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goetzpartners securities Limited
4SC AG (VSC-DE): Melanoma data major catalyst in second half
16-Jul-2018 / 10:35 GMT/BST
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*4SC AG (VSC-DE): Melanoma data major catalyst in second half*
*Recommendation: OUTPERFORM*
*Target Price: EUR10.00*
*Current Price: EUR4.32 (CoB on 13th July 2018)*
*KEY TAKEAWAY*
With the share price down over half from its early 2018 peak, 4SC's valuation
looks justified on the basis of it pivotal resminostat programme alone. The
market ascribes little value to the immunotherapy combination programme with
dominatostat now in Phase II. Although sentiment toward immuotherapy has
deteriorated in the wake of the negative Incyte-Merck epacadostat ("IDO-1")
data, we contend the dominatostat- pembrolizumab ("pembro") immunotherapy
combo still holds promise. Preclinical studies and data from sub-optimally
dosed drugs of the same class support a synergy between immune checkpoint
inhibitors ("ICI") and dominatostat. Interim data expected from the
dominatostat-pembro phase II ("SENSITIZE") melanoma study in H2/2018E could
provide a substantial catalyst for the stock. We reiterate our OUTPERFORM
recommendation and our target price of EUR10.
*Sound basis for HDACi-ICI combos* - Preclinical and clinical data strongly
support HDACi immunostimulatory action. Positive responses reported for other
Class I HDACi (entinostat) - ICI combinations in clinical trials in cancers
including melanoma and lung cancer despite likely sub-optimal dosing resulting
from drug-specific toxicities.
*Improved safety enables optimal dosing* - Superior dominatostat tolerability
facilitates optimal dosing; therapeutic impact expected to exceed other Class
I HDACi including entinostat.
*Interim data catalyst in H2/2018E* - Dominatostat-pembro combo in Phase II
(SENSITIZE) trial in pembro-resistant metastatic melanoma. Interim data due in
H2/2018E may provide catalyst prior to trial read out in 2019E.
*Resminostat justifies valuation* - The use of resminostat as a maintenance
therapy is well supported by both clinical and biological proof-of-concept.
With the programme at a pivotal phase and also recently endorsed by its
Japanese partner, we are comfortable that the current valuation is supported
by this programme alone.
*Remains undervalued* - Our risk DCF analysis indicates a fair value of
EUR4.40 / share on the basis of the resminostat alone. This rises to EUR7.10 /
share when including the in-house dominatostat programmes. Assuming the
company out-licenses dominatostat to major partners drives the valuation to
EUR10.30 / share. This would increase to over EUR14 / share as the drug
successfully moves through clinical trials over the next 6 -12 months.
Kind regards,
Dr. Chris Redhead | Analyst
goetzpartners Healthcare Research Team | Research Team
goetzpartners securities Limited
The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.
T +44 (0) 203 859 7725 | healthcareresearch@goetzpartners.com /
chris.redhead@goetzpartners.com
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704799 16-Jul-2018
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(END) Dow Jones Newswires
July 16, 2018 05:35 ET (09:35 GMT)
