Oryzon Genomics — Ramping up R&D activity; catalysts in 2019

Oryzon Genomics (BME: ORY)

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Research: Healthcare

Oryzon Genomics — Ramping up R&D activity; catalysts in 2019

The €13m (gross) private placement announced on 30 October 2018 will support Oryzon’s expanding R&D programme with a total of five clinical trials now underway. Two new Phase IIa trials with iadademstat (formerly ORY-1001) are starting in acute myeloid leukaemia (AML) (ALICE trial) and small cell lung cancer (SCLC) (CLEPSIDRA trial). Results from another two Phase IIa studies with vafidemstat (formerly ORY-2001) in Alzheimer’s disease (AD) patients (ETHERAL) and multiple sclerosis (MS) patients (SATEEN) are due to report results in H219. Before that, interim results from the innovative design ‘basket trial’ with vafidemstat in aggression control in various neuropsychiatric conditions are due in H119. Our valuation is €342m or €8.7 per share (vs €328m or €9.6 per share).

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Oryzon Genomics

Ramping up R&D activity; catalysts in 2019

Q318 company update

Pharma & biotech

9 November 2018

Price

€3.13

Market cap

€122m

US$1.16/€

Net cash (€m) at end Q318

(including share issue in October 2018)

16.3

Shares in issue

39.1m

Free float

65%

Code

ORY

Primary exchange

Madrid Stock Exchange

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(19.1)

(16.0)

43.8

Rel (local)

(19.0)

(10.8)

60.3

52-week high/low

€5.0

€1.8

Business description

Oryzon Genomics is a Spanish biotech focused on epigenetics. Iadademstat (Phase IIa) is being explored for acute leukaemias and SCLC; Vafidemstat, its CNS product, is in Phase IIa trials in MS, AD and aggression. Newer asset ORY-3001 is being developed for certain orphan indications.

Next events

Preliminary readouts from Phase IIa studies with vafidemstat and iadademstat

H119

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Alice Nettleton

+44 (0)20 3077 5700

Oryzon Genomics is a research client of Edison Investment Research Limited

The €13m (gross) private placement announced on 30 October 2018 will support Oryzon’s expanding R&D programme with a total of five clinical trials now underway. Two new Phase IIa trials with iadademstat (formerly ORY-1001) are starting in acute myeloid leukaemia (AML) (ALICE trial) and small cell lung cancer (SCLC) (CLEPSIDRA trial). Results from another two Phase IIa studies with vafidemstat (formerly ORY-2001) in Alzheimer’s disease (AD) patients (ETHERAL) and multiple sclerosis (MS) patients (SATEEN) are due to report results in H219. Before that, interim results from the innovative design ‘basket trial’ with vafidemstat in aggression control in various neuropsychiatric conditions are due in H119. Our valuation is €342m or €8.7 per share (vs €328m or €9.6 per share).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/16

5.0

(4.7)

(0.17)

0.0

N/A

N/A

12/17

4.3

(4.6)

(0.14)

0.0

N/A

N/A

12/18e

7.0

(5.6)

(0.09)

0.0

N/A

N/A

12/19e

6.3

(7.3)

(0.19)

0.0

N/A

N/A

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

REIMAGINE trial to test holistic vafidemstat effects

Oryzon successfully initiated a further Phase IIa trial with vafidemstat, a dual LSD1/MAOB inhibitor, in aggression. The innovative trial design (basket trial) has been borrowed from drug development in oncology and will include patients with Lewy body dementia, AD, autism spectrum disorder, borderline personality disorder and attention deficit hyperactivity disorder. Aggression is often seen in a variety of neurodegenerative and neuropsychiatric conditions and vafidemstat has demonstrated holistic effects in this regard in preclinical models (more detailed overview in our recent outlook report). Oryzon hopes that testing it in different conditions will allow it to pin down a more precise psychiatric setting where the drug could be useful. Preliminary results are expected in H119.

Two new trials with iadademstat about to start

Oryzon has received authorisation from the regulatory authorities to initiate two Phase IIa studies with iadademstat, a specific LSD1 inhibitor. The Phase IIa ALICE study will recruit elderly AML patients (n=36) who will receive ORY-1001 in combination with standard of care, azacitidine. The other Phase IIa CLEPSIDRA trial will recruit relapsed SCLC patients (n=36) who will receive iadademstat in combination with platinum-etoposide chemotherapy. Interim results from both studies are expected in 2019. We have reviewed key data on iadademstat in our outlook report, including an article recently published in Cell, where a team at the Harvard Medical School described the findings that inhibiting LSD1 could lead to the activation of immune response and overcomes resistance to anti-PD-1 therapy.

Valuation: €342m or €8.7 per share

At €342m our valuation is marginally higher on an absolute basis and slightly lower on a per-share basis at €8.7/share (from €328m or €9.6/share) due to the share issue and rolling our model forward. Near-term catalysts will be multiple preliminary readouts from the Phase IIa studies in 2019.

Two Phase IIa readouts are key short-term catalysts

The two ongoing lead trials are the Phase IIa ETHERAL and SATEEN studies testing vafidemstat in AD and MS patients respectively.

ETHERAL trial (n=150) is a randomised, double-blind, placebo-controlled, 24-week study with ORY-2001 in mild-to-moderate AD patients.

A randomised, double-blind, placebo-controlled, 36-week SATEEN study (n=24) will evaluate vafidemstat in patients with relapsing-remitting MS and secondary progressive MS.

The readouts from these trials are expected in H219 and will provide the first insights into the clinical efficacy of the drug.

Exhibit 1: R&D pipeline

Product

Indication and stage

Mechanism of action

Notes

Iadademstat (ORY-1001)

AML, Phase IIa ALICE trial in combination with azacitidine

SCLC, Phase IIa CLEPSIDRA trial in combination with platinum-etoposide

Small molecule LSD1 inhibitor - LSD1 is a histone eraser enzyme that removes methyl groups

Oryzon reported supportive Phase I/IIa data in acute leukaemia at the ASH conference in December 2016.

Two new Phase IIa trials are about to start enrolling patients in AML (ALICE) and SCLC (CLEPSIDRA). First readouts from both trials expected in Q219.

Vafidemstat (ORY-2001)

AD, Phase IIa ETHERAL trial, monotherapy

MS, Phase II SATEEN trial, monotherapy

Aggression, Phase IIa REIMAGINE trial, monotherapy

Small molecule LSD1 and MAOB inhibitor

Reported Phase I safety and PK/PD data from healthy volunteers on 31 March 2017 at the ADPD conference.

Oryzon initiated clinical trials in MS (SATEEN) and AD (ETHERAL). Preliminary readouts expected in H219.

Basket trial REIMAGINE in aggression in several neuropsychiatric disorders initiated. Preliminary readout expected Q119.

ORY-3001

Undisclosed non-oncological diseases

Small molecule LSD1 inhibitor

Initial positive preclinical data published in sickle cell disease, but further development not disclosed yet. Successfully completed regulatory toxicology.

Source: Edison Investment Research, Oryzon Genomics

Exhibit 2: Expected 2018–2019 newsflow

Source: Oryzon Genomics

Financials and valuation

According to Oryzon’s Q318 report, R&D costs were €1.7m, compared with €1.3m in Q317. We expect R&D costs to increase somewhat in Q418 and FY19 due to the initiation of two new Phase IIa studies, so our estimates remain unchanged (FY18 and FY19 R&D costs of €8.5m and €9.5m respectively). SG&A costs for Q318 were €0.7m, compared with €0.9m in Q317, in line with our expectations.

The private placement transaction closed on 31 October 2018 and raised gross proceeds of €13m at €2.62 per share (12% discount to average of the closing price over the previous three days). The reported Q318 cash position was €22.5m. Considering this cash position, the private placement (post-period) and total debt (€18.4m) bring the estimated net cash to €16.3m. Our model suggests this should be sufficient well into H220.

Our valuation is higher on an absolute basis at €342m and slightly lower on a per-share basis at €8.7 per share (from €328m or €9.6 per share) due to the share issue and rolling our model forward. As Oryzon is on track to develop its assets in all the indications we include in our valuation, we leave our assumptions unchanged. Near-term catalysts will be multiple preliminary readouts from Phase IIa studies in 2019 (Exhibit 1).

Exhibit 3: Oryzon rNPV valuation

Product

Indication

Launch

Peak sales
(US$m)

Value
(€m)

Probability of success
(%)

rNPV
(€m)

NPV/share
(€/share)

Iadademstat (ORY-1001)

AML

2023

927

271.7

15

49.7

1.3

Iadademstat (ORY-1001)

SCLC

2026

571

132.9

8

23.0

0.6

Vafidemstat (ORY-2001)

AD

2026

4,510

991.6

15

153.5

3.9

Vafidemstat (ORY-2001)

MS

2027

1,940

438.8

20

104.1

2.7

Net cash (est. end-2018 + share issue)

11.6

100

11.6

0.3

Valuation

 

 

1,846.6

341.9

8.7

Source: Edison Investment Research


Exhibit 4: Financial summary

€000s

 

2016

2017

2018e

2019e

December

Local GAAP

Local GAAP

Local GAAP

Local GAAP

PROFIT & LOSS

Revenue

 

 

5,009

4,317

7,034

6,301

Cost of Sales

0

0

0

0

Gross Profit

5,009

4,317

7,034

6,301

Research and development

(5,210)

(5,306)

(8,502)

(9,454)

EBITDA

 

 

(3,721)

(3,498)

(4,678)

(6,350)

Operating Profit (before amort. and except.)

(3,879)

(3,660)

(3,879)

(3,660)

Intangible Amortisation

(695)

(664)

(767)

(887)

Exceptionals

(4)

0

0

0

Other

0

0

0

0

Operating Profit

(4,578)

(4,324)

(5,556)

(7,348)

Exceptionals

(58)

0

0

0

Net Interest

(844)

(928)

(793)

(802)

Profit Before Tax (norm)

 

 

(4,724)

(4,588)

(5,582)

(7,263)

Profit Before Tax (reported)

 

 

(5,480)

(5,252)

(6,349)

(8,150)

Tax

32

55

2,200

0

Profit After Tax (norm)

(4,692)

(4,533)

(3,382)

(7,263)

Profit After Tax (reported)

(5,448)

(5,197)

(4,149)

(8,150)

Average Number of Shares Outstanding (m)

27.6

27.6

31.7

36.6

EPS - normalised (c)

 

 

(0.17)

(0.14)

(0.09)

(0.19)

EPS - reported (EUR)

 

 

(0.20)

(0.16)

(0.11)

(0.21)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

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

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

21,269

24,914

31,070

36,373

Intangible Assets

18,810

22,458

28,725

34,139

Tangible Assets

696

638

527

417

Investments

1,763

1,818

1,818

1,818

Current Assets

 

 

28,475

36,130

33,640

13,993

Stocks

8

7

150

79

Debtors

978

857

3,500

2,178

Cash

22,028

34,950

29,990

11,736

Other

5,461

316

0

0

Current Liabilities

 

 

(7,597)

(8,696)

(10,084)

(3,890)

Creditors

(2,119)

(1,343)

(1,731)

(1,537)

Short term borrowings

(5,477)

(7,354)

(8,354)

(2,354)

Long Term Liabilities

 

 

(19,419)

(17,915)

(11,992)

(11,992)

Long term borrowings

(17,723)

(16,041)

(10,041)

(10,041)

Other long term liabilities

(1,696)

(1,874)

(1,951)

(1,951)

Net Assets

 

 

22,729

34,432

42,633

34,483

CASH FLOW

Operating Cash Flow

 

 

(4,536)

(4,281)

(7,792)

(5,953)

Net Interest

(471)

(426)

(793)

(802)

Tax

0

0

2,200

0

Capex

(28)

(105)

0

0

Acquisitions/disposals

0

0

0

0

Financing

287

16,887

12,350

0

Other*

(6,819)

653

(5,925)

(5,499)

Dividends

0

0

0

0

Net Cash Flow

(11,567)

12,728

40

(12,254)

Opening net debt/(cash)

 

 

(10,395)

1,172

(11,555)

(11,595)

HP finance leases initiated

0

0

0

0

Other

0

0

(0)

0

Closing net debt/(cash)

 

 

1,172

(11,555)

(11,595)

659

Source: Edison Investment Research, Oryzon Genomics accounts. Note: Oryzon reports in Spanish GAAP. *Includes cash outflows related to development costs that were capitalised.

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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

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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