Astex Pharmaceuticals: Progress of SGI-110 Is Now Driving Share Value

Astex (ASTX) has expanded its Phase II trial of SGI-110 to 200 patients, by adding a new cohort of relapsed/refractory (r/r) myelodysplastic syndromes (MDS) patients to the existing front-line acute myeloid leukemia (AML), MDS and r/r AML groups. Enrolment in the study is now over half complete and data from the r/r AML cohort should be available for presentation at the American Society of Hematology (ASH) meeting in December. We have reviewed our valuation in the light of separately reported preclinical data on SGI-110 in ovarian cancer, and now value Astex at $678m (including cash), equivalent to $7.25 per share basic or $6.24 per share (fully diluted).


Progress of SGI-110 is now driving share value
SGI-110, Astex’s second-generation hypomethylating agent (HMA), is receiving renewed investor interest because of its proven mechanism of action and potential advantages over first-generation HMAs. Astex expects to determine its registration strategy for the product on completion of the ongoing Phase II trial in MDS/AML. Assuming a Phase III start in a haematological indication in 2014, SGI-110 could reach the market by 2016. With the global HMA market exceeding $1bn per year, SGI-110 could generate a significant revenue stream for Astex.

Data on SGI-110 in ovarian cancer boosts valuation
Despite an early clinical study being underway, ovarian cancer had previously not been included as supportive data had been generated with Dacogen, rather than SGI-110, albeit showing an impressive overall response rate (ORR) (35%) in platinum-resistant or -refractory patients. The recent publication of data from preclinical studies of SGI-110 in ovarian cancer now justifies adding this indication in our valuation model. SGI-110 is in a Phase I/II trial in a group that could produce proof-of-concept data in 2014. It is also in an exploratory Phase I/II trial in hepatocellular carcinoma and this indication is not yet included in our valuation.

Valuation: Upside remains
The addition of a contribution for SGI-110 in ovarian cancer adds $80m to our valuation, which rises to $678m (including cash), equivalent to $7.25 per share basic or $6.24 per share (fully diluted). We contend that our approach remains conservative, principally valuing only Dacogen, SGI-110 (in haematology and ovarian cancer) and AT13387 (in ALK+ NSCLC), with a modest contribution from Astex’s partnered compounds. We see significant potential value increases as SGI-110 and AT13387 advance into later stages of development in the next 12 to 18 months.

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