Edison Investment Research has reinitiated coverage on Kazia with a valuation of A$145 million or A$1.54 per share.
The following is an extract from Edison’s research report:
We are reinitiating on Kazia Therapeutics, which is entering late-stage trials for its lead product, paxalisib, for glioblastoma multiforme (GBM). The product is a PI3K inhibitor originally developed by Genentech to cross the blood-brain barrier. The drug is scheduled to be included in the ongoing GBM AGILE study, an innovative investigator-sponsored study testing multiple candidates against the disease, with the first paxalisib patients being enrolled by the end of 2020. We are reinitiating with a valuation of A$145m or A$1.54.
A new type of PI3K inhibitor
Paxalisib belongs to the PI3K inhibitor class of drugs, which has had a varied history in drug development, with four approved drugs and many (50 or more) abandoned programs. The class has the promise of providing broad spectrum anticancer activity, but many drugs of this class have limiting safety and tolerability issues. While not benign, paxalisib has not showed any of these major safety issues, and interim data from the ongoing open label Phase II GBM study appear to show improvement in survival (median 17.7 months) compared to historical controls (13–15 months). Given the severe lack of options for patients with GBM (only two approved medications with only modest efficacy), any benefit from paxalisib would be significant for this disease.
A different type of pivotal study
Paxalisib has a unique clinical development pathway, because instead of the drug being examined in a pivotal study sponsored by the company, it will be included in the investigator-sponsored GBM AGILE study, which is investigating multiple drug candidates against a common GBM control. Typically, investigator-sponsored trials are insufficient to serve as pivotal studies, but the FDA has provided assurances that GBM AGILE can support approval in the event it shows positive results. This will allow Kazia to have a pivotal study that is beyond the scope of what it could afford to run independently. The company plans to include 200 patients on paxalisib, and enrolment is slated to begin before the end of 2020.
Valuation: Reinitiating at A$145m or A$1.54
We are reinitiating on Kazia, with new models and assumptions, at A$145m or A$1.54 per share. Paxalisib for GBM is our highest value program (A$115m) and we forecast US$450m peak sales. We expect the company to need A$45m in additional capital to reach approval of paxalisib in 2025.