Speculative M&A Transaction Analysis, page-704

Conceptualising Bisantrenes Moa and Value

Following a conversation yesterday with another investor, I felt it was essential for me to explain the following. Please, read the following information very carefully. It's essential that you understand the risk as well as the likelihood of success for Bisantrene. It is also extremely important for investors to precisely conceptualise the opportunity RAC are investigating. The way you interpret information relating to Bisantrene clinically and commercially needs to be through a first-in-class FTO inhibitor with cardioprotection lense.

I understand that RAC can be a confusing company to really understand. This is likely because Bisantrene has such a rich history and has evolved from a less-cardiotoxic anthracene to a first-in-class CPACS drug with first-in-class FTO-inhibition as the method of anti-cancer synergy. Historically, Bisantrene was dosed in a particular way and has demonstrated a wide spectrum of results from excellent to the point of achieving approvals in France to absolutely no clinical activity. The 'old' understanding of the drug needs to die today in order for people to truly understand the opportunity that lies in the 'new'. Bisantrene was never a less-cardiotoxic anthracycline, and was always a first-in-class CPACS drug.

Therefore, the following is true:

Bisantrene is a first-in-class FTO inhibitor because it targets the FTO protein to effectively target cancer.
Bisantrene is a first-in-class CPACS drug because it targets the FTO protein to effectively target cancer while providing cardioprotection
Bisantrene is both, which are interrelated.
FTO-inhibition is a new anti-cancer field.
CPACS has never been achieved despite decades of failed attempts, but includes an anti-cancer target (in our case it's FTO) and a cardioprotective mechanism.

Yeah, but, why do we bother saying first-in-class FTO inhibitor? Why don't we just call it first-in-class CPACS and be done with it?

It is essential to understand that Bisantrene is both a first-in-class FTO inhibitor as well as first-in-class CPACS drug because the markets for each is different. Bisantrenes cardioprotective mechanism does not prevent it from achieving approvals in combination with non-cardiotoxic agents. If FTO inhibition proves to synergise with cardiotoxic drugs in humans, then potentially the entire CPACS market where FTO is a driver of tumorigenesis will be Bisantrenes. Therefore, the FTO-inhibitor market as well as the CPACS market are both completely available to Bisantrene.

The importance of dose

The dosing of Bisantrene is the most important thing to understand with regards to what effects you will receive. This is not unusual in pharmacology. For example, Aspirin targets COX1 at low doses preventing blood clotting and targets both COX1 and COX2 at higher doses promoting anti-inflammatory and analgesic effects (but still retaining the prevention of blood clotting effects). The figure below is not accurate, but intends to visually explain what's happening. Lower dose of Aspirin targets COX1 maximally, while other targets still need more of the drug. It doesn't mean these off-target effects aren't activated, but they just aren't at their maximum. Higher doses of Aspirin maximally targets the COX2 target, which changes the in-human effects.



Bisantrenes in-human effects are explained in the figure below. Imagine that in-human dosing of Bisantrene is like filling up this staircase shape. The height of each compartment relate to the IC50 value for each confirmed target of Bisantrene. The IC50 for FTO is lowest, so the height of that compartment is the lowest. Thus, because the lowest compartment fills first, Bisantrene inhibits the FTO protein maximally first. Because Bisantrene has other targets, these compartments also start to be filled as Bisantrene is given to humans, meaning these effects are present but to a lesser extent. Additional Bisantrene beyond the maximum of the first compartment (FTO) must flow into the next compartments increasing their effects in humans. When I look at the clinical history of Bisantrene, I am applying this model.

Risk reduction and the chance of commercial success

Reformulated drugs have an 80% success rate. Bisantrene has consistently demonstrated excellent efficacy in relapsed/refractory AML, which has ALWAYS been because of it's affinity for the FTO protein. The AML opportunity is the safest biotechnology play on the ASX. If every single program for RAC failed beyond belief, a successful transaction with a pharmaceutical company will be announced as "Company x acquires Australian biotechnology company for first-in-class reformulated FTO inhibitor". The only multiple plays Bisantrene has is as a first-in-class FTO inhibitor AND first-in-class CPACS drug. The only way investors can look at Bisantrene to truly understand the opportunity is that irrespective of the cancer target or drug combination, Bisantrene is targeting the FTO protein first to target cancer and the cardioprotective mechanism second to prevent cardiotoxicity in humans. France did not and have not realised that they approved a first-in-class FTO inhibitor and first-in-class CPACS drug 40-years prior to the world realising.

The base-case for Bisantrene - A hematology buyout comparison

Gilead purchased Magrolimab from Forty Seven for $4.9B USD ($7.1B AUD) in 2020. Commentary from Gilead highlights the acquisition of Magrolimab aligns with its strategic focus in oncology, enhancing their clinical pipeline with a potential first-in-class therapy for several cancers. Magrolimab complements Gilead’s existing hematology and Kite’s cell therapy programs, showing promising Phase 1b results in MDS and AML with high response rates. Additionally, Gilead gains two investigational compounds, FSI-174 and FSI-189, further expanding their therapeutic potential. The favorable safety profile of Magrolimab, particularly in combination with azacitidine, underscores its transformative potential without increased toxicities.

I have captured the key components of Magrolimab and compared it directly to Bisantrene, summarizing it in the table below. Briefly, both Bisantrene and Magrolimab have demonstrated efficacy, safety, and tolerability in a wide range of cancer types and patients. However, Bisantrene is far superior clinically, with numerous phase II and a phase III trial completed. While both drugs have the potential to become first-in-class in their respective targets, Bisantrene’s broader range of cancer indications, higher number of potential drug synergies, and demonstrated clinical efficacy suggest it has the hallmarks to achieve a buyout comparable to, if not exceeding, that of Magrolimab.



https://pubmed.ncbi.nlm.nih.gov/?term=magrolimab&filter=pubt.clinicaltrial&sort=date&size=200
https://s24.q4cdn.com/804398512/files/doc_news/archive/Gilead-to-Acquire-Forty-Seven-for-$4.9-Billion.pdf

On February 7, 2024, Gilead Sciences discontinued the Phase 3 ENHANCE-3 study of magrolimab in combination with venetoclax and azacitidine for AML due to futility and an increased risk of death. Following this, the FDA placed a full clinical hold on all magrolimab studies in AML and MDS, highlighting the significant risks associated with compounds that haven't successfully passed Phase 2 trials. This underscores the inherent uncertainty and potential dangers in advancing experimental therapies without robust early-phase efficacy and safety data. In contrast, Bisantrene has been used in approximately 50 clinical trials in humans and has shown significant promise. It non-significantly outperformed doxorubicin, with 18% of breast cancer patients receiving 5,440 mg/m² of Bisantrene over an average of 17 courses. Additionally, patients from another phase II investigation of Bisantrene in refractory lymphoma received up to 7,000 mg/m² of Bisantrene. Bisantrene was evaluated mostly in heavily pretreated populations, further indicating its safety and tolerability in humans, while also highlighting its efficacy in more aggressive forms of the disease.

Lastly, the historical application of Bisantrene was based on the less cardiotoxic anthracene model, thus dosing regimens reflected those of successful cardiotoxic anthracyclines like doxorubicin. For Bisantrene, more frequent dosing regimens, like those used in AML trials, are significantly more effective in treating cancer. Some examples provide insight into the consistent inhibition of the FTO protein. Bisantrene dosed daily at 80 mg/m² for 5 days every three weeks (Q3W) generated 43% more partial responses than Bisantrene dosed daily at 300 mg/m² Q3W in breast cancer patients refractory to doxorubicin. The recent multiple myeloma data prompted further research into Bisantrene treatment for this indication. A phase 2 study in refractory multiple myeloma patients achieved no responses (5 classified as stable disease) with Bisantrene dosed daily at 260 mg/m² Q3W. However, following in vitro sensitivity to Bisantrene, a multiple myeloma patient refractory to cis-platinum, vinblastine, leukocyte interferon, and mitoxantrone showed a 46% improvement in cancer outcomes in a phase 1 dose-escalation study, receiving 200 mg/m² once per week for three weeks. This highlights the importance of patient selection based on in vitro sensitivity and suggests more frequent dosing regimens drive better patient outcomes through more consistent inhibition of FTO. The optimal single-agent FTO inhibitor dosing regimen for optimum anti-cancer efficacy in clinical trials is currently unknown, which of course extends to combination work. The historical clinical data for Bisantrene clearly demonstrates that infrequent single-agent dosing is not effective; however, frequent dosing regimens have consistently shown improved efficacy, highlighting that the FTO protein is a valid target in cancer and informing future clinical trials investigating FTO inhibitors. Moreover, since the total dose of Bisantrene provided to patients deemed safe and tolerable far exceeds the concentration required to inhibit FTO and provide cardioprotection, the dose of Bisantrene used in combination with approved medicines can be decreased from what is established.

Bisantrene terminology and my established current value for Bisantrene

My estimation for the current value of Bisantrene, relative to competitors purchased four years ago, is $3.44 billion AUD. This figure represents 80% of the market cap of Forty Seven immediately before Gilead's offer. This valuation is supported by Bisantrene's unique status as a first-in-class FTO inhibitor with cardioprotection, backed by extensive clinical history demonstrating its effectiveness in AML, both as a single agent and in combination. Bisantrene is superior to Magrolimab, with a greater clinical history and therapeutic potential, thus its value is significantly underestimated by the wider market. This is in part influenced by the availability of clinical data from researchers that did not use the drug in accordance with its primary mechanism of action (FTO inhibition). I believe the likelihood of achieving this value through an acquisition of RAC to be upwards of 90%, as the characteristics of Bisantrene and RAC align with the factors that motivated Gilead to purchase Magrolimab from Forty Seven, and Bisantrene has established clinical efficacy and safety that drove approvals in France in AML. Given the broader applications, higher number of patients treated, and extensive potential drug synergies, a comparable value for Bisantrene relative to the Magrolimab deal would be approximately $22.7 billion AUD. I want to highlight that the application of Bisantrene is fundamentally as an FTO inhibitor with cardioprotective effects. There are no other ways that Bisantrene can be described, and pharmaceutical companies that recognize the value of first-in-class drugs with wide therapeutic targets and extensive clinical history drive extremely large buyout figures. There is no AML opportunity without CPACS. There is no CPACS without FTO inhibition.