Accelerated development
We raise our Abzena PLC (LONDON:ABZA) valuation to £105m (108p/share) following partner Gilead’s plans to accelerate the development of antibody GS-5745, with Phase III (gastric cancer) and Phase II/III (ulcerative colitis) studies to start in H215. Eight antibodies are currently in clinical development using Abzena’s technology, and more are expected to enter the clinic in the next 12-24 months. Abzena could receive small royalties on these products (and others such as antibody-drug conjugates, ADCs), which offer the prospect of substantial future revenues.
Gilead leapfrogs GS-5745 from Phase I to Phase III
In its Q115 conference call, Gilead Sciences Inc (NASDAQ:GILD) announced plans to advance GS-5745, its anti-MMP9 antibody, directly from Phase I to Phase III development in gastric cancer (to start Q315), in addition to initiating a Phase II/III trial in ulcerative colitis (to start H215). We have increased the probability of success for this asset to 50% (from 35%), and brought forward the potential launch to 2019 (vs 2022). These are primary drivers behind our raised valuation. GS-5745 also recently entered a 175-patient Phase II study in Crohn’s disease, and further Phase I trials are ongoing in COPD, rheumatoid arthritis and pancreatic cancer, highlighting its broad potential.
Technology licenses the key to long-term value
GS-5745 is one of eight antibodies currently in clinical development created using Abzena’s Composite Human Antibody technology (Gilead’s simtuzumab in multiple Phase II trials is another notable partnered candidate). Abzena has also revealed that Annexon Biosciences’ pre-clinical antibody ANX005 for Huntington’s disease was also developed using its technology. Commercialisation of these products could lead to significant long-term revenues from small % royalties on sales.
A solid year in FY15
Abzena’s FY15 results highlighted solid progress on multiple fronts; 129 service projects were completed for >80 customers, while eight new agreements were signed that could lead to milestones/royalties in the future. Total group revenues of £5.7m were boosted by a strong H215 result (£3.2m vs £2.4m in H115) with two-thirds generated from repeat customers. Cash at 31 March 2015 was £15.8m.
Valuation: Raised to £105m or 108p per share
Our fair value for Abzena has increased to £105m (from £97m) or 108p/share (vs 100p), primarily due to the accelerated timelines for Gilead’s GS-5745 and higher probability of success. The potential to receive substantial revenues on royalties from licensed antibody/ADCs remains key to the long-term investment case.
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