Get To Know Addex Therapeutics - Initiating Coverage - Analyst Blog
20 Giugno 2012 - 12:29PM
Zacks
Get To Know Addex Therapeutics - Initiating
Coverage
By Jason Napodano, CFA
Below is a summary of our Initiation of Coverage on Addex
Therapeutics. For the full 28 page report, please click here:
ADXN-6/20.Nap.pdf.
We are initiating coverage of Addex Therapeutics (Swiss:ADXN.SW,
OTC:ADDXF) with a ‘Buy’ rating and CHF 20 ($21.00 US OTC) price
target. Despite limited volume on U.S. OTC tracking stock ADDXF and
the inability of some U.S. investors to purchase shares on the
Swiss SIX, we are initiating coverage of Addex Therapeutics because
we believe the company’s discovery platform, focused on positive
and negative allosteric modulators, offers potential significant
advantages in small molecule drug development. We believe the two
leading pipeline candidates, dipraglurant and ADX71149, offer
blockbuster potential for their respective indications.
…Dipraglurant To Fill A Significant Unmet Medical
Need…
Addex Therapeutics is currently seeking a development and
commercialization partner for dipraglurant. The drug is an oral
negative allosteric modulator (NAM) of the metabotropic glutamate
receptor 5 (mGluR5), for the treatment of Parkinson’s disease
levodopa-induced dyskinesia (PD-LID). LID is a major side-effect of
Levodopa use. Levodopa (L-DOPA) is the leading dopamine replacement
therapy for the treatment of Parkinson’s disease. LID is
characterized by hyperkinetic movements, including chorea (abnormal
involuntary movement), dystonia (sustained muscle contraction,
abnormal posture), and athetosis (involuntary convoluted
movements). It is most common at times of peak L-DOPA plasma
concentrations (peak-dose dyskinesia), although it may also occur
when plasma concentrations of L-DOPA rise and fall (diphasic
dyskinesia) or during off-time (off-period dystonia).
Phase 2a clinical data on dipraglurant, reported in March 2012,
demonstrated encouraging signs of efficacy, safety, and
tolerability. Results showed that patients taking dipraglurant had
a meaningful and statistically significant reduction in abnormal
involuntary movement as soon as one day after starting dipraglurant
therapy. The data was also suggestive of an increased in “on” time
– the time in which a Parkinson’s patient is treated with Levodopa
without experiencing dyskinesia – and a reduction in “off” time –
the time after which L-DOPA has left the body prior to the next
Levodopa dose.
The profile of dipraglurant is one we believe physicians and
patients will look very favorably upon. LID is a significant
problem that emerges during the treatment of Parkinson’s patients.
Levodopa is a staple of modern Parkinson’s treatment and LID is
essentially unavoidable a decade after Levodopa dosing begins. The
only available treatment for LID is to reduce Levodopa dosing,
which in turn worsens the underlying symptoms of Parkinson’s
disease.
There are over 1 million Parkinson’s patients between North
American and Europe on Levodopa therapy. Within five years of
beginning treatment, approximately 50% will develop LID. We see
dipraglurant as a $650 million opportunity. We expect substantial
partnering interest from global pharmaceutical and biotechnology
companies for the drug. Management at Addex would like to partner
dipraglurant for the next stage in clinical development, which we
expect to be a pivotal phase 2b program to begin in 2013, by the
end of the year. Based on the market potential for dipraglurant, we
can foresee an upfront payment greater than $25 million, with
backend potential milestones eclipsing $200 million plus
double-digit royalties on worldwide sales. The Michael J. Fox
Foundation (MJFF) supplied funding for the phase 2a trial.
Based on these parameters, we have built a financial model that
assumes a U.S. and European launch of dipraglurant in 2017. We see
dipraglurant alone worth over $120 million (~ CHF 100 million) in
market value. Addex is currently trading with a market value of
only CHF 65 million. We believe the dipraglurant market opportunity
is being vastly under-valued by investors in both the U.S. and
Switzerland.
…ADX71149 Offers Unique Potential
Profile…
In January 2005, Addex Therapeutics formed a research collaboration
agreement with Johnson & Johnson to discover, develop, and
commercialize novel allosteric modulator compounds for the
treatment of anxiety, depression, schizophrenia, and Alzheimer’s
disease. The first of these compounds, ADX71149, has entered
clinical testing and is current in a phase 2a for the treatment of
schizophrenia. To date, Addex has received a total of €10.2 million
in upfront and milestone payments on ADX71149, with the potential
to receive an additional €109 million in future
pre-commercialization milestones and potential low double-digit
royalties on worldwide sales once commercialized.
The potential therapeutic profile of ADX71149 is intriguing.
Despite generic competition from atypical antipsychotics, we
believe an enormous market opportunity exists for ADX71149.
Atypical antipsychotics carry significant side effects, including
weight gain, hyperprolactinemia, increases in blood glucose,
increases in serum cholesterol and triglycerides, and increased
risk of cataracts, which all lead to high discontinuation rates.
Additionally, atypical antipsychotics have limited efficacy in
addressing the negative symptoms of schizophrenia, including social
withdrawal, apathy, alogia, anhedonia, and avolition.
Addex has designed ADX71149 to address both of these limitations
found with atypical antipsychotics. With over 5 million addressable
schizophrenics between North America and Europe, we see ADX71149 as
a potential blockbuster drug if the theoretical profile holds. For
the purpose of our financial model, we have chosen a more
conservative approach, modeling ADX71149 as having peak sales
around $500 million. Data from the ongoing phase 2a program is
expected by the end of the year.
J&J has also progressed ADX71149 into a phase 2a clinical trial
looking to study the drug in patients with anxiety that have major
depressive disorder (MDD). Conventional selective serotonin
reuptake inhibitors (SSRIs) for the treatment of depression carry
significant side effect, one of which is anxiety. We believe there
is meaningful clinical need for a drug that can treat both major
depression and anxiety without exhibiting some of the debilitating
side effects seen with SSRI and SNRI drugs. Similar to our
forecasts for the drug in schizophrenia, we have chosen a heavy
discount rate and conservative stance on modeling sales for
ADX71149 in anxiety and MDD.
Despite these conservative forecasts, we see ADX71149 as worth an
estimated $75 million (~ CHF 70 million) in value. This includes a
heavily discounted NPV on the potential €109 million in future
pre-launch milestones and potential low double-digit royalties on
worldwide sales of ADX71149 from J&J once commercialized.
…Pipeline Kicks In Upside…
Besides the two clinical stage candidates noted above, Addex
Therapeutics possesses a deep preclinical pipeline, which includes
a handful of GABA and mGlu candidates targeting neurological and
inflammatory diseases. The company also has candidates targeting
GLP-1, TNFR1, and TkkB for various CNS and metabolic disorders in
earlier-stage preclinical trials. The most advanced preclinical
candidate is an oral GABA-B receptor PAM in late-stage preclinical
studies with an investigational new drug application (IND) planned
for the fourth quarter 2012. We see Addex’s allosteric modulator
pipeline and chemistry platform worth an estimated $25 million (~
CHF 20 million).
![](http://www.zacks.com/images/upload_dir/1340204893.jpg)
Price Target
We have built a discounted cash flow (DCF) model to value the
shares of Addex Therapeutics. Our model is built in Swiss francs
and assumes a launch of dipraglurant in 2017 by a yet unfound
partner and ADX71149 by J&J also in 2017. We expect several
additional candidates to enter the clinic over the next several
years. Our model calculates fair value at CHF 217 million, of CHF
20 per share, which equates to a U.S. OTC price of $21.00 per
share. We have posted our DCF model in the back of our report.
For additional information, please visit: scr.zacks.com.
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