Trinity Delta Equity Research & Stock Reports

BerGenBio’s bemcentinib already has broad commercial potential in various cancer settings, and now new preclinical data shows that this compound (or the Axl monoclonal antibody BGB149) could be used to treat fibrosis. There are limited treatments available in this therapeutic field, and the data suggests that inhibiting Axl could reduce fibrosis. BerGenBio is yet to announce any development plans in fibrosis. The company has recently raised NOK187m ($24m) in a private placement and is now well positioned to start such a programme. We raise our valuation to NOK2,880m (NOK52.65/share), which, in line with our conservative approach, excludes the potential of bemcentinib/ BGB149 in fibrosis.

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Karolinska Development

The strategic shift in investment strategy implemented since 2014 appears to be bearing fruit. The greater emphasis on commercial considerations means Karolinska Development is now focussed on nine active investments in mid- and late-stage opportunities. A number of major value inflection points, across several of the portfolio companies, are expected over the next 12-18 months. The convertible debt remains an issue, as does the complexity of the Rosetta Capital share-out. However, our DCF valuation based on the five primary investments suggests a value of SEK1,055m, SEK16.65 per share, with other portfolio assets and earn-outs representing further possible upside.

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BerGenBio is making excellent progress towards achieving its ambitious goals. All six Phase II trials with bemcentinib (BGB324) are on track to report data in 2018, with results from most of them expected at the ASCO meeting in June. The first efficacy data with bemcentinib in immuno-oncology settings should be reported there, from the three Phase II studies in combination with Merck’s pembrolizumab. BerGenBio continues to control its costs carefully and is funded to operate into FY19. Our valuation is maintained at NOK50.46/share.

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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.

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MaxCyte

MaxCyte has filed its first IND with the FDA. This paves the way for a Phase I trial with MCY-M11 (anti-mesothelin CARMA) in peritoneal cancers to start in 2018. The company is also expanding its CARMA programme to target a range of solid and haematological tumours. Revenues in FY17 rose by c 14% to c $14.0m, and the number of cell therapy programmes using MaxCyte’s technology has risen by c 15 to over 50. Despite the good progress, we are reducing our valuation by £12m to £166m, or 327p/share as the level of sales growth in FY17 was weaker than we had forecast.

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The potential of Axl as an oncology target is now widely accepted and BerGenBio’s BGB324 is a first-in-class selective oral Axl inhibitor in clinical development. Data shows that BGB324 can reduce resistance to targeted and chemotherapies. However, it is now recognised that BGB324’s greatest prospects could be as an immuno-oncology agent that acts both on tumour and immune cells. There are currently six Phase II studies ongoing, with three in immuno-oncology settings, and regular data read-outs are due over the coming year. We value BerGenBio at NOK1,564m ($184m), or NOK31.34/share.

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