3rd December 2019
CORPORATE Coverage Initiated ABIVAX Fair Value EUR37.5
Share price EUR11.62
Bloomberg / Reuters ABVX FP/ABVX.PA Healthcare Biotech
Will ABX464 be partnered or Abivax acquired?
We expect Abivax to be one of the hottest topics in the biotech space in 2020. We consider there is a significant probability for the company to able to sign a landmark deal in the field of inflammation. Its lead asset ABX464 has demonstrated in phase IIA a very promising activity in ulcerative colitis (UC) which is its lead indication, together with a very good safety profile. This was true in both the induction and the maintenance phase and irrespectively of whether patients had been previously treated or not. If the trial was relatively small in size, the data is unequivocal and provides clear signs of efficacy with both a quick onset of action and, at first glance, a long duration of action too which is key to this type of chronic diseases. The drug has now embarked into a phase IIB trial and first results are expected at the very end of 2020. Now, in the field of inflammation, few drugs work in only one indication and ABX464 is already investigated in two other ones with phase II trials just starting or about to start in rheumatoid arthritis (RA) and Crohn’s disease (CD). There is a bit more work to do here but the rationale to see ABX464 working is quite high although lower PoS are deserved. Time has come for Abivax to consider extracting value from ABX464 either by partnering it to a large pharmaceutical company that will leverage its potential in all possible markets or by selling the whole company since ABX464 represents most of it. Most because a first-in-class candidate in oncology has started the first part of a phase I/II study, in combination with nivolumab in HCC. We have used a NPV approach by indication and UC alone offers a significant upside to the current valuation. But because ABX464 cannot be split in parts, it will be either partnered or sold to a third party that will recognized its value across its full range of potential indications. We believe there are multiple candidates. Our FV is EUR37.5 per Abivax share. We strongly recommend to buy the stock.
Eric Le Berrigaud |33(0) 1 56 68 75 33| [email protected]
Fiscal year end 31/12 2017 2018 2019e 2020e 2021e 2022e 2023e 2024e ABIVAX Financial Summary EPS (EUR) -1.15 -1.61 -2.14 0.46 1.60 1.45 -1.25 -0.86 Restated EPS (EUR) -1.15 -1.61 -2.14 0.46 1.60 1.45 -1.25 -0.86 CORPORATE Coverage Initiated % change - -39.5% -32.9% - 250.0% -9.2% -185.9% -31.0% Net dividend (EUR) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Average yearly Price 10.07 7.61 ------Fair Value EUR37.5 Avg. Number of shares, 9,726 9,829 11,808 11,808 11,808 11,808 11,808 11,808 dil t d ( ) Historical Entreprise value 81 73 ------Share price EUR11.62 (EUR )Valuation (x) EV/Sales - - NM 2.78x 2.59x 2.93x NM 26.59x Market Cap. EUR137m EV/EBITDA -5.8x -3.8x NM 8.27x 4.35x 4.52x NM NM EV/EBIT -5.7x -3.8x NM 8.30x 4.36x 4.54x NM NM P/E -8.7x -4.7x NM 25.69x 7.34x 8.09x NM NM EPS 3Y CAGR NM Net dividend yield (%) 0.0% 0.0% NM NM NM NM NM NM Profit & Loss Account Revenues 0 0 0 54 55 42 0 5 Change (%) - - - - 3.3% -23.4% -100.0% - R&D 6 11 22 25 13 5 5 5 Shareholder Structure Adjusted EBITDA -14 -19 -31 18 33 28 -15 -10 EBIT -14 -19 -31 18 33 27 -15 -10 Sofinnova Change (%) - -35.0% -64.8% - 83.4% -16.6% -154.6% -30.6% Board & 13% Financial results 0 0 -1 -1 0 0 0 0 Founders Pre-Tax profits -14 -20 -33 16 33 28 -15 -10 5% Truffle Tax 0 0 0 0 0 0 0 0 Incubator & Capital Net profit -11 -16 -25 5 19 17 -15 -10 Founders 46% Restated net profit -11 -16 -25 5 19 17 -15 -10 2% Change (%) - -41.0% -59.7% - 250.0% -9.2% -185.9% -31.0% Cash Flow Statement Operating cash flows -12 -17 -31 18 33 28 -15 -10 Change in working capital - 5 15 -49 -15 5 42 -5 Public Capex, net 0 0 0 0 0 0 0 0 34% Free Cash flow -20 -31 -57 24 52 45 -30 -20 Dividends 0 0 0 0 0 0 0 0 Capital increase 1 1 12 0 0 0 0 0 Net debt (+)/cash (-) -17 -2 10 11 5 -14 -31 -16 Balance Sheet (EURm) Tangible fixed assets 0 0 0 0 0 0 0 0 Intangibles assets 32 32 32 32 32 32 32 32 Cash & equivalents 2 8 12 11 17 36 53 38 Total assets 54 54 55 60 54 59 65 51 L & ST Debt 0 11 22 22 22 22 22 22 Provisions 0 0 0 0 0 0 0 0 Shareholders' funds 44 29 15 16 21 40 57 43 Total Liabilities 54 54 55 60 54 59 65 51
Source: Company Data; Bryan, Garnier & Co ests.
Eric Le Berrigaud 33(0) 1 56 68 75 33 [email protected] TEAM :
E. Le Berrigaud 33 (0) 1 56 68 75 33 [email protected]
J.J. Le Fur, PharmD 33 (0) 1 70 36 57 45 [email protected]
Olga Smolentseva, PhD +44 020 733 225 05| [email protected] +44(0)7 590 452 695
V. Floc’h 33 (0) 1 70 36 57 01 [email protected]
EXECUTIVE SUMMARY
It should not be taken negatively if we say that Abivax is mostly Il ne faudrait pas prendre négativement le fait de dire qu’Abivax about one single asset: ABX464. Unlike others, this drug dépend principalement d’un actif unique : ABX464 candidate is actually a pipeline in a drug, as it is often the case Contrairement à d’autres, celui-ci peut être considéré comme un when we talk about inflammation. When a drug works for a given pipe-line à lui seul, comme souvent s’agissant d’inflammation. inflammatory disease, it usually works in several others, making Quand un médicament fonctionne pour une maladie some anti-inflammatory medications widely used products which inflammatoire donnée, c’est généralement aussi le cas dans then fall into the list of the largest blockbusters by sales in the plusieurs autres, faisant de certains anti-inflammatoires les world together with antibodies for cancer. médicaments les plus vendus au monde aux côtés des anticorps utilisés en oncologie. ABX464 is a first-in-class molecule, derived from the Institut ABX464 est une molécule première de sa classe, issue de la Curie chemical library, which up-regulate the micro-RNA miR-124 librairie de petites molécules de l’Institut Curie¸ qui régule à la which is itself a key mediator for the cholinergic anti- hausse le micro-ARN miR-124, lui-même un médiateur clef du inflammatory process, involved in particular in the production of process anti-inflammatoire cholinergique, lequel est impliqué two well-known pro-inflammatory agents: IL-6 and TNF-alpha. notamment dans la production de deux agents pro- The lead indication is ulcerative colitis (UC) where ABX464 inflammatoires très connus : l’IL-6 et le TNF-alpha. recently achieved a phase IIA study, showing strong and L’indication dans laquelle ABX464 est le plus avancé est la colite promising efficacity in the induction and maintenance phase, in ulcéreuse où la phase IIA est achevée et a fait montre d’une treatment-naïve and refractory patients. The drug showed a forte et très prometteuse efficacité en phases d’induction quick onset of action and compared very well with existing comme de maintenance, chez des patients naïfs ou pré-traités. therapies on all parameters, while offering a convenient once- Le composé a montré une entrée en action rapide et s’est daily oral formulation and a very clean safety profile. The phase comparé favorablement aux thérapies existantes sur tous les IIB study with moderate-to-severe UC patients has now started paramètres mesurés, tout en offrant l’avantage d’une voie orale recruiting and first data is expected towards the end of 2020. quotidienne et une très bonne tolérance. La phase IIB dans la CU modérée à sévère vient de démarrer et les premiers résultats Rheumatoid arthritis (RA) and Crohn’s disease (CD) are following sont attendus fin 2020. closely with phase IIA trials just starting and about to start, respectively. La polyarthrite rhumatoïde et la maladie de Crohn suivent de peu avec des phases IIA qui démarrent ou démarreront In order to leverage such a big opportunity, Abivax now needs to prochainement. find a partner which will help design and finance the late-stage Afin de maximiser une telle opportunité, Abivax doit désormais development of ABX464 in all indications, which might go well trouver un partenaire qui l’aide à dessiner et à financer les beyond the ones mentioned and include MS or PH for instance. études de phase III dans toutes les indications déjà mentionnées Of course, this partner will have an even more instrumental role ou additionnelles comme la SEP ou la PAH par exemple. Bien sûr, when it comes to approach commercialization of the product in ce partenaire sera d’autant plus précieux à l’approche de la the different geographies. phase de commercialisation du produit sur l’ensemble des We do believe that the deals signed by Galapagos about géographies. filgotinib, first with Abbott and then with Gilead are very Nous pensons que les accords signés par Galapagos sur le representative of and inspiring about what can be expected with filgotinib, d’abord avec Abbott puis avec Gilead sont très ABX464. Such an agreement is therefore the central case going représentatifs et inspirants de ce qui pourrait être réalisé avec forward and the one that should drive the valuation of the asset ABX464. Un tel accord est dès lors notre scénario central et celui but also of the company. We have made various assumptions that qui doit servir à estimer la valeur de cet actif mais aussi de are presented in details in this report in terms of market shares, l’ensemble de la société. Nous avons fait différentes hypothèses prices but also milestones and royalties. We have assumed présentées en détails dans cette note en termes de parts de different PoS across the range of indications and a WACC of 15% marché, de prix mais aussi de paiements d’étapes ou de and it results in a value of ABX464 of EUR440m (adjusted). royalties. Nous avons utilisé des PdS variables en fonction des Actually, even UC alone represents more than the current value indications et un CMPC de 15% et aboutissons à une valeur pour attributed to the whole Abivax. ABX464 de 440 MEUR (valeur ajustée). En fait, la CU seule représente plus qu’Abivax dans son entier aujourd’hui. We would not completely rule out the possibility to see Abivax acquired since ABX464 is a large part of the company and in this Nous n’excluons pas du tout la possibilité d’une vente globale de case, we would see CVRs as a good way to play with longer-term la société dans la mesure où ABX464 en représente une part triggers of value like phase III data for ABX464 in RA or first prépondérante de la valeur et auquel cas nous verrions dans efficacy data with ABX196 in HCC. l’utilisation de CVGs un moyen de jouer des leviers de valeur à plus long terme comme les résultats de phase III dans la PAR ou Therefore, we do consider that Abivax today represents a les premiers résultats de ABX196 dans le carcinome hépato- tremendous opportunity of investment in the field of biotech in cellulaire. France and in Europe. The discount is too heavy in our view, all En conclusion, nous considérons qu’Abivax représente une très the more that the catalysts which are able to crystalize the belle opportunité d’investissement dans la biotech française et value are on a short-term agenda, including very significant ones européenne. Le titre est trop fortement décoté selon nous, in 2020. As a consequence, with a FV of EUR37.5, we recommend d’autant que les catalyseurs de valeur sont à court terme, to buy Abivax. notamment en 2020. Par conséquent, avec une FV de 37.5 EUR, nous recommandons d’acheter Abivax.
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Contents
EXECUTIVE SUMMARY 3 PART 1: A VERY ATTRACTIVE TARGET MARKET 5 SoC in IBD can certainly be improved further 5 – The IBD concept actually covers two distinct diseases 5 – Targeting inflammation in IBD 6 IBD: a market of over USD15bn in annual sales, led by US companies 8 – IBD is already a very sizeable target market 8 – A market of big players 9 ABX464, a very competitive profile for IBD 11 – A long history, a ubiquitous target 11 HIV: interesting at least as a safety database 13 UC: the leading indication 14 – A strong rationale from PC studies 14 – Phase II results are highly confirmatory 15 – How do the results compare to existing treatments? 18 – At least two other serious challengers are moving ahead of ABX464 in UC 21 Beyond UC, CD and RA are also indications to consider for ABX464 22 – RA comes second in the programme since recruitment in IIa has already started 23 – Crohn’s disease usually goes with UC but is third in the queue 25 PART 2: ABX196, A TARGETED COMPANION AGENT IN ONCOLOGY 26 The mechanism of action is supportive of a close look 26 ABX196 is a candidate for an out-licensing deal 29 PART 3: MAXIMIZING THE VALUE 30 All options are on the table 30 – What Galapagos did is strongly inspiring 30 – Can Abivax be acquired to get access to ABX464? 32 Two central scenarios offering a range of valuations 34 – A multi-step partnership looks like the preferred route 34 – A FV of EUR37.5 per share 39
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Part 1: A very attractive target market SoC in IBD can certainly be improved further THE IBD CONCEPT ACTUALLY COVERS TWO DISTINCT DISEASES If we summarize to the extreme what Abivax is about then we could say that it is first and foremost a company that has its most advanced asset with strong phase II data in hand for IBD. And so the very first question we would like to address here is what IBD actually covers. Referring to the definition given by the Mayo Clinic, IBD (which stands for Inflammatory Bowel Disease) is “an umbrella term used to describe disorders that involve chronic inflammation” of the digestive tract. IBD can be divided into two different diseases that share similarities but also have specific features: ulcerative colitis (UC) on the one hand, and Crohn’s disease (CD) on the other hand.
The main difference between the two diseases - which are otherwise very similar in terms of symptoms and manifestations, including diarrhoea, abdominal pain and cramping, fatigue or unintended weight loss, and the populations affected (sex, age etc. …) - is the precise location of the inflammation.
Ulcerative colitis Ulcerative colitis is limited to the colon, affecting the innermost lining (the mucosa) and causing and Crohn’s continuous inflammation, while Crohn’s disease can occur anywhere between the mouth and the disease together anus, presents healthy parts of the intestine mixed with inflamed areas and affects all layers of form IBD the bowel walls (see also Fig.1). It is also estimated that about 10% of patients have both UC and CD, which is then reported as indeterminate colitis (IC).
Fig. 1: Differences between UC and CD in a simple chart
Source: Crohn’s & Colitis Foundation
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Because the symptoms are quite clear and although the patient does not always consult early on before the disease develops and becomes painful on a daily basis, once other causes for signs and symptoms are ruled out then the IBD diagnosis is relatively simple and straightforward. It usually starts with blood tests to check for infection and may include some fecal occult blood test but the ultimate procedure is endoscopy and/or colonoscopy and if symptoms are severe, an imaging procedure (X-ray, MRI or CT-scan) to check for potential ulcer or perforation.
Once the diagnosis is established, then comes the time of treating the symptoms and preventing complications and progression towards more severe stages. If the disease is not too advanced yet, diet and lifestyle changes can have some impact although they are usually combined with some kind of drug therapy, which mainly depends on the manifestations and symptoms of the disease. Of course, considering the nature of the condition, anti-diarrheal medications and pain relievers are frequently used, as well as antibiotics when infection is a concern. But this does not address the underlying course of the disease which, as a reminder, is chronic inflammation. Here anti-inflammatory drugs and immuno-suppressants come into play that are more or less specific to IBD.
Before we look in-depth at drugs targeting inflammation, it is worth mentioning that once they are no longer effective or when the disease is already at an overly advanced stage, surgery can be the ultimate option for the patient. The outcomes are different for UC and CD: for the first, surgery usually means removing the colon and the rectum (a proctocolectomy) and although this is extremely disabling afterwards, it can be curative whereas in CD, damaged sections of the digestive tract are removed and then healthy parts reconnected, although this is mostly a temporary solution before the disease progresses again. Like in oncology, adjuvant therapy is commonly used with anti-inflammatory drugs which aim to reduce the risk of recurrence after surgery.
TARGETING INFLAMMATION IN IBD We present the landscape of therapeutic options in three parts before focusing on one of them that is steadily gaining share and has become standard.
The first class of drugs that can be used to treat IBD – often as a first step - comprises classic anti-inflammatory products like corticosteroids (prednisone, budesonide). Now, beyond the fact that not all patients respond equally well, steroids are not used long-term but rather short-term to address flare-ups and help patients go into remission. The third class of drugs, which is quite effective but also rather toxic and complex to manipulate (requirement of frequent liver and blood testing) is made up of immunosuppressants like those used to prevent graft rejection after organ transplant i.e. cyclosporine, azathioprine or methotrexate.
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The anti-TNFa Now, somewhere between the two classes are more targeted biologics that have taken the lion’s class was share of the market for most of the chronic inflammatory diseases in rheumatology, dermatology practice- and gastro-enterology. This started quite a long time ago actually since the first approval of anti- changing in the TNF dates back to 1998. early 2000s TNF blockade represents a fundamental advance in the management of IBD and the most recent guidelines from the American College of Gastroenterology (ACG) recommend the use of either adalimumab, golimumab or infliximab to induce remission in patients with moderate-to-severe UC but also for maintenance of the remission. In Crohn’s disease, once steroids (and sometimes also methotrexate) are no longer effective, it is recommended to use anti-TNFs infliximab, adalimumab or certolizumab pegol. So clearly the introduction of anti-TNFs has changed the course of IBD and these drugs have proven to be very efficacious in a sizeable subset of patients in healing the mucosa, reducing the need for surgery and hospitalisation rates. This led to a major shift in clinics from a symptomatic and transient remission towards a sustained and profound remission. Now, maintaining anti-TNF therapy in the long run does not come cheaply and therefore it can be observed in real life that de-escalation and discontinuation is common practice. However, discontinuation of anti-TNF therapy in UC and CD is clearly associated with an increase in relapse rates and therefore other therapies are urgently needed to keep working options over the course of the disease. Moreover, a significant amount of data has been cumulated to determine that about a third of patients with RA or UC would be non-responders with some gene-expression profiling currently under investigation to help predict who they are. Last but not least, some patients who initially respond may lose their ability to respond over time (Fig.2).
Fig. 2: Duration of remission remains limited despite treatment
Source: Roche, adapted from Amiot & Peyrin-Biroulet in Therap. Adv. GastroEnterol. 2015; 8(2):66-82
Because duration For all patients therefore, alternative treatments are warranted and some have already been of remission is developed and made available. In patients who have non-response or loss of response to an anti- low, new TNF therapy, and in whom there is an adequate serum level of anti-TNF, cycling within the class treatments are to another anti-TNF therapy is not likely to be of benefit. In these situations, swapping to a warranted different mechanism of inflammatory control may be preferred.
Two of these drugs have already become fairly popular and widely prescribed: firstly, the alpha4-beta7 integrin inhibitor vedolizumab in UC, recommended to induce and maintain
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remission, and also in the induction phase of CD, and secondly the IL12-IL23 targeting antibody ustekinumab which is recommended with a high level of evidence by the ACG both for the anti- TNF failers and the anti-TNF naïve patients.
As such the therapeutic arsenal has significantly increased in the recent past and has tremendously influenced the average outcome for patients with IBD. That said, like in all chronic diseases, IBD requires constant innovation to fill the gaps and target patients that are intolerant, non-responsive or relapse with existing therapies or simply to develop better drugs that might become new standards. IBD: a market of over USD15bn in annual sales, led by US companies IBD IS ALREADY A VERY SIZEABLE TARGET MARKET
Before we go into the data with ABX464, we have tried to estimate the market opportunity, which is huge even if we maintain it within the context of IBD. Indeed, IBD is not the whole story since RA is also considered at the very least. And by experience we know that when a drug in the inflammation space works, it usually does so in different indications so that it can become a kind of portfolio-in-a-drug. This was not only the case for anti-TNFs, but more recently also with JAK inhibitors and also the IL-targeting agents like Stelara, Cosentyx or Dupixent.
However, for this reason also, it is somewhat more difficult to assess what the size of the strict IBD market is and what it could be going forward since although splitting prescriptions by indication is achievable, doing it at the sales level proves more complex.
We found it interesting to compare the two sets of data below, reported in Fig.3 and Fig.4, since they suggest of a couple of things: (i) until very effective drugs become available, standards of care take time to change and the vast majority of people stay on well-known old drugs including in developed countries (even though Stelara and Entyvio are growing fast); (ii) the difference in prices is huge and therefore a limited market share in volume can already represent a big market in value.
It might be expected that more competition means lower prices, although this has not always been the case. But with newer options, we can also anticipate longer durations of treatment and so, overall, no drop in value for upcoming drugs in IBD.
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Fig. 3: Estimated current size of the IBD market
7% 1%3% 6%
18%
65%
Biologics Aminosalicylates Corticosteroids Antibiotics Immunomodulators Others Source: adapted from internet, Market Research Report dated June 2019
Fig. 4: Estimated populations in UC (left) and Crohn’s disease (right)
Source: Roche Pharma Day, September 2019
The IBD is worth Anyway, without making more or less aggressive assumptions about what might happen in the at least future, it is estimated that the IBD market was already worth USD15 to USD16bn in 2018, of USD15bn, which two-thirds came from biologics. Although anti-TNF biosimilars will mitigate growth in the growing at c.6% very near future, we expect the growth drivers Entyvio (launched in 2014) and Stelara (launched p.a. in 2016 in Crohn’s) to drive the IBD market up to new highs before newcomers add to the trend.
A MARKET OF BIG PLAYERS
As we think about how Abivax can monetise this opportunity, we can only stress that the competition is among big players and we just cannot see how Abivax can move forward without a partner that will provide the asset the greatest possible chances of success by investing heavily in ABX464 to reduce time to market while maximising the opportunity. Roche is an interesting example of this because the group has one of its key late-stage assets slightly ahead of Abivax i.e. starting phase III in UC and CD. At its Pharma Day back in September Roche presented its global phase III development programme which is made up of eight different studies evaluating more than 3,000 patients in total in the induction and maintenance phases, in TNF-naïve and TNF incomplete responders, against placebo or head-to-head vs Humira or Remicade (Fig.5).
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Fig. 5: Etrolizumab phase III development programme
Source: Roche Pharma Day, September 2019
In this field, it very much looks like size matters to have the largest and most comprehensive clinical programme to cover all potential uses as quickly as possible but also to leverage the opportunity from a commercial perspective in all relevant geographies. So, for Abivax one key question is how far is it reasonable to go alone to keep the value inside the company, and when keeping this value turns out to be detrimental to the drug candidate.
We believe that in a not so distant future Abivax will have to contemplate very seriously external opportunities that could range from a simple partnership of ABX464 (likely in all indications since it should prove difficult to split the asset in parts) to a pure sale of the company which, at the end of the day, is very dependent on this most advanced asset in its pipeline.
We will obviously discuss the data available further on in this report, but in UC at least, the results can be seen as best-in-class and therefore very likely to attract interest from various types of player in the industry.
Inflammation is a field where only “big guys” can play As shown below in Fig.6, the current players involved in the field of IBD are all multinational companies, most of which are US-based and for each, the corresponding drugs are among the most significant ones in the portfolio. This means that resources allocated are usually massive, especially since several of the products do actually cover three different fields and a wide prescriber base including GI specialists, dermatologists and rheumatologists, if not GPs. This also means that the pressure is huge when the drugs are approaching the end of their patent life to try to offset the impact, which is the case for anti-TNFs today or in the coming years but also for natalizumab in the near-term future.
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Fig. 6: Main players and products involved in IBD Molecule Brand name 2018 sales Company Market cap. Indications
Adalimumab Humira USD19,936m AbbVie USD113bn RA, PsO, CD, UC, PsA, AS, JiA, uveitis
Golimumab Simponi USD2,084m J&J USD339bn RA, PsA, AS, UC
Infliximab Remicade USD5,326m J&J USD339bn CD, UC, RA, PsA, AS, PsO
Certolizumab Cimzia USD1,708m UCB EUR14bn RA, PsO, CD, AS, PsA, nrAS
Vedolizumab Entyvio USD2,360m Takeda USD55.2bn UC, CD
Tofacitinib Xeljanz USD1,774m Pfizer USD203bn RA, UC, PsA
Natalizumab Tysabri USD1,864m Biogen USD52bn MS, CD
Ustekinumab Stelara USD5,156m J&J USD339bn PsO, PsA, CD, UC
Sources: from US prescribing information documents of each drug, annual reports ABX464, a very competitive profile for IBD A LONG HISTORY, A UBIQUITOUS TARGET ABX464 is a molecule derived from the Institut Curie chemical library (selected in 2002), developed by Abivax in collaboration with the CNRS and the University of Montpellier, under the leadership of Jamal Tazi, Professor of Functional Genomics at the University of Montpellier (IGMM) where he has led the team “messenger RNA metabolism in metazoans” for more than 20 years. In 2008, Truffle Capital founded Splicos in collaboration with Pr. Tazi and the CNRS to manage the exclusive global licensing rights to patent’s applications on small molecules modulating RNA biogenesis. The molecule ABX464 was designed in 2009 through a common work of CNRS and University Paris-Orsay, in Orsay. In 2013, Splicos was merged with Wittycell and Zophis to form Abivax, the research activities of which are still mainly based at the CNRS unit of Montpellier.
At the very beginning, the idea was to work around a molecule that would attack HIV reservoirs since it had been demonstrated that it is within these that the virus hides to escape antiretrovirals.
ABX464 binds to its cellular target, the Cap Binding Complex (CBC), thereby inhibiting the production of full-length viral RNA by HIV-infected cells that is required for HIV replication. The binding to the CBC of the viral mRNA molecule by ABX464 enhances the splicing of HIV RNA to render it untranslatable by the cell, thereby blocking HIV replication. But it is another type of research that led to the discovery that ABX464 might be useful for anti- inflammatory properties irrespectively of associated antiviral properties. This is described in an article published in early 2019 in Nature Scientific Reports with the title “Both anti-inflammatory and antiviral properties of novel drug candidate ABX464 are mediated by modulation of RNA splicing”.
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ABX464 What we had not studied before and found particularly interesting in this article is the role upregulates miR- played by the micro-RNA miR-124 in the process of inflammation and how it is upregulated by 124 … ABX464. Indeed, we found, back in 2013, in Cell Research, scientific articles clearly demonstrating that miR-124 is “a critical mediator for the cholinergic anti-inflammatory action”. Importantly, it also stated that “our data indicated that miR-124 modulates LPS-induced … itself cytokine production by targeting STAT3 to decrease IL-6 production and TNF-α converting recognized as a enzyme to reduce TNF-α release”. In other words, miR-124 seems to play a precursor modulator precursor of role in the downregulation of two well-known pro-inflammatory agents (IL-6 and TNF-α), which well-known pro- already gave birth to widely prescribed drugs in the form of antibodies (see Fig.7). inflammatory agents Different analysis of blood cells from donors, using microarray or PCR-bases testing, showed that ABX464 induced reproducible upregulation of miR-124 in infected and non-infected cells (see Fig.8 left), whereas this effect was also seen with ABX530 (another member of the same class) but not with other antivirals like efavirenz or darunavir (see Fig.8 right).
Fig. 7: miR-124 mediates anti-inflammatory action
Source: Cell Research 23(11), August 2013
Fig. 8: ABX464 active in both infected and non-infected cells (left) and has specific action unlike known antivirals
Source: Nature Scientific Report (2019) 9:792, January 2019
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Based on the mechanistical understanding of how ABX464 works and the diseases it might therefore target, different phase IIa and IIb studies were initiated, first of which have already delivered promising interim or final results, notably in HIV-infected patients. However, this development programme in HIV has been put on hold , as today there is no clear path to licensure for molecules that can reduce or eliminate the HIV-reservoir, whereas there are clear regulatory guidelines from FDA and EMA specifying the requirements for licensing of products in key inflammatory indications. This makes it possible to discuss with potential partners about the best possible global deal for the product and for the shareholders of Abivax. HIV: interesting at least as a safety database The ability of ABX464 to induce the splicing of HIV DNA and to generate a new variant, two mechanisms that will prevent normal replication, is of high relevance in the field to develop new anti-HIV molecules with specific properties to use in combination with some existing anti-viral therapies.
Before it was able to move in clinical studies, ABX464 was first studied in a comprehensive PC programme in several animal models from rats to monkeys, dogs and mini-pigs. And it proved to be non-genotoxic. There was no significant sign of toxicity in any species, in particular with functions that were of particular screening i.e. CNS, respiratory or heart/cardiac. The results showed that ABX464 had a teratogenic effect though. Once the maximum tolerated dose in animals was established, the drug candidate then moved into a first study in healthy humans in 2014. PK/PD data accumulated showed that Cmax was observed c. two hours after administration and that half-life allowed for daily administration. No significant side-effects were observed beyond some GI ones and headaches, both usually of mild intensity (and sometimes moderate).
In 2015, a first phase IIa study on 66 individuals with HIV naïve of therapy started to enrol and evaluated ABX464 at escalating doses vs placebo. The results were quite impressive, with a very significant dose-relation effect since 1 out of 6, 2 out of 6 and 4 out of 6 patients had a reduction of at least 0.5 log in their viral load (over 68% reduction) in the 75mg, 100mg and 150mg cohorts respectively vs 0 with placebo.
The regulatory Based on the encouraging results obtained, other phase IIa studies were conducted and had path to develop similarly good data, including in combination with antiretrovirals. Now, Abivax made it clear that a drug in HIV was it would further develop ABX464 in HIV only if third-party funding was found, because of “the too complex complexity of the regulatory process in the US and Europe for the development of HIV reservoir therapy”. We consider it very unlikely that a partner excited by the data and prospects in inflammatory diseases would decide to revive a development in HIV where there are multiple therapeutic options, unless GSK and ViiV act together to share this opportunity.
But the work in Consequently, it is fair to look at data in HIV mainly for the purpose of a safety database. This HIV resulted in a will supplement the future registration filing of the dossier nicely since HIV patients are useful safety obviously severely immunocompromised individuals and as such, are highly regarded when it database comes to evaluating the toxicity of any drug candidate, even though exposure to the molecule may not be that long (treatments were discontinued in ABX464-004 after 28 days). Page - 13
UC: the leading indication A STRONG RATIONALE FROM PC STUDIES There is no doubt now that ulcerative colitis (UC) has become the leading indication in the development of ABX464 after it showed very promising results first in mouse models and then in the first human trials. To first test the anti-inflammatory properties of ABX464, Abivax employed a commonly used model of colitis known as the DSS (dextran sulfate sodium)-induced experimental model. Over five to eight days, mice are administrated DSS in drinking water, delivered through a carrier in the colon where it induces intestinal inflammation, which is usually the strongest about three days after the termination of the DSS challenge.
And as show in Fig.9 below, the results are impressive since mice not receiving DSS had an almost unchanged body weight over the 11-day period, whereas those exposed to it experienced a very significant weight loss when having a placebo or a minimal weight loss (c.5%) followed by a rapid recovery when ABX464 was administered. On the right, we see a similar difference in efficacy measured on other parameters such as colon length or lesion size analysed by colon histology at the end of the protocol once mice had been sacrificed.
Fig. 9: Strong influence of ABX464 on key parameters in mice models
Source: Nature Scientific Reports: 4860(2017) by K. Chebli & al. Importantly, we see clearly divergent production of cytokines in mice treated with ABX464 meaning a sharp reduction in the production of pro-inflammatory cytokines TNFα, IL-6 and MCP-1 while in the meantime one main cytokine was up-regulated, namely IL-22 (and the cytokine family it belongs to i.e. IL-10). In Inflamm.Bowel Dis. 2015 Aug;21(8), IL-10 was described as an immuno-regulatory cytokine that is essential for the maintenance of intestinal homeostasis so that a genetically-engineered model was created consisting of an IL-10-deficient mouse with a colon characterised by histological findings that are similar to those of humans with IBD.
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Considering the relatively neutral impact of ABX464 on pro-inflammatory cytokines like IL-6, it has been hypothesized that the up-regulation of IL-22 (which regulates tissue repair and recovery) was the main driver of the protective effect of ABX464 in colitis models.
To try and confirm this finding, an inhibitory anti-IL22 antibody was administered during the recovery phase to mice as shown in Fig.10, the dark pink line fared much worse than the light pink curve, reducing meaningfully the beneficial effect of ABX464 in DSS-induced acute colitis models based on the endpoint of body weight loss.
Fig. 10: ABX464’s effect partially levelled-out when co-administered with anti-IL22
Source: Nature Scientific Reports: 4860(2017) by K. Chebli & al.
All these mechanistic findings and preclinical work made it clear that ABX464 warranted further investigation in the clinic in ulcerative colitis (UC), hence the decision to move forward.
PHASE II RESULTS ARE HIGHLY CONFIRMATORY
Based on the data collected in the mouse inflammatory colitis model, it was decided back in H1 2017 to initiate a proof-of-concept study in UC patients. This one carried the number ABX464-101 during the induction phase and was conducted in six European countries to assess the activity and the tolerability of ABX464. The drug was administered at the dose of 50 mg per day over a period of eight weeks in patients with active UC who were resistant to current treatments. The first patient was included in November 2017 and the first results were published in September 2018, demonstrating a fast onset of action, a meaningful efficacy in both naïve and refractory patients, and a good tolerability.
The patients then had the possibility of entering the second phase of the study, so-called ABX464-102, which is an open-label extension phase carried out over two years, with the aim of assessing the durability of the therapeutic effect of the drug and its long-term tolerability. First 9-month interim analysis was shared at the DDW congress in San Diego in May and 12-month data presented for the first time at the UEG conference in October 2019 in Barcelona. They are highly confirmatory of the strong benefit-risk profile of the drug candidate in ulcerative colitis.
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Let’s return to the inclusion criteria for the study to stress that 32 patients were randomised who had moderate-to-severely active UC and were either intolerant or refractory to anti-TNFs, immunomodulators, vedolizumab or corticosteroids (56% were both refractory to anti-TNF and vedolizumab). They had to have UC for at least three months with a Mayo score of between 6 and 12 (8.44 on average). The Mayo score is the main scale used to determine the severity and activity of UC in patients and consists of four different parameters each ranked on a scale of 0 to 3 depending on the symptoms: stool frequency, rectal bleeding, endoscopy findings and global physician’s assessment. Patients included in the phase IIa study had to have a global score between 6 and 12 out of 12 and a specific endoscopic score of 2 or 3 out of 3, which is the usual definition of moderate-to-severe UC patients.
A first assessment including endoscopy was made after only 8 weeks to measure the onset of action and three main criteria were considered:
• Clinical remission rate, measuring the percentage of patients with a total Mayo score equal or lower than 2 with no endoscopic sub-score above 1;
• Endoscopic improvement i.e. the percentage of patients with a sub-score of 0 or 1;
• Clinical response rate, measuring a reduction by at least 3 points of the total Mayo score and 30% from the baseline and a decrease in the rectal bleeding sub-score of at least 1 point.
Strong benefit of On each of the three endpoints, ABX464 significantly beat placebo with a total Mayo score ABX464 in UC average reduction of 53% vs 27% (Fig.11, left), an endoscopic improvement in about half of the patients in phase patients and a clinical remission (which is seen as the most relevant endpoint by healthcare IIA authorities) seen in about a third. To note is that patients previously treated with biologics did not react as quickly to ABX464 (it takes a bit longer to curves to separate, by about one week only however) but in the end had a very similar benefit.
Fig. 11: Phase IIa results with ABX464 at day 56
Source: Abivax
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Even more Moving to the maintenance phase of the study, the results presented at the UEG conference in patients became October were equally good, if not better. Out of the 22 patients who were candidates to this responders to second phase of the study to receive once-daily oral 50 mg, 19 were deemed evaluable of whom ABX464 in the 13 in the original ABX464 arm and 6 from the placebo arm. maintenance After the induction phase, seven patients were in clinical remission before entering the phase maintenance phase and out of them, five remained in clinical remission after one year while the other two did not have their final endoscopy at the time of the data cut-off and therefore were not fully evaluable. Out of the seven patients who were not in clinical remission while being on ABX464 in the induction phase, four moved into remission after 52 weeks (two still not and one not evaluable).
Out of the five patients who were not in clinical remission while receiving a placebo during the induction phase, moving to ABX464 allowed three of them to move into remission at week 52.
Fig. 12: Seven out of 12 non-responders after eight weeks became responders at week 52
N/E 1 CR 7 CR NCR 7 12 NCR 4
Source: Abivax
Interestingly, 100% of the 16 endoscopies performed at week 52 resulted in sub-scores of 0 or 1, which is important because the endoscopic subscore is one of the strongest and most objective criteria in the assessment of patients with UC.
For the endpoints that are not relative to endoscopic measurements and therefore constitute what is called the partial Mayo score (measured on a 9-point scale), the two graphs below clearly show that the benefit seen after the induction phase at week 8 (-62%) is further expanded during the extension phase (-45%), mainly during the first 3 months. This level of efficacy was subsequently more or less maintained, until the end of the 52-week period.
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Fig. 13: Partial Mayo score declined 62% after 56 days and another 45% after one more year
Source: Abivax, data presented at EUG 2019
HOW DO THE RESULTS COMPARE TO EXISTING TREATMENTS? We briefly described in the first part of this report how the treatment paradigm evolved over the last decades and how it had been transformed with the emergence of the first biologics, starting with the anti-TNFs in the mid-2000s.
Pr. W. Sandborn, Chief GI division at the UC IBD Centre in San Diego concluded his speech at the breakfast meeting organised by Abivax at the UEG congress by saying that infliximab and vedolizumab were probably the most effective agents in TNF-naïve patients, tofacitinib and ustekinumab the most effective ones in TNF-failers, vedolizumab and ustekinumab the safest ones. But he also added that “none of these agents provide transformative efficacy, especially in anti-TNF failure patients”.
Although it is always difficult to compare non-comparative studies all together, we can try to put some data in a unique spreadsheet and derive some conclusions from it. In Fig.14 for instance, we have regrouped data from various phase III studies conducted with the most popular drugs approved for UC and considered the clinical remission rate as a relatively homogenous endpoint to use. We then compare it at the end of an induction phase (at week 6 or 8) and at the end of the maintenance phase (usually at week 52 or 54, except for ustekinumab which is at week 44). Of course, the populations included in the various trials are not fully homogenous and vary, notably in terms of median severity of the disease at baseline and importantly in terms of history (i.e. number of years with the disease and previous lines of treatment). For instance, in the OCTAVE clinical programme, about 50% of the patients previously failed under an anti-TNF. Similarly in IM-UNITI, one study was in TNF-failers (99%) and the other preferentially in TNF- naïve patients (c.70%). Since ustekinumab offers the comparison, it is fair to say that the results were far superior in patients who had not experienced anti-TNF failure before. For this reason, we present absolute data but also placebo-adjusted data in the table.
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Fig. 14: Comparative data of clinical remission rates across the trials infliximab adalimumab golimumab vedolizumab vedo sc tofacitinib ustekinumab ABX464
week 6 or 8 38.8% 16.5% 18.7% 16.9% 18.5% 15.6% 30.0%
week 52 or 54 20.5% 17.3% 28.6% 44.8% 46.2% 40.6% 43.8% 63.2%
diff. vs pbo 23.9% 7.2% 12.4% 11.5% 10.3% 10.3% 19.0%
diff. vs pbo 13.9% 8.8% 13.2% 28.9% 31.9% 29.5% 19.8%
Source: Pr Sandborn, companies, PI documents, Bryan Garnier & Co
Once we acknowledge that the numbers are hardly comparable among each other, we can make a few comments however.
ABX464 is Firstly, few drugs already have clinically meaningful efficacy after the induction phase, with the effective quickly exception of infliximab, which seems to have a good onset of action. Nevertheless, we also and durably … notice that anti-TNFs in general tend to lose some efficacy or fail to improve it to a significant level over time. From this perspective, the most recent drugs seem to offer greater efficacy in the long run.
… irrespectively That said, and even though it is extracted from a relatively small phase II study and cohort (7 of a potential patients only were previously treated with biologics), ABX464 is doing much better and we see no previous real difference between naïve patients and patients refractory to anti-TNFs or vedolizumab. treatment Moving to safety now, there is no need to mention again here the limitations to the use in the long term of corticosteroids and immunosuppressants. Natalizumab and vedolizumab both carry a black box warning relating to the risk of PML, which refers to the mechanism of action but is now pretty well managed with the first thanks to a JC virus test while the second has had no case so far and simply has the mention in the label in reference to Tysabri. There is however a specific risk of liver injury reported. The other drug with significant black box safety warnings is the only one to have the advantage of an oral route i.e. tofacitinib, which has reported serious infections leading to hospitalizations or death, malignancies and thrombosis.
Many approved drugs carry warnings while ABX464 looks safe So far, and including out of a large safety database coming from the studies in HIV together with the growing patient-exposure in inflammatory diseases, ABX464 can be considered as clean from this perspective. No deaths, no malignancies, no severe infections have ever been reported. Most adverse events were of mild to moderate intensity and short duration and most of them were headaches and pain. Out of the phase II trial, one patient withdrew for a transaminase elevation (but with no change to LFTs) during the induction phase and one in the maintenance phase at month 4 for a grade 2 headache. To note is that based on the guidance from the DSMB, the patient in the maintenance phase was kept on ABX464 and this episode subsided within about 10 days, indicating that ABX464 did not cause the adverse event.
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A phase IIB trial So, in conclusion, compared to the existing paradigm, ABX464 has a very compelling profile and has started offers an attractive benefit-risk ratio. already in UC Unsurprisingly, Abivax has therefore decided to initiate a phase IIb study in moderate-to-severe UC the protocol for which was approved by the European and Canadian authorities. And an IND might be filed with the FDA by the end of the year, which would be a major catalyst for the stock. On clinicaltrials.gov, the study carries number NCT03760003 and we would make some comments about the design:
• Firstly, the number of patients to be recruited is said to be in the region of 250, which will give the results far higher significance and power than the phase IIa study that delivered results out of a maximum of 32 patients and usually less after considering protocol exclusions and discontinuations;
• The very first objective is to go in the advanced lines of treatment after any kind of previous therapies, including anti-TNFs, immunosuppressants, corticosteroids and more recent JAK inhibitors and vedolizumab. Stelara is not specifically mentioned but is not in the exclusion list either and so in our view is accepted. It makes sense since a significant portion of the patients does not respond to existing therapies and even when they do, about half of them relapse after less than 12 months, so this is a nice opportunity to start with;
• The study will include three active arms to evaluate different dosages where the 50mg qd dose tested in IIa will be central between the 25mg and 100mg qd doses;
• Patients will be treated for 16 weeks and then evaluated over eight and 16 more weeks with the primary endpoint being the modified Mayo score (MMS) from baseline over eight weeks while secondary endpoints will include clinical remission rate, endoscopic improvement or miR expression over eight and 16 weeks. MMS covers the parameters from the traditional Mayo score except the physician’s global assessment which is sometimes considered more subjective in nature. On a scale of 0-9, patients at entry will have to be ranked between 5 and 9 for MMS while also having an endoscopic sub-score of 2-3;
• First patient In (FPI) was registered in August 2019 and the study is expected to complete towards the middle of 2020 resulting in full read-out at the end of 2020;
• Lastly, Severine Vermeire from the University of Leuven will be the principal investigator as in the previous phase IIa trial and together with Dr William Sandborn from the University of California, also invited by Abivax to present at UEG, are two out of the most widely-recognized specialists in the field of IBD worldwide, having been P.I. in almost all the clinical development programmes of now approved drugs in UC and CD.
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AT LEAST TWO OTHER SERIOUS CHALLENGERS ARE MOVING AHEAD OF ABX464 IN UC It is fair to say that not only is Takeda progressing with a subcutaneous formulation of vedolizumab, which may add to the overall profile of a drug that is already annualising at more than USD2bn in sales in IBD only, but two other candidates require close attention to be paid to their ongoing development: filgotinib on the one hand, licensed from Galapagos by Gilead at a very high price, and etrolizumab on the other hand, for which Roche has built an impressive phase III development programme. Both companies have been very secretive about the data accumulated so far and very little has been made public although phase III trials are well underway.
It is surprising to hear so little about these two compounds since the clinical development of drugs in UC always includes an induction phase, which is rather limited in duration and therefore can deliver first data after four and 10 weeks. In the SELECTION-1 phase IIb/III study, the second part of which started in May 2018, the primary and secondary endpoints are equally divided across the induction and the maintenance phases and the measures at the end of the induction phase are taken after 10 weeks. Neither phase II nor phase III induction data have been made public so far, making it difficult to assess whether filgotinib can improve on what tofacitinib in the same JAK class already showed, beyond formulation (once-daily vs twice-daily) and safety.
What we found with etrolizumab, which is the first dual-action anti-integrin α4β7 (like vedolizumab) but also αEβ7 for a more complete blockade of adhesion molecules (the second part of the action would avoid the retention of αEβ7 cells in the intraepithelial compartment), is not very positive since differences in clinical remission at week 6 and in clinical response at weeks 6 and 10 did not reach statistical significance towards placebo. Only 5% and 8% of patients in the etrolizumab 100 mg and 300 mg doses were in remission six weeks after the first dose.
However, considering the schedule of administration i.e. a monthly sc injection in the 100mg arm and a bi-monthly injection in the high-dose 300mg arm, a cut-off at week 6 is probably too short to get any benefit from the drug. At its PharmaDay in September, Roche showed that etrolizumab started to show a benefit from day 14 on rectal bleeding and stool frequency, two measures out of the four accounted for in the Mayo score. Only 52-week data and even longer- term data will make it possible to compare this drug to most of the others in this space but we would consider it a disadvantage not to offer short-term benefits to patients in terms of perceived symptom relief.
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Beyond UC, CD and RA are also indications to consider for ABX464
A pipeline in a In the field of inflammation, there is no example of a sizeable drug that is approved in only one drug specific indication because the rationale, from a mechanistic point of view, to work in only one is very low. Even the more targeted therapies launched in recent years have been approved in several indications, some coming sometimes years after the first, mainly as a result of the prioritisation of assets in companies developing them. There are pros and cons to starting a large number of clinical trials in a full range of indications very quickly. And it is also fair to say that the bar is not equally high in the respective markets and rheumatology for instance, has been far more intensively investigated than dermatology or gastroenterology by companies with new drugs and new mechanisms of action in recent years.
Now that ABX464 is better understood, the decision to explore the indications of Crohn’s disease (CD) and rheumatoid arthritis (RA) makes sense. In particular, the anti-inflammatory properties of ABX464 appear strongly associated to the upregulation of miR-124 (and even more particularly of the miR-124-1 locus) and among data presented first at day 56 and more recently at month 12, the very substantial increase in the expression of miR-124 not only in rectal biopsies (which more specifically supports the activity in UC) but more broadly in blood samples too, might be indicative of an anti-inflammatory effect in a large variety of indications.
Having said that, we will also pay attention to the trend in miR-124 expression over time since Fig.15 shows a 700-800-fold increase at day 28 and day 56 with only a modest reduction in the magnitude of the increase between the two time points, whereas the reported multiple of increase of miR-124 expression in blood is “only” 215 after 12 months. At the same time, it remains a very substantial effect but may also signal a reduction of it over time, which might correlate (or not) to a loss of efficacy on clinical endpoints. This was not true at all at month 12 but will have to be assessed also with much longer data points since the relevance of long-term data is of course very high in such chronic inflammatory diseases.
Fig. 15: Very high increase in miR-124 expression in blood at different time points
Source: Abivax, data presented at EUG 2019
Now our objective was more to suggest that the increase in miR-124 expression in blood samples was an indicator that ABX464 was unlikely to limit its effect to the GI tract. Actually, since miR- 124 impacts at least two inflammatory well-known pathways i.e. the STAT-3 and the JAK, and suppresses pro-inflammatory cytokines and chemokines like TNF or IL-6, it is reasonable to refer
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to the diseases for which TNF or IL-6 antibodies and JAK-1 inhibitors are already approved to expect ABX464 to have some kind of an effect. Actually, the question might concern the magnitude of the benefit and its clinical relevance compared with existing standards of care.
Crohn’s disease (CD) and rheumatoid arthritis (RA) are therefore the two indications for which the decision to go into phase II has already been taken and this process is ongoing as we write.
RA COMES SECOND IN THE PROGRAMME SINCE RECRUITMENT IN IIA HAS ALREADY STARTED
Phase IIA in RA The phase IIa study in RA is already open to recruitment with the first patient on-boarded in July has started and data expected to report in the second part of 2020. The study should include about 60 recruiting patients randomised 1:1:1 over two doses of ABX464 (50 and 100 mg qd) or placebo with three phases per protocol, namely the screening, the treatment and the follow-up phases. The maximum period of active treatment will be 12 weeks. ABX464 will be co-administered with methotrexate (MTX) in patients inadequately treated with either MTX alone or refractory to or relapsing on anti-TNF therapy.
The primary endpoint will be safety but several secondary endpoints will make a first assessment of activity possible, looking at various scales commonly used in RA like ACR20, ACR global response, DAS score, CDAI or sDAI score at different time points (at the end of weeks 2, 4, 8 and 12).
If we refer to the ACR guidelines, last published in 2015 (see Fig.16), we can easily see that monotherapy DMARD is the preferred choice in patients with established RA and naïve of any therapy, with MTX being standard. And it is equally clearly recommended if and once a DMARD is no longer active enough to provide disease control to move to a combination of two DMARDs, the first of which might be a TNFi therapy, a non-TNF biologic or tofacitinib.
If we then refer to the prescribing information of approved drugs in RA like Actemra, the leading anti-IL6 antibody, or Xeljanz, the leading JAK inhibitor, the indication is very much the one ABX464 might be looking for i.e. treatment of adult patients with moderate-to-severe RA who have had inadequate response or intolerance to MTX/DMARD. They each performed several clinical studies in which they were assessed in different settings, including MTX, DMARD and anti- TNF inadequate responders, when they were usually tested in combination with MTX. So, the phase IIa which has just started recruiting will give a first interesting hint about the efficacy of ABX464 in the segment of RA that matters.
It is also worth mentioning that both Actemra and Xeljanz carry black box warnings on the front pages of the prescribing information leaflets to cover the risk of serious infections for the first, and of serious infections but also mortality, malignancy and thrombosis for the second. If ABX464 confirms its good safety profile, then it could aspire to being used ahead of these agents although new – and maybe safer – JAK inhibitors (the only oral agents available in RA) are also currently under investigation which might also result in an improvement over Xeljanz.
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Fig. 16: In established RA, combinations are recommended right after MTX
Source: ACR guidelines, 2015
Efficacy-wise, to prepare for the headlines to be released in 2020, let’s see how Actemra and Xeljanz far in pretty similar populations. For Actemra, so-called studies III and V were in patients who had inadequate responses to MTX and patients who had inadequate responses or intolerance to anti-TNFs respectively, and then received Actemra in combination with MTX with the primary endpoint being ACR20 at week 24. In the phase IIa, ABX464 will be assessed over 12 weeks and patients will have the opportunity to embark into a separate 1-year maintenance study which will in any case warrant further investigation of course.
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So, at week 24, Actemra 4 and 8mg/kg + MTX achieved 48% and 59% of ACR20 respectively vs 27% for MTX + placebo. Xeljanz had data at month 3 (so week 12), and ACR20 was 55% at 5mg + MTX vs 27% for MTX + placebo. This is what should be expected to be seen, at least, with ABX464 in MTX inadequate responders. In anti-TNF inadequate responders or intolerants this time, Actemra 4 and 8mg/kg + MTX achieved ACR20 in 30% and 50% respectively still at week 24 (vs 10% for MTX + placebo), whereas Xeljanz 5mg bid + MTX achieved ACR20 in 41% (vs 24% for placebo + MTX) and 51% at weeks 12 and 24 respectively.
Filgotinib is It is also worth noting that filgotinib had very promising results in its phase III FINCH 2 in the likely to be one setting although it is difficult to fully compare trials, if only because the background of the of the most patients included in the various studies is significantly different from one to the other. In FINCH significant 2, patients may have had prior exposure to three or even more DMARDs. Anyway, the results competitors were good with 66% and 57.5% of patients on 200mg and 100mg filgotinib respectively achieved ACR20 at week 12.
CROHN’S DISEASE USUALLY GOES WITH UC BUT IS THIRD IN THE QUEUE
We described in the opening chapter of this report the close positioning of ulcerative colitis and Crohn’s disease under the same common denomination of irritable bowel disease (IBD) with, as a main differentiation, where the inflammation is located.
Working drug in It is pure logic then to have clinical guidelines pretty much mimicking each other in UC and CD, UC usually works with corticosteroids, immunosuppressants still used for their cost-effectiveness but increasingly in CD too vedolizumab and anti-TNFs taking the lead as front-line therapies. Among the most commonly prescribed anti-TNFs, we can simply report that infliximab and adalimumab are the ones mentioned the most in guidelines both in UC and in CD whereas the third, which is golimumab (Simponi) in UC, tends to be certolizumab pegol (Cimzia) in CD. Among the newest therapies, vedolizumab and ustekinumab are equally well placed in recommendations for CD whereas it is too recent for the second in UC to be fully reflected yet. But it is very much like a copy-paste and we would expect the differences to be mainly the reflection of a difference in timing of development from one compound to another. Again, we have no example of a drug working in one disease and showing no effect in the other, under the IBD umbrella. Here, although the design of the study is available on clinicaltrials.gov, the trial is not yet open to recruitment and is expected to onboard the first patient in early 2020. About 30 patients with moderate-to-severe CD and inadequate responders or intolerants to existing therapies will be randomized with a 2:1 ratio to receive 50mg of ABX464 or placebo. The treatment period will last 16 weeks and will be followed by a four-week follow-up after the last drug intake. Safety will be the primary endpoint but different efficacy measures (clinical response, clinical remission, etc.) will also be assessed as secondary endpoints.
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Part 2: ABX196, a targeted companion agent in oncology The mechanism of action is supportive of a close look
ABX196 is Abivax’ second compound to be in the clinics and in a completely different field from the first i.e. in oncology, where it could be advocated that it is tough to succeed without being 100% dedicated.
Actually, the origin of the programme dates back to 2006 when one of the companies which later formed Abivax signed an exclusive licensing agreement with different US academic institutions (The Scripps Research Institute in La Jolla, the University of Chicago and the Brigham Young University of Utah) to have access and rights over a technology and the products subsequently arising from it and often referred to as the “immune stimulation platform” or, more specifically, to iNKT (for invariant natural killer T-lymphocyte) agonists. iNKT cells constitute a specific population of T lymphocytes which lie at the interface between the innate and the adaptive immune systems and as such are key mediators of immune response and tumour surveillance. As shown in Fig.17, through direct interactions via CD1d and CD40 signalling pathways and indirect ones with other immune cells (although the quality of the activation may differ here), iNKT cells are capable of maturing dendritic cells (DC) and activating B cells. Conversely, iNKT-cell deficient mice models have provided evidence of poor anti-tumoral response whereas reduced iNKT cell numbers have been noticed in cancer patients, enabling the design of strategies for immune-mediated tumour destruction through iNKT agonists, either alone or in combination with other approaches.
Fig. 17: Anti-tumour activities of iNKT cells
Source: Weatherall Institute of Molecular Medicine and the University of Oxford, Cancer Immunol Res. 2015
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The ability of iNKT cells to activate anti-tumour immune responses can be illustrated by using exogenous iNKT agonists, such as the prototypic ligand α-GalCer which, when injected, was found to inhibit tumour metastases and increase survival in a range of murine cancer models.
That said, there is no clear understanding of the iNKT cell biology and of the factors that activate and regulate these cells so it is equally difficult to optimise iNKT-cell agonists to go into the clinic that are able to promote a Th1 immune response without inducing iNKT-cell loss of energy. From the platform technology acquired from the US academic institutions listed above, a first-in- class iNKT synthetic agonist called ABX196 (an analogue of the parenteral α-GalCer) has been selected (for its potency) and developed in a liposomal formulation. Preclinical work demonstrated that ABX196 enhanced the anti-tumour response when used alone or in combination with IO drugs or with doxorubicin compared with those agents alone, especially in HCC and melanoma models.
A potential A syngeneic orthotopic HCC model was used in which immunocompetent mice are administered synergistic effect large quantities of carbon tetrachloride (CCl4) to induce liver cirrhosis and reproduce the of ABX196 with specific pathophysiological features of human HCC. In this model, 13 mice were recruited in each ICI group and some of the results are set out in Fig.18: the mean liver tumour invasion, scored by macroscopic evaluation at day 61 or at death of the animal, was 58% in the control group, 40% in the sorafenib group (Nexavar is SoC in 1L HCC at the present time) and then dropped dramatically in the anti-PD1 (6%) and the ABX196 (3%) groups while being at 0 in the combined ABX196/PD-1 arm. And this fully correlates on the right with the survival curves at day 61 with only 31% of the mice in the control group still alive and 42% in the sorafenib arm whereas more than 90% of mice in the ABX196 and the anti-PD1 groups were alive and 100% of those allocated to the combination arm.
Fig. 18: ABX196 PC data in HCC mouse model
Source: Abivax
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Pr. Luc Teyton from the Scripps Research Institute who also sits on Abivax’s Scientific Advisory Board called it a superlative result and added: “this powerful therapeutic effect is likely explained by the initiation of an immune response against the tumour, as immune-histologic staining revealed abundant presence of CD4 lymphocytes, as well as PD-L1 positive cells, in liver tissues of ABX196 and/or anti-PD1-treated mice, but not in the control or sorafenib groups”. That said, when it comes to extrapolating the PC results in humans, we would note that the apparent strong efficacy of anti-PD1 therapies measured in mice models was not fully reflected in clinical trials since after encouraging ORR and DOR data, leading to conditional approvals, both Keytruda and Opdivo failed to improve overall survival in a statistically significant manner in 2L HCC. So the predictability of the mouse model should be approached with caution. Hence also the idea to test combinations. And recently Roche disclosed positive headline data for its IMbrave150 phase III trial which was investigating Tecentriq in combination with bevacizumab. The two co-primary endpoints of improvement in PFS and OS over sorafenib were met. We are expecting to see the first set of results at ESMO Asia.
So, both the mechanistic approach and the first accumulated clinical data suggest the investigation of ABX196 in combination with an immune checkpoint inhibitor. It then remained to be assessed whether the safety and tolerability of the compound was compatible with this perspective too.
It appears that ABX196’s toxicity profile was both tested in animal models but also in healthy volunteers some years ago. It was very good in mice and monkeys and although a moderate elevation of hepatic enzymes was seen at very high doses in mice, this was not the case in monkeys. Consequently, it was decided at the time to move into phase I with ABX196 to test it as an adjuvant to a prophylactic vaccine against hepatitis B. The complexity of the data reading is that ABX196 was administered together with a vaccine and it is therefore difficult to assess whether any side effect is associated with one component or the other (or the two combined). Anyway, out of the 44 participants in the ITT population, if 251 drug-related AEs were recorded, most of them were subjective manifestations like headaches or asthenia and only three subjects experienced severe AEs, consisting of ALT/AST elevations. For detailed information about the study, refer to Vaccine. 2014 Oct 21; 32(46): 6138–6145. In conclusion, ABX196 can be considered to be well tolerated overall and its safety profile does not prevent – at first glance – a combination with an ICI in oncology. This phase I/II was finally designed not so long ago and received an IND from the FDA in May 2019 to test ABX196 in combination with nivolumab in patients with hepatocellular carcinoma (HCC) who had received at least one prior systemic therapy. The initial dose-escalation phase of the study will be conducted at the Scripps MD Anderson Cancer Center in San Diego and the MD Anderson Cancer Center in Houston, under the leadership of the principal investigator Dr. Darren Sigal. The subsequent (expansion) phase will then include additional cancer centres in the US.
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First data in The study is expected to recruit around 48 participants and three doses will be assessed (0.1, 0.2 early 2021 will and 0.4 µg) and administered intramuscularly for about 120 minutes every eight weeks whereas tell if ABX196 nivolumab will be administered as recommended by the US label i.e. through 30-minute iv can be a drug infusions on days 1 and 15 of each 28-day cycle. The primary endpoint is the incidence of side- effects whereas secondary endpoints include ORR, DOR and PFS. It is fair to expect the first results to be available at the beginning of 2021. ABX196 is a candidate for an out-licensing deal When it comes to the next step, Abivax has written in some of its registration documents and therefore very officially, that it “does not plan to continue its development in oncology” and that it is seeking an external partner to “grant a license for the use of ABX196 for an immuno- oncology indication, after attaining the first clinical efficacy results in advanced hepatocellular carcinoma”. So, the intention is quite clear and the question is more about the "when" than the "if" and from that perspective, it looks like the 2021 timeframe we have just mentioned for the phase II data to be available would be a good window of opportunity. However, our understanding is also that the destiny of ABX196 is somewhat linked to ABX464 because the partnering discussions about the latter should take place in 2020 and depending on the outcome (acquisition, global out-licensing, partial licensing agreement etc …), it might strongly influence ABX196 too. This will be further addressed in the last part of this report when talking about the various scenarios that we see for the different assets and the company as a whole.
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Part 3: Maximizing the value All options are on the table Abivax is in a unique situation with ABX464 since inflammation is one of the most attractive fields in the healthcare space while competition is not as fierce as in oncology. In other words, when a drug like this reports data as good as ABX464 has, then it quickly stands out from the crowd as a potential game-changer and as such, it can only attract high interest from large pharmaceutical companies.
Now, as in oncology, and at least for the main solid tumours, there is no path for a small and inexperienced biotech company to go commercial with drugs in the main inflammatory diseases such as IBD or RA. And so the question is not whether Abivax needs a partner, but what kind of a deal can be structured that would be in the best interest of the drug and of the company’s shareholders. The Abivax management team is very aware of this and makes no secret that all options are on the table. To some extent, we could even say that Sofinnova's recent entry into the capital (subscribing to 1.5m shares in July 2019 for EUR12m) has added to the second tranche of the Kreos Capital loan of EUR10m to provide visibility over cash to fund the business up until the end of Q2 2020, which provides a reasonable time-frame for an agreement to be negotiated and made public.
ABX196 and Even though Abivax said clearly and loudly that ABX196 would not be further developed without ABX464 both a partner, it is indeed ABX464 that will determine the future of the company. candidates for WHAT GALAPAGOS DID IS STRONGLY INSPIRING partnerships Obviously the very first reference that quickly comes to our mind when we are thinking about a structuring deal in inflammatory diseases is the one inked between Gilead and Galapagos around filgotinib. We would like to spend some time on it to describe it as accurately as possible and make comparisons with the present situation. In December 2015, Galapagos and Gilead announced a global partnership to develop filgotinib, a JAK-1 selective inhibitor for inflammatory diseases including RA. The deal took place at a time when filgotinib completed and presented data from phase II trials in RA (DARWIN) and in Crohn’s disease (FITZROY) while preparing for phase III trials to start in 2016. In terms of timing, this agreement therefore came slightly later than would be the case if one is quickly signed with Abivax for ABX464: the most advanced indication is UC where the phase IIB trial started in August with recruitment to be completed by the summer of 2020 and the first data from the induction phase expected at the end of the same year. In the large RA indication, which was central in the filgotinib case, the phase IIA is ongoing with ABX464 and the first data from the induction phase are expected in Q3 2020. This is a meaningful difference between the two compounds because filgotinib provided real PoC data to Gilead in the two largest future indications of RA (rheumatology) and Crohn’s (GI) whereas ABX464 has UC as the lead indication, which will easily expand to CD but with more difficulty to RA despite evidence brought from PC and early clinical work.
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The deals And so, before we move on and see what was included and negotiated by Galapagos at that involving time, why not spend some time looking at the content of the previous agreement, signed with filgotinib are Abbott in 2012 and which is as interesting as Gilead’s to see the options available to Abivax. The inspiring terms were: an initial upfront payment of USD150m for rights to filgotinib and agreement for an additional one-time fee of USD200m upon successful completion of the RA phase II studies and if the drug meets certain pre-defined criteria. Abbott would have assumed sole responsibility for phase III clinical development and global manufacturing and the total amount of milestone payments to be received by Galapagos upon achievement of different development, regulatory, commercial and sales-based points was as high as USD1bn, in addition to tiered double-digit royalties on sales. Galapagos only retained co-promotion rights in Benelux. AbbVie (which took over Abbott for the agreement with Galapagos) had a last chance to decide whether to opt in or out of the collaboration before moving into phase III. In September 2015, it finally decided to opt out to prioritise an internal competing asset named ABT-494, which since then became upadacitinib and more recently Rinvoq when approved by the FDA in August 2019 for treatment of RA.
And so in December 2015, Galapagos announced a new global partnership for filgotinib, with Gilead this time, the main terms of which are the following: an upfront payment of USD725m, consisting of a license fee of USD300m and a USD425m equity investment in Galapagos. The total payment of potential milestones amounted to a peak of USD1.35bn with tiered royalties starting at 20% and a profit split in co-promotion territories. After co-funding 20% of the development activities, Galapagos this time retained a co-promotion option in the EU Top5, in addition to Benelux.
Fig. 19: Change in Galapagos share price when the deals were inked
Source: Bloomberg
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Price-wise, the chart on Fig.19 indicates that (i) the deal with Abbott was not game-changing for Galapagos although it helped the group slowly move from one league to another in the range of USD250m to USD500m market capitalisation; (ii) the publication of phase II data in 2015 was what actually started changing the company's status and while the AbbVie opt-out clause had an impact in September 2015, it was quickly understood that it had nothing to do with the underlying value of filgotinib. In 2015, the market cap of Galapagos fluctuated between USD1.4bn and USD2.2bn. In mid-2019, the agreement with AbbVie was strengthened and expanded to cover more drugs from Galapagos’ pipeline but this is less instructive and illustrative for us in the context of Abivax. In conclusion, we believe that the above-reported deals around filgotinib are very representative also of the potential value to be created by an asset that is able to deliver more phase II data compared to one that has not yet delivered much of it. We would consider ABX464 to be somewhere in between the situations when Galapagos signed with Abbott in 2012 and when it first signed with Gilead in 2015. We acknowledge though that UC as a first indication does not carry the same NPV as RA for a potential partner.
We assume that a Galapagos-like deal is one of the favourite options Abivax would consider to move ABX464 forward. We also believe that it is the most reasonable one to expect.
CAN ABIVAX BE ACQUIRED TO GET ACCESS TO ABX464? This is obviously the other serious option to consider i.e. a sale of the company, since ABX464 is almost representing the full value of Abivax.
A sale of Abivax The issue with this scenario refers to the data available in each and every possible indication is a credible where ABX464 might be used over time. We have discussed UC, CD and RA and we already said scenario … that extrapolating UC results over CD, we assumed, could be acceptable for potential partners based on the similarities between the two diseases and the rationale for ABX464 to work relatively similarly in both considering its mechanism of action. We would see it as more difficult to be fully priced in RA, at least until the first phase IIA data is out. But it is worth mentioning also that Abivax believes that applications for ABX464 might go well beyond the scope of indications previously mentioned and some data from animal studies is due to be reported shortly that could demonstrate activity in MS or in Parkinson’s disease. A correlation of down or up-regulation of microRNAs in several liver diseases has already been established and although we found miR-122 to be the main target of interest in both human and animal models of NASH, some work with ABX464 might be deserved. Similarly, and maybe more interestingly, upregulating miR-124, as ABX464 has demonstrated it can in IBD, could impact the metabolic and proliferative abnormalities seen in patients with pulmonary arterial hypertension (PAH). Several papers here, from Kang & al. in 2013, Wang & al. in 2014 or Caruso & al. in 2017, have suggested a potential reversal of lung tissue remodelling in PAH when miR-124 is up-regulated. Combining such a drug, if confirmed as very safe, with one targeting vasodilation in PAH, could make a lot of sense.
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… although the However, a lot of potential other developments for ABX464, but also maybe for its follow-on difficulty could compound, which has different PK parameters that could give it different properties in terms of be to value half-life or tissue distribution, would have to be properly valued for Abivax to accept a sale of ABX464 in all the the company. We know there are mechanisms by which this can be reflected over time and one indications of the most popular ones, although not that often seen in practice, is the granting of contingent value rights (CVR). This is a way to close the gap in terms of valuation when buyers and sellers are too far from one another and when the number of issues is limited. Among the famous ones were the CVRs included in the M&A transactions between Sanofi and Genzyme in 2011 and more recently between BMS and Celgene (see Fig.20).
Fig. 20: History of the main transactions involving CVRs Acquiror Target Date Conditions for CVR granting
Sanofi Genzyme 2011 resumption of full production of Cerezyme and Fabrazyme in year 1, approval of Lemtrada and sales milestones for the drug
AstraZeneca Omthera 2013 milestones for the Epanova product
Shire Dyax 2015 approval of DX-2930 before 31/12/2019
BMS Celgene 2019 approval by the FDA of ozanimod, liso-cel and bb2121 “in a certain time-frame”
Source: Bryan Garnier & Co
We would also mention an alternative strategy that we will not go into too much detail for because we have only seen it become reality once since it usually requires a complex structuring: this is the carve-out of assets which are not properly valued by the acquirer. Of course, we are referring here to the transaction between Actelion and Johnson & Johnson with the latter mainly interested in the PAH assets but not in the early to mid-stage assets in the pipeline. CEO Jean-Paul Clozel convinced the Board to discuss the carve-out of these into a new company called Idorsia, which has been largely funded by the same individual.
In the case of Abivax, the issue could be that the value lies in a series of indications but for the same asset and obviously there is no possibility of splitting ABX464 into parts. It is certainly a pipeline in a product but only one product, except if the rights outside IBD and RA are excluded from a deal and in part or in totality associated with the follow-on compound, which could be the base for a new company. Being at a PC stage however, we do not see it as a very likely scenario. Equally, we do not see ABX196, the only other advanced asset in the clinics, as a base for a new company since its development has to be seen in combination with other agents. So, partnering it looks like the relevant strategy.
Since we are discussing the possibility of Abivax being acquired, it is time to say a few words about its shareholder base. Only 34% of the company is considered to be free float. Altogether, Truffle Capital (46%) and the board and management (5%) hold the absolute majority and therefore nothing can be done without their prior approval. That said, if the price is right, we see no reason in principle why the shareholders would reject an offer. The same is true for Sofinnova (13%) in our view. It is our understanding however that offers were articulated at a certain point in the past but were not adequate enough to obtain approval.
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Two central scenarios offering a range of valuations
2020 is likely to For many reasons, Abivax now needs a partner to move ABX464 to the next phase because be the year development programmes in the field of inflammation are huge and conducted by large when a pharmaceutical companies with deep pockets, as illustrated in the first section of this note. It partnership will would be detrimental to the drug to try and keep the value within Abivax for much long because be signed now time matters a lot. The programme needs to be as ambitious as possible and to move on as quickly as possible and so the only way to achieve this is to partner and to put a company in the driving seat that has done this already. It is not only about money, but even more importantly, about processes in designing and conducting phase III trials, interacting with regulators and preparing for the filing and then correctly positioning the drug in the market, with the most accurate messages and appropriate physician targets. This can be carried out in different ways but what we agree with management on is the fact that ABX464 cannot be divided into parts and that it is a single entity. And this is obviously the trickiest point to address because it is indeed not as advanced in all relevant indications. As illustrated with Galapagos though, phase II data is key to getting high valuation metrics from pharma partners and it is fair to state that UC is the only indication in which ABX464 has delivered sound and detailed results in the two equally important phases of induction and maintenance, such that the confidence level is high to have a drug here.
This point is crucial when it comes to assessing the power of the respective parties involved in the discussion. Abivax must negotiate to have the whole potential of ABX464 reflected in the price and conditions of a deal. On the other side, the partner must evaluate the risk of having a drug in UC or in IBD compared with a multi-blockbuster able to compete sales-wise with anti- TNFs. At some point, Abivax will have to pay attention to the level of commitment the partner will be able to make to ABX464 in the context of its global portfolio. While the pharma company needs to be large, the drug also needs to play a significant enough role for it not to carry the risk of being de-prioritised at some point, for the wrong reasons (i.e. anything but the product’s failure).
A MULTI-STEP PARTNERSHIP LOOKS LIKE THE PREFERRED ROUTE
What we see as the preferred option for Abivax is to strike an evolving deal that could change over time as the evidence of efficacy increases over the whole spectrum of targeted indications. We believe this is the best option because we doubt that anyone will be prepared to pay the full price at the present time to value not only for ABX464 globally but also for ABX196, although a CVR can apply to this situation pretty nicely with two main triggering events: supporting data for further development of ABX464 in RA (as with Lemtrada in the Genzyme case, it may support different time points like phase IIA data, phase III, acceptance of filing and final approval), and the start of a first phase III with ABX196 (in an Innate Pharma-like case with monalizumab which triggered a payment of USD100m at the first initiation of a phase III trial, from AZ).
So, here are the main assumptions we have made to derive our central case scenario and a valuation for Abivax:
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• UC is the lead indication. We have worked on a US+EU only target market in details, while applying in the end a multiple factor of 1.15x to include a roughly estimated potential for the rest of the world. In the US and Europe, prevalence of UC is estimated to be 735k and 550k respectively, with around 55% being moderate-to-severe cases. Of those, it is estimated (source: Roche) that about one in five receives a biologic or any kind of modern drug, which will grow over time (our estimate is 30% by the end of the next decade). The incidence-to- prevalence ratio is close to 6%, representing roughly the annual growth of the market (Transparency Market Research is expecting the IBD market to expand at a CAGR of c.6% from 2019 to 2027).
• We assume ABX464 can get approval in patients intolerant to existing therapies but should have a larger audience in patients refractory to/failing on previous therapies. While we model a modest share of the intolerant market because the number of drugs available is so huge and the variety of mechanisms so large that we only see room for a modest low-single digit share for ABX464, the situation in the refractory market is different. Here we do expect the drug to take a progressive share that may go up to 20-25% in the induction and the maintenance phases with no meaningful difference between the two since it works both fast and long at first glance. Price-wise, of course we do not know what the average discount is for drugs in UC in the US but we tried to align with the estimated price of Entyvio i.e. about EUR2k per month outside the EU and slightly more in the US with some room to manoeuvre and to increase prices over time. At peak, around 2033, we see ABX464 reaching annual sales of about EUR1.2bn, assuming the partner is both strong and committed enough to compete with the leaders in the field.
• We have modelled a tiered royalty rate of 15% up until USD150m annual sales, 20% up until USD350m and 25% from USD500m and above together with three installed milestone payments of USD150m for each of the first two upon signature (in 2020) and first entry in phase III (in 2021) and USD200m when it is first approved (in 2025). There are always commercial and sales-related milestones but they are more optional in nature and so we decided not to take any. We applied 15% tax rate on royalties and 30% and then 25% on milestone payments. First sales in the US are booked in 2025 but first full year is 2026. The WACC used is 15% (standard WACC used for most of the biotech companies at BG) and PoS for UC is 40%, which looks in accordance with the status of a drug starting phase IIB trials.
UC alone is • Although we may argue that the first milestone (payment upon signature of the EUR18.6 per deal) goes beyond UC, we derive NPV for ABX464 in UC of EUR219m or EUR18.6 share (adjusted) per share of which EUR184m and EUR15.6 per share if no value is attributed beyond 2035 (-10% annual rate to infinity otherwise). This is more than the total value of Abivax today.
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Fig. 21: Modelling ABX464 in UC
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
UC prevalence - US 779,736 826,520 876,111 928,678 984,399 1,043,463 1,106,070 1,172,435 1,242,781 1,317,348 1,396,388 1,480,172 1,568,982 1,663,121 1,762,908 1,868,683
UC prevalence - Europe 582,682 617,643 654,701 693,984 735,623 779,760 826,546 876,138 928,707 984,429 1,043,495 1,106,104 1,172,471 1,242,819 1,317,388 1,396,431 o/w moderate-to-severe 428,876 454,609 481,885 510,798 541,446 573,933 608,369 644,871 683,563 724,577 768,052 814,135 862,983 914,762 969,647 1,027,826 o/w moderate-to-severe 320,544 339,777 360,163 381,773 404,679 428,960 454,698 481,980 510,898 541,552 574,045 608,488 644,998 683,697 724,719 768,202 o/w treated with biologics 90,043 99,991 110,810 122,566 135,335 149,194 164,230 180,532 198,200 217,337 230,378 244,200 258,852 274,383 290,846 308,297 o/w treated with biologics 70,515 78,144 86,434 95,438 105,211 115,814 127,309 139,768 153,263 162,459 172,206 182,538 193,491 205,100 217,406 230,451
Price US induction 7,014 7,154 7,297 7,443 7,592 7,744 7,899 8,057 8,218 8,383 8,550 8,721 8,896 9,074 9,255 9,440
Price EU induction 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,001
Price US maintenance 28,056 28,618 29,190 29,774 30,369 30,977 31,596 32,228 32,873 33,530 34,201 34,885 35,582 36,294 37,020 37,760
Price EU maintenance 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,001 24,002
MS induction after Biologics 4% 8% 12% 14% 18% 20% 22% 23% 25% 25% 25%
MS induction after Biologics 3% 6% 9% 12% 15% 18% 20% 25% 25% 25%
MS maintenance after Biologics 3% 7% 10% 12% 15% 17% 18% 19% 20% 20% 20%
MS maintenance after Biologics 3% 5% 8% 10% 13% 16% 17% 20% 20% 20%
MS induction intolerants 1% 1% 2% 2% 3% 3% 4% 4% 4% 4% 4%
MS induction intolerants 1% 1% 2% 2% 3% 3% 4% 4% 4% 4%
MS maintenance intolerants 0% 1% 1% 2% 2% 3% 3% 3% 3% 3% 3%
MS maintenance intolerants 0% 1% 2% 2% 2% 3% 3% 3% 3% 3%
Total sales UC - US 28.8 79.0 140.2 193.8 271.9 342.3 403.2 463.9 546.9 587.5 631.1
Total sales UC - Europe 22.2 61.7 114.1 166.0 225.0 291.7 367.2 433.0 496.1 532.9 572.5
Total sales (EURm) 58.7 161.8 292.5 413.8 571.4 729.2 885.9 1,031.5 1,199.4 1,288.4 1,384.1
Royalties stage I – 15% 8.8 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5
Royalties stage II – 20% 2.4 28.5 52.8 70.0 70.0 70.0 70.0 70.0 70.0 70.0
Royalties stage III – 25% 17.8 57.3 96.5 132.9 174.9 197.1 221.0
Total royalties 8.8 24.9 51.0 75.3 110.3 149.8 189.0 225.4 267.4 289.6 313.5
Milestones 135.7 135.7 181.0
Tax rate 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
30% 30% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
95.0 95.0 0.0 0.0 0.0 143.2 21.1 43.3 64.0 93.8 127.3 160.6 191.6 227.2 246.2 266.5
# of discounted years 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
NPV 548
PoS 40%
219.3 11.808 18.6 per share
Source : Bryan, Garnier & Co
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• RA should be the largest opportunity if we consider the prevalent population of 2.8 million people with the disease in the US and about 2.3 million in Europe and even when extracting only the diagnosed population with moderate-to-severe forms of the disease (1.9 million and 1.4 million respectively), according to Roche.
• We have considered a positioning of ABX464 in line with how it is used in the context of the about-to-start phase IIA study i.e. in patients with inadequate response with MTX (methotrexate) and/or anti-TNF therapies. At least 40% of the patients are eligible to biologics and we have estimated that about 18% of them would relapse every year (70% will relapse over a 4-year period). We have assumed also that 1 to 2% of the population eligible to other treatments in front- line would be intolerant and therefore progressively put on ABX464.
• We have taken price assumptions in line with existing therapies for RA, in particular Humira the leader and Xeljanz the other oral treatment but it is fair to say that one single price will be negotiated across all indications for ABX464 and if all indications are approved then some price-volume discussions will take place in some countries like France. This may impact parts of the modelling but not in a too meaningful way however.
• It is more difficult to make assumptions in RA because the available data to compare with existing therapies is limited and so when it comes to assessing the kind of market share ABX464 is able to take, we lack basic information. Now, since we are talking at this stage about an advanced line of treatment after relapse with anti- TNF, then ABX464 would mainly compete against IL-6 antibodies and more particularly JAK inhibitors, sharing with them also the oral route of administration. We believe that JAK inhibitors can represent more than half of the market since they have now delivered a strong set of data supporting evidence of efficacy while the newest compounds look safer compared to Xeljanz (which, despite drawbacks, is annualizing above USD2bn in sales now), having also been first to market and supported by large cap pharma companies (Pfizer, J&J, AbbVie). Actemra is also annualizing around USD2bn but with a larger spectrum of indications and we do not see the class growing very strongly over the years to come. So, we believe it is reasonable to expect ABX464 to take a share of about 20% of the segment at peak.
• We apply the same assumptions as with UC in terms of royalty rates and taxes. We also included two milestone payments of USD150m each when the compound starts phase III (assumed in 2022) and when it is approved (2027). • Of course, this opportunity translates into high PS of EUR2.4bn in 2035 and the highest NPV among all indications (EUR717m). Considering the least advanced stage of development compared to UC and the absence of clear and systemic overlap between IBD and RA, we have applied a 15% PoS to this programme, which results in an adjusted NPV of EUR108m or EUR9.1 per share.
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Fig. 22: Modelling ABX464 in RA 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
US 2,959,300 2,988,893 3,018,782 3,048,970 3,079,459 3,110,254 3,141,357 3,172,770 3,204,498 3,236,543 3,268,908 3,301,597 3,334,613 3,367,959 3,401,639 3,435,655
Europe 2,302,800 2,325,828 2,349,086 2,372,577 2,396,303 2,420,266 2,444,469 2,468,913 2,493,602 2,518,538 2,543,724 2,569,161 2,594,853 2,620,801 2,647,009 2,673,479 o/w moderate-to-severe 1,949,300 1,968,793 1,988,481 2,008,366 2,028,449 2,048,734 2,069,221 2,089,913 2,110,813 2,131,921 2,153,240 2,174,772 2,196,520 2,218,485 2,240,670 2,263,077 o/w moderate-to-severe 1,444,300 1,458,743 1,473,330 1,488,064 1,502,944 1,517,974 1,533,154 1,548,485 1,563,970 1,579,610 1,595,406 1,611,360 1,627,473 1,643,748 1,660,186 1,676,787 o/w treated with biologics 696,900 703,869 710,908 718,017 725,197 732,449 739,773 747,171 754,643 762,189 769,811 777,509 785,284 793,137 801,069 809,079 o/w treated with biologics 575,700 581,457 587,272 593,144 599,076 605,066 611,117 617,228 623,401 629,635 635,931 642,290 648,713 655,200 661,752 668,370
Price US 16,612 16,945 17,284 17,629 17,982 18,341 18,708 19,082 19,464 19,853 20,250 20,655 21,069 21,490 21,920 22,358 Price EU 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,001 12,002
Yearly relapse rate 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18
MS after Biologics 3% 8% 10% 13% 15% 18% 20% 20% 20% MS after Biologics 3% 7% 10% 13% 15% 18% 18% 18% MS intolerants 0% 1% 1% 1% 1% 2% 2% 2% 2% MS intolerants 0% 1% 1% 1% 1% 2% 2% 2%
Total sales RA - US 62.4 232.1 357.4 474.6 590.2 711.0 837.3 857.8 878.8 Total sales RA - Europe 99.7 252.3 412.2 579.6 754.9 938.3 1,130.2 1,158.4 1,187.3 Total sales (EURm) 186.4 557.1 885.0 1,212.3 1,546.8 1,896.7 2,262.7 2,318.6 2,376.1
Royalties stage I - 15% 0.0 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 Royalties stage II - 20% 81.4 70.0 70.0 70.0 70.0 70.0 70.0 70.0 Royalties stage III - 25% 96.3 178.1 261.7 349.2 440.7 454.6 469.0 Total royalties 0.0 22.5 22.5 103.9 188.8 270.6 354.2 441.7 533.2 547.1 561.5
Milestones 135.7 135.7
Tax rate 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 30% 30% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
0.0 0.0 101.8 0.0 0.0 0.0 19.1 120.9 88.3 160.4 230.0 301.1 375.4 453.2 465.1 477.3 # of discounted years 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
NPV 717 PoS 15% 107.6 11.808 9.1 per share Source : Bryan, Garnier & Co If we summarize our thoughts about Abivax and the way we value the company, we have taken an NPV approach with the two main assets of the company. Obviously, we’ve done it more carefully with ABX464, details of which are presented in the previous few pages for UC and RA which are the two main value drivers. CD is indeed also very significant but we do consider it as very closely related to UC. That said, we’ve done a very similar work, starting from a prevalence lower than with UC, a similar portion of severe patients but a larger proportion of biologic users, hence a non-adjusted potential for ABX464 very close to the one in UC. Although the two indications usually go together, ABX464 is about two years behind in CD compared to UC, hence a PoS of 25% representative of the stage of development (about to start phase IIA). The two milestones of USD100m each are in 2022 and 2027 and correspond to the phase II results and potential launch.
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To note is that we have considered annual flows for ABX464 until 2035 which corresponds to the patent held by Abivax and covering indications (inflammation) with the product. Composition of matter patent goes at least until 2030. It is key for us to mention that should we decide that there is no value at all beyond 2035 because partners should stop paying royalties beyond patent expiry, then the total value per share would go down from EUR37.5 to EUR29.8, still representing a very significant upside to the current valuation of the company.
Similarly, we would like to say a word about ABX196. We have taken a cautious approach to the drug because we have some mechanistical rationale to expect signs of efficacy but there are plenty of examples where this has never translated into marketed products. So we did the job to model the targeted market and 2L and 3L of systemic therapy of HCC, with a peak of 25% market share, in combination to PD-1/PD-L1 agents. With an annual price of EUR100,000 but cut by half to assume a median PFS of 6 months (arbitrary but representative of what VEFR-TKis have achieved), sales would reach c. EUR100m annually. Access to the 1L would significantly increase the potential of the drug but we have decided to remain in line with the design of the ongoing phase I/II study for the time being. It is conservative but the competition is also intense in this field and by the time ABX196 eventually hits the market, SoC is very likely to have changed and maybe several times. However, what looks interesting is that, like in RCC, IO-based therapies are moving first line and so the strategy to combine with PD-1/PD-L1 may prove successful. We would also note that a very significant part of the target market would be in Asia and so it would be essential for Abivax to have a partner that is able to tackle this market opportunity together with US and Europe.
For the purpose of modelling, and although we have limited visibility, we have assumed a 20% royalty rate and two milestones payments of USD20m and USD50m for the initiation of the next phase of trials, respectively in 2021 and 2024. We are applying a conservative 10% PoS to ABX196.
A FV OF EUR37.5 PER SHARE Fig.23 shows in a nutshell what the valuation of Abivax is made of. Of course, everything is dependent upon the ability to sign a global agreement for ABX464 in 2020.
Fig. 23: Final composition of the valuation of Abivax Assets/blocks Indication NPV PoS Adj. NPV per share ABX464 UC 543 40% 217 18.4
CD 477 25% 119 10.1
RA 671 15% 101 8.5 ABX196 HCC 68 10% 7 0.6
Discounted central costs -3 100% -3 -0.2
Cash/Debt 2 100% 2 0.1
1,758.5 443 37.5
Source: Bryan Garnier & Co
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This agreement would include the following parts:
• a milestone to be paid immediately of USD150m for the acquisition of full rights to ABX464 in all indications, therefore including IP and a share of the costs incurred to bring the drug to the current level of development. This amount is strictly identical to the one paid by Abbott when the first agreement was signed with Galapagos back in 2012. When the first deal with Gilead was signed, filgotinib was phase III-ready in RA and Gilead agreed to pay USD725m upfront, consisting of USD300m of license fee and USD425m in equity investment. Although not in the field of inflammation, the agreement between Innate Pharma and AstraZeneca signed in 2015 can also be considered as interesting to get some benchmark numbers since monalizumab was in phase II at the time and AZ acquired rights to develop it in monotherapy and in combination from phase III onwards (Innate Pharma was in charge up to the end of the phase II) and paid USD250m upfront plus a further USD100m at the start of the first phase III. We are therefore conservative in our approach but we think it is reasonable in the context of a phase IIA in UC of limited size to drive conclusions from;
• USD850m in development and regulatory milestones, corresponding to the validation in phase II and III trials of a good benefit-risk profile in UC, CD and RA as well as the acceptance of filing and first approval by the regulatory agencies. The total amount of milestones in the context of the agreement between Galapagos and Abbott was USD1.2bn but included commercial and sales-based milestones which are usually representing a majority of the total milestones in such a deal. Here we have excluded such milestones. We might be somewhat aggressive in terms of development and regulatory milestones but this is balanced by the absence of any commercial milestone;
• Tiered royalties starting at 15% and going up to 25% with three tranches of up to USD250m in annual sales, between USD250m and USD500m and anything above USD500m. The deal with Gilead signed in 2015 by Galapagos started at a 20% rate. The deal between Innate Pharma and AZ is understood to included royalty rates around 20% too. We believe that we are in the right range of royalty rates considering the level of maturity of the ABX464;
• Responsibility and funding for all upcoming clinical trials beyond the ones that are either started or designed that would remain within Abivax’s hands (phase IIB in UC, phase IIA in RA and phase II in CD);
• We have not considered that Abivax may ask to retain some rights in specific regions but co-promotion rights could easily be discussed in the context of such an agreement. It was the case with Galapagos and with Innate Pharma in part or all of Europe.
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We can identify As we discussed already, we believe there is room to balance the scenario of a collaboration with multiple the one making Abivax a take-over target. The candidates are more or less the same in our view candidates to since ABX464 is by far the main asset of the company. To a certain extent, if someone is ready to partner with (or pay a fair price for ABX464, ABX196 could be ignored if it cannot be individually negotiated. buy) Abivax
Before we move to the last chapter of the note and say a few words about who we see as potential partners for ABX464, we’d like to mention here some of the other assumptions we’ve made to build up our valuation. First of all, we have assumed that Abivax would incur costs for the phase IIB in UC up to the end in mid-2021 and costs for the two phase IIA studies in RA and CD, as well as the first part of the phase I-II study for ABX196. Together with some research activities, and after a peak of expenses somewhere between EUR30m and EUR33m in 2019, this would represent operating expenses of around EUR30m in 2020, then falling significantly as of 2021 to stabilize about EUR15m thereafter. The reason why the discounted sum of losses reported as “central costs” in Fig.21 is not higher is because this is combined with the tax carry forward of Abivax which is superior to EUR100m and that we’ve taken as a credit in year 1 but which could have offset part of the tax paid on milestones and royalties over time too. This is pure methodology.
We would note that Abivax has the possibility now to self-finance its operations going forward. When Sofinnova subscribed to a capital increase last summer, Abivax said that it provided financial visibility up to the end of H1 2020. By then, we assume that Abivax will have to determine what its future looks like, meaning that it will have either signed a partnership agreement for ABX464 or sell the company. We expect the upfront payment to be at least USD150m and therefore this would guarantee the financing of operations for the company for several years whatever is decided for the rest of the portfolio.
Lastly, we have applied a 15% WACC across all projects, which is in line with the traditional rate used for biotech stocks. Two remarks however: first, the mechanistical approach of ABX464 does not consist of a fundamentally new and disruptive technology carrying a high risk-high reward profile like some in the field of biotech but we nevertheless decided to keep the usual rate of 15%; second and very importantly, as soon as the asset becomes the ownership of the third party that will have partnered it (or acquired it), the WACC to apply is no longer so high. The large cap pharma companies that may be interested in acquiring the rights to ABX464 would immediately create value by applying WACC which are more in the range of 7% to 8%.
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Among the companies we see as interested to enter into discussions with Abivax about some form of collaboration, we believe it is fair to mention at least the following ones:
• AbbVie is having Humira to manage in the coming years with a significant base of revenues to offset as biosimilars start to reach the US market in 2023 (it is already the case in some ex-US territories). Of course it has risankizumab (IL-23 antibody), approved as Skyrizi in PsO and developed in IBD and also upacatinib (JAK1 inhibitor), approved as Rinvoq in RA and developed also in IBD but it is fair to expect AbbVie to look in a potential disruptive agent in a core field for the group. However, in Abivax shoes, we would wonder the level of commitment AbbVie would have for ABX464 considering the competing agents internally and the previous case with Galapagos. We would not feel comfortable with a classic partnering deal but of course it would be different if AbbVie is interested in buying Abivax;
• The other anti-TNF owners can also be interested parties to discuss with Abivax. J&J maybe has enough internally (starting with Stelara) but there is a long tradition of acquisitions with the company and we would not rule out some interest on their side first to think about the next generation of products since we are talking here about a drug that would not reach the market before 2025; secondly, we are dealing with an oral agent and it is fair to assume that orals and injectables with time might take different segments of the same market. But in this category of anti-TNF promoters, we would rank UCB at the top of the list because not only is the company approaching the LOE period for Cimzia but also for other key drugs of its portfolio and so the willingness to replace is high. Moreover UCB may have the right size for Abivax to guarantee a strong commitment relative to the importance of ABX464 within its R&D pipeline;
• Among the large pharma players, many have either competing agents at least in one indication (GSK in RA, Roche in IBD) or no synergy to offer in the field but some are in search for new large opportunities. Among them, we would assume that Sanofi with its new management may be interested in considering ABX464 (and maybe ABX196 by the way) since they want to increase their exposure to Specialty Care. They have Kevzara in RA which has a limited potential in our view and it could make sense to have an ABX464-like product to strengthen the pipeline for the mid-term although some more near-term opportunities could be warranted too;
• Lastly, we would mention large biotech companies as another possible option for Abivax with, again, the Galapagos-Gilead link-up as an example. Some of them need to reinvent themselves. Hepatitis gave Gilead a lot of cash at the time to reinvest in new areas. It could be the same for Galapagos today which has a lot of cash too and might use its knowledge of the field to help Abivax reach the finish line.
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