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Vivoryon Therapeutics (PBD-NA): Fresh funding for AD. Immuno-oncology optionality explored

goetzpartners securities Limited

15-Jun-2019 / 13:34 GMT/BST

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Published to the market and investors on 13th June 2019 @ 8.28am (BST).

Vivoryon Therapeutics (PBD-NA): Fresh funding for AD. Immuno-oncology optionality explored.
Recommendation: OUTPERFORM
Target Price: EUR 20.00 (reduced from EUR 71.00)
Current Price: EUR 5.25 (CoB on 12th June 2019)


Vivoryon Therapeutics AG (previously known as Probiodrug AG) recently raised EUR8.2m in equity and won a $15m grant from the US NIH to partially fund the US Ph IIb trial in early Alzheimer's disease ("AD") for lead asset PQ912, a small molecule inhibitor of the two glutaminyl cyclase ("QC") isoforms QPCT and QPCTL. This has extended the cash runway to end Q1/2020E and given the company the financial means to start enrolling patients into the PQ912 Ph IIb trial in AD. Separately, a recent Nature Medicine paper (Mar-2019) identified QPCTL as a novel target for immuno-oncology ("I-O") in the context of the CD47 / SIRPα immune checkpoint and highlighted PQ912 as the only clinical-stage QPCTL inhibitor. Vivoryon is in a unique position to benefit from pharma's appetite for novel mechanisms of action in I-O and we see room for potential licensing deals for PQ912 or follow-on molecules. We set a new target price ("TP") of EUR20/share on revising our forecasts for PQ912 in AD. Retain OUTPERFORM.

EUR8.2m equity raise and $15m NIH grant trigger patient recruitment into Ph IIb in AD

PQ912 showed promising efficacy in a 120-patient, 12-week Ph IIa trial in patients with early AD, including: (1) Proof-of-mechanism, reaching 90% target occupancy; (2) significant effects on synaptic function; and (3) improvement of working memory, with significant results on the "one card back" test. Preparations for a Ph IIb trial designed to show proof-of-concept ("PoC") in early AD are ongoing, but patient recruitment has been on hold due to limited financial resources. This changed following the fundraise and the NIH award, with enrolment now scheduled to begin in Q1/2020E (Europe & US). Management previously estimated that the 250-patient, 12-month European trial would cost c.$25m and the 460-patient, 18-month US trial c.$50m, equating to c.EUR64m in total. Hence, another c.EUR40m would be required to complete the Ph IIb programme, which the company intends to raise through equity and potential pharma licensing deals.

PQ912 licensing deal for AD possible in 2022E following EU data. Approval in 2025E

The rationale behind carrying out two AD trials simultaneously is that while each one alone would provide clinical PoC in early AD, both would be required for conditional (EU) / accelerated (US) approval. Given recent events in AD including the failure of Biogen's aducanumab in Ph III in Mar-2019, we now think that it may be challenging for Vivoryon to find a licensing partner prior to PoC data. However, we believe that positive data from the shorter European trial in Q3/2022E could trigger a lucrative licensing deal. A positive outcome for the US trial in Q2/2024E would then allow the company and its potential partner to discuss conditional / accelerated approval, which could translate to market entry in 2025E. We have updated our forecasts and now forecast peak sales of c.$11.5bn in 2035E (US & Europe).

Nature paper highlighting potential of PQ912 in I-O could trigger pharma deals

A paper published in Nature Medicine describes a critical role for QPCTL in the CD47 / SIRPα immune checkpoint. Tumour cells express CD47 on the cell surface to escape destruction by the immune system, as binding of CD47 to SIRPα on myeloid cells triggers a "don't eat me" signal. The authors showed that: (1) QPCTL catalyses an important modification of CD47 at the SIRPα binding site required for the interaction; (2) interference with QPCTL activity leads to a major increase in cell killing by human neutrophils and macrophages; (3) small molecule inhibition of QPCTL with PQ912 prevents the CD47 / SIRPα interaction and enhances tumour cell killing comparable to that achieved by genetic deficiency of the CD47 checkpoint or CD47 inhibitors.

TP of EUR20 per share reflects updated forecasts for PQ912 in AD

We have updated our Vivoryon model and valuation to reflect the updated timelines for the development of PQ912 in early AD, the absence of a licensing deal until after first Ph IIb PoC data, a higher discount rate (18%) to take into account the challenging backdrop in AD, the equity fundraise and the NIH grant. The recent financing events have increased visibility on the AD programme, and we see room for upside from potential licensing deals in I-O, which are not yet captured in our valuation.

Kind regards,

Brigitte de Lima, PhD, CFA | Research Analyst

goetzpartners Healthcare Research Team | Research Team

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