zie hieronder analyse van Thomas Bohner, analist in US en aandeelhouder van Aby.
Ablynx, My Favorite Belgian (Biotech) Stock
Thomas Bohner
Summary
Strong cash position keeps Ablynx on track.
Positive voba results, waiting on AbbVie's decision.
One nanobody heading towards regulatory filing in orphan indication.
Biotech is booming business and especially the Belgian biotech outperforms the market. The Belgian biotech index increased by 37% in 2015, confirming this booming industry. This reflects the success of biotechs such as Ablynx +76% (OTC:ABLYF), Tigenix +128% (OTC:TGXSF) and Galapagos +266% (NASDAQ:GLPG) in 2015. Let's dig a little deeper into my favorite Belgian biostock: Ablynx.
Belgium bio-tech took a dip in 2016
Ablynx is developing novel therapeutics based on small functional domains derived from special camelidae antibodies (nanobodies). The company aims to develop nanobodies against both known and novel disease targets, through collaborations or internally. Several partnerships with global players such as AbbVie (NYSE:ABBV), Merck (NYSE:MRK), Novo Nordisk (NYSE:NVO) and Genzyme have been closed. These and further collaborations can further generate hundreds of millions in potential milestones, plus royalties.
Voba
About two weeks ago, Ablynx released its long-anticipated top line phase 2b results of combination trial with the anti-IL-6R nanobody voba for the treatment of rheumatism. So how were the results? The results were good, actually excellent and a lot better than competitors as filgotinib (Galapagos) and adalimumab (AbbVie). The benchmarks for this test are the ACR50 and ACR70 scores. These scores indicate an improvement of 50% and 70% of the symptoms (painful and swollen joints) in rheumatoid arthritis patients.
On both scores voba is doing much better than placebo. Another parameter on which voba scored very well is the DAS remission (also includes laboratory testing), this is the degree to which patients are free of symptoms after treatment. Again voba scored significantly better than placebo. Finally, also in terms of safety scores voba did very well.
Test: bi-weekly dosing of 225mg
ACR20: 74% (placebo: 74% vs. 62% at 12w)
ACR50: 59% (placebo: 39%)
ACR70: 43% (placebo: 17%)
DAS remission: 49% (placebo: 17%)
Safety: TRAE (6.5% vs. 4.3% for placebo) and TRSAE (1.8% vs. 2.9% for placebo without dose dependency).
Test results. Source: Ablynx
Ablynx itself was very positive about the results, again emphasized the positive results of its RA monotherapy study the previous month. Remarkable is the high score for the placebo group for ACR20 score. However, this is less relevant; an improvement of 20% is after all not so much, and sometimes quite subjective (study design). This focus created some doubts about the chances of success of the product.
AbbVie
AbbVie must decide before the end of this year whether or not to take a license on voba. If it takes the licence, it will immediately have to pay $75 million upfront and be responsible for the development (and thus costs) in phase III of this product candidate. So what if AbbVie doesn't take the license? No cash injection for Ablynx? No, not till it finds another partner that takes the license. But, what are the odds? This market is very competitive; look at Galapagos that got an even better deal from Gilead (NASDAQ:GILD) after being rejected by AbbVie.
Key upcoming catalysts (Source: Ablynx)
Why invest in Ablynx?
So what if voba doesn't work out? Ablynx is not a 'one product company.' With one phase III, four phase II studies and >35 in early development, the pipeline is diversified, with several shots on goal for value creation. One nanobody, caplacizumab (a first in its kind orphan drug), is being prepared to file for approval in Europe based on strong phase II data and is currently in a pivotal phase III study to support the US FDA dossier (2018). Ablynx has said it will commercialize the product itself in the US and Europe.
Cash burn is expected at €65-75m for FY16 (€67m in 2015). This is no problem as we know Ablynx is sitting on a huge pile of cash (+€288.7m). The company's total R&D spend grew by 52% in line with growth in external development costs (clinical trial expenditures for caplacizumab, ALX-61 and ALX-0171). Remember, if AbbVie wishes to exercise its option to licence ALX-61, Ablynx will receive a $75m milestone payment.
Conclusion
Ablynx is a best-in-class R&D engine having partnerships with global players. Its growth drivers are caplacizumab heading towards regulatory filing in orphan indication, two phase II nanobodies and a strong cash position. Note that, at current trading levels, 40% of Ablynx's market cap reflects cash (€288.7m cash / €710.83m market cap), indicating a market undervaluation of the portfolio. Based on a SOTP analysis I value, we give Ablynx a €19.00 target price.
Disclosure: I am/we are long ABLYF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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