BerGenBio has presented encouraging initial clinical data of bemcentinib (BGB324) as an immuno-oncology agent at the ASCO-SITC Immuno-Oncology Symposium. Bemcentinib (first-in-class specific oral Axl inhibitor) was well tolerated in combination with Merck’s pembrolizumab (Keytruda) in patients treated to date from three different Phase II trials. Also, there is clinical evidence that bemcentinib enhances immune activity. Our base case valuation is unchanged at NOK31.34/share, but increases to NOK50.46/share when we take into account the broader potential of bemcentinib in immuno-oncology.
| Year-end: December 31 | 2015 | 2016 | 2017E | 2018E |
| Sales (NOKm) | 0.0 | 0.0 | 0.0 | 0.0 |
| Adj. PBT (NOKm) | (72.1) | (129.8) | (194.1) | (238.8) |
| Net Income (NOKm) | (72.1) | (129.8) | (194.1) | (238.8) |
| Adj. EPS (NOK) | (296.3) | (419.7) | (4.3) | (4.8) |
| Cash (NOKm) | 74.0 | 161.8 | 348.6 | 114.3 |
| EBITDA (NOKm) | (72.7) | (131.4) | (194.2) | (237.9) |
Update
31 January 2018
| Price (NOK) | 39.40 |
| Market Cap (NOKm) | 1,967 |
| Enterprise Value (NOKm) | 1,568 |
| Shares in issue | 49.9m |
| 12-month range (NOK) | 18.60-44.40 |
| Free float | 57% |
| Primary exchange | Oslo |
| Other exchanges | N/A |
| Sector | Healthcare |
| Company Code | BGBIO |
| Corporate client | Yes |
Company description
BerGenBio is a clinical-stage, drug development company based in Bergen, Norway and Oxford, UK. It is developing innovative anti-cancer therapies that act on the promising Axl signalling pathway. The lead oncology compound, BGB324, is in a number of Phase II trials.
Analysts
Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042
Franc Gregori
fgregori@trinitydelta.org
+44 (0) 20 3637 5041
BerGenBio’s bemcentinib (BGB324) has an exceptionally broad potential in oncology, as shown by the breadth of the Phase II programme (Exhibit 1). This is due to the fact that it is a first-in-class specific, oral inhibitor of the Axl receptor, which plays a key role in the formation of aggressive cancers (discussed in detail in our Initiation note of 4 January 2018).
The potential is particularly sizeable in immuno-oncology, given the effects of Axl signalling within tumours and on immune cells. Within a tumour, Axl signalling has been shown to enable tumour cells to both resist immune cell mediated killing and to support an immune-suppressive tumour micro-environment. Axl inhibition not only reverses these effects, but also increases the anti-tumour activity of many immune cells, including cytotoxic T-cells.
At the same time oncology care is being transformed by immuno-oncology therapies. This is especially the case with the checkpoint inhibitors targeting PD-1/PD-L1 (such as Merck’s pembrolizumab/Keytruda), which are becoming a core component of treatment regimens in many oncology indications.
Consequently, it is likely that the immuno-oncology development programme for bemcentinib will be expanded if there are promising results from the current studies in non-small cell lung cancer (adenocarcinomas), triple negative breast cancer, and melanoma. Hence, we believe it is prudent to assess the value of bemcentinib in immuno-oncology beyond these three indications, and to do so we assess the value of the indications in which pembrolizumab is currently approved.
Our core valuation of BerGenBio remains NOK1,564m ($184m, NOK31.34/share), but increases to NOK2,519m ($296m, NOK50.46/share) after recognising the value of bemcentinib in the wider immuno-oncology field. Details of our valuation are shown in Exhibit 2.
Although we are now recognising the broader value of bemcentinib in immuno-oncology, we have still not valued bemcentinib’s wider potential in combination with chemotherapy or targeted-therapy regimens. This could be considered as additional upside to our valuation, together with its preclinical pipeline.
There are no changes to our estimates.
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