The company and its collaborators are currently running six clinical studies of paxalisib across multiple different indications.
Over the next 12 months, H.C. Wainwright expects Kazia to report results from four of these clinical programs which could become significant catalysts for the stock.
The following is an extract from H.C. Wainwright’s initiation report on Kazia:
Paxalisib is a unique PI3Ki effective against GBM. Kazia Therapeutics is a clinical-stage oncology company developing novel therapies against brain cancer. The company’s lead product is paxalisib, an oral pan-PI3K/mTOR dual inhibitor that can cross the bloodbrain barrier to destroy glioblastoma multiforme (GBM) cells. Kazia reported positive interim results from an ongoing Phase 2 study in Dec. 2020, which showed that patients with newly diagnosed GBM and unmethylated MGMT status (50-65% of all GBM) treated with paxalisib on top of standard-of-care (SoC) achieved 60% improved progressionfree survival and 40% improved overall survival vs. patients treated with SoC alone. Furthermore, in our view, paxalisib has one of the cleanest safety profiles among PI3K inhibitors and it has been welltolerated in nearly 100 patients. If approved, we believe paxalisib could become the new SoC for MGMT-unmethylated GBM patients. The drug is being evaluated in the GBM AGILE adaptive pivotal study, which costs significantly less than a traditional Phase 3 study and could report topline results as early as YE2023. We expect paxalisib to launch in 2025 and generate risk-adjusted revenues of A$401M by FY2030.
Additional indications provide avenue for growth. Beyond GBM, Kazia is also exploring several additional indications that we believe paxalisib is well-suited for, including DIPG and brain metastases caused by breast cancer. In December 2020, the company’s partners at St. Jude Children’s Hospital reported that the drug is safe for pediatric DIPG patients and has some encouraging early signs of efficacy. We note that the FDA has granted the drug the Rare Pediatric Disease Designation for this indication, which could lead to a priority review voucher with a potential value of over $100M for Kazia, if approved. We believe breast cancer brain mets, which is being investigated in a Phase 2 study, could become the largest indication for paxalisib in the future with up to 70,000 new cases each year in the U.S. alone.
A catalyst-rich 2021. Kazia and its collaborators are currently running six clinical studies of paxalisib across multiple different indications. Over the next 12 months, we expect Kazia to report results from four of these clinical programs which could become significant catalysts for the stock: (1) the initial results from the Phase 2 study in breast cancer brain mets from Dana-Farber in 1H21; (2) the initial results from the Phase 2 study in brain mets by the Alliance group in 1H21; (3) the initial results from the Phase 1 study in brain mets by Sloan Kettering in 1H21; and (4) the final results from the company’s Phase 2 study in newly diagnosed GBM in mid-2021.
Valuation and risks. We are initiating coverage of KZIA with a Buy rating and 12-month price target of $17 per ADS. We derive our price target based on a risk-adjusted net present value (rNPV) analysis of projected future royalty revenues from paxalisib, assuming an 14% discount rate and a 0% terminal growth rate. We derive an rNPV of A$374M for the product and add in pro forma net cash and cash equivalents of A$31M, to arrive at a 12-month price target of $17 per diluted ADS. At that time point, we project the company to have a total of 130M shares of common stock, or 13M ADS. Risks include, but are not limited to: (1) clinical; (2) commercial; (3) financial; (4) pandemic; and (5) intellectual property.
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