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The cancer burden is growing globally. Each year >18 million people are diagnosed, nearly 10 million die and the estimated economic cost exceeds $1 trillion. From early diagnosis to late-stage disease, cancer care often involves inappropriate or unnecessary interventions that drive costs but provide limited clinical benefit. Coupled with an increased understanding of cancer biology and rapid technological advances, this has been driving momentum for precision medicine, leading to patient and societal benefits. The use of biomarkers and sophisticated diagnostics is facilitating early intervention through robot-enabled minimally invasive surgery and locally delivered radiotherapy. Immuno-oncology has revolutionised cancer care, with the focus now on identifying combinations that further improve long-term outcomes. Liquid biopsies and companion diagnostics are increasingly being used to personalise therapy.
VSC 0Q15 0QCV 0HL9 0HAV 0RIH 0R0T AZN BCART BMYS CVRS EJXB EXK GSK 0J8Z IPH 0R29 IBAB 0R34 0O8G 0Y6X MRCK 0K3W NSTGQ 0QLR 0KCC 0Q1N 0GRZ RHO5 SANO SGEN 0R0H TRXC 0OCQ 0LNU 12V VNRX XE9 0QXH IMM 0RLT MDG2
4SC has reported progress with both its clinical-stage assets – resminostat, a broad spectrum HDAC inhibitor, and domatinostat, a specific Class 1 HDAC inhibitor. In January 2019, the investigator-led Phase II EMERGE study was initiated, which is testing domatinostat in gastrointestinal cancer. 4SC has developed a broad development programme for this drug, which will include several strategic options to commercialize the asset including out-licensing based on data from multiple Phase II studies and internal pivotal development for Merkel cell carcinoma. In January 2019, the resminostat RESMAIN study received a second positive DSMB safety review and the top-line results are expected in H120. 4SC remains well funded with cash of €30.8m at end-Q318, which should fund operations into 2020. Our valuation is virtually unchanged at €328m or €10.7/share.
4SC AG
We have recently carried out a review of our Corporate Sponsored Research Coverage. Following this review we have decided to terminate 4SC AG's formal agreement and to discontinue research coverage of 4SC AG with immediate effect.
During the Q218 results call, 4SC management announced that with current funds, it plans to initiate some of its additional domatinostat trials including the pivotal Merkel-cell carcinoma (MCC) study and a Phase II skin cancer checkpoint combination study. 4SC will provide further detail in H218. The SENSITIZE study (Phase Ib/II, melanoma) is on track in Europe (data H119), while a new IND will allow expansion of the study into the US in 2019. The EMERGE study (Phase II, GI cancers) is now expected to initiate in Q318 (previously H118). The multiple domatinostat studies in H218/H119 will provide several R&D catalysts while investors wait for pivotal RESMAIN study data. Enrolment for the RESMAIN study (CTCL) continues in Europe and Japan (100/150 patients by end-2018), and top-line data are now expected in H219 (previously H119). Due to this modest delay, we now forecast resminostat launch in 2021 (previously 2020), and therefore slightly lower our valuation to €327m or €10.7/share (vs €11.4/share).
4SC's H1/2018A report published today indicates that the company remains on track, but is fundamentally undervalued. As detailed in our note of the 16th July, financed into 2020E, the company's current valuation is largely justified by its pivotal stage resminostat ("RESMAIN") programme. It takes little or no account of the potential value of the domatinostat currently in Phase II in combination with the immune checkpoint inhibitor ("ICI") pembrolizumab for melanoma. First interim data from the domatinostat ("SENSITIZE") trial due in H1 should provide a substantial catalyst for the stock now trading at less than half of its early 2018 peak. Preclinical studies and positive data from sub-optimally dosed drugs of the same class support a synergy between immune checkpoint inhibitors ("ICI") and domatinostat. We maintain and reiterate both our OUTPERFORM recommendation and TP of €10.
With the share price down over half from it's early 2018 peak, 4SC's valuation looks justified on the basis of it pivotal resminostat programme alone. The market ascribes little value to the immunotherapy combination programme with dominatostat now in Phase II. Although sentiment toward immuotherapy has deteriorated in the wake of the negative Incyte-Merck epacadostat ("IDO-1") data, we contend the dominatostatpembrolizumab ("pembro") immunotherapy combo still holds promise. Preclinical studies and data from sub-optimally dosed drugs of the same class support a synergy between immune checkpoint inhibitors ("ICI") and dominatostat. Interim data expected from the dominatostat-pembro phase II ("SENSITIZE") melanoma study in H2/2018E could provide a substantial catalyst for the stock. We reiterate our OUTPERFORM recommendation and our target price of €10.
Yakult, 4SC’s development partner for resminostat in Japan, has reached two clinical development milestones. First, just two weeks after it joined 4SC’s pivotal RESMAIN study (n=150) in CTCL, the company recruited the first patient in Japan. Top-line results from the RESMAIN trial are expected in mid-2019. In addition, Yakult initiated its own Phase II study in biliary tract cancer (n=100) in combination with S-1 chemotherapy. S-1 is widely used in Japan and other Asian countries to treat patients following relapse after a 1st line chemotherapy regimen. The final data readout is expected in mid-2020. Meanwhile, at the AACR Annual Meeting in April, 4SC presented new preclinical data supporting the use of its second lead product, 4SC-202 in combination with various immunotherapy agents. Our valuation is virtually unchanged at €348 or €11.4/share.
4SC's Japanese partner Yakult Honsha's (Yakult) decision to join the RESMAIN study looks a significant endorsement of the resminostat programme. While CTCL (Cutaneous T-Cell Lymphoma) is probably not itself a substantial opportunity in Japan, with Yakult's prime focus on the more Asian-prevalent biliary cancer, it clearly demonstrates commitment from a partner that already knows the product well. Outside Japan, prospects for 4SC also look bright. Its clinical programmes appear to be progressing well. Strong news flow, including the first read out from its proof-ofconcept phase II for 4SC-202 in H2/2018E, should maintain momentum for the stock over the next 6 months and beyond. Adding in the potential upside from Yakult in Japan and the expected news flow, we reiterate our OUTPERFORM recommendation and increase our target price to €10 (from €7.50).
Together with its Q417 results announced last week, 4SC also reported progress with its R&D activities. All three lead assets – resminostat, 4SC-202 and 4SC-208 – remain on course to be developed for specialty dermato-oncological indications. New details include an update on the 4SC-202 development plan and the news that 4SC’s Japanese partner, Yakult Honsha, joined 4SC’s pivotal resminostat study and will enrol patients in Japan. Our valuation is largely unchanged at €349m or €11.4/share (€11.3/share previously).
Over the past several months 4SC has reported progress with both its clinical-stage assets – resminostat and 4SC-202. The pivotal trial with resminostat as a maintenance therapy in advanced CTCL passed the first DSMB review and is on track to report data in H119. The Phase Ib/II study with 4SC-202 for melanoma has been initiated, while another Phase II study with 4SC-202 for GI cancer should start in Q118. 4SC-208 completes the core portfolio and is expected to enter the clinic in early 2019. Our valuation is largely unchanged at €347m or €11.3/share (€344m previously).
4SC announced today that the scheduled Data Safety Monitoring Board ("DSMB") had identified no safety concerns with the on-going RESMAIN pivotal trial Cutaneous TCell Lymphoma ("CTCL") and recommended the study should continue as planned. With top-line data from RESMAIN for resminostat and first interim data from SENSITIZE for 4SC-202 in melanoma expected in H1/2019 and H2/2018 respectively, there is plenty to drive value over the next 6-18 months. We reiterate our OUTPERFORM recommendation and a fair value of €7.50 / share potentially rising to over €10 / share with expected news flow from the pipeline as well as non-core assets over the next 6 to 12 months.
With a pipeline based on sound proof-of-principle, 4SC is building an independent strategy focussed on orphan drugs with best-in-class blockbusters exploited through major partners. The company's lead product resminostat is in a pivotal trial as a much needed maintenance therapy in the orphan CTCL (Cutaneous T-Cell Lymphoma). Class I HDACi (Histone Deacetylase inhibitors) are showing real promise in combination with the new wave of immuno-therapeutics. Entering phase II in combination with an approved checkpoint inhibitor in melanoma, the safety and efficacy of the Class I HDACi 4SC-202 provide the hallmarks of a best-in-class blockbuster as well as providing a snug fit into the company's orphan strategy. We initiate with an OUTPERFORM recommendation and a fair value of €7.50 / share potentially rising to over €10 / share with expected newsflow from the pipeline as well as non-core assets over the next 6 to 12 months.
4SC’s new core strategy revealed earlier this year has focused on dermato-oncological indications, while its assets for other indications are partnered. The sharp focus will allow 4SC to become an expert in the field and to accumulate commercial know-how, as the company intends to market the core assets (resminostat, 4SC-202 and 4SC-208) in orphan indications on its own. A successful fund-raise in July means that the company now has sufficient funds until 2020 and past several important R&D events. We have overhauled our model to reflect 4SC’s new strategy and our new valuation is €344m or €11.2/share.
4SC has announced an updated development programme, to be funded by an equity fund-raising, which we expect in 2017. The proceeds from this will be used to accelerate development of 4SC’s leading drug candidates. This will include continuing to progress resminostat in CTCL (initiated at end 2016), a subsequent filing of a marketing authorisation application in Europe (2019) and progression of resminostat into a further pivotal study in HCC (2018). 4SC also expects a pivotal study in 4SC-202 in Merkel cell carcinoma (2018) and the progression of 4SC-208 into clinical evaluation (early 2019). Our forecasts and valuation are under review. We believe that if 4SC executes the proposed plans it could be a significant and positive step.
2016 was an important year for 4SC as it launched its potentially pivotal Phase II study with resminostat, an epigenetic cancer drug, in CTCL. In addition, it announced positive subgroup analysis of a Phase II study in HCC with its partner Yakult. It is streamlining its focus on three core assets: resminostat, 4SC-202 (initiating Phase II trials in 2017) and 4SC-208 (initiating preclinical development). We have slightly increased our rNPV to €124m, but note that we forecast a cash horizon to end 2017/early 2018.
4SC has announced the enrolment of the first patient in its RESMAIN study. This is a pivotal study to evaluate resminostat (RES), an epigenetic cancer drug for maintenance treatment (MAIN) in patients with advanced-stage cutaneous T-cell lymphoma (CTCL). We expect early data to be reported in 2019. We increase our rNPV to €120m from €117m as we have raised the probability of the CTCL programme in Europe to 30% (from 20%) following the initiation of the trial.
4SC has announced positive Phase II results from a more detailed analysis of the HCC Yakult Phase II trial data, which we believe could lead to further clinical development. It has also recently announced the sale of its immunology portfolio (Vidofludimus and a cytokine inhibitor), which further streamlines the company’s focus further on its core business of epigenetics while retaining potential upside (via milestones and royalties). We increase our rNPV to €117m from €110m to reflect the increase in potential of resminostat development in Japan.
4SC has announced that its partner Yakult Honsha did not reach the primary endpoint in its Asian liver cancer trial with all-comer patients. As a result, it will not be progressing resminostat to a pivotal study. These results do not affect 4SC’s core focus on the launch of its pivotal EU Phase II resminostat study in CTCL and progression of its earlier pipeline. A positive partnership with Link Health (4SC-205) and data at ASCO (4SC-202) underline this. Removal of the Japan HCC contribution reduces our rNPV to €104m (vs €145m).
4SC’s Q1 results highlight an increased focus on its core business of epigenetic research and commercialisation, resulting from the sale of the operational assets (for €650k in proceeds) of its discovery and collaborative segment, 4SC Discovery. 2016 is an important year for 4SC with expected newsflow from its clinical pipeline including the launch of its potentially pivotal EU Phase II study with resminostat in Cutaneous T-cell lymphoma (CTCL) and expected Phase II Japanese trial data in HCC and NSCLC (from partner Yakult).
2016 is an important year for 4SC as it will launch its potentially pivotal Phase II study with resminostat, an epigenetic cancer drug, in CTCL. In addition, we expect partner Yakult to report Phase II Japanese trial data in HCC and NSCLC. Alongside its primary focus on resminostat for CTCL, 4SC is actively pursuing partnerships for its earlier stage assets, 4SC-202 and 4SC-205, which would enable both candidates to move into Phase II. We maintain our rNPV at €143m, with near-term potential catalysts.
The 4SC oncology strategy is primarily driven by epigenetics, a distinct and effective mechanism against many cancers. A potentially pivotal Phase II study with resminostat, an epigenetic cancer drug, in CTCL is due to start in H116, while partner Yakult should reveal Phase II Japanese trial data in HCC and NSCLC in 2016. Financings and/or collaborations may allow 4SC-202 and 4SC-205 to move into Phase II. We have made adjustments to our model to include a specific value for 4SC-202. Our rNPV rises slightly to €143m (€7.55 per share), with near-term potential upside on initiation of the Phase II CTCL study.
4SC’s recent €29m capital increase has provided vital funds to advance the epigenetic lead candidate resminostat. Focus is now on an EU Phase II trial in CTCL, rather than liver cancer (HCC). HCC would have been more costly and time-consuming compared with CTCL. Clinical data in 2016 in HCC and NSCLC from the Yakult collaboration will allow 4SC to revisit, with less risk, the prospects for resminostat in other cancers ex-Asia. Combination of resminostat with new immunotherapies is also being explored. Our valuation increases from €115m to €141m to reflect the cash increase and fresh development plans for resminostat in CTCL (EU).
