*.- A US listing could strengthen the company’s financial position, and potentially enable the group to expand its US operations.
*.- Yondelis approvals to drive near-term growth .
*.- PharmaMar already has a profitable business driven by Yondelis sales in Europe and a non-core consumer chemicals business.
*.- We forecast royalty income flowing from the recent approvals for Yondelis in the US and Japan .
*.- A Phase III multiple myeloma trial of a third drug, Aplidin, is expected to read out in Q116.
*.- The readout of two key trials – the Phase III study of Aplidin in multiple myeloma and the Phase III relapsed/refractory ovarian cancer trial of PM1183 – are also major near-term value drivers that could catalyse lucrative licensing deals or development/commercialisation partnerships for non-European territories.
*.- The pending launches of Yondelis in the US and Japan will be key drivers of earnings growth. We forecast peak sales in Japan of €130m in STS and assume a 15% royalty rate. In the US we forecast peak sales of $130m STS and assume an 11% royalty on initial sales, rising to 15% in 2020. PharmaMar will also earn a margin on sales of Yondelis raw material to Janssen.
*.- We assume premium pricing in Japan (US$37,500, 40% higher than Europe) and in the US (US$41,250, 50% higher). In both these markets, Yondelis will enjoy orphan drug market exclusivity post-launch (for seven years in the US and 10 years in Japan).
*.- Phase II trials are also underway in meningioma and mesothelioma, which are potential new indications for Yondelis.
*.- PM1183 : ovarian cancer Phase III underway, lung next .
*.- PM1183 is effectively a second-generation compound of Yondelis, with activity in similar (ovarian cancer) and new indications (SCLC, NSCLC, breast cancer). The compound has been optimised to improve the pharmacokinetic profile, such that PM1183 can be given at 4x the tolerated dose level of Yondelis and offers administration advantages. PM1183 can be administered in a one-hour infusion using a peripheral intravenous catheter, compared to a 24-hour infusion with Yondelis via a central catheter.
*.- PharmaMar initiated a Phase III trial in June of PM1183 as a monotherapy in platinum-resistant ovarian cancer, compared to a control arm with topotecan or liposomal doxorubicin. The randomised open-label trial will enrol 420 women with unresectable platinum-resistant ovarian cancer, and will assess whether PM1183 can improve PFS as the primary endpoint. Recruitment is expected to complete around the end of 2016.This pivotal study follows encouraging PFS and OS rates in a Phase IIb trial.
*.- The company is currently finalising the design of a pivotal Phase III study in SCLC after positive data from a Phase Ib study. The proposed Phase III will be a head-to-head study comparing the combination of PM1183 and doxorubicin against topotecan, in relapsed (second-line) SCLC patients. Preliminary results from the Phase Ib study showed that 67% of SCLC patients responded to PM1183 plus doxorubicin, compared to response rates of 20-25% typically seen with standard-of-care drug topotecan.
*.- PM060184 :
Preparations for a Phase II trial in advanced breast cancer (HR positive, HER2 negative subgroup) are well advanced, with the protocols submitted to institutional review boards for ethics approval. The trial will be conducted in Spain, Belgium and France. A second Phase II trial in patients with advanced colorectal cancer is planned to be conducted in Spain, Canada and the US. Recruitment is ongoing in a Phase I trial of PM060184 in combination with gemcitabine.
*.- Through annual diving expeditions around the globe, the company has built an extensive library of c 160,000 marine samples that form the basis of its cancer research activities.
*.- Non-core operations :
PharmaMar’s wholly owned operating subsidiaries are independently managed, allowing each management team to concentrate on its line of activity. Zenova and Xylazel (consumer chemicals) are leaders in their market segments and are, like molecular diagnostics company Genomica, self-sustaining profitable businesses requiring little external investment.
*.- The remaining biopharmaceuticals subsidiaries have both complementary (Genomica) and distinct (Sylentis) activities to marine oncology. Genomica develops and commercialises in vitro diagnostic kits with its CLART platform (launched in 2006) and performs DNA identification analysis. The company is diversifying strategically into cancer molecular diagnostics with the launch of a new line of products (CLART CMA) based on the detection of genetic DNA mutations in cancer genes.
*.- With regard to PM1183 and Aplidin, we have maintained our previous base case assumptions that these products will be commercialised with a partner, resulting in a 25% royalty on net sales.
*.- However, we acknowledge that with the new corporate structure, US IPO plans and resulting opportunity to establish a US commercial business, these products could be self-commercialised in the US. This would offer upside potential to our base case royalty assumption; for example, applying a 50-60% pre-G&A margin (after 10-15% COGS + 30-35% S&M costs) to PM1183 in the US for currently targeted indications would raise the rNPV of the product to approximately €595m vs €382m in our current model.
