Onxeo
Company update
Key catalyst approaching
Pharma & biotech
23 August 2016
With its H116 results, Onxeo reported that R&D is progressing according
to plan. Preliminary data from the Phase III ReLive trial with Livatag are
due around mid-2017, which is the main catalyst in the next 12 months.
Update on the newly acquired DNA repair asset, AsiDNA, revealed that the
Price
€3.11
project could enter the clinic already next year. Although sales of Onxeo’s
third product Beleodaq somewhat lagged our expectations, H116 operating
costs were managed well, suggesting that the key catalysts are achievable
with current cash.
Net cash (€m) at end H116
Market cap
€129m
19.5
Shares in issue
41.5m
Free float
85%
Code
Year
end
12/14
12/15
12/16e
12/17e
Revenue
(€m)
22.1
3.5
3.5
8.7
PBT*
(€m)
0.2
(20.0)
(21.5)
(16.8)
EPS*
(€)
(0.05)
(0.44)
(0.52)
(0.41)
DPS
(€)
0.0
0.0
0.0
0.0
P/E
(x)
N/A
N/A
N/A
N/A
Yield
(%)
N/A
N/A
N/A
N/A
ONXEO
Primary exchange
Euronext Paris
Secondary exchange
OMX Copenhagen
Share price performance
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles,
exceptional items and share-based payments.
H116 results: Sales somewhat behind, costs in line
Onxeo reported H116 results, with recurring sales of its marketed products
somewhat below our expectations but still representing 50% growth year-on-year,
although from a low base of €1.2m in H115 to €1.8m in H116. The company
mentioned that its partners Spectrum Pharmaceuticals and Cipher, which market
Beleodaq (HDAC inhibitor for peripheral T-cell lymphoma, PTCL) and Sitavig
(mucoadhesive formulation of acyclovir for herpes labialis) respectively, continue
with intensive marketing efforts. Operating expenses were well in line with our
expectations.
%
1m
3m
12m
Abs
0.3
(1.6)
(21.3)
(0.4)
(2.6)
(17.9)
Rel (local)
52-week high/low
€4.5
€2.3
Business description
R&D progress according to plan
The development plan for AsiDNA, announced at the end of June, was a major
R&D update, which provided more granularity about what lies ahead for the
recently acquired first-in-class asset in the DNA repair field. Development progress
with Beleodaq and Livatag is on track. The preparations for Beleodaq’s labelexpansion Phase III trial in first-line PTCL are ongoing, in partnership with
Spectrum and scheduled to start around end-2016. Of the planned 400 patients,
80% are now recruited in Livatag’s Phase III trial ReLive, with the first results
Onxeo is focused on orphan cancer and has three
late-stage orphan oncology assets it could
commercialise alone in Europe (Livatag, Beleodaq
and Validive). Royalty-earning Beleodaq
(belinostat) is launched in the US, along with two
non-core, partnered, specialty products. Recent
acquisition of DNA Therapeutics adds a Phase I
stage asset in DNA repair field to Onxeo’s pipeline.
Next events
expected in mid-2017, as guided previously.
Start of Phase III Beleodaq combo
trial
Valuation: €339m or €8.2/share
Preclinical data from ongoing Livatag
and Beleodaq collaborations
Our valuation of Onxeo is largely unchanged at €339m or €8.2/share (from €343m
or €8.3/share). The main adjustments include somewhat slower than expected
Beleodaq sales uptake and a lower net cash position, partially offset by moving our
model forward in time. Livatag Phase III preliminary data and results from
preclinical studies with Beleodaq and Livatag in combination with other undisclosed
anti-cancer compounds are the key catalysts within the next 12 months and
achievable with current cash.
AsiDNA preclinical data
End-2016
H216
H216/H117
Livatag Phase III data
Mid-2017
Analysts
Jonas Peciulis
+44 (0)20 3077 5728
Lala Gregorek
+44 (0)20 3681 2527
[email protected]
Edison profile page
Onxeo is a research client of
Edison Investment Research
Limited
Update on AsiDNA: likely to move into clinic in 2017
According to the update on the development plans for AsiDNA, preclinical pharmacokinetic/
pharmacodynamic profile data after the intravenous administration should be obtained later this
year, which will allow the project to progress into Phase I in 2017. Onxeo acquired AsiDNA,
together with its original developer DNA Therapeutics, earlier this year. The compound has already
been tested in Phase I DRIIM trial with 23 skin melanoma patients, where it was injected
intratumourally or peritumourally alongside the radiation therapy. Onxeo’s plan is to expand
AsiDNA’s potential by changing the administration route to intravenous administration.
Onxeo is able to leverage the existing clinical data from melanoma patients. Among other findings,
lesions that were not injected with AsiDNA also demonstrated a response, indicating AsiDNA’s
ability to circulate and potentially provide a systemic effect. Together with a good safety profile, this
allowed for testing systemic delivery of AsiDNA (oral or intravascular), which in turn opens up
possibilities for developing the drug in a variety of tumours and expanding product potential. Onxeo
has not yet disclosed the first indication for AsiDNA, but the two likely indications are triple-negative
breast cancer (TNBC) and platinum-resistant ovarian cancer, which we discuss in detail in our
previous report.
First-in-class AsiDNA is based on signal-interfering DNA technology which, if introduced into a cell,
acts as a signal mimicking the damage of the cell’s own DNA. AsiDNA then activates a cascade of
repair proteins, which are recruited to ‘repair the damage’, as a result of which the actual damage of
a cell’s DNA (such as from radiotherapy or chemotherapy) remains unrepaired, leading to cell
death.
Beleodaq’s commercialisation and new R&D initiatives
In June Onxeo announced the first steps of an R&D initiative to develop belinostat in oral
formulation. The newly obtained preclinical pharmacokinetic data on belinostat’s bioavailability in an
oral formulation were positive. The oral formulation could open several opportunities for belinostat.
This would be a competitive advantage compared to other PTCL treatments (more convenient
administration than injectibles, likely better patient compliance, pain-free). Oral formulation would
also allow for more flexibility in expanding to other indications and developing the drug in
combination with other medicines. While still an early initiative and potential clinical development
timelines are yet to be clarified, as a next step Onxeo plans to conduct preclinical in vivo efficacy
studies.
With another new R&D initiative announced in July, Onxeo, together with the Royal College of
Surgeons in Ireland (RCSI), will explore derivatives of belinostat (Beleodaq) with the goal of
optimising the pharmacokinetic profile, which could lead to new IP. Research costs will be shared
between the partners and Onxeo will have an option to license RCSI’s patents. Results are
expected in 2017.
On the commercialisation front, Onxeo also released news about the addition of a new distributor,
Pint Pharma, which will cover seven South American countries. The data filed with the NDA will
most likely be sufficient to register Beleodaq in the same indication – second-line PTCL. Onxeo will
receive an upfront payment, milestone payments and double-digit royalties for Beleodaq with a total
deal value of $20m. While the timing for the registration remains somewhat undefined, Pint Pharma
plans to establish an early access programme by end-2016.
Onxeo | 23 August 2016
2
Financials
Onxeo’s total revenues for H116 were €1.9m, of which €54k were non-recurring related to licensing
agreements. Our focus was on recurrent sales, which totalled €1.8m. Onxeo does not provide a
split per product, but breaks down sales into oncology products and other products. Consequently,
the former category represents Beleodaq (€964k, up 48% y-o-y) and the latter Loramyc/Oravig and
Sitavig (together €914k, up 4% y-o-y). Beleodaq grew substantially y-o-y, although from a low base
and below our expectations, hence we have revised our sales ramp-up expectations downwards
somewhat. Nevertheless, Beleodaq is the most advanced of Onxeo’s products, relatively recently
marketed in the US by Spectrum since July 2014 and with at least another 10 years of IP
protection, which provides leeway for market penetration. The drug is currently approved for
second-line treatment of PTCL, but could also be developed for first-line treatment with the Phase
III trial of Beleodaq in combination with standard-of-care chemotherapy to start around end 2016
(positive Phase I data released in December 2015).
Total H116 operating costs were in line with our expectations and came in at €13.0m versus €13.5m
in H115. The only change to our cost estimates is the delay in sales and marketing costs related to
Livatag, which we initially included in 2017, but now postpone to 2018. This allows time for Onxeo
to deliver both preliminary (mid-2017) and full data readout from the ReLive Phase III study and file
for regulatory approval in the case of a positive outcome. Following these changes, we have
decreased our 2016 EPS estimate from -€0.48 to -€0.52, and increased our 2017 estimate from
-€0.46 to -€0.41.
Onxeo reported cash and equivalents at end-H116 of €19.6m (net cash €19.5m). In line with the
company’s guidance, we believe this should be sufficient to fund operations well into 2017, likely
until Q417.
Exhibit 1: Key changes to our financial forecasts
€m
2015
Actual
3.482
(22.334)
(19.972)
(17.648)
(0.44)
Revenue
Operating profit (reported)
Profit before tax (reported)
Profit after tax (reported)
EPS (norm, €)
2016e
Old
5.260
(21.707)
(19.614)
(19.614)
(0.48)
New
3.483
(23.614)
(21.521)
(21.354)
(0.52)
2017e
Change (%)
(34)
9
10
9
8
Old
11.339
(20.878)
(19.018)
(19.018)
(0.46)
New
8.697
(18.682)
(16.822)
(16.822)
(0.41)
Change (%)
(23)
(11)
(12)
(12)
(12)
Source: Onxeo accounts, Edison Investment Research
Valuation
Our valuation of Onxeo is largely unchanged at €339m or €8.2/share from €343m or €8.3/share.
The main adjustments include a somewhat slower than expected Belodaq’s sales uptake, although
we have not changed our peak sales assumption. Together with the lower net cash position (H116),
this was partially offset by moving our model forward in time. Our other assumptions remain
unchanged, including the recently added TNBC indication with AsiDNA. AsiDNA has clearly added
value to Onxeo’s R&D pipeline and, to capture that, we have focused on TNBC, although the
company has not revealed the precise indication for this asset. TNBC has a significant unmet need
with no novel targeted treatment approved (see our previous report for more details).
Preliminary data from the c 400-patient, 80%-recruited ReLive Phase III trial with Livatag for liver
cancer patients (hepatocellular carcinoma) are due in mid-2017 and represent the main catalyst for
the company in the near term, which is reachable with current cash. In preclinical studies Onxeo is
also exploring both Livatag and Beleodaq in combination with other undisclosed anti-cancer
compounds, which may also deliver interesting feasibility data in the coming months.
Onxeo | 23 August 2016
3
Exhibit 2: Onxeo rNPV valuation
Product
Indication
Launch
Peak sales
(€m)
NPV
(€m)
Probability
(%)
rNPV
(€m)
NPV/share
(€/share)
Validive
Livatag
Oral mucositis (H&N cancer)
Liver cancer
2021
2018
200
250
67.7
183.7
50%
40%
33.3
70.4
0.8
1.7
Beleodaq US
Beleodaq EU
AsiDNA
PTCL
PTCL
TNBC
2014
2020
2024
80
60
1,110
40.0
65.3
179.6
100%
70%
15%
40.0
44.0
35.5
1.0
1.1
0.9
Loramyc/Oravig
Sitavig
Oropharyngeal candidiasis
Recurrent herpes labialis
2007
2014
50
110
26.1
70.5
100%
100%
26.1
70.5
0.6
1.7
19.5
652.4
100%
19.5
339.3
0.5
8.2
Net cash (at end H116)
Valuation
Source: Edison Investment Research. Note: Specialty products shaded. PTCL = peripheral T-cell lymphoma, TNBC = triple negative
breast cancer.
Onxeo | 23 August 2016
4
Exhibit 3: Financial summary
Year-end December
PROFIT & LOSS
Revenue
Cost of Sales
Gross Profit
EBITDA
Operating Profit (before amort. and except.)
Intangible Amortisation
Exceptionals
Operating Profit
Other
Net Interest
Profit Before Tax (norm)
Profit Before Tax (reported)
Tax
Profit After Tax (norm)
Profit After Tax (reported)
€000s
2010
IFRS
2011
IFRS
2012
IFRS
2013
IFRS
2014
IFRS
2015
IFRS
2016e
IFRS
2017e
IFRS
22,532
(859)
21,673
3,065
2,698
(105)
0
2,593
0
217
2,914
2,809
(0)
2,914
2,809
3,231
(750)
2,481
(14,429)
(14,841)
(97)
0
(14,938)
0
316
(14,525)
(14,622)
0
(14,525)
(14,622)
4,028
(375)
3,653
(11,300)
(11,506)
(9)
0
(11,515)
0
(33)
(11,539)
(11,548)
0
(11,539)
(11,548)
1,467
(264)
1,202
(15,189)
(15,412)
(10)
0
(15,422)
(29)
126
(15,286)
(15,325)
0
(15,315)
(15,325)
22,081
(249)
21,832
(4,505)
184
(800)
(4,861)
(5,477)
(77)
5
189
(5,549)
(2,150)
(2,038)
(7,699)
3,482
(337)
3,145
(20,355)
(20,574)
(1,600)
(160)
(22,334)
(29)
602
(19,972)
(21,761)
2,353
(17,648)
(19,408)
3,483
(453)
3,030
(21,605)
(22,009)
(1,605)
0
(23,614)
0
488
(21,521)
(23,126)
167
(21,354)
(22,959)
8,697
(453)
8,244
(16,638)
(17,058)
(1,624)
0
(18,682)
0
236
(16,822)
(18,446)
0
(16,822)
(18,446)
Average Number of Shares Outstanding (m)
EPS - normalised (€)
EPS - normalised and fully diluted (€)
EPS - (reported) (€)
Dividend per share (€)
13.6
0.21
0.21
0.21
0.0
17.7
(0.82)
(0.82)
(0.83)
0.0
17.7
(0.65)
(0.65)
(0.65)
0.0
20.7
(0.74)
(0.74)
(0.74)
0.0
40.5
(0.05)
(0.05)
(0.19)
0.0
40.5
(0.44)
(0.44)
(0.48)
0.0
41.0
(0.52)
(0.52)
(0.56)
0.0
41.5
(0.41)
(0.41)
(0.44)
0.0
Gross Margin (%)
EBITDA Margin (%)
Operating Margin (before GW and except.) (%)
96.2
13.6
12.0
76.8
N/A
N/A
90.7
N/A
N/A
82.0
N/A
N/A
98.9
N/A
0.8
90.3
N/A
N/A
87.0
N/A
N/A
94.8
N/A
N/A
2,083
117
1,632
334
24,251
38
243
20,947
3,023
(5,737)
(5,680)
(57)
(1,745)
(1,131)
(614)
18,852
1,793
27
1,401
366
32,288
1
456
28,666
3,164
(7,051)
(6,881)
(170)
(4,128)
(2,237)
(1,891)
22,902
1,540
33
1,086
422
20,581
3
2,089
14,503
3,986
(6,147)
(6,090)
(57)
(4,231)
(511)
(3,720)
11,742
1,300
23
908
369
16,432
3
338
11,329
4,762
(6,357)
(6,266)
(91)
(3,487)
(303)
(3,185)
7,888
89,052
87,932
711
409
62,946
65
582
57,227
5,073
(12,919)
(11,290)
(1,630)
(17,108)
(138)
(16,970)
121,971
87,539
86,367
841
331
41,697
106
1,036
33,793
6,762
(10,606)
(10,537)
(69)
(15,831)
0
(15,831)
102,799
87,371
86,429
611
331
22,974
142
1,036
15,033
6,762
(11,621)
(11,552)
(69)
(15,831)
0
(15,831)
82,892
85,761
84,805
625
331
10,492
142
2,588
1,000
6,762
(11,732)
(11,663)
(69)
(20,690)
(4,859)
(15,831)
63,831
3,492
(61)
0
(108)
0
2,867
0
6,191
(13,569)
0
0
(19,760)
(11,614)
(1,106)
0
(148)
0
19,367
0
6,499
(19,760)
0
0
(26,259)
(14,076)
1,837
0
(39)
0
(46)
0
(12,324)
(26,259)
0
0
(13,935)
(14,020)
333
0
(119)
0
10,807
0
(3,000)
(13,935)
0
(0)
(10,935)
(7,733)
843
0
(2)
14,208
37,207
0
44,524
(10,935)
0
0
(55,459)
(20,067)
579
(2,448)
(410)
0
611
0
(21,735)
(55,459)
0
0
(33,724)
(20,788)
489
714
(174)
0
1,000
0
(18,760)
(33,724)
0
0
(14,964)
(17,736)
236
42
(435)
(1,000)
0
0
(18,893)
(14,964)
0
0
3,928
BALANCE SHEET
Fixed Assets
Intangible Assets
Tangible Assets
Investments
Current Assets
Stocks
Debtors
Cash
Other
Current Liabilities
Creditors
Short term borrowings
Long Term Liabilities
Long term borrowings
Other long term liabilities
Net Assets
CASH FLOW
Operating Cash Flow
Net Interest
Tax
Capex
Acquisitions/disposals
Financing
Dividends
Net Cash Flow
Opening net debt/(cash)
HP finance leases initiated
Other
Closing net debt/(cash)
Source: Edison Investment Research, Onxeo accounts. Note: Historic financials display standalone data only, with Topotarget
consolidated from H214.
Onxeo | 23 August 2016
5
Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks
worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Onxeo 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 2016. “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
Onxeo
| 2334bAugust 2016
60325 Frankfurt
Germany
London +44 (0)20 3077 5700
280 High Holborn
London, WC1V 7EE
United Kingdom
New York +1 646 653 7026
245 Park Avenue, 39th Floor
10167, New York
US
Sydney +61 (0)2 9258 1161
Level 25, Aurora Place
88 Phillip St, Sydney
NSW 2000, Australia
Wellington +64 (0)48 948 555
Level 15, 171 Featherston St
Wellington 6011
New Zealand
6