FYI
Latest Bell Potter update 29/09/17
Starpharma (SPL)
AstraZeneca unveils first partnered candidate as Bcl-2/xl inhibitor
First glimpse of AZN/SPL’s partnered candidate AZD0466 provided at a UK conference earlier this week
AstraZeneca (AZN) has unveiled the first DEP candidate under its partnership with SPL as AZD0466, a dual BCL-2/xl inhibitor being targeted at a broad range of blood cancers (liquid tumours) and with the potential to be also applicable across some solid tumours.
In April we had already speculated that this drug was AZD0466 and hence are pleased to have it confirmed today. The first glimpse of AZD0466 was provided earlier this week at the ‘3rd AstraZenecaMedImmune-CRUK Cambridge Centre Symposium 2017’, held in Cambridge, UK. This conference was in association with ‘Cancer Research UK’ and the theme this year was ‘cancer combination therapies’.
First DEP drug ‘a potential best-in-class oncology drug’ AZN at the conference has described AZD0466 as a best-in-class- drug with a broad combination opportunity in solid and haematological tumours. This is a well validated target, hampered by an arrow therapeutic window and on-target bone marrow toxicities such as thrombocytopenia and neutropenia.
The inherent toxicity issues seen with this class of drugs makes it an ideal candidate to benefit from SPL’s DEP technology which can improve its therapeutic window. This is also confirmed by the recent results from the Phase 1 DEP-docetaxel trial which have demonstrated the utility of SPL’s DEP platform in improving the safety profile of cancer drugs whose utility has been hampered by dose limiting toxicities, especially bone marrow related toxicity.
AZD0466 has immense potential and broad applicability both as monotherapy and in combination. A first in class BCL-2 inhibitor from Abbvie/Genentech called Venclexta (venetoclax) has already been approved by the FDA last year for a sub group of patients with chronic lymphocytic leukemia (CLL) and provides validation for the target.
Venclexta is also in several clinical trials both as a single agent and in combination with other drugs including Abbvie’s imbruvica (ibrutinib) forothe r B-cell lymphoid malignancies. Street forecasts puts Abbvie’s haematological tumor sales (imbruvica and venclexta) reaching US$6bn by 2020. Venclexta is expected to contribute to this both as a single agent and by boosting imbruvica sales in combination.
Venclexta only targets BCL-2 and does not target BCL-XL. While the early results have been promising enough for the drug to get ‘Breakthrough designation’ from the FDA and accelerated approval, complete response rates are still relatively low and not all people respond to treatment.
This has been attributed to resistance mechanisms by upregulation of the other BCL-2 family of proteins. AZN’SPL’s AZD0466 by targeting both BCL-2 and BCL-xl has the potential to overcome this resistance and therefore potentially be best-in-class. We also note that recently partial royalty rights for Venclexta was sold by WEHI (Walter and Eliza Hall Institute) for US$325m (including US$250m as cash upfront). This deal further highlights the underlying value inherent in this class of drugs.
AZD0466’s broad applicability, potential for accelerated approvals, along with blood cancers being one of AZN’s key oncology focus as evident from their recent US$4bn acquisition of Acerta, in ourv iew would make this drug very valuable to AZN, especially if we consider the potential for it to be combined with AZN/Acerta’s lead candidate acalabrutinib (est. $5bn+ peak sales potential for AZN) down the road. Progress of this asset towards the clinic therefore bodes well for SPL/AZN’s
long term collaboration and AZN’s interest in SPL.
Key Highlights from the conference:
While the presentation slides have not been released by AZN or SPL, we have managed to get hold of an abstract from the conference. Key conclusions we make from the abstract summary are as follows:
• AZN has tried the candidate in a broad spectrum of blood cancer models pre-clinically and it has demonstrated significant anti-cancer activity when used as a monotherapy i.e. a single agent;
• AZD0466 in combination with either standard-of-care chemotherapy or targeted agents preclinically has also shown improved and durable tumour response in both solid and haematological tumours;
• Along with AZD0466, AZN has two other drugs targeting different BCL-2 family of proteins and together the company believes ‘inhibitors of BCL-2 family proteins, when used in combination, can lead to deep and durable responses in patients and potentially even cures’. We remaine xcited about this target and AZN’s increased investment in this class of drugs
supports our view that AZD0466 has the potential to be a key player within AZN’s bloo d cancer franchise.
FY18 to be a transformational year for SPL
We believe FY18 is already proving to be a transformational year for SPL with the momentum expected to continue based on significant progress expected across its DEP drug delivery business and approval and licensing of its late stage VivaGel BV product. Following the positive Top-line results from the Phase 1 DEP docetaxel trial released last week and initiation of the Phase 2 trial, asw ell as the unveiling of AZN/SPL’s promising oncology candidate today, other key upcoming milestones include a) submission of marketing application for BV treatment in early 4QCY17 and for prevention of recurrence of BV later in 4QCY17; b) licensing deal for VivaGel BV over the next 2-3 months which will lead to further cash injection; c) release of pre-clinical data on SPL/AstraZeneca’s lead candidate in Dec’17, followed by initiation of Phase 1 trial in 1QCY18 which triggers a US$3m milestone and d) initiation of Phase 1 trial with DEP cabazitaxel.
Retain Buy (speculative) with Valuation of $1.32
No changes to our estimates at this stage. We now intend to model potential royalties to SPL on net sales of AZD0466 from a first indication, likely in a form of blood cancer. We also intend to assign a higher probability of success to DEP docetaxel now that it has officially moved into Phase 2 trials and also revise our model to include the two disclosed Phase 2 indications of lung and prostate cancer for DEP docetaxel. Cumulatively these represent an upside to our current valuation ofA $1.32/sh for SPL. We retain Buy (speculative).
SPL remains in our top FY18 picks.
Disclosure: Bell Potter Securities acted as joint lead manager in the December 2015 placement and received fees for
that service.
Recommendation: Buy, Speculative Previous Close: $1.24 Valuation: $1.32 (under review)
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