TKMR: Tekmira Exited 3Q13 With Very Strong Balance Sheet

Zacks Small Cap Research

By Grant Zeng, CFA

Tekmira Exited 3Q13 With Very Strong Balance Sheet  

Revenue was $3.0 million for the third quarter of 2013 as compared to $3.0 million for the third quarter of 2012.

Under a DoD contract to develop TKM-Ebola, Tekmira is being reimbursed for costs incurred, including an allocation of overheads, and is being paid an incentive fee. For this contract, Tekmira (TKMR) recorded $2.9 million in revenue in the third quarter of 2013 and $1.9 million in third quarter of 2012.

In the third quarter of 2012, Tekmira earned a $1.0 million milestone from Talon when they received accelerated approval for Marqibo from the U.S. Food and Drug Administration (FDA). Spectrum, who acquired Talon in July 2013, began commercial sales of Marqibo in September 2013.

Research, development, collaborations and contracts expenses were $5.7 million in the third quarter of 2013 as compared to $3.1 million in the third quarter of 2012. Development expenses have increased in the quarter as the company advances multiple product candidates into the clinic.

General and administrative expenses were $1.0 million in the third quarter of 2013 as compared to $1.5 million in the third quarter of 2012. Third quarter of 2012 general and administrative expenses were higher as they included legal fees incurred in respect of a lawsuit against Alnylam and AlCana that was settled in November 2012.

For third quarter of 2013, net loss was $6.1 million ($0.42 per common share) as compared to a net loss of $3.4 million ($0.25 per common share) for the third quarter of 2012.

At September 30, 2013, there was $36.9 million in cash and cash equivalents as compared to $46.8 million at December 31, 2012.

In October, Tekmira completed a public offering financing of 4,312,500 common shares priced at US$8.00 for gross proceeds of US$34.5 million. Net estimated proceeds were approximately $33.1 million (US$32.1 million).

Including the net proceeds of recent financing, Cash on hand will be sufficient to last until early 2016, and based on updated cash projections it is expected that the year-end 2013 cash balance will be in the range of $65.0 to $70.0 million.


Transition From a Platform Technology to a Product-focused Company

Tekmira is transitioning from a pure delivery platform technology to a product-focused biotech company. Tekmira is one of the pioneers in the field of RNAi therapeutics. The Company has been at the forefront of the RNAi technology revolution over the last decade and has been involved in the research and development of RNAi therapeutics since the early days of RNAi discovery and has developed the “gold-standard” systemic RNAi delivery technology: lipid nanoparticle (LNP) platform.

LNP has generated robust preclinical and clinical data so far. With the success of the delivery technology, Tekmira recently has shifted its focus to be product-focused.

Tekmira’s therapeutic product pipeline consists of internally developed products as well as partnered programs. The Company’s internal pipeline has been developed with its own research and development resources. Partnered programs are developed by the Company’s partners using Tekmira’s LNP technology.

The lead internal program is its oncology product candidate, TKM-PLK1, which is in a Phase I/II clinical study for cancers.  TKM-PLK1 has been shown in preclinical animal studies to selectively kill cancer cells, while sparing normal cells in adjacent healthy tissue. TKM-PLK1 targets PLK1 (polo-like kinase 1), a protein involved in tumor cell proliferation and a validated oncology target. Inhibition of PLK1 expression prevents the tumor cell from completing cell division, resulting in cell cycle arrest and death of the cancer cell.

Other internal programs are in preclinical studies which include TKM-Ebola for Ebola viral infection, TKM-HBV for chronic HBV infection, TKM-ALDH2 for alcohol dependence, and other candidates for rare disease.

For the partnered programs, Tekmira has licensed its LNP delivery technology to Alnylam and Merck. In addition, Tekmira has ongoing research relationships with Bristol-Myers Squibb, the United States National Cancer Institute, the U.S. Government, through their TMT program, and other undisclosed pharmaceutical and biotechnology companies. On November 10, 2013, Alnylam announced that it had initiated a Phase III trial with LNP-enabled ALN-TTR02 (patisiran), and the associated US$5 million milestone payment to Tekmira has now been triggered.

Outside the field of RNAi, Tekmira has legacy licensing agreements with Talon Therapeutics, which was acquired by Spectrum Pharma.

Tekmira’s current focus is on advancing products that utilize its proprietary LNP technology for the delivery of small interfering RNA (siRNA) and multivalent RNA (MV-RNA). These products are intended to treat diseases through a process known as RNA interference, which prevents the production of disease associated proteins.


View gallery

.

View gallery

.


Enters into HBV Market

On October 8, 2013, Tekmira (TKMR) presented a webinar for the update of its pipeline. The big takeaway is that Tekmira is heading into anti hepatitis B (HBV) research area.

This is obviously a huge market and one that Tekmira feels their LNP delivery technology is ideally suited for.

Hepatitis B Virus (HBV) infection is highly prevalent worldwide, and represents a major global health problem. Two billion people globally have been infected with HBV, and approximately 350 million are chronic carriers, including approximately 1.5-2.2 million people in the US. Among the chronically infected, 15% - 40% will develop cirrhosis and/or hepatocellular carcinoma.  Each year approximately 5000 people in the US and 1 million worldwide die from cirrhosis, liver failure or hepatocellular carcinoma resulting from HBV infection.

The chronic hepatitis B patient population still has substantial unmet medical needs that must be addressed for effective treatment and control of the disease. Current treatment regimens, based on interferons and antivirals, are not reliably effective in eradicating infection in chronically infected patients. These regimens are often rendered ineffective by the emergence of resistant strains of the virus and suffer from problematic dosing schedules and debilitating side effects that negatively impact patient compliance.

TKM-HBV is an RNAi therapeutic in development which may provide a meaningful alternative for the treatment of HBV. TKM-HBV is a multi-valent therapeutic targeting multiple sites in the HBV genome avoiding resistance. TKM-HBV is developed through bioinformatic analysis of 37,457 sequences derived from 4078 distinct HBV genomes. Multiple triggers in TKM-HBV provide broad coverage across genotypes C, A, B and D. TKM-HBV is designed to inhibit HBsAg expression, leading to seroconversion and functional cure.

TKM-HBV has a differentiated mechanism of action compared to that of existing anti-HBV drugs. The mechanism of RNA interference could provide a powerful new treatment for hepatitis B through the unique ability to specifically reduce the amount of circulating HBV antigens. Experts in the field of HBV therapeutics hypothesize that the large excess of viral proteins in chronic HBV patients functions to absorb antibodies that would otherwise neutralize the virus, and that potent reduction of HBV antigens would allow the patient’s immune system to clear the infection, leading to a functional cure.

TKM-HBV is a third generation LNP product, leveraging Tekmira’s improvements in both formulation and payload technology. TKM-HBV has demonstrated great efficacy in reducing HBV DNA and HBsAg expression in animal models.

Tekmira intends to complete preclinical work and file an IND for TKM-HBV 2H2014. Phase I data in chronically infected HBV patients will be available in 2015.

View gallery

.

View gallery

.


New TKM-PLK1 Phase I/II Clinical Trial is Underway

Based on the above Phase I data, on Aug. 12, 2013, Tekmira initiated a new Phase I/II clinical trial with TKM-PLK1.

The new Phase I/II trial will enroll patients with either advanced Gastrointestinal Neuroendocrine Tumors (GI-NET) or Adrenocortical Carcinoma (ACC). By focusing on these indications, where drug activity in the previous Phase I trial was observed, Tekmira aims to collect additional data on the efficacy of TKM-PLK1 to guide future development and regulatory strategy for this promising agent.

The GI-NET and ACC Phase I/II clinical trial will be a multi-center, single arm, open label study designed to measure efficacy using RECIST and tumor biomarkers for GI-NET patients, as well as to evaluate the safety, tolerability and pharmacokinetics of TKM-PLK1. TKM-PLK1 will be administered weekly with each four-week cycle consisting of three once-weekly doses followed by a rest week. It is expected that approximately 20 patients with advanced GI-NET or ACC tumors will be enrolled in this trial, with a minimum of 10 GI-NET patients to be enrolled.

Results from this trial are expected to be available by mid-2014. If supported by the data, Tekmira will commence a pivotal trial in GI-NET by the end of 2014.

In addition, the company anticipates initiating a separate Phase I/II clinical trial with TKM-PLK1, which will enroll patients with Hepatocellular Carcinoma (HCC) in the first half of 2014. This clinical trial will be a multi-center, open label, non-randomized, dose escalation study designed to evaluate the safety, tolerability and pharmacokinetics of TKM-PLK1 as well as determine the maximum tolerated dose in HCC patients and measure the anti-tumor activity of TKM-PLK1 in HCC patients.

Neuroendocrine tumors (NETs) arise from a variety of anatomic sites and share the capacity for production of hormones and vasoactive peptides. Because of their perceived rarity, NETs have not historically been a focus of rigorous clinical research. However, the diagnosed incidence of NETs has bers using Tekmira’s LNP technology.

The lead internal program is its oncology product candidate, TKM-PLK1, which is in a Phase I/II clinical study for cancers.  TKM-PLK1 has been shown in preclinical animal studies to selectively kill cancer cells, while sparing normal cells in adjacent healthy tissue. TKM-PLK1 targets PLK1 (polo-like kinase 1), a protein involved in tumor cell proliferation and a validated oncology target. Inhibition of PLK1 expression prevents the tumor cell from completing cell division, resulting in cell cycle arrest and death of the cancer cell.

Other internal programs are in preclinical studies which include TKM-Ebola for Ebola viral infection, TKM-HBV for chronic HBV infection, TKM-ALDH2 for alcohol dependence, and other candidates for rare disease.

For the partnered programs, Tekmira has licensed its LNP delivery technology to Alnylam and Merck. In addition, Tekmira has ongoing research relationships with Bristol-Myers Squibb, the United States National Cancer Institute, the U.S. Government, through their TMT program, and other undisclosed pharmaceutical and biotechnology companies. On November 10, 2013, Alnylam announced that it had initiated a Phase III trial with LNP-enabled ALN-TTR02 (patisiran), and the associated US$5 million milestone payment to Tekmira has now been triggered.

Outside the field of RNAi, Tekmira has legacy licensing agreements with Talon Therapeutics, which was acquired by Spectrum Pharma.

Tekmira’s current focus is on advancing products that utilize its proprietary LNP technology for the delivery of small interfering RNA (siRNA) and multivalent RNA (MV-RNA). These products are intended to treat diseases through a process known as RNA interference, which prevents the production of disease associated proteins.


View gallery

.

View gallery

.


Enters into HBV Market

On October 8, 2013, Tekmira (TKMR) presented a webinar for the update of its pipeline. The big takeaway is that Tekmira is heading into anti hepatitis B (HBV) research area.

This is obviously a huge market and one that Tekmira feels their LNP delivery technology is ideally suited for.

Hepatitis B Virus (HBV) infection is highly prevalent worldwide, and represents a major global health problem. Two billion people globally have been infected with HBV, and approximately 350 million are chronic carriers, including approximately 1.5-2.2 million people in the US. Among the chronically infected, 15% - 40% will develop cirrhosis and/or hepatocellular carcinoma.  Each year approximately 5000 people in the US and 1 million worldwide die from cirrhosis, liver failure or hepatocellular carcinoma resulting from HBV infection.

The chronic hepatitis B patient population still has substantial unmet medical needs that must be addressed for effective treatment and control of the disease. Current treatment regimens, based on interferons and antivirals, are not reliably effective in eradicating infection in chronically infected patients. These regimens are often rendered ineffective by the emergence of resistant strains of the virus and suffer from problematic dosing schedules and debilitating side effects that negatively impact patient compliance.

TKM-HBV is an RNAi therapeutic in development which may provide a meaningful alternative for the treatment of HBV. TKM-HBV is a multi-valent therapeutic targeting multiple sites in the HBV genome avoiding resistance. TKM-HBV is developed through bioinformatic analysis of 37,457 sequences derived from 4078 distinct HBV genomes. Multiple triggers in TKM-HBV provide broad coverage across genotypes C, A, B and D. TKM-HBV is designed to inhibit HBsAg expression, leading to seroconversion and functional cure.

TKM-HBV has a differentiated mechanism of action compared to that of existing anti-HBV drugs. The mechanism of RNA interference could provide a powerful new treatment for hepatitis B through the unique ability to specifically reduce the amount of circulating HBV antigens. Experts in the field of HBV therapeutics hypothesize that the large excess of viral proteins in chronic HBV patients functions to absorb antibodies that would otherwise neutralize the virus, and that potent reduction of HBV antigens would allow the patient’s immune system to clear the infection, leading to a functional cure.

TKM-HBV is a third generation LNP product, leveraging Tekmira’s improvements in both formulation and payload technology. TKM-HBV has demonstrated great efficacy in reducing HBV DNA and HBsAg expression in animal models.

Tekmira intends to complete preclinical work and file an IND for TKM-HBV 2H2014. Phase I data in chronically infected HBV patients will be available in 2015.

View gallery

.

View gallery

.


New TKM-PLK1 Phase I/II Clinical Trial is Underway

Based on the above Phase I data, on Aug. 12, 2013, Tekmira initiated a new Phase I/II clinical trial with TKM-PLK1.

The new Phase I/II trial will enroll patients with either advanced Gastrointestinal Neuroendocrine Tumors (GI-NET) or Adrenocortical Carcinoma (ACC). By focusing on these indications, where drug activity in the previous Phase I trial was observed, Tekmira aims to collect additional data on the efficacy of TKM-PLK1 to guide future development and regulatory strategy for this promising agent.

The GI-NET and ACC Phase I/II clinical trial will be a multi-center, single arm, open label study designed to measure efficacy using RECIST and tumor biomarkers for GI-NET patients, as well as to evaluate the safety, tolerability and pharmacokinetics of TKM-PLK1. TKM-PLK1 will be administered weekly with each four-week cycle consisting of three once-weekly doses followed by a rest week. It is expected that approximately 20 patients with advanced GI-NET or ACC tumors will be enrolled in this trial, with a minimum of 10 GI-NET patients to be enrolled.

Results from this trial are expected to be available by mid-2014. If supported by the data, Tekmira will commence a pivotal trial in GI-NET by the end of 2014.

In addition, the company anticipates initiating a separate Phase I/II clinical trial with TKM-PLK1, which will enroll patients with Hepatocellular Carcinoma (HCC) in the first half of 2014. This clinical trial will be a multi-center, open label, non-randomized, dose escalation study designed to evaluate the safety, tolerability and pharmacokinetics of TKM-PLK1 as well as determine the maximum tolerated dose in HCC patients and measure the anti-tumor activity of TKM-PLK1 in HCC patients.

Neuroendocrine tumors (NETs) arise from a variety of anatomic sites and share the capacity for production of hormones and vasoactive peptides. Because of their perceived rarity, NETs have not historically been a focus of rigorous clinical research. However, the diagnosed incidence of NETs has been increasing, and the estimated prevalence in the United States exceeds 100,000 individuals. According to the Carcinoid Cancer Foundation, it is estimated that more than 12,000 new cases of carcinoid/NETs are diagnosed each year, and at least 115,000 people are living with carcinoid/NETs in the United States. Metastatic gastrointestinal carcinoid (neuroendocrine) tumors often have a poor prognosis and may have an aggressive clinical course.

Currently, treatment options for patients with neuroendocrine tumors are limited. Tekmira’s TKM-PLK1 has the potential to become a standard of care for NET patients if successful. 

Tekmira is on Track to Advance TKM-Ebola Program

Ebola is a virus, which, for many years, has been associated with periodic outbreaks of hemorrhagic fever in human populations with mortality rates reaching 90%. Currently there are no approved treatments for Ebola or other hemorrhagic fever viruses.

TKM-Ebola is an anti-Ebola viral therapeutic, being developed under a contract with the U.S. DoD's Joint Project Manager Transformational Medical Technologies (JPM-TMT) Office with a total contract value of approximately $140 million.

Tekmira has initiated pre-clinical and chemistry, manufacturing and control studies that support the use of these improvements in the program. This development strategy will be accommodated by modifications to the existing contract, allowing both Tekmira and TMT to benefit from the significant advancements in LNP formulation technology made by Tekmira since the commencement of the TMT-funded program in July 2010.

New preclinical data from the TKM-Ebola program has been generated showing survival in non-human primates despite infection with the most lethal Zaire variant of Ebola virus and delayed treatment. In a new study each cohort received seven daily treatments of 0.5 mg/kg TKM-Ebola beginning 24-, 48-, 72-, or 96-hours after infection. The study demonstrated 83% survival when treated 24- or 48-hours post infection and 67% survival when treatment was initiated at 72-hours, as compared to 0% survival rates in the placebo and 96-hour cohorts.

Phase I
clinical trial is expected to be initiated in the first quarter of 2014 with data available in the second half of 2014.

TKM-Ebola is being developed under specific FDA regulatory guidelines called the “Animal Rule.” The Animal Rule provides that under certain circumstances, where it is unethical or not feasible to conduct human efficacy studies, the FDA may grant marketing approval based on adequate and well-controlled animal studies when the results of those studies establish that the drug is reasonably likely to produce clinical benefit in humans. Demonstration of the product's safety in humans is still required.

We think the “Animal Rule” means a lot for Tekmira, because this can accelerate the development of TKM-Ebola. Once approved by the FDA, Tekmira will have the opportunity to negotiate a stock-pile contract with the US government.  These stock-pile or procurement contracts have been very lucrative for other companies supplying similar drugs to the US government.

New preclinical data from the TKM-Marburg program also showed 100% survival when dosing at 0.5 mg/kg TKM-Marburg began 48 hours after infection with lethal quantities of the virus. Dosing was administered once daily for seven days.


Why We Think Tekmira Shares Are Undervalued

Although there has been a huge run in the past few months, we think that Tekmira shares are still undervalued at its current market price.  Our call is based on the company’s strong fundamentals and recent progress the company has made. We have multiple reasons for our argument.

Tekmira is one of the pioneers and leaders in the field of RNAi therapeutics. We are optimistic about the Company’s LNP delivery platform technology, which has proven to have the power to systemically deliver RNA drug candidates to a variety of organs and cells throughout the body.

Based on the LNP platform, Tekmira has built a diversified pipeline, which targets cancer and other indications. Its internal lead drug candidate TKM-PLK1 for cancers is in a Phase I/II clinical trial and preliminary data has shown promising efficacy and favorable safety profile. A pivotal study will be initiated by the end of 2014.

Tekmira has also established a strong partnership with the US government and biotech/pharmaceutical companies to utilize its LNP technology to advance RNAi therapeutics. These partnerships not only provide non-dilutive financing, but also validate the technology and diversify the Company’s risk.  The government sponsored TKM-Ebola program is being developed under specific FDA “Animal Rule”, which means that the development for TKM-Ebola could be accelerated since no human clinical trial for efficacy is required. The company also entered into new areas such as HBV and Marburg virus.

Our call also considers the Company’s strong balance sheet. Tekmira’s cash balance should last into early 2016 according to our long term financial model. This is compelling for a small cap biotech company. The Company will also receive royalty payments from Marqibo sales which we expect will start in 2013 (Spectrum Pharma launched Marqibo in September, 2013). Further, Tekmira will continue to monetize its LNP platform technology and receive license fees and milestone payments from its partners. Tekmira is well positioned to execute its long term growth strategy.

Based on our analysis, we think Tekmira shares are still undervalued at this time. Currently, shares of Tekmira are trading at around $7.7 per share, which values the Company at $145 million in market cap based on 19 million outstanding shares. 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. Tekmira’s TKM-PLK1 for cancer is in Phase I/II clinical studies, and the Company’s TKM-Ebola product is being developed under the accelerated FDA “Animal Rule”. TKM-PLK1 has the potential for the treatment of multiple cancers providing a large market opportunity. In the next year or so, Tekmira will advance additional programs into the clinic. TKM-HBV targets a big HBV market.

We think at this time Tekmira should be valued between $300 and $500 million in market cap. If we look at the below table of RNA based biotech companies, we think Tekmira should be worth more than Regulus. Our price target of $18 values Tekmira at $340 million in market cap which we think is conservative.

 

Name

Ticker

Share Price

Market Cap ($million)

Phase I

Phase II

Phase III

Marketed Products

Isis

ISIS

$32.64

$3,760.00

5

15

2

1

Alnylam

ALNY

$53.16

$3,360.00

4

3

0

0

Regulus

RGLS

$5.89

$2,13.00

0

0

0

0

Arrowhead

ARWR

$7.21

$227.00

2

1

0

0

Sarepta

SRPT

$12.88

$432.00

3

1

0

0

RXi

RXII

$3.20

$37.00

1

0

0

0

Bio-Path

BPTH

$2.05

$155.00

1

0

0

0

Tekmira

TKMR

$7.71

$144.95

3

2

0

0

Average

$15.59

$1,041.60



A copy of the full research report can be downloaded here >> 
 Tekmira Report

Please visit 
SCR.Zacks.com for additional information on our research and coverage universe, and Subscribe to receive our articles and reports emailed directly to you each morning.
 

Rates

View Comments (0)