Therapix Biosciences

THX-ULD01 to focus on TBI

Earnings update

Pharma & biotech

18 August 2017

Price	US$5.31
Market cap	US$19m
NIS3.62/US$
Net cash ($m) at 30 June 2017		11.8

ADSs in issue	3.5m
Free float	92.5%
Code	TRPX

Primary exchange	TASE
Secondary exchange	NASDAQ

Share price performance

%	1m	3m	12m
Abs	(19.6)	(18.3)	(33.8)
Rel (local)	(18.7)	(20.7)	(40.5)

52-week high/low

US$10.1

US$5.3

Business description

Therapix Biosciences is an Israeli pharmaceutical company developing two cannabinoids to treat Tourette syndrome and mild cognitive impairment. It is currently in Phase IIa and soon to begin Phase I, respectively, and owns or licenses several IPs for cannabinoid nasal and sublingual administration.

Next events

THX-ULD01 Phase I	Q417
THX-TS01 Phase IIa complete	YE17

Analysts

Maxim Jacobs	+1 646 653 7027
Nathaniel Calloway	+1 646 653 7036

healthcare@edisongroup.com

Edison profile page

Therapix Biosciences is a research client of Edison Investment Research Limited

Therapix reported H117 results and provided a company update in which it announced that the planned development program for sublingual ultra-low dose THC (THX-ULD01) will focus on the treatment of traumatic brain injury (TBI). The program is planned to enter a Phase I pharmacokinetic study in Q417, expected to take one month to complete. The company also reported that the Phase IIa Tourette’s study of THX-TS01 was going smoothly and eight (of 18) patients have completed the trial, seven of whom opted to remain on the drug.

Year end	Revenue ($m)	PBT* ($m)	EPADS* ($)	DPADS ($)	P/E (x)	Yield (%)
12/16	0.0	(1.7)	(1.80)	0.0	N/A	N/A
12/17e	0.0	(3.6)	(0.97)	0.0	N/A	N/A
12/18e	0.0	(7.0)	(1.81)	0.0	N/A	N/A
12/19e	0.0	(11.5)	(2.85)	0.0	N/A	N/A

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

TBI is a major unmet medical need

TBI is one of the most common medical conditions affecting western countries. In the US there are approximately 2.5m emergency room visits per year from TBI, 300,000 of which result in a hospital in-stay. There is significant need for agents to improve cognitive impairment following TBI, as approximately 37% of patients admitted to the hospital have long-term cognitive disability following the event.

Patients electing to stay on THX-TS01

Therapix announced that the ongoing Phase IIa trial at Yale examining THX-TS01 for Tourette’s is on schedule to complete enrolment in September or October 2017 and be complete around YE17. Twelve patients have been enrolled in the study and the company has data on eight patients who have completed the study, of whom seven have elected to remain on drug for an additional three months, suggesting that the formulation is tolerable and has a perceived benefit.

Phase IIb study moving to the US

The company previously announced that it would be participating in an investigator-sponsored Phase IIb study comparing THX-TS01 to placebo at Hannover Medical School. It announced on the H117 earnings call that this study would be moved to a site in the US instead. This has resulted in a small delay in the trial initiation (From Q317 to Q417), and the trial is expected to be complete in H218.

Valuation: Increased to $41.9m or $11.98 per ADS

We have increased our valuation to $41.9m or $11.98 per ADS, from $38.4m or $10.97 per ADS. This change was largely driven by the addition of THX-ULD01 to our model, because the company announced TBI as the target indication. We arrive at a risk-adjusted NPV of $5.4m based on a 5% probability of success. We expect the program to launch in 2022. We have increased our financing requirement to $27m from $25m based on higher than expected SG&A ($1.4m) for H117.

THX-ULD01 focus on traumatic brain injury

Therapix announced with its Q217 financial report that the company would focus its efforts developing THX-ULD01, a sublingual ultra-low dose formulation of THC, for traumatic brain injury (TBI). The company had previously discussed developing the drug for patients with mild cognitive impairment (MCI) associated with Alzheimer’s, but this indication now appears to be deprioritized. Historically, Alzheimer’s has been a difficult area of drug development with many prominent failures, and TBI may provide a quicker pathway to market. The company has stated that it is currently determining the optimal regulatory pathway for the program, and that these considerations have delayed the planned Phase I pharmacokinetic study of the drug. The pharmacokinetic study is currently planned to initiate in Q417 and take approximately one month. Following the Phase I, the company will be initiating a proof-of-concept study enrolling patients in the acute phase of the TBI, which is typically patients as they are admitted to the emergency room.

TBI is common in the US and in Europe. The Centers for Disease Control and Prevention estimates that 824 out of every 100,000 will have a TBI related emergency room visit, and 92 per 100,000 will have a hospital stay.1 The rate of hospital discharges for TBI is lower in Europe (and highly variable by country) at 287 per 100,000, but the majority of these (81%) involve hospital stays.2 The need for a solution to address cognitive impairment following a TBI is significant. Of patients admitted to a hospital, 37% have long lasting disability following the event.3

Centers for Disease Control and Prevention. Get the Stats on Traumatic Brain Injury in the United States. www.cdc.gov/TraumaticBrainInjury accessed on 10 August 2017.

Majdan M, et al. (2016) Epidemiology of traumatic brain injuries in Europe: a cross-sectional analysis. Lancet Pub. Health 1, e76-83.

Thurman DJ, et al. (1999) Traumatic Brain Injury in the United States: A Public Health Perspective. Head Traum. Rehab. 14, 602-615.

THX-TS01 program update

Therapix announced that 12 patients have been enrolled on in its 18-person Phase IIa study being performed at Yale, with the 13th patient scheduled to be enrolled around the time of the call. The company predicted at this pace that the last patient would be enrolled in late September or early October. Patients are treated for 12 weeks on the trial, and this enrolment schedule is on time to complete around YE17. The company has data on eight patients who have completed the trial, of whom seven have elected to remain on the treatment for an additional three months. This level of interest among patients is encouraging because it suggests some degree of perceived benefit and that the treatment is tolerable. There have not been any reported safety issues to date, which is consistent with the known profile of cannabinoids.

The company also provided an update on the planned placebo-controlled Phase IIb trial. This trial was originally planned as an investigator-sponsored trial to be conducted at Hannover Medical School, but the company announced that it now plans to perform the study in the US. Bringing on a US site for the study will cause a delay in its initiation from Q317 to Q417. The trial will observe patients over 13 weeks and based on this new schedule the trial should be complete in H218.

Valuation

We have increased our valuation to $41.9m or $11.98 per ADS, from $38.4m or $10.97 per ADS. We have added the TBI program to our valuation and determined a risk-adjusted NPV of $5.4m for the program. This is based on a 5% probability of success, which reflects the lack of in-human data regarding the use of ultra-low dose THC for this indication. We assume the target market will be the approximately 300,000 patients in the US who have severe enough TBI to warrant a hospital in-stay. Although hospital in-stays are more common in Europe for TBI, we assume this to be a function of the medical system and we have extrapolated our estimates for the rates of severe TBI to Europe, corresponding to approximately 500,000 patients per year. We assume a (WAC) pricing of $4,000 in the US and $3,000 in Europe. This pricing is approximately at parity with the total yearly reimbursement available from Medicaid for cognitive rehabilitation services (billed under the $1980 for physical therapy and speech-language pathology and $1980 for occupational therapy). We also assume 30% in discounts off the gross price in both territories. COGS are predicted at 8%, which includes the low single-digit royalty (modelled at 3%) due to Ramot for the technology. We have also included the $3.5m in milestones due to Ramot for Phase II completion, Phase III completion, and approval. Cost of selling is $5m per year in fixed costs, and 10% variable costs. Development costs for the program assume that patients will cost approximately $30,000 apiece, and that the company will need 370 patients between all trials. We forecast that the company will have exclusivity through the 2035 expiration of its patents.

Other changes to our valuation include lower net cash ($11.8m vs $14.5m), an increase in unallocated costs to reflect higher than expected SG&A expenses ($2.47m vs $1.79m), and advancing our NPVs to the current period. We expect to update our valuation with the release of interim data from the THX-TS01 Phase IIa trial expected in Q417 as well as potentially with the readout of the planned Phase I study of THX-ULD01, expected around YE17.

Exhibit 1: Valuation of Therapix

Development program	Region	Prob. of success	Launch year	Peak sales ($m)	Margin			rNPV ($m)
THX-TS01	US	10%	2021	177	55%			15.04
THX-TS01	Europe	10%	2021	120	55%			14.59
THX-TS01	Development costs					(2.41)
THX-ULD01	US	5%	2022	69	50%			2.72
THX-ULD02	Europe	5%	2022	106	57%			4.60
THX-ULD03	Development costs						(1.97)
Unallocated costs							(2.47)
Total							$30.1
Net cash and equivalents (H117) ($m)							$11.8
Total firm value ($m)							$41.9
Total ADS (m)							3.5
Value per ADS ($)							$11.98

Source: Edison Investment Research, Therapix reports

Financials

Therapix reported a loss of $2.5m for H117. This is a significant increase over H116 ($1.0m), albeit from a very low base and still low in absolute terms. The increase in spending was compounded by exchange rate losses of $0.7m. R&D spending for the period was $695,000, which was within our estimates ($1.2m for the year). SG&A spending significantly increased over our previous forecasts to $1.4m for the period, which is what we previously predicted for the year. This increase was attributed to more investor relations and business development activity. We have adjusted our SG&A forecasts in line with the current rate ($2.8m in 2017). This has increased our expected financing required to $27m ($12m in 2018, $15m in 2020) from $25m to reach profitability in 2021.

Exhibit 2: Financial summary

	$000s	2016	2017e	2018e	2019e
Year end 31 December		IFRS	IFRS	IFRS	IFRS
INCOME STATEMENT
Revenue		0.0	0.0	0.0	0.0
Cost of Sales		0.0	0.0	0.0	0.0
Gross Profit		0.0	0.0	0.0	0.0
R&D		739.0	1,140.0	4,500.0	9,000.0
SG&A		1,267.0	2,787.4	2,843.1	2,900.0
EBITDA		(1,675.0)	(3,572.4)	(6,988.1)	(11,545.0)
Normalised operating profit		(1,679.0)	(3,572.4)	(6,988.1)	(11,545.0)
Amortization of acquired intangibles		0.0	0.0	0.0	0.0
Exceptionals		7.0	0.0	0.0	0.0
Share-based payments		(327.0)	(355.0)	(355.0)	(355.0)
Reported operating profit		(1,999.0)	(3,927.4)	(7,343.1)	(11,900.0)
Net Interest		(6.0)	0.6	9.0	13.7
Joint ventures & associates (post tax)		0.0	0.0	0.0	0.0
Exceptionals		0.0	0.0	0.0	0.0
Profit Before Tax (norm)		(1,685.0)	(3,571.8)	(6,979.2)	(11,531.3)
Profit Before Tax (reported)		(2,005.0)	(3,926.8)	(7,334.2)	(11,886.3)
Reported tax		0.0	0.0	0.0	0.0
Profit After Tax (norm)		(1,685.0)	(3,571.8)	(6,979.2)	(11,531.3)
Profit After Tax (reported)		(2,005.0)	(3,926.8)	(7,334.2)	(11,886.3)
Minority interests		0.0	0.0	0.0	0.0
Discontinued operations		0.0	0.0	0.0	0.0
Net income (normalised)		(1,685.0)	(3,571.8)	(6,979.2)	(11,531.3)
Net income (reported)		(2,005.0)	(3,926.8)	(7,334.2)	(11,886.3)

Basic average number of ADS outstanding (m)		1	4	4	4
EPADS - basic normalised ($)		(1.80)	(0.97)	(1.81)	(2.85)
EPADS - diluted normalised ($)		(1.80)	(0.97)	(1.81)	(2.85)
EPADS - basic reported ($)		(2.14)	(1.07)	(1.90)	(2.94)
Dividend ($)		0.00	0.00	0.00	0.00

BALANCE SHEET
Fixed Assets		441.0	11.0	11.0	11.0
Intangible Assets		0.0	0.0	0.0	0.0
Tangible Assets		11.0	11.0	11.0	11.0
Investments & other		430.0	0.0	0.0	0.0
Current Assets		804.0	10,098.8	15,400.4	4,243.6
Stocks		0.0	0.0	0.0	0.0
Debtors		117.0	0.0	0.0	0.0
Cash & cash equivalents		676.0	10,087.8	15,389.4	4,232.6
Other		11.0	11.0	11.0	11.0
Current Liabilities		(672.0)	(293.6)	(574.4)	(948.9)
Creditors		(672.0)	(293.6)	(574.4)	(948.9)
Tax and social security		0.0	0.0	0.0	0.0
Short term borrowings		0.0	0.0	0.0	0.0
Other		0.0	0.0	0.0	0.0
Long Term Liabilities		0.0	0.0	(12,000.0)	(12,000.0)
Long term borrowings		0.0	0.0	(12,000.0)	(12,000.0)
Other long term liabilities		0.0	0.0	0.0	0.0
Net Assets		573.0	9,816.2	2,837.0	(8,694.3)
Minority interests		0.0	0.0	0.0	0.0
Shareholders' equity		573.0	9,816.2	2,837.0	(8,694.3)

CASH FLOW
Op Cash Flow before WC and tax		(1,675.0)	(3,572.4)	(6,988.1)	(11,545.0)
Working capital		233.0	(261.4)	280.7	374.5
Exceptional & other		(38.0)	0.0	0.0	0.0
Tax		0.0	0.0	0.0	0.0
Net operating cash flow		(1,480.0)	(3,833.8)	(6,707.4)	(11,170.5)
Capex		(4.0)	0.0	0.0	0.0
Acquisitions/disposals		0.0	0.0	0.0	0.0
Net interest		0.0	0.6	9.0	13.7
Equity financing		913.0	12,900.0	0.0	0.0
Dividends		0.0	0.0	0.0	0.0
Other		(349.0)	0.0	0.0	0.0
Net Cash Flow		(920.0)	9,066.8	(6,698.4)	(11,156.8)
Opening net debt/(cash)		(1,596.0)	(676.0)	(10,087.8)	(3,389.4)
FX		0.0	345.0	0.0	0.0
Other non-cash movements		0.0	0.0	0.0	0.0
Closing net debt/(cash)		(676.0)	(10,087.8)	(3,389.4)	7,767.4

Source: Edison Investment Research, Therapix Biosciences reports

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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Therapix Biosciences 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2017. “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.

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

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Equities

Equities by Sector

Sectors

Thematics

Latest

ConsumerWatch – Don’t look down

A net zero perspective – Investing in sustainability, technology & innovation

Banco Angolano de Investimentos (BAI) – Money-centre bank with lending optionality

Audiovisual

Latest

JPMorgan European Discovery Trust in 60 seconds

Baillie Gifford US Growth Trust in 60 seconds

Take on Trusts – October 2024

About Edison

About Edison

Careers

Therapix Biosciences — THX-ULD01 to focus on TBI

Latest

IRLAB Therapeutics — Progress across the pipeline in Q324

Sylvania Platinum — Healthy production recovery

Braemar — Robust trading, but UK budget adds to costs

AFT Pharmaceuticals — H125 profitability weighed down by one-offs

Molten Ventures — Strong exits and stable NAV/share ex FX in H125

Henderson Alternative Strategies Trust — Steady improvement from multi-asset specialist

Subscribe to Edison