Issued by Nomura today. Some very interesting insights on their views of the comparative merits of the manufaturing and injecting processes. I'm liking what I hear. -----------------------------------------------------------
Quick Note - Prima BioMed (PRR AU, Buy) - Comparable’s supply issues sorted January 06, 2012
Health Care & Pharmaceuticals Target Price: AUD 0.31 Closing Price: AUD 0.18
One of PRR’s comparables in the development of immunotherapeutic treatments for cancer, Dendreon (DNDN US, unrated), announced better-than-expected revenue for 4Q11, with gross product revenue of US$82 million. This represents c25% growth over 3Q11, and c230% growth compared to 4Q10. In addition, DNDN reported full-year gross revenues from its Provenge sales of cUS$228 million. Provenge is an immunotherapeutic treatment for prostate cancer, whilst PRR’s C-Vac product is an immunotherapeutic treatment for ovarian cancer. Hence, DNDN does not compete with PRR, but is a useful comparable.
Background What are PRR's similarities with Dendreon? C-Vac is based on the same cellular technology as Dendreon's Provenge. We would argue that the FDA approval of Provenge for asymptomatic or minimally symptomatic metastatic hormone-refractory prostate cancer validates the underlying science behind C-Vac.
Difference between DNDN and PRR Dendreon effectively has a purification strategy – this removes already existing dendritic cells (DCs) from the circulation. However, PRR, in common with many others, uses a mononuclear white cell collection to get a large number of monocytes, which it then converts into DCs through expansion culture using cytokines known as IL4 and GM-CSF. We believe some industry players have invested more in automation upfront to reduce the risk of product changes further down the track when they move to automated platforms.
DNDN has had supply issues – these look to have been solved The share price of DNDN came under pressure during 2011, due to market perception of difficulties of supply of Provenge, in our view. These look to have been addressed in 4Q11. At the end of 4Q11, DNDN completed in-servicing for more than 840 total sites, of which: 1) more than 590 sites have infused Provenge, which represents the greatest growth yet seen in infusing sites q-o-q; and 2) c615 sites have either infused the product or have their patients scheduled for their first Provenge regimen. Finally, there has also been improved Provenge reimbursement for customers and patients, with reported average time to payment now less than 30 days for physicians.
What does it mean for PRR? We continue to believe that PRR is developing a manufacturing platform that should be an improvement on DNDN’s, and hence is unlikely to suffer from the same issues as DNDN’s. Compared to DNDN, we believe that PRR has a new, more automated process. PRR requires that the patient be apherised once vs. the required three times as a part of the DNDN process. The manufacturing of PRR’s required cells requires also subcutaneous injection vs. DNDN’s intravenous injection. As a fast follower, we believe PRR’s manufacturing technology has the potential to be better than that of DNDN.
Finally, we have estimated the recurrence ovarian cancer market. We believe the potential market size for PRR’s C-Vac treatment is in the order of cUSD2bn per annum. Assuming that PRR treats 25% of those females with recurrence of epithelial ovarian cancer, then its potential market is cUSD500mn pa. Our risk-weighted valuation and price target for PRR is AUD0.31 per share. At present, there have been no significant adverse effects or health issues, and PRR’s Phase II trials indicate a product with the potential for market viability. Therefore, we believe this is an investment opportunity for investors with a higher risk appetite
PRR Price at posting:
14.8¢ Sentiment: None Disclosure: Held
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