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Summit Therapeutics Plc - Stock Valuation Undemanding

Writen by Riccardo Lowi

KEY INVESTOR MESSAGES 

- Key inflection point: topline data readout from the PhaseOut DMD phase 2 trial in Duchenne (DMD) expected in 3Q 2018
- Imminent start of a pivotal phase 3 study for ridinilazole in C. difficile infections (CDI)
- Recent Discuva acquisition reinforces novel antibiotics discovery capabilities 
- Current valuation (market cap of c. $165 mln) undemanding given the stage and commercial potential of Summit's lead programs

DUCHENNE MUSCULAR DYSTROPHY (DMD)

DMD is an extremely severe genetic disease, affecting approximately 1:3500 male births. It is estimated that there are about 50,000 DMD patients in the US, European and Japanese markets.

Due to random mutations of the dystrophin gene, the dystrophin protein isn't synthetized and this causes a progressive degradation of the muscular tissue.

Symptoms start to appear in the first years of life and typically DMD patients lose the ability to walk in their early teens, and ultimately die of respiratory or cardiac complications in their mid-twenties.

Mainstay drug treatment has long been limited to the chronic use of corticosteroids, until two new drugs were recently approved. Sarepta's Exondys 51 was launched in the US in 2017, whereas PTC's Translarna has been available in Europe since 2015. Both drugs only work in patients with specific genetic mutations, so each covers approx. 10-15% of the Duchenne population.

By contrast Summit's ezutromid may become a universal drug treatment, addressing all Duchenne patients.

In developmental muscular fibres, the dystrophin's function is carried out by a similar protein called utrophin. Utrophin is then replaced by dystrophin as the fibres mature. 

Ezutromid is an oral drug that works by keeping the expression of utrophin switched on in the mature muscular tissue, thereby preventing its degradation.

Summit has recently reported interim data from the ongoing phase 2 clinical trial, that is studying ezutromid in 40 patients, aged 5-10.

Interim muscle biopsy data from 23 patients, over 24 weeks, have shown a significant reduction of muscular damage. Figure 1 shows a patient's biopsy at baseline and week 24, when a lower repair activity is evident from the reduction of yellow, orange and red fibres.

Figure 1: Biopsy at week 24, showing a lower level of repair activity (source: Company presentation, January 2018)

Figure 2: A lower level of developmental myosin indicates lower level of muscular damage (source: Company presentation, January 2018)

48-weeks headline data, including muscle biopsy data from the remaining 15 patients, are expected to be released in 3Q 2018.

In 2016 Summit entered a collaboration agreement with Sarepta, a leading DMD company and marketer of Exondys 51. Based on this agreement Sarepta is covering 45% of R&D costs for all DMD activities at Summit since January 2018, in exchange for ezutromid's rights in Europe and other selected geographies. Summit is also eligible to receive development, regulatory and sales milestones, and sales royalties.

In terms of market potential we note that Sarepta's Exondys 51, in the first year of US launch, reached sales of approx. $155mln, despite an addressable population of only 10-15% of DMD patients.

Given the very high unmet need, we would expect ezutromid to achieve net prices per patient/year well in excess of $100,000, across major developed markets.

CLOSTRIDIUM DIFFICILE INFECTIONS (CDI)

The second pillar of Summit's R&D efforts is the development of novel precision antibiotics, of which ridinilazole C. difficile infections (CDI) represents the lead program.

There are over 1 million cases of CDI in US and Europe every year, almost 30,000 deaths in the US alone, where acute care costs related to CDIs are almost $5bn annually.

Approx. 25% of acute CDI episodes are followed by a recurrence within a few weeks, due to a compromised gut's microbiome that results from mainstay antibiotic therapies such as vancomycin.

By contrast ridinilazole is highly selective against C. difficile, and leaves almost unaffected the rest of gut's bacteria resident population (microbiome), as shown in the picture below.

Figure 3: microbiome preservation following ridinilazole vs vancomycin treatment (source: Company presentation, January 2018 - data from phase 2 CoDIFy trial)

The CoDIFy phase 2 study demonstrated ridinilazole superiority over standard-of care vancomycin. As shown in Figure 4, ridinilazole significantly reduced infections recurrence within 30 days from the first CDI episode.

Figure 4: A 100-patients phase 2 study has shown ridinilazole superiority vs vancomycin, on the composite primary endpoint of Sustained Clinical Response - SCR (source: Company presentation, January 2018)

Summit is now planning a phase 3 pivotal study (2 x 700-patient trials) due to begin in the first half of 2018 and expected completion in about two years.

The ridinilazole phase 3 program costs will be partially covered by external funding. The US Biomedical Advanced Research and Development Authority (BARDA) will contribute with up to $62 mln, and a further ca. $25 mln are covered by Eurofarma's, following a December 2017 licensing deal related to ridinilazole LatAm rights.

Finally we note Summit has recently strengthened their antibiotic discovery platform with the acquisition of Discuva Ltd, for £10mln in cash and shares.

The acquisition of Discuva reinforces the Company’s ability to discover new, highly selective antibiotics to treat multi-drug resistant and hospital-acquired infections.

FINANCIALS

With approx. $42 mln in cash as of the end of October 2017, Summit looks fully funded up until the end of 2018.

Current valuation (market cap $165 mln) seems undemanding, especially vis-à-vis the $900 mln valuation of recently listed Solid Biosciences, whose lead program is just about to start clinical development.

Figure 5: Selected biotech valuations (source: CN analysis)

 

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