CHM (ASX) valuation thoughts

Originally posted by stockrock: ↑

Here is some food for thought... CLTX CAR-T is aiming to make the same impact as the first FDA approved CAR-T therapies.. namely Kymriah (Aug17), Yescarta/Kite (Oct17), Tecartus/Kite (Jul20), Breyanzi/Juno (Feb21) and Abecma (Mar21).

The difference is that all of the above targeted the same antigen receptor, CD-19. As such, some were picked up early and developed in house.. and others were acquired. To get a gauge of the value of these treatments, the acquired entities provide the best 'market value' available. So Yescarta was acquired by Kite in Aug17 for US$11.9bn and Juno was acquired in Nov19 for US9bn.

The overall response rates for these treatments were around the 70-87% mark, with complete response ranging from 54%-83%. So these are very high benchmarks and if CLTX CAR-T were to seriously consider itself a contender to these CD-19 CAR T's, it would need to demonstrate overall response between 70-87% as a starting point. And that is exactly what they've put out in the first interim read-out, albeit on four patients. So if they maintain or improve on a 75%+ response rate... we'll be right up there.

Arguably because we are the only one using Chlorotoxin, we may be worth a lot more given the lack of competition/choice for big pharma... but lets just discount that and assume that doesn't matter.

So what does the above mean in terms of valuation (ignoring we are 1 of 1 and not 1 of 4 or 5)? If we take a conservative discount and halve the values for Kite and Juno, if CHM were to finish up with similar data as Kite and Juno's phase 2 trials... at AUD/USD 0.74, Kite would be A$8.0bn (50% of A$16.1bn) and Juno A$6.1bn (50% of $A12.2bn). Compared to CHM now, at A$0.1bn, even at a 50% discount to Kite and Juno's acquisition price... we are priced at 1.24% of Kite and 1.64% of Juno.

In other words, if we achieve similar results to Kite and Juno for GBM or other solid cancers.. and using them as a gauge of what we could be acquired for (with a 50% discount applied), it is like saying we currently have a 1.24% chance of achieving this if compared to Kite. And a 1.64% of achieving this if compared to Juno.

That may have been the case with preclinical studies only... but my thinking is this, with each set of clinical data that puts us in the league of the first blood cancer FDA approved CAR T treatments i.e. overall response of between 70-87%... the probability of us achieving their valuation (or even 50% of it) increases.

So after reading out our first interim phase 1 data on GBM with the lowest dose and only via one administration route... we hit 75% overall response.

What do you think we chance of getting that after a phase 2 trial.. or even better now?

If at preclinical the relative chance was around 1-2%... would it be fair to say maybe we could consider that we have a 3% chance.

Lets say I price CHM at a 3% chance of achieving this... that values CHM (after discounting Kite/Juno at 50%) at A$241m if compared to Kite, and at A$182m if compared to Juno.

If I translate that to a share price, with 331m on issue .. that is $0.73cps if compared to Kite, and $0.55cps compared to Juno. The average of those would be A$0.64cps. We are currently at A0.32cps.

This is not even factoring in all the other trials we'll have going next year.. two basket trials which could in themselves become blockbusters.

The thing with CHM is that we are playing in a field of absolute giants. If we make it, we'll make it BIG. So when it comes to the valuation of CHM, a slight improvement in probability.. such as moving it from 3% to a 5% probability, would have a massive change in extrapolated value... for instance having 5% probability would mean a comparative valuation of A$1.22cps and A$0.92cps with an average of A$1.07cps.

Who's to say what % we really are.. that is for the market to determine.. and one day enough market participants may come up with the same idea and decide we are 5% instead of 2%... or 10% instead of 3%... and off she goes, with what would seem for no apparent reason. But if we could appreciate the dollars CHM could potentially be worth, then in hindsight, it makes a hell of a lot of sense.

But first things first... we hit 75% overall response in our first interim data read out... that is a big step in the right direction.

Goodluck all

Expand

Great write up! Love your work. One question on this, when I looked through definitions of ORR on the NCBI (national centre for biotechnology information) website they state that ORR does not include stable disease, only partial or complete response to therapy. I'm wondering if there's differing measurements of response amongst varying organisations and what CHM are using for the trial as a benchmark to work off. From what I read, if they were using the information provided by the NCBI then would the ORR for those initial four patients officially be 0%?
I still think those data stats of stable disease in 75% is fantastic, especially within the first low dose cohort. But playing devil's advocate, could this not also be documented as 0% ORR from what NCBI claim?

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