YM BioSciences: Trading Below Cash with Multiple Catalysts Print E-mail
Saturday, 08 August 2009 14:33

YM BioSciences (AMEX:YMI) (TSE:YM) (US$0.58) currently trades at a negative enterprise value of about $10 million (M), which includes $43M in cash, zero debt, and a trailing 12-month cash burn rate of about $18M. YMI has about 58.5M shares outstanding and 65M shares of common stock on a fully diluted basis, which equates to a market cap of about US$34M and US$38M, respectively.

Nimotuzumab (nimo) (an IgG1, humanized epidermal growth factor or EGFR targeting monoclonal antibody or MAb) is currently being evaluated in 11 Phase 2 and 3 international trials, including three by YMI and eight by its licensees. The Company is making progress on its lead cancer drug nimotuzumab, which is in the same class as Erbitux (cetuximab), but has a better safety profile since it does not cause the severe (Grade 3 or 4) skin rash associated with these types of treatments. The lack of severe skin rash would otherwise be a clear advantage, but in this case the clinical effectiveness of EGFR inhibitors is thought to be linked with the occurrence of this side effect (see the Company's corporate presentation for more details and images of Grade 3 or 4 rash).

In April 2009, YMI presented data at AACR that demonstrated bivalent binding by nimo results in differential recognition of EGFR over-expressing cancer cells and normal cells, which is in contrast to observations with Erbitux, whose high affinity monovalent interaction prevents it from discriminating between the cells. Whereas the activity of high-affinity anti-EGFR MAbs such as Erbitux is dispersed across all tissues (resulting in toxicities such as severe skin rash), the activity of nimo is concentrated at the site of the tumor, thus sparing health tissues such as the skin.

YMI is able to leverage Phase 3 data for nimo from less-regulated markets where the drug is already used such as India, Argentina, and Colombia (nimo is already approved for marketing in 18 countries with potential for approval in a large market such as Europe, Japan, and/or U.S. during 2010-2011). As of late 2007, a consortium of licensees was also formed to share late-stage clinical trials in order to rapidly recruit patients in numerous countries and familiarize oncologists with the drug as part of the clinical development process for nimo in developed markets. Nimo is approved for use in India and is marketed by licensee Biocon (BOM:532523) and the drug is also available in Singapore, Malaysia, Indonesia, and several European countries on a special-access, compassionate use basis.

On 8/6/09, Amgen (NASDAQ:AMGN) announced that colon cancer patients lived significantly longer without their disease getting worse when treated initially Vectibix (panitumumab) and chemotherapy compared to chemo alone. Currently, Vectibix is only approved only for use in colon cancer patients whose tumors have spread despite chemo. The results of this study apply to patients with the normal version of a gene known as KRAS.

Previous studies have found that patients with the normal (wild-type) KRAS gene respond favorably to EGFR drugs like Vectibix ($150M in sales) and Erbitux ($1.5B in sales), while patients with a mutated version of the gene do not respond to the drugs. The FDA recently allowed both of these drugs to include information in their product labels regarding the KRAS gene as a biomarker for guiding treatment decisions. It is estimated that about 35% of patients with colorectal cancer (CRC) have KRAS mutations, and Amgen reported that adding Vectibix to chemo in CRC patients with the KRAS mutation was associated with a negative effect.

In August 2008, YMI announced preliminary results from a Phase 2 study of nimo in patients with irinotecan-refractory, metastatic colorectal cancer (mCRC). The data was based on 58 evaluable patients of the 61 enrolled in the trial. The prospective primary endpoint in the trial was objective tumor response rate [RR] with secondary endpoints that include overall survival, the rate and duration of stable disease, and progression free survival [PFS]. The RR was 3.4% while the disease control rate reported was 50%, consisting of 27 patients with stable disease and two patients with partial response as determined using RECIST criteria. Median PFS was 12 weeks. Overall survival (Kaplan-Meier) in the evaluable patients was 9.3 months.

Tissue samples from 17 patients were available for kRas analysis, and indicated that about 30% of the patients had mutated KRAS (a negative factor for EGFR treatment). PFS of 12 weeks was observed in patients with the mutation and 18 weeks in patients with wild type (normal version of the KRAS gene). These results are in line with expectations since the KRAS mutation is a well known impediment to EGFR antibody effectiveness. In this trial, nimo continued to demonstrate a best-in-class safety profile with only 22% of patients (15) reporting a rash, all of which was Grade I/II. In contrast, Grade I/II rash was reported in 80% and severe Grade III/IV rash occurred in 9.4% of patients in the Erbitux + irinotecan trial known as BOND 1.

Shares of YMI declined by about 20% on heavy volume on the Phase 2 mCRC trial news last year, as many traders and investors were hoping for blockbuster survival results in the study were disappointed with a median PFS of 12 months for nimo versus 18 months for Erbitux in the BOND I trial. YMI decided to file for registration trials last year for patients with non small cell lung cancer (NSCLC) and brain metastases because of encouraging Phase 2 results in those indications and since they require shorter development times than CRC trials would require. Despite the disappointing Phase 2 mCRC results last year, nimo continues to demonstrate a best-in-class safety profile among EGFR antibodies with a differentiated affinity for EGFR that is targeted toward tumor cells rather than healthy cells such as the skin with lower EGFR expression.

The following are expected milestones for nimo clinical data: (1) nimo post-marketing data 150 patients in epithelial-derived tumors 3Q09; (2) nimo Phase 2 first-line NSCLC in 2010; (3) nimo European final Phase 3 first-line pediatric glioma data in 2010; (4) nimo European Phase 3 first-line adult glioma data in 2010; (5) nimo North American Phase 2 recurrent pediatric glioma data in 2010; (6) nimo esophageal Phase 2 first-line data (Brazil) in 2010; (7) nimo Phase 2 (Japan) recurrent gastric cancer data possibly in 2010; (8) recruitment by Oncoscience AG in nimo Phase 3 trial among newly diagnosed pediatric pontine glioma patients is concluded; and (9) recruitment by Oncoscience AG in a Phase 3 trial for adult glioblastoma grade IV will be completed in 2009. The 9/30/09 date for this entry represents the end of 3Q09, which is the earliest expected data from the seven trials listed.

In mid-May, YMI provided an update on AeroLEF, which has completed Phase 2 development for the treatment of moderate to severe acute pain. The product is differentiated from other approaches using fentanyl because patients can individually control the analgesia required for their differing intensities of pain. AeroLEF is a proprietary, inhaled-delivery composition of free and liposome-encapsulated fentanyl in development for the treatment of moderate to severe acute pain. AeroLEF met all endpoints in a randomized Phase 2 trial and is currently being prepared for late-stage development internationally. After consulting with regulatory bodies in Europe and Canada, YMI is now determining the optimal clinical path forward and conducting discussions with potential partners.

AeroLEF is targeted for inpatient use in hospitals in conjunction with an FDA- approved inhaler device to provide both immediate and longer-lasting (e.g. 4 - 5 hours) pain relief through a proprietary combination of free and liposomal fentanyl for inhalation. AeroLEF allows patients to precisely and effectively control their pain versus current options such as fixed dosing intervals or patient-controlled analgesia (PCA) pumps. PCA pump administration typically results in only 60-90 minutes of pain relief; while intravenous fentanyl is rapidly degraded and falls below effective levels in about 45 minutes.

At current valuations, the market currently places no value on nimo or AeroLEF with YMI trading a discount to its cash since reporting the Phase 2 mCRC results last year. However, the following factors in favor of YMI support the current share price and provide for a multitude of potentially positive clinical development catalysts over the next year or so as the Company works toward its goal of nimo approval in a major market by 2010-2011.

(1) the major safety advantage and discriminate EGFR binding of nimo with best-in-class potential

(2) the global consortium behind nimo clinical development, which includes 11 Phase 2 or 3 trials being conducted by YMI (3) or its licensees (8), including Daichii-Sankyo (TYO:4568) (DSKYY.PK), Biocon, and Oncoscience AG

(3) the strong balance sheet of YMI with about $43M in cash, zero debt, and a trailing 12-month cash burn rate of about $18M

(4) pending clinical data for nimo, including the milestones outlined above included nine studies through 2010

(5) marketing approval of nimo in 18 countries with a goal of approval in major market by 2010-2011

(6) possible licensing deal for Phase 3 development of AeroLEF since FDA hold was removed in June 2008

Disclosure: No positions

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