BerGenBio

Advancing towards randomised studies

Update | 26 November 2018

Share this note

BerGenBio continues to report promising data from the Phase II study in non-small cell lung cancer (NSCLC) with bemcentinib in combination with pembrolizumab, on this occasion progression free survival (PFS) data at SITC 2018. The final data from the current trials are due over the next six months. But, the results to date are sufficiently compelling that the company has already started to prepare a randomised Phase II trial programme with bemcentinib to begin in H219. No details of the Phase II studies have been disclosed; but we expect the company to run a series of trials in various NSCLC settings (including with pembrolizumab) and in AML. We have raised our valuation of BerGenBio from NOK52.65 to NOK54.21 per share.

Year-end: December 31201620172018E2019E
Sales (NOKm)0.00.00.00.0
Adj. PBT (NOKm)(129.8)(182.2)(197.5)(240.2)
Net Income (NOKm)(129.8)(182.2)(197.5)(240.2)
Adj. EPS (NOK)(419.7)(4.0)(3.8)(4.4)
Cash (NOKm)161.8370.4345.1109.5
EBITDA (NOKm)(131.4)(183.5)(200.0)(239.2)
Source: Trinity Delta Note: Adjusted numbers exclude exceptionals.
  • PFS data further emphasises potential of bemcentinib with pembrolizumab  BerGenBio previously reported promising overall response rate (ORR) data from stage 1 of the Phase II study with pembrolizumab (Merck’s Keytruda). The ORR of patients (n=10) with Axl+ tumours was 40% vs 9% in those with Axl- tumours. Consistent with this, BerGenBio reported at SITC 2018 median PFS of 5.9 months and 3.3 months in patients with Axl+ and Axl- tumours, respectively; in historical trials with pembrolizumab or nivolumab monotherapy in PD-L1 low NSCLC, median PFS was c 2 months. Stage 2 is actively recruiting an extra 24 patients to the trial.
  • Randomised Phase II studies to be initiated in H219 BerGenBio is planning  randomised Phase II trials to start in H219. No details have been disclosed by the company, but they are likely to centre on bemcentinib’s potential in second-line NSCLC, in particular with pembrolizumab, and in AML/MDS. The studies will probably include pre-specified analyses of patients stratified using biomarkers, such as Axl or sAxl expression, to confirm the observations made in the current trials.
  • BGB149 to enter the clinic in Q418 A Phase I study in healthy volunteers with Axl antibody, BGB149, is due to start in December 2018. It will be a single-ascending dose trial with six patients per cohort. The trial is expected to be completed in Q319, with the aim of initiating in H219 a Phase I/II study in patients. BerGenBio is yet to indicate in which indications BGB149 will be developed; but, as it inhibits Axl signalling like bemcentinib, it could be developed in oncology or fibrosis.
  • Valuation increased by NOK1.56 to NOK54.21/share   We have raised our valuation of BerGenBio by NOK86m to NOK2,966m ($349m or NOK54.21/share), following the Q318 results, the promising data in NSCLC and the termination of the development programme in triple-negative breast cancer. We have also revised our estimates to take into account the tight cost control in FY18 and the expanding clinical trial programmes from H219 with the randomised Phase II trials. BerGenBio had a cash position of NOK398m at Q318, sufficient to operate into FY20.

Update

26 November 2018

PriceNOK26.90
Market CapNOK1,472m
Enterprise ValueNOK1,074m
Shares in issue54.7m
12-month rangeNOK18.60-54.80
Free float57%
Primary exchangeOslo
Other exchangesN/A
SectorHealthcare
Company CodeBGBIO
Corporate clientYes

Company description

BerGenBio is a clinical-stage, biopharmaceutical company based in Bergen, Norway and Oxford, UK. It is developing innovative therapies for aggressive cancers by way of inhibiting the Axl signalling pathway. The lead oncology compound, bemcentinib, is in multiple Phase II trials.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Valuation and financials

We have revised our valuation to take into account the company’s progress in clinical trials. We have increased our valuation of BerGenBio by NOK1.56 to NOK54.21/share, as detailed in Exhibit 1. The main changes to our model are the removal of TNBC, and increases in the probability of success from 20% to 30% for both NSCLC with pembrolizumab and with docetaxel, due to the promising data that has been presented since the ASCO meeting in June 2018.

Exhibit 1: rNPV-based valuation of BerGenBio
Source: Trinity Delta

We still consider it reasonable to include bemcentinib’s broader potential as an immuno-oncology therapy, given the promising data to data in NSCLC. However, we note that BerGenBio’s shares are currently trading at a discount of 29.3% to our core valuation, which also places no value on the antibody BGB149.

Additional data from the current clinical trials will be presented over the next six months at various conferences, which will probably include ASH on 1 to 4 December, AACR on 29 March to 3 April, and ASCO on 31 May to 4 June. The new data could act as share price catalysts. The most eagerly awaited results will be the overall survival data from the first stage of the Phase II study in NSCLC with pembrolizumab and the results from the trial’s second stage, which will hopefully confirm the findings from the first stage. These data should be reported in Q219.

We have also amended our estimates as summarised in Exhibit 2. The changes reflect the company’s tight cost control and the lower R&D spending due to the termination of the TNBC study in the short-term. We then anticipate that R&D investment will increase significantly from H219 as BerGenBio rolls out its randomised Phase II programme. We will refine our estimates for FY19 and beyond, once BerGenBio has announced the development programme for the randomised Phase II studies.

Exhibit 2: Summary of changes to estimates
Source: Trinity Delta
Exhibit 3: Summary of financials
Source: Company, Trinity Delta

Disclaimer

Trinity Delta Research Limited (“TDRL”; firm reference number: 725161), which trades as Trinity Delta, is an appointed representative of Equity Development Limited (“ED”). The contents of this report, which has been prepared by and is the sole responsibility of TDRL, have been reviewed, but not independently verified, by ED which is authorised and regulated by the FCA, and whose reference number is 185325.

ED is acting for TDRL and not for any other person and will not be responsible for providing the protections provided to clients of TDRL nor for advising any other person in connection with the contents of this report and, except to the extent required by applicable law, including the rules of the FCA, owes no duty of care to any other such person. No reliance may be placed on ED for advice or recommendations with respect to the contents of this report and, to the extent it may do so under applicable law, ED makes no representation or warranty to the persons reading this report with regards to the information contained in it.

In the preparation of this report TDRL has used publically available sources and taken reasonable efforts to ensure that the facts stated herein are clear, fair and not misleading, but make no guarantee or warranty as to the accuracy or completeness of the information or opinions contained herein, nor to provide updates should fresh information become available or opinions change.

Any person who is not a relevant person under section of Section 21(2) of the Financial Services & Markets Act 2000 of the United Kingdom should not act or rely on this document or any of its contents. Research on its client companies produced by TDRL is normally commissioned and paid for by those companies themselves (‘issuer financed research’) and as such is not deemed to be independent, as defined by the FCA, but is ‘objective’ in that the authors are stating their own opinions. The report should be considered a marketing communication for purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. TDRL does not hold any positions in any of the companies mentioned in the report, although directors, employees or consultants of TDRL may hold positions in the companies mentioned. TDRL does impose restrictions on personal dealings. TDRL might also provide services to companies mentioned or solicit business from them.

This report is being provided to relevant persons to provide background information about the subject matter of the note. This document does not constitute, nor form part of, and should not be construed as, any offer for sale or purchase of (or solicitation of, or invitation to make any offer to buy or sell) any Securities (which may rise and fall in value). Nor shall it, or any part of it, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. The information that we provide is not intended to be, and should not in any manner whatsoever be, construed as personalised advice. Self-certification by investors can be completed free of charge at