By Grant Zeng, CFA Dose Escalation Scheme (mg/m2) Patients Treated Status Original Revised 1.5 1.5 3 Completed – No DLT 3.0 3.0 4* Completed – No DLT 5.0 5.0 10* Completed – No DLT 10.0 10.0 3 No DLT** 15.0 20.0 3 (planned) Enrollment scheduled Dec 2013 20.0 25.0 30.0 3 (planned) To be initiated subject to no DLT in 20mg/m2 dose 30.0
· Updated interim Phase I/II Clinical data of VAL-083 will be presented at AACR;
· Registration directed Phase II and Phase II/III trials will begin in 1H2014;
· Balance sheet remains relatively strong;
· Valuation attractive, and maintain Outperform rating;
Update on the Ongoing Phase I/II Clinical Trial of VAL-083 for GBM
Background of the Phase I/II clinical trial
DelMar initiated the Phase I/II clinical trial of VAL-083 for the treatment of refractory glioblastoma multiforme (GBM) or progressive secondary brain tumor in October 2011. The Phase I/II study is an open-label, single arm dose-escalation study designed to evaluate the safety, tolerability, pharmacokinetics and anti-tumor activity of VAL-083 in patients with histologically confirmed initial diagnosis of primary WHO Grade IV malignant glioma (GBM), now recurrent. Patients with prior low-grade glioma or anaplastic glioma are eligible if histologic assessment demonstrates transformation to GBM. Patients must have been previously treated for GBM with surgery, and/or radiation, if appropriate, and must have failed both Bevacizumab (Avastin) and temozolomide (Temodar), unless either or both are contra-indicated. Patients with brain tumors that have developed due to CNS metastases were eligible for the DelMar clinical trial at early doses.
The primary outcome measures in the dose-modernization portion of the clinical trial will be the determination of maximum tolerated dose (MTD). Secondary outcome measures include tumor response in patients and pharmacokinetics.
An initial phase of the study will involve dose escalation cohorts until a maximum tolerated dose (MTD) is established in the context of modern care. Once the modernized dosing regimen has been established, additional patients will be enrolled at the MTD in a registration directed Phase II clinical trial. Up to 30 patients will be enrolled in the Phase I study.
In Aug, 2013, DelMar received a notice of allowance from the FDA that will enable the company to accelerate the dose-escalation of its ongoing Phase I/II of VAL-083 in refractory glioblastoma multiforme (GBM) patients.
The revised dosing regimen was allowed by the FDA following an extensive safety review of patients treated to date. In comparison to the original dose-escalation scheme, the revised plan will enable the trial to reach higher doses and complete the dose-escalation portion of the clinical trial more quickly by skipping two interim doses. The revised dosing scheme also permits dosing above 30mg/m2 if VAL-083 is safe and well-tolerated at that dose.
Accelerating the program will enable DelMar to complete the dose-escalation portion of the Phase I/II clinical trial, attain doses that are more likely to have anti-tumor effects and advance into registration-directed studies for refractory GBM in the timeliest manner possible. The company’s goal remains to advance into registration-directed trials in 2014.
Enrollment in the first four cohorts of the VAL-083 trial has been completed with no significant adverse events or dose limiting toxicity (DLT) observed. Twenty five percent of patients evaluated in Cohorts 1-3 exhibited stable disease or tumor-regression and improved disease symptoms. Evaluation and clinical observations of Cohort 4 is ongoing.
*Cohorts 2 and 3 were expanded to allow for patient demand and to gather additional data on CNS metastases patients. ** Observation period for final patient in this cohort ongoing
Cohort 5 enrollment has completed, enrollment has advanced to Cohort 6
DelMar most recently presented VAL-083 interim clinical data from Cohort 1 to Cohort 4 in November 2013 at the 18th Annual Society for NeuroOncology (SNO) meeting.
Enrollment of Cohort 5 (20mg/m2), including a mandatory safety observation period, has been completed. VAL-083 was well tolerated by patients treated in the study with no significant adverse events or dose limiting toxicity (DLT) reached. The maximum tolerated dose (MTD) for VAL-083 has not yet been achieved.
While clinical observations of Cohort 5 are ongoing, the Company has now begun enrollment for Cohort 6 (30mg/m2).
Higher doses will be used in DelMar’s clinical trial
Previous VAL-083 clinical trials sponsored by the National Cancer Institute (NCI) reported promising safety and efficacy data for the treatment of GBM. Going forward, the DelMar clinical trial will be delivering higher doses of VAL-083 more often in comparison to the historical GBM treatment regimen studied at the NCI. The NCI-sponsored studies, a cumulative dose of 125mg/m2 delivered in a 33 day cycle in combination with radiation was demonstrated to be superior to radiation alone. In a comparative 33-day cycle, Cohort 6 of DelMar's dosing regimen will deliver a total of 180/mg2taking advantage of higher drug concentration and exposure to the tumor.
Reaching the 30mg/m2 dose cohort is an important clinical milestone in the development of VAL-083 as a potential treatment for refractory GBM. We believe higher concentration and higher exposure will position VAL-083 as a promising new treatment option for GBM patients who have failed other available therapies.
Updated Interim clinical data will be presented at AACR
DelMar will present updated interim clinical data, including available data from Cohort 6, at the upcoming American Association of Cancer Research (AACR) Annual Meeting, which is being held April 5 – 9 in San Diego, CA.
A Registration Directed Phase II Trial and a Phase II/III to Begin in 1H2014
Based on the positive interim data, we expect DelMar to initiate a registration directed Phase II trial in refractory GBM in 1H2014. Based on historical development of other products in GBM, it’s possible that DelMar may be able to obtain FDA approval to commercialize VAL-083 to treat patients who have failed other therapies from an open-label Phase II registration-directed clinical trial, which will save significant costs of a large Phase III clinical trial. It’s also possible that the FDA may grant fast-track, accelerated approval and/or priority review status to VAL-083, which will enable DelMar to begin filing for commercial approval during the clinical trial process.
Based on historical precedent with the FDA, the Phase II registration directed trial are expected to mirror the Avastin approval study in that indication. Under this scenario, the Phase II trial would be:
· Single-arm; open label design;
· Primary endpoints: PFS6 & Radiographic response
· Secondary endpoints: overall survival;
· N = 80-100 patients;
· Minimum response rate = 20%;
· Enrollment:Patients with recurrent GBM who have failed or are ineligible for both Temodar® and Avastin® (i.e. the same population as in the
The recent failure of Avastin in the front line treatment of GBM has highlighted the need for new therapies in newly diagnosed patients, particularly those with unmethylated MGMT promoter regions who do not respond to standard of care with temozolomide. DelMar would plan to advance modernized dosing regimen into a Phase II/III trial in newly diagnosed patients with unmethylated MGMT promoter in parallel with the refractory GBM registration trial (i.e. in 1H2014). The Company has begun designing this trial with KOLs.
· Randomized groups: Temodar vs. VAL-083;
· Primary endpoints: overall survival;
· Secondary endpoints: PFS6 & radiographic response;
· N = 500 – 600 patients (with interim endpoint at ~10% enrollment);
Positive Interim Phase I/II Clinical Data for VAL-083 Presented
On Nov. 22, 2013, DelMar presented interim data from its ongoing Phase I/II clinical trial for VAL-083 in recurrent glioblastoma (GBM) at the 4th Quadrennial Meeting of the World Federation of Neuro-Oncology (WFNO) being held in conjunction with the 18th Annual Society for Neuro-Oncology (SNO) meeting in San Francisco.
Highlight of the presentation include:
· Maximum tolerated dose (MTD) has not yet been reached.
· Enrollment of Cohort 5 (20mg/m2) is expected in December 2013, subject to completion of mandated safety observation period with Cohort 4 (10mg/m2).
· Pharmacokinetic analysis demonstrates a dose-dependent plasma exposure.
We are impressed by the safety profile of VAL-083, which is safe and well-tolerated by patients at the doses tested to date. We are also pleased to see some efficacy of VAL-083 in low doses.
Although accelerating dose escalation is not expected to significantly alter the duration of the trial, the company will treat fewer patients at sub-optimal doses and reach doses more likely to achieve meaningful patient benefit in a more cost efficient manner.
Based on historical data, we expect to see stronger patient benefit and tumor responses of VAL-083 as DelMar deliver higher doses.
DelMar Exited 2013 with Financials on Budget
No revenue was recorded for 2013.
R&D expenses were $2.3 million, and SG&A expenses were $4.0 million for the year ended December 31, 2013.
Adjusted non-GAAP net loss was $6.3 million ($0.21/share).
Balance sheet remains relatively strong. As of December 31, 2013, DelMar had cash and cash equivalents of approximately $4.1 million. We estimate that these funds will provide the company with sufficient capital to support its ongoing research and development activities for the next 12 months according to our financial model
Valuation Very Attractive
We maintain our Outperform rating on DelMar shares and reiterate our 12-month price target of $4.50 per share. Our call is based on recent clinical progress the company has made and attractive valuation of the company shares
DMPI is a clinical and commercial stage biopharmaceutical company focused on the development and commercialization of oncology drugs. The Company’s lead drug candidate VAL-083 is currently in a Phase I/II trial for the treatment of recurring GBM.
Previous multiple clinical studies conducted by NCI have demonstrated that VAL-083 is safe and efficacious for the treatment of GBM. Interim data from the Company’s Phase I/II trial confirmed the efficacy and safety profile of VAL-083 in GBM patients. Based on the data currently available, DMPI intends to initiate a registration directed Phase II trial of VAL-083 for recurring GBM and a Phase II/III trial for first line GBM in 2014. This will be a significant milestone for the Company which will position the Company in a late stage development.
VAL-083 has been approved in China for leukemia and lung cancer and DMPI has acquired its commercial rights in China market. Delmar is seeking to enter into a marketing partnership that could generate upfront fees, milestones and royalty revenue for DMPI, which is a de-risking event for the Company.
VAL-083 is a first-in-class alkylating agent with a different mechanism of action from that of Temodar, current market leader for GBM. The unique MOA of VAL-083 overcomes the resistance problem for Temodar.
Currently, DMPI shares are trading at around $1.3 per share, which values the Company at about $42 million in market cap based on 32 million outstanding shares. This is a deep discount compared to its peers. We noticed that most small biotech companies of development stage are valued from $50 million to $500 million depending on how advanced the pipeline is and which indications the company is targeting. DMPI’s lead drug candidate VAL-083 is in a Phase I/II clinical trial and will enter a registration directed Phase II trial in 1H2014.
We estimate VAL-083 could be approved by the FDA in 2017 for recurring GBM. The broad application of VAL-083, including first line, second line and third line treatment of GBM, and other cancers, means a great market potential for VAL-083, which could be a blockbuster for DelMar. We estimate DMPI will be profitable in 2018 with an EPS of $0.06 based on product sales of $35 million. EPS will grow to $0.35 in 2019 based on total product sales of $70 million.
Based on our financial model and the Company’s fundamentals, we have a price target of $4.50 per share for DMPI. We think a P/E ratio of 38x is appropriate for DMPI considering its growth in the next few years. Based on this P/E multiple, we come up with our price target of $4.50 per share using 25% discount for 5 years. Our price target values DMPI at $140 million in market cap, which we think is appropriate and fare compared to its peers.
But risk is high at this point for DMPI. Although VAL-083 has been approved in China for marketing, its indications are leukemia and lung cancer, different from the current indication of GBM under development in the US. The bar on both clinical and regulatory hurdle in the US is higher. We remind investors that risks associated with drug development are high, especially for early stage of drug candidates. VAL-083 is only in Phase I clinical trial, and both clinical and regulatory hurdles are significant at this point.
Another concern we have is that DMPI has a limited pipeline. Right now, VAL-083 is the Company’s only clinical-stage candidate. While DelMar has early-stage second-generation analogues from the VAL-083 chemistry platform and has access to additional clinical-stage product candidates through its relationship with Valent Technologies LLC, no other clinical stage candidates currently in the DelMar portfolio. If VAL-083 fails, the value of the Company will be negatively impacted significantly.
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Dose Escalation Scheme (mg/m2)
Completed – No DLT
Completed – No DLT
Completed – No DLT
Enrollment scheduled Dec 2013
To be initiated subject to no DLT in 20mg/m2 dose
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