)

(12.209)

-22%

(11.230)

Profit before tax (normalised)

(15.692)

(19.680)

+25%

(14.020)

(12.212)

-13%

(11.232)

Profit after tax (normalised)

(11.692)

(11.883)

+2%

(14.020)

(12.212)

-13%

(11.232)

EPS (norm, €)

(0.24)

(0.24)

-2%

(0.28)

(0.24)

-13%

(0.22)

Source: Onxeo accounts, Edison Investment Research

Valuation

We substantially revised our model in our last outlook report and, following the FY17 results we make no changes to our R&D assumptions. Our valuation is €221m or €4.4/share, which is marginally higher compared to our previous valuation of €218m or €4.3/share. This is mainly due to rolling our model forward, which was offset by lower net cash.

Exhibit 4: Onxeo rNPV valuation

Product

Indication

Launch

Peak sales (€m)

NPV
(€m)

Probability
(%)

rNPV
(€m)

NPV/share
(€/share)

Core assets

AsiDNA

TNBC

2024

2,170

378.1

15%

78.0

1.5

Beleodaq (US)

PTCL

2014

80

34.6

100%

34.6

0.7

Beleodaq (EU + US)

PTCL

2022

60

59.6

70%

41.7

0.8

Other assets

Livatag

250

226.3

5%

11.3

0.2

Validive

70

55.2

50%

27.6

0.5

Est. earn-outs associated with Loramyc/Sitavig

45.8

30%

13.7

0.3

Net cash at end FY17

14.1

100%

14.1

0.3

Valuation

 

 

 

813.7

221.1

4.4

Source: Edison Investment Research. Note: PTCL = peripheral T-cell lymphoma, TNBC = triple negative breast cancer.

Exhibit 5: Financial summary

€000s

2015

2016

2017

2018e

2019e

Year-end December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

3,482

4,423

9,505

2,623

3,898

Cost of Sales

(337)

(655)

(634)

(530)

(530)

Gross Profit

3,145

3,768

8,871

2,093

3,368

EBITDA

 

 

(20,355)

(21,304)

(17,393)

(12,109)

(11,130)

Operating Profit (before amort. and except.)

(20,574)

(21,542)

(19,189)

(12,209)

(11,230)

Intangible Amortisation

(1,600)

(1,626)

0

(1,000)

(1,000)

Exceptionals

(160)

(43)

(47,188)

0

0

Operating Profit

(22,334)

(23,211)

(66,377)

(13,209)

(12,230)

Other

(29)

0

0

0

0

Net Interest

602

1,107

(491)

(3)

(3)

Profit Before Tax (norm)

 

 

(19,972)

(20,435)

(19,680)

(12,212)

(11,232)

Profit Before Tax (reported)

 

 

(21,761)

(22,104)

(66,868)

(13,212)

(12,232)

Tax

2,353

(566)

7,797

0

0

Profit After Tax (norm)

(17,648)

(21,001)

(11,883)

(12,212)

(11,232)

Profit After Tax (reported)

(19,408)

(22,670)

(59,071)

(13,212)

(12,232)

Average Number of Shares Outstanding (m)

40.5

47.0

50.4

50.5

50.5

EPS - normalised (€)

 

 

(0.44)

(0.45)

(0.24)

(0.24)

(0.22)

EPS - normalised fully diluted (€)

 

 

(0.44)

(0.45)

(0.24)

(0.24)

(0.22)

EPS - (reported) (€)

 

 

(0.48)

(0.48)

(1.17)

(0.26)

(0.24)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

90.3

85.2

93.3

79.8

86.4

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

87,539

88,232

48,111

47,011

45,911

Intangible Assets

86,367

87,213

47,535

46,535

45,535

Tangible Assets

841

713

344

244

144

Investments

331

306

232

232

232

Current Assets

 

 

41,697

36,868

30,857

19,604

16,139

Stocks

106

184

30

25

25

Debtors

1,036

1,548

740

204

303

Cash

33,793

29,243

14,277

3,564

0

Other

6,762

5,893

15,810

15,810

15,810

Current Liabilities

 

 

(10,606)

(12,417)

(18,841)

(18,841)

(18,841)

Creditors

(10,537)

(12,311)

(18,711)

(18,711)

(18,711)

Short term borrowings

(69)

(106)

(130)

(130)

(130)

Long Term Liabilities

 

 

(15,831)

(18,594)

(9,358)

(8,918)

(15,670)

Long term borrowings

0

0

0

0

(6,753)

Other long term liabilities

(15,831)

(18,594)

(9,358)

(8,918)

(8,918)

Net Assets

 

 

102,799

94,089

50,769

38,856

27,538

CASH FLOW

Operating Cash Flow

 

 

(20,067)

(16,838)

(20,974)

(11,029)

(10,249)

Net Interest

579

(1,560)

317

382

(3)

Tax

(2,448)

538

(7,801)

0

0

Capex

(410)

(316)

(65)

(66)

(66)

Acquisitions/disposals

0

0

0

0

0

Financing

611

13,589

13,533

0

0

Dividends

0

0

0

0

0

Net Cash Flow

(21,735)

(4,587)

(14,990)

(10,713)

(10,317)

Opening net debt/(cash)

 

 

(55,459)

(33,724)

(29,137)

(14,147)

(3,434)

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(33,724)

(29,137)

(14,147)

(3,434)

6,883

Source: Company accounts, 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 OnxeoOnxeo 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). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

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Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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NSW 2000, Australia

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 OnxeoOnxeo 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. 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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

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Sydney +61 (0)2 8249 8342

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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

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