Topotarget Restructuring Could Lead To Substantial Milestones

Data from the BELIEF study on Topotarget’s (TOPO.CO) key asset belinostat due in Q412 could transform the company’s prospects. Positive data could lead to substantial milestones being received in H213 from its partner Spectrum Pharmaceuticals, belinostat being launched in the US in 2014 and the product potentially being partnered in Europe and Asia Pacific. Recent data from a Phase II study in cancer of unknown primary (CUP) was mixed, but still indicated that belinostat has anti-tumour activity. We value Topotarget at DKK909m and the BELIEF data could lead to a re-rating of the shares.

Pivotal BELIEF data due in Q412
Topotarget expects to report data from the pivotal BELIEF study in peripheral T-cell lymphoma (PTCL) in Q412. This could result in Topotarget receiving a c $10m milestone and 1m Spectrum shares in H213 and the US launch of belinostat in 2014. There is a delay to the expected filing of belinostat by Spectrum, which seems to have been caused by Spectrum’s acquisition of Allos Therapeutics rather than the progress of the BELIEF trial.

Phase II CUP data mixed but still shows promise
The Phase II trial in CUP failed to show that belinostat in combination with carboplatin and paclitaxel increased progression free survival, but clinical activity was indicated by a doubling of overall response rate (statistically significant) and a trend towards improved overall survival. There were only 89 patients in the trial and CUP is very heterogeneous. In total, the data indicates that belinostat has activity in solid tumours.

Strategic review to assess all options for Topotarget
Topotarget has asked ABG Sundal Collier, the Nordic investment bank, to conduct a strategic review to assess licensing and M&A options. The results will be presented in Q412. The decision by the board to conduct the review led to the resignation of Francois Martelet as CEO and the promotion of Anders Vadsholt from CFO. The resignation of CMDO, Axel Mescheder, is unrelated and due to personal reasons.

Valuation: DCF valuation of DKK909m
We have reduced our valuation by DKK111m to DKK909m, because of the mixed data from the Phase II CUP data. However, the current market cap is DKK142m and the shares could undergo a major re-rating in Q412 if data from the BELIEF trial are positive. The company has sufficient capital to operate into 2014, by which time it might have received the substantial milestone payments from Spectrum.

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