Scandion Oncology — Proof-of-concept data elusive

As a reminder, CORIST part 2 was a Phase II trial investigating the efficacy of the SCO-101 in combination with FOLFIRI in mCRC patients harbouring wild-type RAS. The primary endpoint for the study was objective response rate (ORR), defined as complete response and partial response using RECIST v 1.1. Secondary endpoints included progression free survival (PFS), duration-of-response, overall survival (OS) and biomarker analysis. While management has reported that results from part 2 confirmed the safety and tolerability of the SCO-101/FOLFIRI combination in mCRC patients, the trial failed to reach the +30% tumour reduction threshold defined as its primary endpoint. The combination did, however, show evidence of tumour reduction, with prolonged PFS and stable disease.

With the CORIST part 2 results announced, the company will continue with its development timeline for SCO-101 in mCRC. Part 3 of the CORIST study will investigate the safety and tolerability of new, optimised dosing regimens and will inform Part 4, which will investigate the efficacy of the chosen dose. While the results of CORIST part 2 are disappointing for Scandion, we note that patients have continued treatment past the eight-week endpoint and longer-term results will be important in definitively assessing efficacy.

Following top-line date from CORIST part 2, Scandion intends to begin enrolment for CORIST part 3, which will investigate use of the SCO-101/FOLFIRI combination in both mutant and wild-type RAS mCRC patients. As discussed in a brief company update, the trial will enrol up to 36 patients and aims to identify a new dosing schedule (based on pharmacokinetic and pharmacodynamic data from CORIST part 1 and 2), using a dose-escalation [3+3] design. SCO-101 in combination with FOLFIRI will be administered once daily on days one to six and FOLFIRI administered on days two to four of each treatment cycle. The company expects this protocol could be more efficacious than previous regimens. We expect top-line results from part 3 to be reported in Q323. However, this may vary as patient enrolment depends on the observed safety profiles of the new dosing protocols. CORIST part 4, which we expect could begin as soon as Q323 (subject to part 3 enrolment), will then assess the efficacy of the optimised SCO-101/FOLFIRI dosing protocol (n=24) identified in part 3. We expect part 4 will use a similar trial design to that used in part 2 and will run for six months, bringing the earliest potential top-line readout to Q224. Management will provide an update on clinical timelines in Q123.

As evidence of efficacy was observed in CORIST part 2, exploring new dosing regimens of SCO-101/FOLFIRI is an attractive strategy for Scandion, in our view. Additionally, the drug has consistently demonstrated a good safety profile, suggesting higher doses and potentially better efficacy may be tolerated. However, we note that higher doses do not always correlate with increased efficacy and may result in undesirable side effects.

We see Phase Ib PANTAX data in PC (expected in H123) as the next key catalyst for Scandion. If the SCO-101/gemcitabine/paclitaxel combination being studied can show signs of efficacy in the PANTAX trial, we expect this will increase confidence in management’s development plans in mCRC. We note, however, that as SCO-101’s proposed mechanism of action in mCRC and PC are the same, there could be potential read-across between the two indications. The trial will primarily assess the safety and tolerability of the SCO-101/gemcitabine/paclitaxel combination; however, secondary endpoints, including ORR, PFS, OS and pharmacokinetic profile, will be a crucial focus, in our view, following the CORIST part 2 data.

In addition to its clinical development programme, Scandion is conducting preclinical studies for the use of SCO-101 in double combination with chemotherapy and immunotherapy. In a setting (oncology) where many higher lines of treatment are dominated by immune checkpoint inhibitors, we see this as a natural progression for the company. In addition, a second oral efflux pump inhibitor, known as SCO-201, is being evaluated in preclinical studies for the treatment of solid tumours. We anticipate the company will continue to progress assets towards clinical development, thus demonstrating its ability to create value from its drug discovery platform.

Considering recent events, we have reduced our valuation of Scandion Oncology to SEK279.0m or SEK6.9 per share from SEK609.5m or SEK15.0 per share. Our valuation is based on a risk-adjusted NPV calculation for SCO-101 in mCRC and PC (applying a 12.5% discount rate) and reflects an estimated net cash position of DKK114m at 30 June 2022 (including estimated net proceeds of the July 2022 SEK75m gross rights issue). The company’s value is reduced as we lower the probability of success for SCO-101 in mCRC to 10% (previously 20%) and in PC to 10% (previously 15%). We believe the failure to reach proof-of-concept in CORIST part 2 could have read-across to potential efficacy readouts in the PANTAX trial, hence our lower probability of success in both indications. Scandion will continue developing SCO-101 in CORIST part 3 and 4, bringing the earliest potential end of the CORIST programme (and Phase II development) to Q224. Therefore, we have delayed our estimated potential launch date for SCO-101 in mCRC to 2028, from 2026 previously. We now assume a potential full licensing deal for SCO-101 is signed in 2026 (previously 2024).

As part 3 and 4 will investigate SCO-101 in both mutant and wild-type RAS patients, we have incorporated this new patient population into our model (previously we only included wild-type patients). However, considering this large increase in patient population (c 50% of mCRC patients harbour mutant RAS) and in light of the recent CORIST part 2 data, we have lowered our peak penetration estimate for SCO-101 to 10% (20% previously) in mCRC and to 10% from 15% in PC. Our remaining valuation assumptions are detailed in our initiation report. A breakdown of our valuation is shown in Exhibit 1.

As management’s near-term clinical development plan for SCO-101 is largely unchanged by the recent CORIST part 2 data, our FY22 and FY23 financial estimates are unchanged and we continue to estimate that Scandion is sufficiently funded into FY24. As described in our prior note, Scandion had an H122 net cash position of DKK72.7m and in July 2022 it completed a rights issue, raising gross proceeds of c SEK75m. Based on estimated transaction costs of SEK17m (DKK12m), we estimate it resulted in a net cash injection of c SEK58m (DKK41m).

However, we now assume a licensing deal for SCO-101 will be delayed to 2026 (previously 2024), as we expect the company will still need to generate positive randomised data in a Phase II/III trial before a licensing deal is viable. We now estimate the company will need to raise capital by end-2023/early-2024 to fund the longer-term development of SCO-101. Our model suggests c DKK200m (SEK288m) would be sufficient to fund the company’s operations to into FY26 where we anticipate a licensing deal for SCO-101 is agreed.

Our cash runway estimate will see the company past key top-line data readouts from the Phase Ib PANTAX trial (expected H123) and the newly initiated Phase II CORIST part 3. If enrolment for Part 3 is started quickly, then current funds may see the company past part 4. However, if part 3 enrolment is delayed, our estimates indicate Scandion will need additional funds to complete part 4 of the CORIST study and SCO-101’s Phase II development. If timelines are delayed, or clinical data prove positive, this may lead us to revise our cash runway estimate. Our model assumes illustrative debt funding of c DKK200m in early FY24.