ASLAN Pharmaceuticals — Novel treatments for worldwide unmet needs

ASLAN Pharmaceuticals — Novel treatments for worldwide unmet needs

We are initiating coverage on ASLAN Pharmaceuticals, a clinical-stage drug developer focusing on in-licensing drugs with a high prevalence in Asia that are orphan indications in the West. The company’s lead asset is the pan-HER inhibitor varlitinib, which is in clinical trials for biliary tract cancer (BTC, pivotal) and gastric cancer (GC, Phase II/III), both of which are widely prevalent in Asia. The company has also planned a Phase II trial of ASLAN003 targeting AML via the novel mechanism of inducing blast differentiation. We initiate at NT$9.5bn or NT$72.87 per share.

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ASLAN Pharmaceuticals

Novel treatments for worldwide unmet needs

Initiation of coverage

Pharma & biotech

8 November 2017

Price

NT$39.35

Market cap

NT$5.2bn/
US$171.3m

NT$30.36/US$

Net cash (NT$bn) at June 2017

1.84

Shares in issue

130.1m

Free float

50.9%

Code

6497

Primary exchange

Taipei

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

-12.2

-0.6

N/A

Rel (local)

-14.2

-3.2

N/A

52-week high/low

NT$55.8

NT$33.5

Business description

ASLAN Pharmaceuticals is a Singapore based drug developer targeting Asia prevalent diseases. It has varlitinib in pivotal clinical trials for biliary tract cancer and gastric cancer, and will be advancing ASLAN003 to Phase II trials for acute myeloid leukaemia.

Next events

ASLAN004 Phase I initiation

2018

Varlitinib first-line BTC results

2018

Varlitinib GC interim results

2018

Analysts

Nathaniel Calloway

+1 646 653 7036

Maxim Jacobs

+1 646 653 7027

ASLAN Pharmaceuticals is a research client of Edison Investment Research Limited

We are initiating coverage on ASLAN Pharmaceuticals, a clinical-stage drug developer focusing on in-licensing drugs with a high prevalence in Asia that are orphan indications in the West. The company’s lead asset is the pan-HER inhibitor varlitinib, which is in clinical trials for biliary tract cancer (BTC, pivotal) and gastric cancer (GC, Phase II/III), both of which are widely prevalent in Asia. The company has also planned a Phase II trial of ASLAN003 targeting AML via the novel mechanism of inducing blast differentiation. We initiate at NT$9.5bn or NT$72.87 per share.

Year end

Revenue (NT$m)

PBT*
(NT$m)

EPS*
(NT$)

DPS
(NT$)

P/E
(x)

Yield
(%)

12/15

0.0

(403)

(7.32)

0.0

N/A

N/A

12/16

373.0

(247)

(2.35)

0.0

N/A

N/A

12/17e

0.0

(1,093)

(8.81)

0.0

N/A

N/A

12/18e

0.0

(1,109)

(8.52)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Varlitinib: A pan-HER inhibitor for solid tumours

Inhibitors of the HER class of growth factor receptors have been some of the earliest and most successful targeted therapies, including Herceptin and Erbitux among others. The goal of pan-HER inhibition is to prevent tumour cells from adapting to treatment by shifting to another receptor as the driver. Varlitinib inhibits the whole class of proteins and inhibited an array of tumour types in early trials.

Lead clinical trials: Pivotal BTC, Phase II/III GC

Following strong responses in biliary tract cancer and gastric cancer in open label Phase Is, ASLAN initiated ongoing pivotal clinical studies in these indications (in second and first line, respectively). These diseases are more common in Asia by 10-20 fold or more depending on the region, and these clinical trials are enrolling broadly across Asia and the US. Interim results for GC are expected in 2018, and pivotal results for BTC are expected in 2019.

ASLAN003: Turning AML cells back into normal

ASLAN003 is an inhibitor of dihydroorotate dehydrogenase (DHODH), a protein important for DNA synthesis. Drugs of this class have previously been approved for the treatment of inflammatory disorders because they inhibit the growth of immune cells, but new preclinical data have found that DHODH inhibitors may be able to force AML cancer cells to differentiate into normal blood cells. A Phase II clinical study was initiated in late 2017.

Valuation: Initiated at NT$9.5bn or NT$72.87/share

We arrive at an initial valuation of NT$9.5bn or NT$72.87/share based on a risk-adjusted NPV analysis. We currently model commercialisation of varlitinib and ASLAN003 in the US, Europe and Asia. We assume a 30% probability of success for BTC and 20% for GC, based on the limited efficacy data to date. The company ended Q217 with NT$2.12bn, which we expect to be enough to finance the company through the Phase II readouts for varlitinib and eventual licensing.

Investment summary

Company description: In-licensing for Asia-prevalent diseases

ASLAN is a pharmaceutical company focused on in-licensing early-stage assets for diseases with a high prevalence in Asia that are orphans in the West. This allows the company to quickly progress these assets through clinical trials in Asia. The goal then is then to out-license rights to the EU and Japan while commercialising in the US and other Asian geographies. The company’s lead programme is varlitinib, a pan-HER inhibitor in a pivotal trial for biliary tract cancer (BTC) and Phase II/III for gastric cancer (GC). Initial readouts for these trials are planned for 2018. It also has an ongoing Phase II clinical trial of ASLAN003, an inhibitor of dihydroorotate dehydrogenase, which is being tested for acute myeloid leukaemia, a novel indication for this class of drug. The company also has the preclinical ASLAN004 (IL-4/IL-13 inhibitor) for inflammatory and oncology indications and ASLAN005 for solid tumour indications, as well the Modybody antibody fragment platform.

Valuation: NT$9.5bn or NT$72.87 per share

We arrive at an initial valuation of ASLAN of NT$9.5bn or NT$72.87 per share based on a risk-adjusted NPV analysis of the commercialisation value of its assets. We value varlitinib at NT$6.9bn based on a 20-30% probability of success and commercialisation throughout the US, Europe and Asia. We are encouraged by the early response rates in BTC and the FDA’s lenience with clinical trial design for a response rate primary end point. We value ASLAN003 at NT$864m, because we assign a lower probability of success (10%) on the basis of an untested mechanism of action, and we only expect commercialisation in the US and Europe. We expect to update our valuation with the advancement of ASLAN004 to the clinic (expected in late 2017) and clinical results from the ongoing trials.

Financials: Runway to 2019 and potential out-licensing

ASLAN had a comprehensive loss of NT$270m during Q217, which was almost entirely driven by R&D spending of NT$210m. We expect a slight acceleration of spending in the coming periods (loss of NT$1.1bn in 2017 and 2018) due to the advancement of varlitinib and ASLAN003. The company ended the quarter with NT$2.12bn in cash, which we will expect to provide a runway through the pivotal BTC trial for varlitinib and its potential out-licensing in the EU and Japan in 2019. We model that the company will need NT$2.5bn in additional financing needed to reach profitability in 2021 (included as debt for illustrative purposes), although we expect this to be offset through out-licensing payments.

Sensitivities: Typical of early-stage drug development

The risks facing ASLAN are common to drug developers and are largely clinical in nature. The company has performed several early-stage clinical trials of varlitinib, but a statistical improvement in an approval end point has not been established, although this is typical for drugs at this early stage. The broader class of ErbB inhibitors to which it belongs has had mixed results in BTC, although Herceptin has been approved for GC. BTC is an exceptionally difficult disease to treat with short period of survival, only a few months in the second line where varlitinib is being tested. On this basis however, the FDA agreed to an end point of response rate for the BTC trial, which is more lenient than survival end points. ASLAN003 is higher risk because its mechanism of action is untested in AML, although the class of drug has been approved in the past, albeit for inflammatory indications. Despite limited options for all these indications, there are a high number of ongoing clinical trials and there may be future competition. Finally, there is risk that ASLAN will not be able to find a global partner willing to license these assets.

Leveraging regional variation to speed drug development

ASLAN was founded in 2010 and is headquartered in Singapore with a corporate presence in Taiwan, Australia, Hong Kong and Shanghai. The company became Singapore’s first publicly listed biotech company when it went public in a $33m (NT$996m) IPO in June 2017 on the Taipei Stock Exchange, bringing the total amount of capital raised since inception to $130m (NT$2.9bn).

The company’s strategy is to leverage its access to Asian clinical trial populations to advance in-licensed assets in the clinic. This development strategy has strengths across multiple classes of drugs, but in particular for drugs to treat disorders that are uniquely prevalent in Asia. For instance, there are certain tumour types that have a much higher prevalence in Asia, whereas they are orphan indications in the West. This enables facile clinical trial enrolment for drugs with significant market opportunities worldwide. This method has been successfully employed previously by major drug companies. For instance, the majority of patients for the Phase III trial of Herceptin (tastuzumab, Roche) were Asian most of which were drawn from clinical trial sites throughout China, Japan, Korea and Taiwan.1 Although Asian populations can be leveraged for these studies, the focus is not exclusively on commercialising in these Asian markets. The clinical trials are specifically designed with US and European regulatory agencies in mind and with their input, and they include sufficient western patients for these regulatory bodies. ASLAN has stated that it intends to out-license these drugs in the EU and Japan, while commercialising in the US and other Asian markets.

  Bang Y, et al. (2010) Trastuzumab in combination with chemotherapy versus chemotherapy alone for treatment of HER2-positive advanced gastric or gastro-oesophageal junction cancer (ToGA): a phase 3, open-label, randomised controlled trial. Lancet 376, 687-697.

The company has five development programmes across nine indications and one fully out-licensed asset. The company’s lead programme is varlitinib, a pan-HER tyrosine kinase inhibitor (inhibits downstream HER1, -2, -3, and -4 signalling) with biliary tract cancer and gastric cancer as lead indications. The company has also initiated a Phase II clinical trial for the dihydroorotate dehydrogenase (DHODH) inhibitor ASLAN003 in acute myeloid leukaemia. Bristol-Myers Squibb recent reacquired the rights to ASLAN002, a dual inhibitor of c-MET and Recepteur d’Origine Nantais (RON). Interest in RON was in part the motivation to in-license the preclinical RON inhibitor ASLAN005. ASLAN004 is an IL-4 and IL-13 inhibitor in preclinical testing for inflammation and oncology indications. And finally the company has in-licensed the technology behind the Modybodies platform, a novel method of developing heavy chain only antibody fragments.

Exhibit 1: ASLAN pipeline

Drug

Class

Mechanism

In-licensing partner

Out-licensing partner

Indication

Stage

Varlitinib (ASLAN001)

Small molecule

Pan-HER inhibitor

Array BioPharma

Hyundai Pharm (Korea)

2nd line biliary tract cancer

Pivotal, China Pivotal

1st line gastric cancer

Phase II/III

1st line biliary tract cancer

Phase II

Breast cancer

Phase II

Colorectal cancer  

Phase II

Hepatocellular carcinoma

Phase Ib

ASLAN002 (out-licensed)

Small molecule

MET/RON inhibitor

Bristol-Myers Squibb

Bristol-Myers Squibb (worldwide)

Gastric cancer

Phase II

ASLAN003

Small molecule

DHODH inhibitor

Almirall

AML

Phase II

ASLAN004

Antibody

IL-4/IL-13 inhibitor

CSL

Inflammation

Preclinical

Oncology

Preclinical

ASLAN005

Antibody

RON inhibitor

A*STAR

Oncology

Preclinical

Modybodies

Antibody fragments

Various

Nanyang Technological University

Oncology

Lead generation

Source: ASLAN

Varlitinib: Expanding on a proven mechanism

ASLAN is developing varlitinib (ASLAN001, formerly ARRY-543) for the treatment of solid tumours and has ongoing clinical trials investigating the drug for biliary tract cancer (BTC), gastric cancer (GC), and hepatocellular carcinoma (HCC). It has orphan status for cholangiocarcinoma (CC, a subset of BTC see below) and GC. The drug is a tyrosine kinase inhibitor (TKI) that inhibits proteins across epidermal growth factor receptor class of receptor tyrosine kinases (termed ErbB), or a so-called pan-HER inhibitor. The drug was initially discovered by Array BioPharma, whom ASLAN entered into a partnership with in 2011. The original agreement stipulated that ASLAN out-license the asset following Phase II results, although we expect that this agreement is being renegotiated now that ASLAN has stated it intends to develop the drug through pivotal trials and retain certain rights. We expect composition of matter patents to protect the drug until 2029 following patent term extensions. In 2015, ASLAN out-licensed the rights of the drug in South Korea to Hyundai Pharma for undisclosed royalties and milestones.

The logic and history of pan-HER inhibition

The ErbB receptors were some of the first proteins that were successfully drugged as part of the move towards targeted therapies. The ErbB class has four members, EGFR (also known as HER1), HER2, HER3, and HER4, which have all been variously associated with cancer. These proteins drive tumour cell growth when overexpressed or mutated. The approval of Herceptin in 1998 was both pioneering for the role of targeted therapies in the clinic as well as setting a high watermark for their commercial success. Herceptin targets HER2, and the majority of its market is driven by HER2+ breast cancer (approximately 30%, also approved for gastric cancer), and it had sales of CHF6.8bn in 2016. The main limitation of Herceptin is that it is associated with cardiomyopathy and ventricular dysfunction, and can lead to an increase in cardiac adverse events.

There have also been several drugs developed to target EGFR-driven cancers. These drugs fall into two classes: monoclonal antibodies similar to Herceptin that drive receptor internalisation and immune targeting such as Erbitux (cetuximab, Merck KGaA) and Vectibix (panitumumab, Amgen); and small molecule TKIs such as Tarceva (erlotinib, Roche/Astellas) and Iressa (gefitinib, AstraZeneca), which prevent the receptor from engaging its downstream targets. The adverse event profile of the TKI class is characterised by diarrhoea and rash in a significant fraction of patients (generally the 20-50% range), although grade 3 or higher reactions are generally uncommon (less than 10%).

There have been several programmes targeting the development of TKIs that can inhibit the activity of multiple ErbB proteins. The logic behind these drugs is that multiple targeting can drive efficacy across a broader range of cancers, including those with more complex genotypes. For instance, it is known that HER4 can be drugged to inhibit the proliferation of NSCLC cells.2 Additionally, the development of new oncogenic drivers from this class is a known resistance mechanism to treatment. For instance, expression of HER4 is a known mechanism driving resistance to HER2 inhibition in breast cancer.3

  Starr A, et al (2006) ErbB4 increases the proliferation potential of human lung cancer cells and its blockage can be used as a target for anti-cancer therapy. Int. J. Can. 119, 269-274.

  Canfield K, et al. (2015) Receptor tyrosine kinase ERBB4 mediates acquired resistance to ERBB2 inhibitors in breast cancer cells. Cell Cycl. 14, 648-655.

Lapatinib (branded as Tykerb, Novartis) is the first TKI to target multiple ErbB proteins. Lapatinib was approved for HER2+ breast cancer (either after progression on Herceptin or in combination with aromatase inhibitor letrozole). The drug inhibits both EGFR and HER2, although inconsistently across breast cancer cell lines.4 This in part may be able to explain the modest response rate of the treatment: a 9.8% improvement, although those patients that do respond, respond well, with a median 8.5 month improvement in time to progression (HR=0.57, p=0.00013). The drug had peak sales of $378m in 2012.

  Konecny GF, et al. (2006) Activity of the dual kinase inhibitor lapatinib (GW572016) against HER-2-overexpressing and trastuzumab-treated breast cancer cells. Can. Res. 66, 1630-1639.

Nerlynx (neratinib) is the first true pan-HER inhibitor to be approved, and effectively targets EGFR, HER2, and HER4 (HER3 cannot be targeted by a kinase inhibitor because it lacks kinase activity). It was developed by Puma Biotechnology and approved in June 2017 for extended breast cancer adjuvant therapy in HER2+ patients. A significant limitation to this drug is severe diarrhoea: 95% of patients in clinical trials experience diarrhoea, 40% at grade 3. The approved usage of the drug requires prophylactic diarrhoea medication (loperamide) up to three times a day. Besides varlitinib, the only other clinical programmes investigating pan-HER inhibitors that we are aware of are dacomitinib from Pfizer (Phase III) and poziotinib from Spectrum and Hanmi (Phase II complete, recent data), both for NSCLC.

Biliary tract cancer

Biliary tract cancer (BTC) is a particularly aggressive and lethal form of cancer that afflicts the gallbladder or bile ducts connecting the liver and pancreas to the small intestine. The disease is divided into several sub-indications that are most accurately delineated as: intrahepatic cholangiocarcinoma (ICC), extrahepatic cholangiocarcinoma (ECC), gallbladder cancer (GBC), and cancer of the ampulla of Vater (CAV). However, statistics for these indications and for BTC as a whole can be difficult to interpret because reporting of these sub-indications are frequently and inconsistently grouped together (like ICC with liver cancer and CAV with gastrointestinal cancer or ECC). ICC represents only approximately 8% of BTC cases in the US,5 but has the worst prognosis of only a 15% five-year survival rate, compared to 19% for GBC and 30% for extrahepatic CC.6 In each type, the survival rate for metastatic disease is vanishingly small at approximately 2%. CAV is exceptionally rare (5,625 cases in the US from 1973-2005), but has a better prognosis sand is typically surgically treated.7

  Rizvi S and Gores GJ (2013) Pathogenesis, Diagnosis, and Management of Cholangiocarcinoma. Gastroint. 145, 1215-1229.

  American Cancer Society.

  Talamini MA, et al. (1997) Adenocarcinoma of the ampulla of Vater. A 28-year experience. Ann. Surg. 225, 590-600.

Exhibit 2: Estimated incidence rates of BTC in select countries

Raw incidence (per 100,000 person-years)

Region

ICC

ECC

GBC

Total

United States

0.3

2.2

1.5

3.9

China

5.4

0.9

3.0

9.3

Japan

3.6

5.5

9.0

18.2

Korea

5.6

3.4

7.6

16.6

Source: Extrapolated from Globocan; American Cancer Society, Cancer information Service, National Cancer Center Japan; Annual Report of Cancer Statistics 2014, National Cancer Center Korea, Shin et al.;8 Chen et al.9 Note: incidence rates are raw and not age adjusted.

  Shin HR, et al. (2010) Comparison of Incidence of Intrahepatic and Extrahepatic Cholangiocarcinoma - Focus on East and South-eastern Asia. Asian Pac. J. Can. Prev. 11, 1159-1166.

  Chen W, et al. (2016) Cancer Statistics in China, 2015. CA Cancer 66, 115-132.

BTC is rare in the West: the American Cancer Society estimates 11,740 new cases of ECC and GBC in the US in 2017 (3.6 per 100,000), roughly split 60%/40%. East Asia has higher rates of this disease than other regions (Exhibit 2). North-eastern Thailand has the highest rate in the world, with 96 per 100,000 men of ICC alone driven by the presence of parasitic liver flukes which are endemic to the region.10 Other risk factors associated with increased incidence of BTC in Asia include cirrhosis (from hepatitis or otherwise) and gallbladder or bile duct stones. These issues are further exacerbated by aging populations in some countries such as Japan.

  Shaib Y and El-Serag HB (2004) The Epidemiology of Cholangiocarcinoma. Semin. Liver Dis. 24, 115-125.

There are limited treatment options for patients diagnosed with BTC, and it is rarely diagnosed at an early stage.11 Locally advanced and metastatic tumours are typically treated with chemotherapy, gemcitabine and cisplatin or other combinations, and are associated with a progression free survival of 8.0 months and overall survival of 11.7 months.12 5-Fluorouracil and derivatives are typically second line agents, with a 7.7% response rate, progression free survival of 3.2 months, and overall survival of 7.2 months.13 There are no approved targeted therapies for the treatment of BTC in the US or Europe. Several studies however have found increased ErbB proteins in BTC. EGFR overexpression is found in 20-30% of CC and up to 39% of GBC. HER2 amplification occurs in 12-15% of GBC,14 but the expression profile in CC varies wildly depending on the study. There is less information on HER3 and HER4 but one study found overexpression in 12% and 56-63% of CCs for the two proteins respectively, and expression levels correlate with pathologic features of the disease.15,16 There have been several attempts to target ErbB receptors for BTC, with mixed results (Exhibit 3), and nothing has been approved.

  Valle JW, et al. (2016) Biliary cancer: ESMO Clinical Practice Guidelines for diagnosis, treatment and follow-up. Ann. Oncol. S5, v28-v37.

  Valle J, et al. (2010) Cisplatin plus Gemcitabine versus Gemcitabine for Biliary Tract Cancer. N. Eng. J. Med. 362, 1273-1281.

  Lamarca A, et al. (2014) Second-line chemotherapy in advanced biliary cancer: a systematic review. Ann. Oncol. 25, 2328-2338.

  Milind J, et al. (2015) HER2/neu-directed therapy for biliary tract cancer. J. Hematol. Oncol. 8, 58.

  Ito Y, et al. (2001) Expression and clinical significance of the erbB family in intrahepatic cholangiocellular carcinoma. Pathol. Res. Pract. 197,95-100.

  Yang X, et al. (2014) Characterization of EGFR family gene aberrations in cholangiocarcinoma. Oncol. Rep. 32, 700-708.

Exhibit 3: Studies targeting ErbB receptors for BTC

Study

Drug

Target

Details

Other treatment

n

ORR

PFS (m)

Notes

Lee17

  Lee J, et al. (2012) Gemcitabine and oxaliplatin with or without erlotinib in advanced biliary-tract cancer: a multicentre, open-label, randomised, phase 3 study. Lancet Oncol. 13, 181-188.

Erlotinib

EGFR

1st line metastatic

gem + ox

135

30%

5.8

p=0.087

Control

1st line metastatic

gem + ox

133

16%

4.2

Gruenberger18

  Gruenberger B, et al. (2010) Cetuximab, gemcitabine, and oxaliplatin in patients with unresectable advanced or metastatic biliary tract cancer: a phase 2 study. Lancet Oncol. 11, 1142-1148.

Cetuximab

EGFR

1st line advanced or metastatic

gem + ox

30

63%

8.8

Malka19

  Malka D, et al. (2014) Gemcitabine and oxaliplatin with or without cetuximab in advanced biliary-tract cancer (BINGO): a randomised, open-label, non-comparative phase 2 trial. Lancet Oncol. 15, 819-828.

Cetuximab

EGFR

1st line advanced

gem + ox

76

23%

6.1

Control

1st line advanced

gem + ox

74

23%

5.5

Javle20

  Javle MM, et al. (2017) Pertuzumab + trastuzumab for HER2-positive metastatic biliary cancer: Preliminary data from MyPathway. J. Clin. Oncol. 35, s4 402.

Herceptin + Perjeta

HER2

HER2 amp/oe refractory metastatic

N/A

8

38%

4.2

HER2

HER2 mut, refractory metastatic

N/A

3

33%

2.8

Peck21

  Peck J, et al. (2012) HER2/neu May Not Be an Interesting Target in Biliary Cancers: Results of an Early Phase II Study with Lapatinib. Oncol. 82, 175-179.

Lapatinib

EGFR/HER2

2nd+ line advanced

N/A

9

2.6

Terminated for futility

Source: Various. Notes: ORR=overall response rate, PFS=progression free survival, gem=gemcitabine, ox=oxaliplatin, amp/oe=amplified or overexpressed, mut=mutant.

There are numerous ongoing BTC clinical trials (Exhibit 4). The only other Phase III programme to our knowledge is the IDH1 inhibitor ivosidenib being developed by Agios for CC. We expect this drug to largely be limited to ICC because IDH1 mutations are generally limited to this type.22 Agios presented data on this compound from a Phase I dose-escalation expansion trial in IDH1+ CC patients with multiple prior therapies in June 2017. In these data, 5% of the 73 evaluable patients had a partial response and 56% had stable disease. The median progression free survival was 3.8 months.

  Borger DR, et al. (2012) Frequent Mutation of Isocitrate Dehydrogenase (IDH)1 and IDH2 in Cholangiocarcinoma Identified Through Broad-Based Tumor Genotyping. Oncologist 17, 72-79.

Exhibit 4: Selection of Phase II and III BTC trials

Drug

Company

Stage

Mechanism

Indication

Asian trial presence

Varlitinib

ASLAN

Pivotal

Pan-HER

BTC

China, Japan, Korea, Taiwan, Singapore

Ivosidenib 

Agios

Phase III

IDH1 inhibitor

CC

Korea

Aliqopa (copanlisib)

Bayer

Phase II

PI3K inhibitor

BTC

N/A

Amcasertib

Sumitomo Dainippon

Phase II

NAGOG inhibitor

Hepatocellular carcinoma and CC

N/A

Apatinib

Jiangsu HengRui

Phase II

VEGF inhibitor

BTC

China

ARQ 087

ArQule

Phase II

FGFR inhibitor

ICC

N/A

CAP7.1

CellAct

Phase II

Topo II inhibitor

Lung Cancer and BTC

N/A

CX-4945

Senhwa Biosciences

Phase II

CK2 inhibitor

CC

Korea, Taiwan

Erdafitinib

Janssen/Otsuka

Phase II

FGFR inhibitor

NSCLC, oesophageal cancer, urothelial cancer, CC

China, Korea, Taiwan

INCB54828

Incyte

Phase II

FGFR inhibitor

CC

Korea, Taiwan, Thailand

Keytruda (pembrolizumab)

Merck

Phase II

PD-1 inhibitor

BTC

N/A

Lenvima (levantinib)

Eisai

Phase II

VEGF inhibitor

BTC

Japan

Merestinib

Eli Lilly

Phase II

c-Met inhibitor

BTC

Korea, Japan, Taiwan

Nerlynx (neratinib)

Puma

Phase II

Pan-HER

Solid tumours, including BTC

N/A

Opdivo (nivolumab)

Bristol-Myers Squibb

Phase II

PD-1 inhibitor

BTC

N/A

Sprycel (dasatinib)

Bristol-Myers Squibb/Otsuka

Phase II

Bcr-Abl, Src family inhibitor

ICC

N/A

Stivarga (regorafenib)

Bayer/Amgen

Phase II

multiple TKI

BTC

N/A

Sulfatinib

Hutchison China Meditech

Phase II

multiple TKI

BTC

China

Votrient (pazopanib)

Novartis

Phase II

multiple TKI

BTC

N/A

Zepsyre (lurbinectedin)

PharmaMar

Phase II

RNA polymerase inhibitor

Solid tumours, including BTC

N/A

Source: Clinicaltrials.gov

Phase Ib BTC interim results

ASLAN published data from a Phase Ib open label dose ranging clinical trial of varlitinib for BTC at ASCO in June 2017. It reported on the results of 15 evaluable patients (out of 27 enrolled at the time) with metastatic CC that received varlitinib in combination with doublet chemotherapy (cisplatin with 5-fluorouracil or capecitabine). There were three partial responses (20%) and 10 stable diseases (67%). This is encouraging compared to historical rates (7.7% response rate and 49.5% disease control rate).13 Adverse events in the ASLAN study were consistent with previous clinical experience with varlitinib and chemotherapy, as well as other TKIs. 37% of patients had diarrhoea, 11% grade three or above, but were well controlled with loperamide. It is worth noting that in this trial the dose of varlitinib was not optimised, and there is potential for an increased response once the optimal dose is found for this combination (as well as increased AEs). The trial is ongoing, with a target completion date of December 2017.

Gastric cancer

Gastric cancer (GC) is one of the most common cancers in the world, behind lung, breast and prostate, and was the most common cause of cancer death in the US in the first half of the 20th century.23 The rate throughout western countries has been on a consistent decline since this time, and there are currently 7.3 new cases of GC and 3.2 deaths per year per 100,000 in the US.24 However, rates of the disease are dramatically higher in parts of Asia. Japan has the highest rate of gastric cancer in the world at 85.3 per 100,000 (non-age adjusted). Rates are also high in China (29.7) and Korea (64.4). The number one risk factor for the development of GC is H. pylori infection, which is associated with a six-fold higher risk GC.25 Other risk factors include smoking and diets rich in preserved meats and vegetables. All of these factors are more common in Asia compared to the West.

  CDC

  SEER

  Helicobacter and Cancer Collaborative Group (2001) Gastric cancer and Helicobacter pylori: a combined analysis of 12 case control studies nested within prospective cohorts. Gut 49, 347-353

The five-year survival rate for GC is 30%, but as low as 5% for metastatic disease.26 Early stage disease can frequently be treated surgically or with radiation, but metastatic disease typically requires combination chemotherapy starting with cisplatin and 5-fluorouracil or derivatives (doublet chemotherapy). This may be expanded to irinotecan or docetaxel-based combinations in later lines.

  American Cancer Society

Herceptin is approved for the treatment of HER2+ GC, which constitutes roughly 20% of advanced disease cases. It is associated with a 47% overall response rate (compared to 35% with chemotherapy alone) and 2.5 month survival benefit (HR=0.73, p=0.0038) in the first line when combined with doublet chemotherapy. By comparison, EGFR inhibitors appear to be contraindicated for gastric cancer, despite a correlation with prognosis:27 trials of cetuximab and panitumumab showed lower overall survival in the active arms.28 Lapatinib has failed to show a statistically significant improvement in overall survival but has shown an improvement in overall response rate when combined as a second line therapy in HER2+ GC (27% vs 9%, p<0.001).29

  Nicholson RI, et al. (2001) EGFR and cancer prognosis. Eur. J. Oncol. 37, s4 9-15.

  Kanat O, et al. (2015) Targeted therapy for advanced gastric cancer. World J. Gastrointest. Oncol. 7, 401-410.

  Bang YJ. (2013) A randomized, open-label, phase III study of lapatinib in combination with weekly paclitaxel versus weekly paclitaxel alone in the second-line treatment of HER2 amplified advanced gastric cancer (AGC) in Asian population: Tytan study. J. Clin. Oncol. 31, 11.

The only other targeted therapies approved by the FDA for gastric cancer are the VEGF inhibitor Cyramza (ramucirumab, Eli Lilly) and the PD-1 inhibitor Keytruda (pembrolizumab, Merck). Keytruda was only recently approved (in September 2017), and only for third-line therapy, although we expect a label expansion into earlier lines in the future. There is an ongoing first-line Phase III trial. Also, the PD-1 inhibitor Opdivo (nivolumab, Bristol-Myers Squibb) has a NDA submitted for gastric cancer. There is significant development interest for this indication both in the US and in Asia. There are currently 72 industry sponsored clinical trials registered on clinicaltrials.gov enrolling in the US, and 39, 20, and 34 in China, Japan, and Korea respectively.

Other clinical results

Phase II breast cancer study

The largest clinical validation of varlitinib to date comes from a Phase II study of the drug in breast cancer which the company presented in February 2017. The study enrolled 50 HER2+ patients that had previously progressed on Herceptin. The study consisted of two arms that compared varlitinib combined with capecitabine verses lapatinib and capecitabine. The study did not result in a statistically significant increase in the endpoints of overall survival or progression free survival (and neither value was reported by the company). There were trends toward increased responses in the varlitinib arm and patients experienced increased tumour shrinkage (36.4% vs 17.8%, p=0.075) and a higher overall response rate (60% vs 46%, p not reported). Although this study failed to statistically demonstrate superiority to lapatinib, a key take-away is that varlitinib appeared to show at least as much (and potentially more) activity as lapatinib, and we can therefore conclude that varlitinib should have meaningful efficacy in humans. Additionally, ASLAN reported that the rate of grade 3 diarrhoea was 12.5% (no cases of grade 4 were observed). This is comparable to previous studies of lapatinib + capecitabine (14%) and capecitabine alone (10%). This puts varlitinib in a similar profile to other TKIs, as opposed to dramatically higher rates of diarrhoea for the pan-HER inhibitor Nerlynx (40% grade 3).

Exhibit 5: Comparison of varlitinib and lapatinib in second line breast cancer

ASLAN study

Tykerb pivotal Phase III

.

Varlitinib + capecitabine

Lapatinib + capecitabine

p

Lapatinib + capecitabine

Capecitabine

p

n

50 total

198

201

Tumour shrinkage

36.40%

17.80%

0.075

ORR

60%

46%

23.7%

13.9%

0.017

PFS

N/R

N/R

27.1

18.6

0.00013

OS

N/R

N/R

75.0

64.7

0.21

Diarrhoea grade ≥ 3

12.50%

N/R

14%

10%

Source: ASLAN, Tykerb label, Cameron et al.30 Note: N/R=not reported.

  Cameron D, et al. (2010) Lapatinib Plus Capecitabine in Women with HER-2–Positive Advanced Breast Cancer: Final Survival Analysis of a Phase III Randomized Trial. The Oncologist 15, 924-934.

Phase I all-comers studies

ASLAN has a series of two ongoing exploratory dose-ranging studies investigating varlitinib for the treatment of an array of solid tumours (the difference between these studies being primarily the combination chemotherapies on the protocol). These studies are very important for the direction of the company because they provided insight into the array of indication varlitinib could have potential efficacy. The company has reported the results from the first 40 patients to complete six cycles of therapy (approximately six months) from these studies. The study showed 20 partial responses and 73% stable disease overall. This level of disease control is very encouraging, as the majority of these patients had had two prior lines of therapy, there was no pre-screening for the status of EGFR or HER2 expression status, and the varlitinib dosing was not optimised (300-500mg).

Exhibit 6: Waterfall of Phase I tumour responses

Source: ASLAN

Ongoing clinical studies

The company is currently sponsoring no less than 10 ongoing clinical trials (Exhibit 7). The company’s most advanced clinical programme is the pivotal clinical trial for second line BTC (Treetopp). The 120-person trial is not of the traditional pivotal study design and will have objective response rate (ORR) as the primary end point, which the company indicates was chosen following guidance from the FDA. This is in contrast to the more common progression free survival or overall survival end points (although these will also be measured). This is likely in response to the exceptional difficulty in designing a clinical trial for an indication with such a short expected period of survival. Results are expected in 2019. The company is also investigating BTC in the first line setting in a Phase Ib study. Also recently, following discussions with the Chinese FDA, the company expanded a Phase IIa programme in China into a pivotal trial for approval there (more details such as total enrolment to be announced). Other BTC trials are early stage and are investigating varlitinib in other chemotherapy combinations or as a monotherapy.

In addition to the BTC trials, the company also has an ongoing Phase II/III GC trial. This study will provide an interim readout on the 40 patients from the Phase II portion in 2018, after which the programme will expand into a Phase III with OS as the primary end point. Patients in this trial will be selected on the basis of their EGFR and HER2 expression status, and will only enrol patients with EGFR and HER2 expression but not HER2 amplification. This class of patients do not otherwise undergo treatment with Herceptin.

Finally, the company announced in September 2017 that a Phase Ib investigator-sponsored study examining varlitinib for the treatment of hepatocellular carcinoma (HCC) had been initiated. There is little in-human data regarding targeting ErbB receptors for HCC (a previous trial saw no benefit in OS or PFS from erlotinib),31 and we see this trial as largely exploratory.

  Zhu AX, et al. (2015) SEARCH: A Phase III, Randomized, Double-Blind, Placebo-Controlled Trial of Sorafenib Plus Erlotinib in Patients With Advanced Hepatocellular Carcinoma. J. Clin. Oncol. 33, 559-566.

Exhibit 7: Varlitinib clinical trials

Target

Stage

Location

Enrolment

Next readout

Regimen

Primary end point

2nd line BTC (TreeTopp)

Pivotal

US, Japan, China, Asia Pac

120

2019

varlitinib + cap vs cap

ORR

1st line EGFR/HER2+ GC

Phase II/III

China, EU, and Asia Pac

40

2018

varlitinib + mFOLFOX6 vs mFOLFOX6

OS

2nd line BTC

Pivotal*

China

*

2018

varlitinib + cap

ORR

1st line BTC

Phase II

40

2020

varlitinib + cap

ORR

2nd line BTC

Phase IIa

Korea, Singapore, Taiwan

25

2017

monotherapy

ORR

1st line BTC

Phase Ib/II

Korea, Singapore, Taiwan

175

2018

varlitinib + gem + cis

ORR

Adjuvant BC

Phase I/II

Singapore

55

2018

Varlitinib + carb + pac

CRR

2nd line HER3+ HCC

Phase Ib

Singapore

monotherapy

MTD

Doublet therapy dosing

Phase Ib

Taiwan

42

2017

varlitinib + cis + 5-FU or varlitinib + cis + cap

DLT

Solid tumours  

Phase Ib

Singapore

18

2018

varlitinib + mFOLFOX6 or varlitinib + cap + ox

MTD

Solid tumours/BTC

Phase I

Japan

42

2017

monotherapy, varlitinib + cap

DLT

HER2+ BC brain metastasis

Pilot

Singapore

Varlitinib + cap

Source: ASLAN, clinicaltrials.gov. Note: *Started as 25 person Phase IIa, expanding into pivotal trial, BC=breast cancer, BTC=biliary tract cancer, GC=gastric cancer, cap=capecitabine, mFOLFOX6 = 5-fluorouracil + leucovorin + oxaliplatin, gem=gemcitabine, cis=cisplatin, carb=carboplatin, pac=paclitaxel, 5-FU=5-fluorouracil, ox=oxaliplatin, HCC=hepatocellular carcinoma, ORR=objective response rate, OS=overall survival, MTD=maximum tolerated dose, DLT=dose limiting toxicities.

ASLAN003: reversing AML

ASLAN are currently investigating ASLAN003 (formerly LAS186323) for the treatment of acute myeloid leukaemia (AML) and has planned a Phase II clinical trial. ASLAN licensed global rights to the drug from Almirall in 2012 and renegotiated in 2016 to include global rights. The agreement includes undisclosed milestones and royalties. The drug will have composition of matter protection through 2032 (after expected patent term extensions).

ASlAN003 is an inhibitor of dihydroorotate dehydrogenase (DHODH), the rate limiting enzyme in the biosynthesis of pyrimidines. DHODH inhibitors have previously been investigated for immunomodulatory properties, although the mechanism is not entirely understood. Arava (leflunomide) and Aubagio (teriflunomide) are DHODH inhibitors, both owned by Sanofi, which have been approved for rheumatoid arthritis and multiple sclerosis respectively. They are thought to work by selectively preventing growth of quickly dividing lymphoid cells, which depend more on DHODH than other tissues.32 ASLAN003 was initially licensed by ASLAN with the intent on pursuing the drug for rheumatoid arthritis, and the company performed two Phase I trials of this molecule in healthy patients (although the detailed results have not been released).

  Bar-Or A, et al. (2014) Teriflunomide and its mechanism of action in multiple sclerosis. Drugs. 74, 659-674.

Interestingly, there is an increasing body of evidence the DHODH inhibition could be effective for the treatment of cancer. First there is a reasonable expectation that the same inhibition of growth seen in other rapidly dividing cells would extend to cancer. Pyrimidine biosynthesis has been identified as an adaptive response to the DNA damage associated with chemotherapy in breast cancer cells.33 DHODH appears to be the rate limiting enzyme for the growth of PTEN mutated cancer cells,34 which is common in an array of tumours.35

  Brown KK, et al. (2017) Adaptive Reprogramming of De Novo Pyrimidine Synthesis Is a Metabolic Vulnerability in Triple-Negative Breast Cancer.

  Mathur D, et al. (2017) PTEN Regulates Glutamine Flux to Pyrimidine Synthesis and Sensitivity to Dihydroorotate Dehydrogenase Inhibition.

  Yen Y and Shen WH (2008) PTEN: a new guardian of the genome. Oncogene 27, 5443-5453.

But DHODH is also implicated in the differentiation of cancer cells. DHODH inhibitors are potent teratogens in animal models and inhibition of DHODH is associated with abnormal development of the neural crest. This same mechanism was found to inhibit the growth of melanoma cells.36 Subsequently it was found that DHODH inhibition could induce the differentiation AML blasts into normal blood cells in mouse models, and this translated into increased survival.37 The company announced in June 2017 that it had replicated this result, and that ASLAN003 induced the differentiation of AML cell lines in a preclinical study (Exhibit 8). The company has initiated a Phase II study of the molecule for AML in late 2017. To our knowledge it is the only DHODH inhibitor in development for cancer.

  White RM, et al. (2011) DHODH modulates transcriptional elongation in the neural crest and melanoma. Nature 471, 518-522. Cancer Disc. 7, 1-9.

  Sykes DB (2016) Inhibition of Dihydroorotate Dehydrogenase Overcomes Differentiation Blockade in Acute Myeloid Leukaemia. Cell 167, 171-186. Cancer Disc. 7, 380-390.

Exhibit 8: ASLAN003 induces differentiation in AML cell lines

Source: ASLAN. Note: A*3=ASLAN003, AML blast differentiation measured by presence of CD11b or CD14 as markers of differentiation.

There are approximately 21,380 patients with AML in the US (4.2/100,000) according to SEER data, and a similar incidence rate in Europe. Historically, it has been very difficult to develop new treatments for this disease, although recently there have been a series of new approvals: Vyxeos (daunorubicin and cyterabine liposomes, Jazz), Rydapt (midostaurin, Novartis), Idhifa (enasidenib, AbbVie), and the reapproval of Mylotarg (gemtuzumab ozogamicin, Pfizer), all in 2017. Additionally, AML has always been an area of intense clinical development and there are currently 31 industry sponsored Phase III clinical trials on clinicaltrials.gov.

Other assets

ASLAN004

ALSAN004 is a monoclonal antibody directed against the interleukin 13 receptor α 1 (IL13Rα1), a receptor for interleukins 4 and 13 (IL-4 and IL-13). ASLAN licensed the asset in 2014 from CSL, and recently secured manufacturing for the drugs to enable progress into clinical trials. IL-4 and IL-13 underlie an array of inflammatory disorders, but are of particular importance in the pathophysiology of allergy and asthma. The receptor targeted by ASLAN004, IL13Rα1, is present on the surface of macrophages and regulates the balance between their pro-inflammatory (M1) and anti-inflammatory (M2) subtypes. ASLAN has announced that it intends to start a Phase I clinical trial of ASLAN004 in 2018, and that it is exploring the drug for the treatment of both inflammatory disorders and cancers with macrophage driven pathology such as cutaneous T-cell lymphoma. Sanofi recently got a similar drug approved, Dupixent (dupilumab), which inhibits IL4Rα, a protein in the same receptor complex as IL13Rα1. The drug is approved for atopic dermatitis and is in Phase III for asthma.

ASLAN002 and ASLAN005

Aslan previously licensed AsiaPac rights to the c-MET and RON inhibitor ASLAN002 from Bristol-Myers Squibb, and advanced the drug through Phase I. The company was able to demonstrate that the drug altered biomarkers for bone turnover in cancer patients and may prevent cancer mediated bone loss.38 This is a process mediated by the secretion of macrophage stimulating protein (MSP) from certain cancers, for which RON is the receptor on an array of tissues. MSP is also implicated in supressing the immune response in these tumours by preventing macrophage engagement. After this trial was complete, Bristol-Myers Squibb exercised an option to reacquire global rights to the drug for $10m and future milestones in July 2016.

  Andrade K, et al. (2017) RON kinase: A target for treatment of cancer-induced bone destruction and osteoporosis. Science. Trans. Med. 9, eaai9338.

Recognising the potential for RON inhibition both for the prevention of cancer driven osteoporosis and macrophage activation, ASLAN in-licensed the RON inhibitor ASLAN005 from Singapore’s Agency for Science, Technology and Research in 2016. The drug is in preclinical development.

Sensitivities

The hurdles that ASLAN faces are typical for a development stage pharmaceutical company and are largely clinical in nature. Varlitinib is currently being progressed for BTC and GC, and efficacy in these indications has not been established to a level of statistical certainty. However, the compound appears to be active and the mechanism of action is well understood. Other drugs targeting EGFR/HER2 in these indications have had mixed results and it is unclear at this time how much pan-HER activity will improve outcomes. BTC is an exceptionally aggressive disease, and it is likely that this has complicated the results in previous clinical trials. This risk is offset in part because of the acceptance by the FDA to take response rates in lieu of survival end points for the current study. ASLAN003 is higher risk, because targeting DHODH for AML has not been previously tested in the clinic. A number of treatments for AML have recently been developed, but historically, there have been significant difficulties developing drugs for this indication. ASLAN also faces a degree of commercial risk. There are a large number of ongoing clinical trials for BTC, GC, and AML, which may increase competition in the future. Finally, the company will require at least NT$2.5bn in additional capital to reach profitability, and if the company is not able to meet these needs through the licensing of its assets in certain territories, it may require other dilutive forms of financing.

Valuation

We arrive at an initial valuation of NT$9.5bn or NT$72.87 per share based on a risk-adjusted NPV analysis of the commercialisation potential of ASLAN’s assets. Our model is based on certain assumptions regarding these assets, the target markets, and the eventual parameters of commercialisation. We use a 12.5% discount rate, which is our standard for pre-commercial companies, through expected patent expiration. We acknowledge that the company intends to out-license these assets in certain territories, but our valuation incorporates commercialisation details to encapsulate the value to any potential partners. We currently only include varlitinib, ASLAN003, and royalties from ASLAN002 in our model, although we may add further assets to our calculations as they enter the clinic.

For illustrative purposes we group our valuation into regions: US + Europe (considering the EU 28), and Asia, in which we model Japan, Korea, and China. For China in particular, we only consider persons covered under the urban insurance schemes (roughly 35% of the population) to be a viable market. We assume these countries will all have lower prices than the US: 40% lower for Europe, 50% lower for Japan and Korea, and 80% lower in China; after which we assume 30% reduction in net sales for discounts. For each asset we assume a COGS of 15%, which includes a 5% manufacturing cost and 10% in assumed royalties to partners. We assume a cost of selling of 10% plus $5m in fixed costs per year, per region.

Exhibit 9: Valuation assumptions

Drug

Indication

Clinical trial patients

Development $/patient

US launch pricing

Penetration

Varlitinib

BTC

120

$75k

$16,000 x 4 mo.

50%, 25% in China

GC

415

$75k

$16,200 x 9 mo.

30%, 20% in China

ASLAN003

AML

240

$100k

$110,000/course

10%

ASLAN002

BC

N/A

N/A

$16,600 x 7 mo.

15%

GC

N/A

N/A

$16,600 x 7 mo.

20%

Source: Edison Investment Research

We have assigned a 30% probability of success for varlitinib in BTC and a 20% probability of success for GC. Response rates for BTC were encouraging from the Phase Ib clinical trial and all comers studies compared to historical controls, and we are encouraged by the FDA’s acceptance of response rate for the end point of the pivotal clinical trial. This is balanced by historical difficulty in this indication and previous failures of all ErbB receptor targeting drugs. Currently, there are no data to support the specific indication of first line GC in EGFR/HER2 expressing (but not amplified) tumours, as results in GC from the all comers trial may have been driven by HER2 over-expressors, where Herceptin is already approved.

We assume a launch pricing for varlitinib in the US of around $16,000 per month, which is approximately a 50% premium over the median solid tumour cancer drugs (adjusted for 2% per year price growth). We believe that this premium is justified based on the limited availability of treatment options and the expected short duration of treatment, especially for BTC at only four months. We believe that the high unmet medical need will drive high penetration of up to 50% for BTC. We forecast lower penetration in China than other regions due to the increased reliance on cash for medical expenses in that region. We assume royalties of 20% from Hyundai for the commercialisation of the drug in Korea. We also assume a lower than average development cost for varlitinib at $75,000 per patients due to the availability of Asian patients for these indications, and $40,000 per patient for the Chinese pivotal trial. We currently model that only a single pivotal trial will be needed for BTC approval (two for GC), although this will depend on the totality of the data from the ongoing study. If we amend this in the future this would result in a delay in approval to approximately 2022, and $9m in additional clinical trial expense. We currently do not include treatment in the first line setting in our model, although we may add this following the results from the first line BTC study expected in 2018.

Our probability of success for ASLAN003 is low at 10% because of the untested mechanism of action for this compound. We only model commercialisation of ASLAN003 in the US and Europe, because lower rates of AML in Asia limit its market in these regions, and the resulting value at this stage. However, we may include Asian commercialisation at a later date as the programme progresses. We model the market being first-line patients unfit for other treatment with a launch pricing of $110,000 per course (at launch in 2024, similar to Idhifa, adjusted for price growth), although details such as the precise target demographic and treatment duration are currently unknown, so these details may change. We model clinical trial sizes based on recent approvals.

We model ASLAN002 for the purposed of calculating royalties, which we assume at 5% of sales, and we conservatively only model royalties from sales in the US and Europe. We also include three milestones triggered at Phase III results ($10m), approval ($20m), and $500m in sales ($20m)

Exhibit 10: Valuation of ASLAN

Program

Indication

Region

Clinical stage

Prob. of success

Launch year

Peak sales ($m)

Margin/royalties

rNPV (NT$m)

Varlitinib

2nd line BTC

US + Europe

Phase II/III

30%

2020

267

59%

3,236

East Asia

Phase II/III

30%

2020

195

53(58%

1,986

R&D

(349)

1st line GC

US + Europe

Phase II/III

20%

2021

175

57%

841

East Asia

Phase II/III

20%

2021

302

54(60%

1,430

R&D

(243)

ASLAN003

1st line AML

US + Europe

Phase II

10%

2022

296

59%

1,011

R&D

(147)

ASLAN002 Royalties

1st line BC + GC

US + Europe

Phase II

15%

2022

876

5%

456

Unallocated costs

(586)

Total

7,635

Net cash and equivalents (Q217) ($m)

1,847

Total firm value ($m)

9,482

Total basic shares (m)

130.1

Value per share ($)

72.87

Source: ASLAN reports, Edison Investment Research

Financials

ASLAN reported a comprehensive loss of NT$270m for Q217, driven primarily by R&D spending of NT$210m. We expect this R&D spending to continue to increase to NT$869m in 2017 and NT$880m in 2018 with the progress of the varlitinib and ASLAN003 clinical trials. We also expect the company to initiate the Phase I clinical study of ASLAN004 during this period, and we may increase our R&D spending estimates if the company progresses this programme to Phase II as well. The company had NT$373m in revenue in 2016 associated with the licensing deals with Hyundai Pharm and Bristol-Myers Squibb. The company ended Q217 with NT$2.12bn in cash and equivalents. The company has a loan of SG$10m (NT$272m) from the Singapore Economic Development Board (6%, 25% repayable on a licensing and 100% repayable on a Phase III approval). The company has enough cash to provide a runway into 2019, through the expected Phase II readouts for BTC and GC in 2018. We expect the company to seek out-licensing partners for varlitinib in Japan and the EU at that time, which will significantly offset future cash flow needs, although in lieu of this deal we record NT$2.5bn in illustrative debt to account for future development costs. We may adjust these financing schedules in the future to reflect other clinical or business development activities.

Exhibit 11: Financial summary

NT$k

2015

2016

2017e

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

0

373,018

0

0

0

Cost of Sales

0

(4,038)

0

0

0

Gross Profit

0

368,980

0

0

0

R&D

(210,471)

(425,296)

(869,061)

(880,446)

(752,365)

SG&A

(223,690)

(224,721)

(244,442)

(249,331)

(861,517)

EBITDA

 

 

(384,537)

(232,716)

(1,081,990)

(1,097,864)

(1,581,969)

Normalised operating profit

 

 

(386,191)

(235,167)

(1,080,243)

(1,096,517)

(1,580,622)

Amortisation of acquired intangibles

0

0

0

0

0

Exceptionals

0

0

0

0

0

Share-based payments

(47,970)

(45,870)

(33,260)

(33,260)

(33,260)

Reported operating profit

(434,161)

(281,037)

(1,113,503)

(1,129,777)

(1,613,882)

Net Interest

(33,376)

(16,932)

(12,512)

(12,512)

(12,512)

Joint ventures & associates (post tax)

0

0

0

0

0

Exceptionals

16,910

5,644

0

0

0

Profit Before Tax (norm)

 

 

(402,657)

(246,455)

(1,092,755)

(1,109,029)

(1,593,134)

Profit Before Tax (reported)

 

 

(450,627)

(292,325)

(1,126,015)

(1,142,289)

(1,626,394)

Reported tax

0

0

0

0

0

Profit After Tax (norm)

(402,657)

(246,455)

(1,092,755)

(1,109,029)

(1,593,134)

Profit After Tax (reported)

(450,627)

(292,325)

(1,126,015)

(1,142,289)

(1,626,394)

Minority interests

0

0

0

0

0

Discontinued operations

0

0

0

0

0

Net income (normalised)

(402,657)

(246,455)

(1,092,755)

(1,109,029)

(1,593,134)

Net income (reported)

(450,627)

(292,325)

(1,126,015)

(1,142,289)

(1,626,394)

Basic average number of shares outstanding (m)

55

105

124

130

137

EPS - basic normalised (NT$)

 

 

(7.32)

(2.35)

(8.81)

(8.52)

(11.66)

EPS - diluted normalised (NT$)

 

 

(7.32)

(2.35)

(8.81)

(8.52)

(11.66)

EPS - basic reported (NT$)

 

 

(8.19)

(2.78)

(9.08)

(8.77)

(11.90)

Dividend (NT$)

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

5,200

19,201

20,527

20,527

20,527

Intangible Assets

430

2,727

2,727

2,727

2,727

Tangible Assets

2,919

12,437

12,437

12,437

12,437

Investments & other

1,851

4,037

5,363

5,363

5,363

Current Assets

 

 

890,962

1,718,671

1,688,397

594,490

1,593,447

Stocks

0

0

0

0

0

Debtors

0

41,867

0

0

0

Cash & cash equivalents

889,728

1,673,906

1,685,499

591,592

1,590,549

Other

1,234

2,898

2,898

2,898

2,898

Current Liabilities

 

 

(65,984)

(123,061)

(177,861)

(180,471)

(260,050)

Creditors

(33,043)

(123,061)

(177,861)

(180,471)

(260,050)

Tax and social security

0

0

0

0

0

Short term borrowings

0

0

0

0

0

Other

(32,941)

0

0

0

0

Long Term Liabilities

 

 

(2,066,865)

(269,692)

(282,204)

(294,716)

(2,807,228)

Long term borrowings

(279,491)

(269,692)

(282,204)

(294,716)

(2,807,228)

Other long term liabilities

(1,787,374)

0

0

0

0

Net Assets

 

 

(1,236,687)

1,345,119

1,248,859

139,830

(1,453,304)

Minority interests

0

0

0

0

0

Shareholders' equity

 

 

(1,236,687)

1,345,119

1,248,859

139,830

(1,453,304)

CASH FLOW

Op Cash Flow before WC and tax

(384,537)

(232,716)

(1,081,990)

(1,097,864)

(1,581,969)

Working capital

(6,269)

48,749

96,667

2,609

79,579

Exceptional & other

16,848

3,184

(9,019)

(9,817)

(9,817)

Tax

0

0

0

0

0

Net operating cash flow

 

 

(373,958)

(180,783)

(994,341)

(1,105,072)

(1,512,208)

Capex

(1,095)

(12,094)

(1,747)

(1,347)

(1,347)

Acquisitions/disposals

0

(2,627)

0

0

0

Net interest

0

0

0

0

0

Equity financing

1,053,660

1,031,496

996,495

0

0

Dividends

0

0

0

0

0

Other

(260)

(2,186)

(1,326)

0

0

Net Cash Flow

678,347

833,806

(919)

(1,106,419)

(1,513,555)

Opening net debt/(cash)

 

 

53,083

(610,237)

(1,404,214)

(1,403,295)

(296,876)

FX

(15,027)

(37,794)

0

0

0

Other non-cash movements

0

(2,035)

0

0

0

Closing net debt/(cash)

 

 

(610,237)

(1,404,214)

(1,403,295)

(296,876)

1,216,679

Source: ASLAN reports, Edison Investment Research

Contact details

Revenue by geography

83 Clemenceau Avenue #12-03 UE Square
Singapore 239920
+65 6222 4235
http://aslanpharma.com

N/A

Contact details

83 Clemenceau Avenue #12-03 UE Square
Singapore 239920
+65 6222 4235
http://aslanpharma.com

Revenue by geography

N/A

Management team

Chairman and CEO: Carl Firth

CMO: Bertil Lindmark

Dr Firth co-founded ALSLAN in 2010 and served as its CEO since inception. Previously, he was head of Asia Healthcare at Bank of America Merrill Lynch, supporting public and private financing of healthcare companies across the region and advising on M&A transactions. Prior to joining the banking industry, Carl worked for AstraZeneca for 10 years in various commercial and R&D roles, including regional business development director, Asia Pacific, and director of new product development, China.

Dr Lindmark has been at ASLAN since 2015. He was previously executive director of research and development and member of the board of directors at Almirall, a European pharmaceutical company with global reach, where he led the global R&D team of more than 500 R&D staff across three sites, focusing on respiratory, gastrointestinal, dermatology and neuroscience. He secured EU and US approval of several important new drugs, including Eklira/Tudorza, Constella and Eklira/formoterol, and was instrumental in the US$2bn sale of Almirall’s respiratory franchise to AstraZeneca.

COO: Mark McHale

CBO: Jeff Tomlinson

Dr McHale is one of the co-founders of ASLAN. Previously, he was head of molecular sciences at AstraZeneca Respiratory & Inflammation, and in this role supported small molecule and therapeutic antibody projects from target identification to Phase 2a. Mark was a core member of the respiratory strategy research team for five years and personally led all new target identification in asthma. In 2006, he led a US$136m investment in the AZ/Dynavax collaboration to produce inhaled TLR9 agonists for the treatment of asthma and led preclinical/ Phase 1 projects.

Jeff Tomlinson is also a co-founder of ASLAN Pharmaceuticals. He held multiple senior business development roles including chief business officer at Active Pass Pharmaceuticals, Senior VP business development at Pharmacopae Biosciences and director of business development for GeneLogic. Jeff was at GlaxoSmithKline (UK and US) for five years as international research project management and technical sales.

Management team

Chairman and CEO: Carl Firth

Dr Firth co-founded ALSLAN in 2010 and served as its CEO since inception. Previously, he was head of Asia Healthcare at Bank of America Merrill Lynch, supporting public and private financing of healthcare companies across the region and advising on M&A transactions. Prior to joining the banking industry, Carl worked for AstraZeneca for 10 years in various commercial and R&D roles, including regional business development director, Asia Pacific, and director of new product development, China.

CMO: Bertil Lindmark

Dr Lindmark has been at ASLAN since 2015. He was previously executive director of research and development and member of the board of directors at Almirall, a European pharmaceutical company with global reach, where he led the global R&D team of more than 500 R&D staff across three sites, focusing on respiratory, gastrointestinal, dermatology and neuroscience. He secured EU and US approval of several important new drugs, including Eklira/Tudorza, Constella and Eklira/formoterol, and was instrumental in the US$2bn sale of Almirall’s respiratory franchise to AstraZeneca.

COO: Mark McHale

Dr McHale is one of the co-founders of ASLAN. Previously, he was head of molecular sciences at AstraZeneca Respiratory & Inflammation, and in this role supported small molecule and therapeutic antibody projects from target identification to Phase 2a. Mark was a core member of the respiratory strategy research team for five years and personally led all new target identification in asthma. In 2006, he led a US$136m investment in the AZ/Dynavax collaboration to produce inhaled TLR9 agonists for the treatment of asthma and led preclinical/ Phase 1 projects.

CBO: Jeff Tomlinson

Jeff Tomlinson is also a co-founder of ASLAN Pharmaceuticals. He held multiple senior business development roles including chief business officer at Active Pass Pharmaceuticals, Senior VP business development at Pharmacopae Biosciences and director of business development for GeneLogic. Jeff was at GlaxoSmithKline (UK and US) for five years as international research project management and technical sales.

Principal shareholders

(%)

Alnair Investment

6.78

Howden Andrew

0.34

Bertil Lindmark

0.23

Asarpota Kiran

0.05

Chih-I Hsieh

0.04

Companies named in this report

AbbVie (ABBV), Agios Pharmaceuticals (AGIO), Array BioPharma (ARRY), Bristol-Myers Squibb (BMY), Eli Lilly (LLY), Hyundai Pharmaceutical (004310.KR), Jazz Pharmaceuticals (JAZZ), Merck (MRK), Novartis (NVS), Pfizer (PFE), Puma Biotechnology (PBYI), Roche (RHHBY ), Sanofi (SNY), Spectrum Pharmaceuticals (SPPI)

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by ASLAN Pharmaceuticals and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by ASLAN Pharmaceuticals and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: Real Estate

Raven Russia — Growing into an improving market

Raven has announced a second significant acquisition for the current year, a large, modern Grade A warehouse complex north of Moscow. The acquisition (maximum consideration c $120m) is initially funded from Raven’s existing strong cash position and immediately enhances earnings with the potential for further upside from lettings and higher rents. With the Russian economy continuing to improve, and occupier demand running well in excess of falling new warehouse supply, management comments that it feels increasingly like the bottom of the market. The company remains well positioned for additional accretive acquisitions.

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