DNB Markets – Isofol Medical: AGENT phase III trial fails
Isofol Medical announced that the phase III trial AGENT had failed to reach its primary and most important secondary endpoints. This is a huge disappointment and reduces the company’s valuation significantly (as arfolitixorin – the drug evaluated in the AGENT trial – was its only asset in clinical development). We have cut our fair value to SEK0–3 (14–26).
AGENT phase III trial in mCRC failed to reach its endpoints. The AGENT trial compared mFOLFOX-6 + bevacizumab (Avastin) in mCRC patients, but arfolitixorin replaced leucovorin; the aim was to reach an increase in ORR of ⟩10% (primary endpoint) and to see a positive trend in the PFS (secondary endpoint). Unfortunately, the trial did not achieve either of these endpoints. Even though the data is not fully mature, the CEO stated that the ORR is; hence, it will not change over time. The PFS could change marginally as the data matures, we believe.
Trial set to be completed in Q4 with full data read-out then. We will not receive more detailed data or granularity on different subgroups, bio-markers or gene-expression data until later this year. The company stated that the trial will be completed in a responsible matter and the data submitted for publication as soon as possible.
Arfolitixorin its only asset in clinical development. As Arfolitixorin is Isofol Medical's most advanced asset and its only project in clinical development, we believe the steep share price fall (c85%) on the news was warranted. The failure of the trial and lack of data until Q4 also calls into question future developments and opportunities, in our view.
Financial position decent – for now. The company had cSEK332m in cash at end-Q1 (Q2 earnings not yet reported). However, cash will decline over time as the AGENT trial is completed and terminated. Even if the company scales back operations now because of the data read-out, cash will become an issue at some point.
How to proceed? The answer to this question is still highly uncertain and will depend on the detailed data analysis of the AGENT trial. Depending on the final data read-out in Q4, we believe there could be subgroups of interest that make further development of arfolitixorin worth pursuing, but at this stage we have no such indications that we can factor into our model.
Fair value cut to SEK0–3. We estimate cash burn for the remainder of the year of cSEK130m (assuming some cost-cutting and rationalisation of operations when the AGENT trial is completed), meaning Isofol Medical should have cSEK200m at end-Q4. We have lowered our LOA for arfolitixorin from 23.2% to 6% as there could still be some value left in the project. In addition, we have lowered our penetration assumptions, as the drug does not seem to benefit the entire population of mCRC patients.
Click here to view full report
Patrik Ling | DNB Markets | Equity Research | Senior Analyst Healthcare
DNB Bank ASA
Regeringsgatan 59 | Stockholm | Sweden
E-mail: patrik.ling@dnb.se| www.dnb.no