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Probiodrug (PBD-NA): Lifting the veil on Phase IIb design
The key updates at Probiodrug's FY2017 results were the overall strategy for the Phase IIb programme and the detailed design of the European study for lead compound PQ912, a small molecule glutaminyl cyclase ("QC") inhibitor in development for Alzheimer's disease ("AD"). The trial design incorporates the draft guidance provided by the FDA and the EMA in February 2018 for the development of drugs in early AD patients, with a focus on detecting changes in cognition thus building on the clinical data from the successful Phase IIa study. The first patient for the slightly more advanced European trial is expected to be enrolled in Q4/2018E, with results possible in Q3/2021E. Strong positive data for both the European and the US trial could lead to accelerated / conditional approval and launch in 2023E. We reiterate our OUTPERFORM recommendation and adjust our target price to EUR71 (from EUR91).
Phase IIb design reflects recent FDA and EMA draft guidance for early AD trials
Past Phase III trial failures in AD have in many cases been due to exploratory trials not providing bona fide proof-of-concept to inform Phase III. In contrast, Probiodrug is making every effort to ensure that this is not the case for its own Phase IIb programme. A key element of the PQ912 Phase IIb development strategy is the focus on cognition and function (activity of daily living) through the assessment of neuropsychological and functional endpoints, respectively, and the assessment of the pathophysiological changes that characterise early AD through the measurement of biomarkers. The types of assessments overlap with those from the successful Phase IIa trial, which in our view increases the chance of trial success.
De-risked European trial includes interim safety analysis
The trial design includes a safety analysis once 90 patients have been treated for 3 months with the 300mg BID dose. The study will only continue and enrol the target population of 250 patients if the tolerability meets pre-specified criteria set out by the data safety monitoring board. This approach reduces the risk of continuing a trial that would ultimately fail due to safety / tolerability issues, in our view.
Valuation based on NPV for PQ912 assumes licensing deal is signed by YE2018
Our new TP of EUR71 per share is based on our risk-adjusted net present value ("rNPV") for PQ912 in AD plus cash at YE2017 and includes an estimated $25m upfront payment from a biopharma licensing deal in 2018E. We model 2023E sales of $250m and peak global sales in excess of $15bn in 2030E, with Probiodrug entitled to $475m in upfront ($25m), as well as clinical ($50m), regulatory ($275m) and sales-based ($125m) milestone payments, plus royalties on sales at a fixed rate of 12%. We apply a probability of success for PQ912 to reach the market of 25%.
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