Kazia Therapeutics valuation lifts off the back of in-licensing of EVT901 drug: Edison Group

Kazia Therapeutics Ltd’s (ASX:KZA) (FRA:NV9) (NASDAQ:KZIA) valuation has increased to A$346 million or A$2.68 per share from A$301 million or A$2.32 per share following the company’s in-licensing of EVT801, a novel small molecule inhibitor of VEGFR3, from Evotec SE (FRA:EVT) (OTCMKTS:EVTCY)

A new research report from Edison Group analyst Nathaniel Calloway highlighted the expansion of the company’s product pipeline to include EVT801 as a good strategic fit while paxalisib is in the clinic.

He said: “Strategically, this is an important deal for Kazia, because it enables it to expand the pipeline to multiple drugs. 

“Paxalisib will remain the lead asset, but most of the operational burden of that development is borne by the investigators running GBM AGILE. 

“This leaves capacity for the company to expand its offering.”

Targeting tumours 

EVT801 is an oral small molecule that targets VEGFR3, a family of proteins are receptor tyrosine kinases involved in the formation of the circulatory system and lymphatic vessel networks.

Calloway highlighted that the lymphatic system was the primary route of metastasis for many tumour types.

“The lymphatic system acts as a highway of sorts for immune cells, and EVT801 has also shown capacity in vitro to shift the balance of immune cell subtypes in a tumour. 

“This shift in immune cell populations can potentially sensitize tumours to immunotherapy. 

“We expect this to be the focus of some of the research into this molecule in the coming years.” 

EVT801 Phase 1 Study 

EVT801 was developed as part of a collaboration between Evotec and Sanofi and is being licensed from Evotec for €1 million upfront, €308 million in milestones and tiered single-digit royalties. 

The report said: “Kazia will be responsible for development but will collaborate with and have access to Evotec resources to support development.

“The product is currently in preclinical development, but Kazia believes it can launch a Phase I study before the end of CY21.” 

Valuation increased 

The valuation increase was due to the Evotec transaction and Edison added EVT801 to its models with an initial valuation of A$47.2 million. 

Calloway said: “We model initial commercialisation of the drug for RCC and assume it will be used in the second line after progression on checkpoint inhibitors. 

“We estimate a total addressable market of approximately 70,000 in the US and Europe.

“We assume an initial launch price of US$120,000 per course.

“This is a discount from the pricing of checkpoint inhibitors (~$150,000 per course in current day pricing) because we model it being used primarily as an adjunct to these treatments.”

Commercialisation in 2028

The report also flagged a peak penetration of 15%, and with the expectation of initial commercialisation in 2028. 

“The company noted in the press release that patents on the compound extend to 2031/32 in most jurisdictions and we assume a five-year patent term extension to this. 

“We model royalties of 4-8% payable to Evotec as well as €158 million in milestones (out of €308 million in total), of which €18 million are clinical and regulatory and €140 million are commercial. 

“Our probability of success is 10%, which we view as average for a drug at this stage. 

Financial forecast

With the new development program, Calloway expects an increased R&D expenditure going forward.

He said: “We have increased our expected R&D spending for FY21 to A$10.6 million (from A$8.2 million) and to A$14 million (from A$6.6 million) in FY22. 

“We may adjust this spending schedule in the future once we have a more concrete timeline for development. 

“This has also increased our expected financing requirement for the company to A$50 million (A$30 million in FY23, A$20 million in FY25) from A$10 million previously (which had been modelled in FY24). 

“Otherwise, our forecasts remain unchanged.”

Story by ProactiveInvestors