Telix Pharmaceuticals — Progress on clinical, regulatory and BD fronts

Telix Pharmaceuticals (AU: TLX)

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Research: Healthcare

Telix Pharmaceuticals — Progress on clinical, regulatory and BD fronts

Telix has had a raft of announcements, marking its steady progress in a range of areas. Notably, the company received feedback from the FDA regarding the clinical briefing package to support an NDA for illumet, which it says should be ready in March or April 2020. Additionally, Telix will be expanding its pivotal ZIRCON study of TLX250-CDx to the US with the recent IND filing for the program. The company also provided a first look at its Phase I/II study of TLX101 for glioblastoma multiforme (GBM). Finally, it announced two separate deals for preclinical programs.

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Healthcare

Telix Pharmaceuticals

Progress on clinical, regulatory and BD fronts

Clinical & regulatory update

Pharma & biotech

28 February 2020

Price

A$1.44

Market cap

A$364m

US$0.76/A$

Net cash (A$m) at 31 December 2019

42.5

Shares in issue

253m

Free float

67.6%

Code

TLX

Primary exchange

ASX

Secondary exchange

OTCMKTS

Share price performance

%

1m

3m

12m

Abs

(5.3)

(17.2)

104.3

Rel (local)

1.3

(14.6)

89.0

52-week high/low

A$1.91

A$0.66

Business description

Telix Pharmaceuticals is a Melbourne-headquartered global biopharmaceutical company focused on the development of diagnostic and therapeutic products based on targeted radiopharmaceuticals or molecularly targeted radiation.

Next events

Illumet NDA submission

March or April 2020

ZIRCON enrolled

Mid-2020

TLX101 Phase II start

Mid-2020

Analyst

Nathaniel Calloway

+1 646 653 7036

Telix Pharmaceuticals is a research client of Edison Investment Research Limited

Telix has had a raft of announcements, marking its steady progress in a range of areas. Notably, the company received feedback from the FDA regarding the clinical briefing package to support an NDA for illumet, which it says should be ready in March or April 2020. Additionally, Telix will be expanding its pivotal ZIRCON study of TLX250-CDx to the US with the recent IND filing for the program. The company also provided a first look at its Phase I/II study of TLX101 for glioblastoma multiforme (GBM). Finally, it announced two separate deals for preclinical programs.

Year end

Revenue (A$m)

PBT*
(A$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

10.3

(15.7)

(6.8)

0.0

N/A

N/A

12/19

15.2

(31.1)

(11.9)

0.0

N/A

N/A

12/20e

9.6

(28.1)

(11.1)

0.0

N/A

N/A

12/21e

82.8

52.0

19.7

0.0

7.3

N/A

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

NDA progress for illumet, IND accepted for ZIRCON

Telix is seeking NDA approval for illumet (TLX591-CDx) through the FDA’s 505(b)2 pathway. The company received feedback FDA on whether the current package is sufficient on 24 February 2020, and believes it can satisfy the agency’s requests with the existing data set. The full NDA is planned to be submitted 30–60 days from this date. Additionally, the FDA accepted an IND to expand its ZIRCON Phase III study (ongoing in Australia and the EU) to the US. The study is examining TLX250-CDx for kidney cancer imaging, and Telix expects to complete enrolment by mid-2020.

TLX101: No hang-ups in dosing yet

TLX101 is currently in the dose escalation portion of a Phase I/II study for GBM. As promised, Telix provided a clinical update at the end of 2019, which stated that all the patients treated so far (number undisclosed) had achieved stable disease (SD) and that no serious adverse events had been reported to date. The company expects the study to progress to the Phase II portion around mid-2020.

Multiple early-stage deals

Telix also recently announced two deals regarding early-stage assets for new indications. In the first, the company in-licensed the rights to a new targeted radiotherapy drug from AusHealth for A$30m in future milestones. AusHealth will continue to be responsible for clinical development. Also, Telix announced a deal to license some of its own assets from its antibody library to ATONCO for A$30m in future milestones, in the first out-licensing deal of Telix’s intellectual property.

Valuation: Increased to A$450m or A$1.78/share

We have increased our valuation to A$450m or A$1.78 per basic share from A$448m or A$1.77/share. The increase is driven by rolling forward our NPVs and offset by lower net cash (A$42.5m) and an increase in SG&A costs, but we expect to update our valuation progress of the illumet submission and ongoing clinical studies.

Regulatory: Illumet NDA and ZIRCON IND progress

Telix announced in late December 2019 that it has submitted an NDA clinical briefing package to the FDA on illumet (TLX591-CDx) for the detection of prostate cancer. This package contains the experimental data intended to eventually be included in the completed NDA application if the FDA deemed it sufficient.

On 24 February 2020, the company reported that it had received ‘positive’ feedback from the FDA on the package. According to the company: ‘The FDA has provided detailed feedback on the clinical briefing package for the efficacy data, which the company expects to be able to satisfy, based on the planned submission dataset.’ This suggests that the FDA asked for additional analyses of the data, but that Telix does not believe that additional clinical studies will be required. This is supported by the company’s timeline in which it will be submitting the completed NDA 30–60 days after the feedback. It also noted that the FDA said that the safety dataset in the submission was sufficient as is (subject to formal NDA review).

The agency previously agreed with Telix that the product could be submitted under the 505(b)2 pathway, which allows certain data not collected by the sponsor to be included in the application. This seems reasonable considering the significant amount of prior research into prostate-specific membrane antigen (PSMA) targeted imaging and the widespread study of the PSMA-11 molecule on which the drug is based.

Additionally, Telix announced that it had filed an IND with the FDA to start the Phase III ZIRCON study of TLX250-CDx for the detection of renal cancer, and this application was accepted on 23 January 2020. The study is already ongoing in Australia and the EU, and the current IND will expand it to the US. The ZIRCON study is designed to be a confirmatory study using the 89Zr radioligand in the product instead of the previously developed 125I version of the product. The 89Zr version of the product has lower radiation exposure, allowing for higher dosing and improved signal. The company previously completed a 10-patient bridging study in 2018 confirming the improved signal and safety. The ZIRCON study is expected to enroll 250 patients and enrollment is expected to be complete by the end of Q220.

Clinical update on TLX101, expect Phase II mid-2020

Telix is currently investigating TLX101 for the treatment of GBM in its Phase I/II study called IPAX-1. The study is currently in the dose escalation Phase I portion, where the maximum tolerated dose of drug will be found and will determine future dosing in the Phase II portion and onwards. In addition to TLX101, patients will receive 18 weeks of external radiation therapy according to the study protocol. The company provided an update on the progress of the trial to date in December 2019.

The company is currently enrolling patients under two treatment regimens, a single dose of drug and a fractionated dose where the same quantity is administered in three separate injections over the course of three weeks. At the current time, both regimens have a total radiation exposure of 2GBq, but dose escalations of up to 8GBq are planned (if needed in three patient cohorts). The company reported in the update that the fractionated dosing appears to be working better based on preliminary data, and we therefore expect doses to be administered this way going forward.

The safety and efficacy data provided so far have been limited, but the company did note that SD responses were seen in all patients enrolled to date, although the number treated and the current dosing cohort were not disclosed. Moreover, no serious adverse events (SAEs) have been seen and no hematologic toxicity has been observed. Consistent with earlier data, imaging has shown a clear localization of the drug to the tumor site at this dose (Exhibit 1), which is encouraging for the safety profile as toxicity to organ systems outside the brain is likely to be limited.

Exhibit 1: SPECT imaging brain localization of TLX101

Source: Telix Pharmaceuticals

The company did not disclose whether it had escalated above the 2GBq starting dose, but it did provide an updated timeline for the progress of the study, which suggests it is close to determining the Phase II dose and moving forward. It expects to finalize this dose in Q220, and stated that it will then present the Phase I data to the FDA for review and will initiate the Phase II portion of the study in mid-2020.

Multiple exploratory deals

In addition to Telix’s recent clinical and regulatory progress, it has begun the process of exploring future indications and new directions for the company with some recently announced deals. Announced in October 2019, the first deal is a collaboration with AusHealth using its APOMAB platform. The platform is designed to develop antibodies targeting the Sjögren syndrome type B antigen (SSB, aka the Lupus La protein). Patients with Sjögren syndrome and lupus often develop antibodies against the protein, which is normally found inside cells but revealed on cell death. According to AusHealth, the La/SSB protein is also expressed by distressed cancer cells such as those found in patients who have been pre-treated with chemotherapeutic agents. The goal is to use antibodies against SSB to deliver targeted radiation to dying or distressed tumor cells.

AusHealth is a private company owned by the Central Adelaide Local Health Network aimed at promoting research in the network. AusHealth will lead the clinical development of the platform, targeting new indications such as lung and ovarian cancer. Telix will make an initial investment of A$300,000 to fund the early stages, and A$30m in clinical and commercial milestones in exchange for worldwide rights.

Telix announced an additional deal in December 2019 in which it would license its antibody portfolio to French startup ATONCO to investigate potential therapies for bladder cancer. This is the first time Telix has out-licensed its portfolio. The deal includes A$30m in development milestones payable to Telix, undisclosed royalties, and Telix receives an option to reacquire the program. We know relatively little about the company’ partner ATONCO, outside that it is a targeted radiation company based in France.

Valuation

Our valuation has increased slightly to A$450m or A$1.78 per basic share from A$448m or A$1.77/ share. The increase in valuation from rolling forward our NPVs is offset by lower net cash (at A$42.5m) and an increase to SG&A costs (see below). There are no other significant changes to our models. We expect to update our valuation with the continued progress of the company’s programs in the clinic (such as further readouts on TLX101) and on the regulatory front (such as FDA feedback on the illumet NDA).

Exhibit 2: Valuation of Telix

 

Peak sales
(US$m)

Likelihood (%)

rNPV
(A$m)

rNPV/
share (A$)

TLX250-CDx kidney cancer imaging:

75

75%

65.3

$0.26

TLX250 kidney cancer therapeutic:

460

20%

60.4

$0.24

TLX591-CDx prostate cancer imaging

160

80%

143.1

$0.56

TLX591 prostate cancer therapeutic:

1,050

20%

126.2

$0.50

TLX101 brain cancer therapeutic

520

10%

42.6

$0.17

SG&A

-29.9

-$0.12

Portfolio total

407.6

$1.61

Net Cash (Q319)

42.5

$0.17

Enterprise total

450.0

$1.78

Source: Telix Pharmaceuticals reports, Edison Investment Research

Financials

Telix reported cash receipts of A$3.49m for the 12 months ending 31 December 2019, following $4.4m in order for illumet for research purposes. Total revenue for the period (including R&D rebates of A$11.7m) was A$15.2m. SG&A costs increased on a yearly basis to A$15.8m compared to A$9.15m for 2018, largely due to increased professional fees and salaries. We carry a large portion of these costs forward into 2020 and beyond. We assume this is because of increased investment in the ongoing clinical programs and regulatory submissions. The company ended 2019 with A$42.5m in net cash. We expect the company to license its assets for eventual commercialization and continue to include A$79.2m in illustrative milestones in 2021 associated with the licensing of TLX591 and TLX250. We do not expect the company to need additional capital based on these estimates, or even if milestone payments are lower than we anticipate. If the company cannot secure a marketing deal for these products, we would expect it to incur additional costs associated with the commercial buildout and additional financing may then be needed.

Exhibit 3: Financial summary

 

A$'000s

 

2018

2019

2020e

2021e

Year end 31 December

AASB

AASB

AASB

AASB

PROFIT & LOSS

Sales, royalties, milestones

195

3,485

1,975

82,789

Other (includes R&D tax rebate)

10,142

11,693

7,600

0

Revenue

 

 

10,337

15,178

9,575

82,789

R&D expenses

(18,692)

(21,162)

(19,750)

(12,250)

SG&A expenses

(9,150)

(15,800)

(13,699)

(14,110)

Other

0

0

0

0

EBITDA

 

 

(17,505)

(24,327)

(23,874)

56,429

Operating Profit (before amort. and except.)

 

(18,992)

(24,078)

(24,254)

56,105

Intangible Amortisation

0

(4,236)

(4,309)

(4,309)

Exceptionals

0

0

0

0

Operating Profit

(18,992)

(28,314)

(28,563)

51,796

Net Interest

304

(2,310)

446

178

Profit Before Tax (norm)

 

 

(15,714)

(31,122)

(28,117)

51,973

Profit Before Tax (reported)

 

 

(15,714)

(31,122)

(28,117)

51,973

Tax benefit

1,884

3,255

0

(1,987)

Profit After Tax (norm)

(13,830)

(27,867)

(28,117)

49,987

Profit After Tax (reported)

(13,830)

(27,867)

(28,117)

49,987

Average Number of Shares Outstanding (m)

202.1

233.4

253.4

253.4

EPS - normalised (c)

 

 

(6.84)

(11.94)

(11.10)

19.72

EPS - diluted (c)

 

 

(6.84)

(11.94)

(11.10)

19.24

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

40,852

43,929

39,340

34,807

Intangible Assets

39,451

41,948

37,639

33,330

Tangible Assets

226

1,899

1,619

1,395

Investments and other

1,175

82

82

82

Current Assets

 

 

35,856

58,679

27,228

87,020

Stocks

643

542

0

0

Debtors

8,436

12,071

7,978

378

Cash

25,771

44,598

17,782

85,174

Other

1,007

1,468

1,468

1,468

Current Liabilities

 

 

(8,242)

(10,625)

(1,505)

(5,545)

Creditors

(6,893)

(9,218)

(99)

(4,139)

Short term borrowings

(1,133)

(490)

(489)

(489)

Other

(216)

(917)

(917)

(917)

Long Term Liabilities

 

 

(15,562)

(21,902)

(21,902)

(21,902)

Long term borrowings

(596)

(1,641)

(1,641)

(1,641)

Other long term liabilities

(14,966)

(20,261)

(20,261)

(20,261)

Net Assets

 

 

52,904

70,081

43,161

94,379

CASH FLOW

Operating Cash Flow

 

 

(21,065)

(23,314)

(27,162)

69,301

Net Interest

316

(19)

446

178

Tax

0

0

0

(1,987)

Capex

0

(403)

(100)

(100)

Acquisitions/disposals

(2,693)

(65)

0

0

Equity Financing

0

43,890

0

0

Dividends

0

0

0

0

Other

0

0

0

0

Net Cash Flow

(23,442)

20,089

(26,816)

67,392

Opening net debt/(cash)

 

 

(48,414)

(24,042)

(42,467)

(15,652)

HP finance leases initiated

0

0

0

0

Other

(929)

(1,664)

1

0

Closing net debt/(cash)

 

 

(24,042)

(42,467)

(15,652)

(83,044)

Source: Telix Pharmaceuticals reports, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Telix Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Telix Pharmaceuticals. Edison Investment Research standard fees are £49,500 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.

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General disclaimer and copyright

This report has been commissioned by Telix Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Telix Pharmaceuticals. Edison Investment Research standard fees are £49,500 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 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “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.

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.

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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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Aberdeen Latin American Income Fund — Income without compromising on capital growth

Aberdeen Latin American Income Fund (ALAI) offers exposure to Latin American equities and government debt. It is managed by Aberdeen Standard Investments’ (ASI’s) global emerging markets equities and emerging market debt teams. While 2019 was a difficult year in terms of economic growth, the markets performed strongly, underlining the resilience of the region. The managers remain ‘cautiously optimistic’ on the outlook for Latin America, led by the largest economies Brazil and Mexico, which are supported by lower interest rates and stable inflation, while there is also a positive government reform agenda in Brazil. ALAI is continuing to deliver on its income objective without compromising on its capital growth potential. It has meaningful revenue reserves and the fund offers an attractive 5.1% yield.

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