Shaw and Partners
03 October 2018
Rating: Buy, Risk: High, Price Target: $0.90
Phase 2 Post Traumatic Stress Disorder Trial Fails to Meet its Primary Endpoint
Event
BNOs’ Phase 2 Post Traumatic Stress Disorder Trial has not met its primary endpoint of a decrease in PTSD symptoms as measured by CAPS-5 at 12 weeks. Shaw and Partners has reduced its forecasts and TP to $0.90 (from $1.50). Our rating remains BUY.
Highlights
• BNO’s PTSD trial did not meet its primary endpoint of a decrease in PTSD symptoms as measured by CAPS-5 at 12 weeks. BNO will cease further development of BNC210 in PTSD which cuts USD4.7bn from the potential U.S. addressable market for BNC210. The remaining U.S. addressable market for BNC210 is estimated at USD15.9 to 17.9bn. This covers six indications including GAD, Panic and Agitation. BNO has strong phase 2 GAD and Panic results and it is awaiting phase 2 results in Agitation which are expected in 1Q19. Partnering of BNC210 is expected prior to further studies being initiated.
• BNC210 remains an attractive partnering opportunity for these anxiety and depression indications despite the PTSD results because of the recognised heterogeneity of PTSD symptoms, which sets PTSD apart from conditions such as GAD, Agitation and SAD. Furthermore evidence of anti-depressant effects and anti-anxiety activity were observed in the PTSD trial CAPS-5 symptom clusters, which will be viewed positively by potential BNC210 partners of which we understand there are a number. The PTSD trial also added significant safety data with BNC210 administered for the first time over a 3-month treatment period.
• BNO’s funding looks to be OK; a capital raise is not expected. Prior to additional cash inflow BNO remains funded through to October 2019. In addition to current cash ($24.9m as at June 30) we expect an R&D tax rebate of ~$7mn to be received in November 2018, a Merck milestone payment estimated at $20m is expected in 1Q19 upon Merck initiating a phase 2 trial in BNC375 and the licensing of BNO’s Oncology assets, BNC105 and BNC101 could bring in $20mn plus. Operating costs post the final costs associated with the PTSD trial are expected to decline significantly, however monthly capital repayments on the USD15mn debt facility begin in November.
Recommendation
Following the PTSD results we have revisited our sum-of-the parts valuation of BNO revising our valuation down from $1.50 to $0.90 ps. The valuation reflects conservative market share assumptions, peak sales and probability of success (10%) across all assets. Our recommendation remains BUY.
