Paradigm Biopharma — Potential for disease-modifying kOA treatment
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Paradigm Biopharma (ASX: PAR)

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Research: Healthcare

Paradigm Biopharma — Potential for disease-modifying kOA treatment

Paradigm has announced day 168 (six-month) data from the PARA_OA_008 trial, which is evaluating injectable pentosan polysulfate sodium (iPPS) as a potentially disease-modifying treatment for knee osteoarthritis (kOA). Highlights from the interim data include: structural changes in several disease features as measured by magnetic resonance imaging (MRI), potential support for disease-modifying OA drug (DMOAD) activity from trends in biomarker data, and persistent positive responses in WOMAC scores. During the second half of CY23, Paradigm intends to discuss with the FDA and EMA a potential regulatory pathway for DMOAD indication labelling; we believe that the outcome, along with clarification on the Phase III development pathway, could represent a significant catalyst for the company.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Paradigm Photography Pool Bone

Healthcare

Paradigm Biopharmaceuticals

Potential for disease-modifying kOA treatment

Pharma and biotech

Spotlight – Update

5 April 2023

Price

A$1.35

Market cap

A$381m

Share price graph

Share details

Code

PAR

Listing

Australian Stock Exchange

Shares in issue

282.1m

Net cash at end-December 2022

A$83.9m

Business description

Paradigm Biopharmaceuticals is an Australian biotechnology company focused on the development of injectable pentosan polysulfate (iPPS). The company’s most advanced clinical programme is investigating the drug’s use as a potentially disease modifying treatment for knee-osteoarthritis, a degenerative disease with significant unmet medical needs. iPPS is in pivotal Phase III trials.

Bull

Knee osteoarthritis (kOA) is a prevalent indication with large commercial potential.

Comprehensive late-stage development programme to maximise opportunity in kOA.

iPPS has a known safety profile, which somewhat de-risks development.

Bear

Failure to meet clinical endpoints would significantly affect the value of iPPS.

Historically the development of disease modifying drugs in OA has been unsuccessful.

Funding is needed to complete the Phase III programme.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Paradigm Biopharmaceuticals is a research client of Edison Investment Research Limited

Paradigm has announced day 168 (six-month) data from the PARA_OA_008 trial, which is evaluating injectable pentosan polysulfate sodium (iPPS) as a potentially disease-modifying treatment for knee osteoarthritis (kOA). Highlights from the interim data include: structural changes in several disease features as measured by magnetic resonance imaging (MRI), potential support for disease-modifying OA drug (DMOAD) activity from trends in biomarker data, and persistent positive responses in WOMAC scores. During the second half of CY23, Paradigm intends to discuss with the FDA and EMA a potential regulatory pathway for DMOAD indication labelling; we believe that the outcome, along with clarification on the Phase III development pathway, could represent a significant catalyst for the company.

Consensus estimates

Year
end

Revenue (A$m)

PBT
(A$m)

EPS
(A$)

DPS
(A$)

P/E
(x)

Yield
(%)

06/21

8.94

(34.3)

(0.17)

0.0

N/A

N/A

06/22

0.08

(39.3)

(0.17)

0.0

N/A

N/A

06/23e

0.005

(58.5)

(0.20)

0.0

N/A

N/A

06/24e

64.5*

(12.7)

0.04

0.0

33.6

N/A

Source: Refinitiv. Note: *Revenue may reflect market expectations on potential licensing revenue.

kOA is a serious unmet medical need

kOA is a highly prevalent disease that lacks disease-modifying treatments and therefore provides a significant opportunity for Paradigm. The company has several active clinical programmes in this indication; more information on these is detailed in our previous update.

Encouraging data throughout PARA_OA_008 trial

The PARA_OA_008 study previously showed encouraging data at day 56 (reported in October 2022). Key highlights from this stage included biomarker analyses in the knee joint space (synovial fluid) consistent with DMOAD efficacy and improvements in Western Ontario and McMaster University Arthritis Index (WOMAC) scores for pain and function versus the placebo group. Paradigm has now provided an update at day 168, showing a continuation of the favourable effects on clinical outcomes and on the objective measure of disease progression at day 56. We believe these results are encouraging for a potential DMOAD indication label for iPPS.

DMOAD label potential to increase impact of iPPS

During H2 of CY23, Paradigm intends to initiate discussions with key regulatory agencies (the FDA and EMA) to agree on potential DMOAD indication label pathways for iPPS. The outcome of these discussions could represent a significant catalyst for the company, in our view. A DMOAD indication label would increase both the clinical and commercial impact of iPPS upon regulatory approval; iPPS could become a first-line therapy and strengthen the revenue opportunity for Paradigm.

Supportive data in all tested disease measurements

The Phase II trial (PARA_OA_008) is assessing iPPS as a potential DMOAD, and in this study patients (n=61) were randomised into three treatment groups according to a 1:1:1 ratio:

a subcutaneous injection of 2mg/kg iPPS twice weekly (n=19),

iPPS plus one placebo injection once weekly (n=20), and

placebo injection twice weekly (n=22).

Now in the 12-month follow-up stage, Paradigm has announced an update on multiple objective measures associated with disease progression from the day 168 (six-month) data.

MRI measurements to assess OA progression

Prior to the commencement of this study, patients underwent MRI scans to determine their baseline levels of OA. Patients then received follow-up MRIs at day 168 to establish differences in disease progression between the iPPS-treated arms versus placebo. While we acknowledge that this study has a relatively small patient population, the MRI measurements did show some improvements in those receiving iPPS, consistent with a demonstration of DMOAD efficacy. A 21% improvement in mean cartilage loss score in the medial femur was observed in the once-weekly iPPS group versus a 4% worsening with placebo. The twice-weekly iPPS group also showed trends of improvement, although not of statistical significance.

In addition, bone marrow lesions in the lateral femur showed an average reduction of 38% in the once-weekly iPPS arm versus an average increase of 47% in the placebo group. Furthermore, statistically significant reductions in bone marrow edema lesions in the lateral tibiofemoral compartment were observed in the once-weekly iPPS group (average reduction of 17%) versus the placebo group (average increase of 56%).

Analysis of OA biomarkers

A broad panel of key biomarkers were also assessed in the blood (serum), urine and knee joint space (synovial fluid):

ARGS (an articular cartilage breakdown product – serum & synovial fluid),

COMP (a marker of cartilage turnover – serum & synovial fluid),

C2C (a marker of cartilage breakdown – serum), and

CTX II (a marker of cartilage breakdown – urine).

Generally, it was found that the trends of these biomarkers of cartilage degradation in iPPS-treated patients were favourable, with reductions in all cases. Further, these reductions were deemed statistically significant for the measurements of serum C2C levels and synovial fluid ARGS levels in the day 168 data versus the placebo group.

WOMAC scores

Patients provided baseline scores using the WOMAC index, and after initiation of treatment, these were assessed at pre-determined timepoints. Following statistically significant improvements at day 56, persistent responses have been observed since then in pain, function and stiffness scores. Notably, at day 168, a 50% improvement in function was reported in 53.3% of twice-weekly iPPS patients versus 22.1% of placebo patients. Furthermore, the average number of days that patients used rescue medication (such as paracetamol or NSAIDs to manage pain symptoms) was around four times lower in the twice-weekly iPPS group (five days) versus placebo (23 days).

An active year ahead for Paradigm

We believe that these data are positive for iPPS as a potentially disease-modifying treatment for kOA and recognise that a DMOAD indication label could help maximise the impact of the therapy. Management has communicated that it is currently evaluating the data to prepare for discussions with the FDA and EMA in H2 CY23. The outcome of these discussions, along with clarification on the Phase III development pathway, could represent a significant catalyst for the company, in our view. PARA_OA_008 is an ongoing trial, and we anticipate that the 12-month clinical outcome data will be shared in H2 CY23.

Regarding other ongoing clinical activities, the PARA_OA_002 Phase III trial is a two-stage pivotal study to assess the effect of iPPS in patients with kOA pain, and is the company’s most advanced-stage clinical programme. Patient enrolment began in H222 and management has said that it expects to share an update from this trial in Q2 CY23, representing the next material near-term catalyst. Paradigm is also currently in active discussions with multiple potential partners for its Phase II asset in mucopolysaccharidosis (MPS), an orphan indication, and top-line data from the ongoing clinical trials in MPS, as discussed in our initiation note, are expected in Q4 CY23.

Financials

As discussed in our prior note, in H123, net cash outflow from operations was A$17.8m, 6.1% higher (y-o-y) than A$16.7m in H122. The cash balance at the end of H123 was A$83.9m, supported by a total A$66m capital raise in August 2022. If it is assumed that the cash burn rate remains similar to recent run rates (A$17.8m in H123), the company’s funds on hand would be anticipated to provide an operating cash runway at least into CY24.

General disclaimer and copyright

This report has been commissioned by Paradigm Biopharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Paradigm Biopharmaceuticals. Edison Investment Research standard fees are £60,000 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.

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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 2023 Edison Investment Research Limited (Edison).

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.

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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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Paradigm Biopharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Paradigm Biopharmaceuticals. Edison Investment Research standard fees are £60,000 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 2023 Edison Investment Research Limited (Edison).

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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