ADR research

SymBio Pharmaceuticals

Strategy update

Preparing to establish own sales organization

Pharma & biotech
12 December 2018

SymBio announced in October that it has begun preparations to establish
its own sales organization to market Treakisym and other anticancer drugs
in Japan after the marketing agreement with Eisai expires in December
2020. The announcement validates our decision earlier this year to adopt
self-commercialization in Japan in our base-case valuation model. Selfcommercialization will improve operating margins and allow it to establish
a team of in-house experts to communicate the benefits of Treakisym (andrigosertib if approved) to healthcare providers. Our valuation increases to$225m as we roll forward the DCF model; our earnings forecasts andvaluation assumptions are unchanged.
Year end
12/16
12/17
12/18e12/19eRevenue(US$m)
21.0
30.5
37.2
38.3

PTP
(US$m)(20.5)(35.2)(26.8)(32.0)

EPADR($)(0.52)(0.71)(0.41)(0.41)

DPADR
($)
0.0
0.0
0.0
0.0

P/E
(x)
N/A
N/A
N/A
N/A

Gross yield
(%)
N/A
N/A
N/A
N/A

Note: Converted at ¥113 to US$1.

Liquid formulations and DLBCL justify own sales
The extension of Treakisym’s lifecycle through the in-license of liquid formulations
from Eagle Pharmaceuticals plus the potential for the r/r diffuse large B-cell
lymphoma (DLBCL) Phase III to drive further sales growth from 2021 (if successful)support the rationale for SymBio to establish its own salesforce to market
Treakisym and other drugs. Treakisym in-market sales grew by ~61% to $67m in2017 (on an NHI price basis), supported by two new indications approved in 2016.
We model Treakisym sales of $95m in FY21, allowing SymBio to attain profitability
in the first year of self-commercialization.

New Treakisym indications, rigosertib to drive growth
Treakisym (bendamustine hydrochloride) plus rituximab is already established as
standard-of-care for malignant lymphoma in a number of settings. SymBio initiateda Phase III study in r/r DLBCL in August 2017, with top-line data expected in 2019.
We estimate the r/r DLBCL indication could double the peak sales potential for
Treakisym, if approved. In July SymBio filed for approval of Treakisym as part of apre-treatment regimen prior to CAR-T therapy with Kymriah. In addition, SymBio
aims to recruit 40 Japanese patients, as part of partner Onconova’s 360-patient
global Phase III trial of intravenous (iv) rigosertib in r/r higher-risk myelodysplastic
syndromes (MDS) and plans to file for approval in Japan in 2021.

Valuation: $225m (¥25.5bn) or $2.9/ADR
We roll forward our DCF model and increase our risk-adjusted valuation to $225m(¥25,469m) (vs $211m). The extra 20m shares issued under the 45th stockacquisition rights (raising $22.9m) sees value per share decline to $2.9/ADR (vs$3.6/ADR). Our valuation assumptions and earnings forecasts are unchanged, as
we already adopted self-commercialization in Japan as the base-case valuation
scenario in in our April report. SymBio has reaffirmed its guidance, which alreadyallowed for expenses related to establishing its own salesforce.

Price

US$2.45*

Market cap

US$191m*underlying ¥ price converted at ¥113/US$
ADR/Ord conversion ratio 1:1
Net cash (US$m) at end June 201827

ADRs in issue

77.9m

ADR code

SYMQY

ADR exchange

OTC

Underlying exchangeTokyo

Depository

BNY

Business description
SymBio Pharmaceuticals is a Japanese specialty
pharma company with a focus on oncology andhematology. The Treakisym powder formulation
was in-licensed from Astellas in 2005; liquid
Treakisym was in-licensed from Eagle
Pharmaceuticals in 2017. Rigosertib was inlicensed from Onconova.

Next events
Treakisym sales update

Q119

DLBCL top-line data

2019

iv rigosertib top-line data

2019

Analysts
Dr Dennis Hulme+61 (0)2 8249 8345

Maxim Jacobs+1 646 653 7027

healthcare@edisongroup.com
Edison profile page

SymBio Pharmaceuticals is a
research client of Edison
Investment Research Limited

Establishing own salesforce for revitalized Treakisym
SymBio acquired the rights to develop and commercialize Treakisym from Astellas in Japan (2005)
and subsequently in China/Hong Kong, Korea, Taiwan and Singapore (April 2007). Treakisym isapproved in Japan for the treatment of the hematological cancers chronic lymphocytic leukemia(CLL) and low-grade non-Hodgkin’s lymphoma and mantle cell lymphoma (lg NHL/MCL). Orphan
exclusivity on the currently-marketed freeze dried powder (FD) Treakisym product expires in
October 2020.
Treakisym is marketed by Eisai in Japan, Singapore and South Korea under a business partnershipagreement that expires in December 2020.
In September 2017, SymBio in-licensed two liquid formulations of bendamustine HCl (Treakisym)from Eagle Pharmaceuticals (Eagle). The new formulations are protected by patents that extend to2031, which will add around 10 years to the Treakisym product lifecycle compared to the company’smarketed FD powder Treakisym product. The new formulations are more convenient for healthcare
workers and for patients, which will be important advantages as SymBio seeks to switch users
away from the FD formulation.
The extended period of patent protection for the liquid formulations has made investment in a
Phase III study of Treakisym in the DLBCL indication an attractive proposition for SymBio. DLBCL
comprises around 45% of NHL cases in Japan, and we estimate that approval in this indication
could double the sales potential of Treakisym.
Taken together, the patented liquid formulations and the DLCBL Phase III justify SymBio investingin establishing its own sales organization to market Treakisym and other drugs such as rigosertib (ifapproved), in our view. We estimate that SymBio could earn an operating profit margin of 50% of
net sales of Treakisym under a self-commercialization model, compared to an estimated margin of
10–12% of in-market top-line sales under the arrangement with Eisai.

Own sales organization provides leverage for new products
SymBio has noted that having its own sales organization in place will enable it to better understandand respond to market needs, positioning it to deliver the benefits of Treakisym to healthcare
providers and patients. Treakisym is used in the hematology departments of approximately 900
institutions across Japan, with the top 400 institutions accounting for ~90% of sales. If rigosertib isapproved for treating MDS, the top 400 institutions would similarly be expected to account for the
majority of use. Therefore, SymBio would be in a position to market rigosertib (if approved) throughits own sales organization for minimal additional cost. The same operation leverage would apply
were SymBio to in-license or develop other hematological drugs. Establishing its own salesorganization will be an important step towards achieving SymBio’s vision of establishing itself as aleading specialty pharma company.

Pipeline progress
Exhibit 1 summarizes the status of SymBio’s product pipeline. The main areas of focus are:

Obtaining approval for the two liquid formulations of Treakisym to extend the product lifecycleout to 2031.

Completion of the Phase III study of Treakisym in DLBCL, which could potentially double thesales potential of Treakisym.

SymBio Pharmaceuticals | 12 December 20182

Participating in the global Phase III study of iv rigosertib in MDS, which could become SymBio’s
second product for hematological cancers.

Completion of ongoing Phase I studies of oral formulations of Treakisym and rigosertib, which
could lead to development of additional indications for both drugs.

Exhibit 1: Status of the SymBio pipeline

Source: SymBio

Key news anticipated for SymBio in 2019 includes:Top-line data from the DLBCL and rigosertib Phase III studies.

Filing for approval of the ready-to-dilute (RTD) liquid Treakisym formulation.

Update on the clinical study of the rapid infusion Treakisym formulation.

Liquid formulations extend Treakisym lifecycle
The new liquid formulations of Treakisym that SymBio in-licensed from Eagle are more convenient
for healthcare workers and for patients.
The first in-licensed product is an RTD liquid formulation that will significantly reduce dose
preparation time, making it easier and safer for health professionals. This compares to the FD
Treakisym, which has to be reconstituted before administration, a time-consuming process thatcarries the risk of exposing healthcare workers to cytotoxic powders and vapors.
The second in-licensed product is a rapid-infusion (RI) formulation that will cut drug infusion time to
10 minutes from 60 minutes for the current Treakisym product (and the RTD formulation).
Exhibit 2 illustrates the differences in use between the current FD Treakisym and the new liquid
RTD and RI formulations.

SymBio Pharmaceuticals | 12 December 20183

Exhibit 2: Comparison of the current FD powder and new liquid formulations

Source: SymBio

Liquid formulations aim to maintain SymBio’s market share
We expect the approval pathway for the RTD Treakisym formulation to be relatively straightforward,
as the same dose of drug is administered to patients in the same way, with the only difference
being the way the dose is prepared. SymBio is aiming to launch the RTD product in H121, which
would allow it to be well established in the marketplace before the expected entry of the first FD
generics in 2022.
The RI product represents a greater change to the current treatment protocols, so approval of thisproduct is expected to take longer – we model a 95% chance of a launch by the start of 2023.
Given the greater convenience for patients of the rapid 10-minute infusion with the RI formulation,
we expect over 95% of patients to be switched to this product.

DLBCL indication could substantially increase Treakisym sales
SymBio is seeking to add another indication for the treatment of r/r DLBCL, an intermediate or highrisk form of NHL, with Treakisym. It commenced a Phase III trial to confirm the safety and efficacyof Treakisym plus rituximab in r/r DLBCL in August 2017. SymBio’s mid-range plan aims to file an
NDA in H120. We model Phase III costs of $18m and a potential launch in H221.
DLBCL is a rapidly growing, intermediate or high-risk form of NHL, in contrast to the slower-growing
indolent or low-risk lymphomas that are included in the current approvals for Treakisym. There iscurrently no standard chemotherapy for the treatment of DLBCL.
DLBCL is the most common form of NHL and is estimated to represent 45% of NHL cases inJapan1. Based on epidemiology studies1 and Globocan data, we estimate there will be 35,500 new
cases of NHL and 16,000 new cases of DLBCL in Japan in 2020. Assuming that 70% of DLBCL
patients progress to receive second-line therapy, we forecast a target market of 11,200 second-line(r/r) DLBCL patients per year in Japan by 2020.

1

Chihara et al; British Journal of Haematology, 2014, 164, 536–545; doi: 10.1111/bjh.12659

SymBio Pharmaceuticals | 12 December 2018

4

The patient market of 11,200 r/r DLBCL patients in Japan is almost as large as the combined
market of ~12,500 patients for the currently approved indications for Treakisym in CLL and first-line
and r/r low-grade NHL and MCL patients. Given the high unmet need for this patient group, we
model a 50% market penetration and peak sales (net sales after discounts) of $85m for DLBCL vs$84m for the currently approved indications.

Iv rigosertib a potential second product for SymBio
SymBio in-licensed rigosertib (iv and oral formulations, Japan and Korean rights) from Onconova in2011 for MDS, a rare blood cancer. SymBio is contributing patients from Japan to the global Phase
III INSPIRE trial of iv rigosertib for the treatment of second-line higher-risk MDS (HR-MDS); as ofend of July 2018 it had already enrolled 36 patients in the study.
Onconova announced in January 2018 that it is moving forward with the study as it had beencleared to continue following an interim analysis by the independent data monitoring committee(DMC). Following a pre-planned sample size re-estimation conducted by the DMC as part of theinterim analysis, the target enrolment was expanded from 225 to 360 patients, with the aim ofincreasing the power of the trial. SymBio will continue to collaborate with Onconova on the study
and plans to increase the total enrolment in Japan to 40 patients. Onconova is guiding for top-line
results of the overall survival analysis after 288 events to be available in 2019. SymBio aims to filefor approval in 2021.
Onconova raised $28.8m in May and had a cash balance of $22.4m at 30 September 2018. With
operating expenses currently averaging ~$6m per quarter, it should have sufficient funds to report
top-line data from the INSPIRE trial.

Valuation
We have rolled our valuation model forward in time, which increased our valuation of SymBio to($225m) (¥25,469m), based on a risk-adjusted NPV analysis. We use a 10% discount rate forapproved products and 12.5% elsewhere. The additional 20m shares in issue following the exerciseof the 45th stock acquisition rights (raising $22.9m) sees value per share decline to $2.9/ADR (vs$3.6/ADR). Our valuation includes Treakisym approved indications and the r/r DLBCL indication,plus rigosertib. Our valuation assumptions and financial forecasts are unchanged. Our main
assumptions are summarized in Exhibit 3 below.
Exhibit 3: SymBio rNPV valuation
Product

Indication

LaunchTreakisym
LG NHL/MCL (r/r and 1st line); CLLTreakisym (DLBCL)
r/r DLBCL
Rigosertib (IV)r/r HR-MDS
Rigosertib (oral)First-line HR-MDS (combo)
Net cash at 30 December 2017
Valuation

2010*
2021
2023
2025

Peak Sales($m)**
84
85
34
66

Value ($m)

Probability

rNPV ($m)

153.7
84.1
17.7
29.1
26.1
310.7

100-95%
60%
50%
15%
100%

147.4
43.0
6.2
2.5
26.1
225.2

NPV/ADR($/ADR)***
1.9
0.6
0.1
0.0
0.3
2.9

Source: Edison Investment Research Edison Investment Research. Note: *Treakisym was launched in 2010 in r/r low-grade NHL/MCL;
it received approvals in Japan in CLL in August 2016 and in first-line, low-grade NHL/MCL in December 2016; **we present Treakisym
peak sales estimates net of discounts, to align with sales reporting by Eisai; 77.9m shares on issue.

We model a 95% likelihood that the RI Treakisym formulation will be launched by the start of 2023,
thereby minimizing the penetration of generic copies of the FD Treakisym formulation. We model
branded Treakisym market share gradually declining from 96% in 2022 to 75% in 2031, followed bya more rapid decline from 2032 after the liquid formulation patents expire.

SymBio Pharmaceuticals | 12 December 20185

Our Treakisym valuation assumes that SymBio earns an average net margin of 10–12% on top-line
reported Treakisym sales until 2020. We assume that after 2020 the net operating margin gradually
increases to reach 50% in 2024 and subsequent years as SymBio switches to selfcommercialization of Treakisym via its own salesforce and the liquid formulations in-licensed from
Eagle gain market share vs powder formulations.
We model $13m of development costs to achieve approval for the RTD and RI liquid formulations ofTreakisym. We estimate that a salesforce of 60 would be needed to market Treakisym in Japan. At
a fully-loaded cost of $250,000 per person, this would cost $15m per year.

Scenario analysis
In a scenario where the Treakisym market share declines to 50% by 2031 (vs 75% for the basecase), our valuation would fall by around $18M ($0.2/ADR) to around $207m ($2.7/ADR).
We currently assume stable Treakisym pricing apart from a 5% price cut in 2022 when FD powder
generics are expected to enter the market. However, should Treakisym be subject to an additional
price cut in the future, this could represent downside to our forecasts; a 10% price cut in 2019
would remove around $22M from our Treakisym rNPV, or $0.3/ADR.
Exhibit 4: SymBio’s 2018 outlook and 2019 targets versus our estimates; ¥-based futurefinancial forecasts

Revenue
R&D
SG&A (including R&D)
Operating loss
Ordinary loss
Net loss2018
guidance¥ 4,201m¥ 2,311m¥ 4,350m¥ 2,981m¥ 3,044m¥ 3,056m

2018
estimates¥ 4,203m¥ 2,250m¥ 4,289m¥ 3,045m¥ 3,030m¥ 3,034m

2019
targets¥ 4,238m
N/A
N/A¥ 3,786m¥ 3,849m¥ 3,853m

2019
estimates¥ 4,325m¥ 2,200m¥ 4,920m¥ 3,640m¥ 3,617m¥ 3,621m

Source: Edison Investment Research

SymBio Pharmaceuticals | 12 December 2018

6

Exhibit 5: Financial summary
Accounts: JPN GAAP, year end: 31 December, $'000s
Total revenues
Cost of sales
Gross profit
SG&A (expenses)
R&D costs
Other income/(expense) included in adjusted
Other income/(expense) excluded from adjusted
Reported EBIT
Finance income/ (expense)
Other income/(expense) included in adjusted
Other income/(expense) excluded from adjusted
Reported PBT
Income tax expense
Reported net income
Average number of ADRs - basic (m)Basic Earnings per ADR

USD

2014
17,301(12,641)
4,661(9,343)(6,850)0
0(11,533)
219
(16)
1,488
(9,841)(34)(9,875)30.8(0.32)

2015
17,108(11,949)
5,159(9,734)(18,006)00(22,581)
144
19
(841)
(23,259)(34)(23,293)32.4(0.72)

2016
20,957(12,955)
8,002(12,072)(14,753)00(18,823)48
65(1,728)(20,437)(34)(20,471)39.3(0.52)

2017
30,480(21,353)
9,126(17,350)(26,706)00(34,930)
27
24
(290)
(35,169)(34)(35,202)49.9(0.71)

2018e
37,193(26,184)
11,009(18,044)(19,912)00(26,946)131
00(26,815)(34)(26,849)
66.0(0.41)

2019e
38,279(26,948)
11,330(24,075)(19,469)00(32,214)206
0
0(32,008)(34)(32,041)77.9(0.41)

USD
USD(11,421)(11,533)(9,826)(0.32)(0.32)(22,367)(22,581)(23,278)(0.72)(0.72)(18,596)(18,823)(20,503)(0.52)(0.52)(34,668)(34,930)(35,193)(0.71)(0.71)(26,588)(26,946)(26,815)(0.41)(0.41)(3,178)(3,221)(3,201)(0.41)(0.41)

Balance sheet
Property, plant and equipment
Goodwill
Intangible assets
Other non-current assets
Total non-current assets
Cash and equivalents
Inventories
Trade and other receivables
Other current assets
Total current assets
Non-current loans and borrowings
Trade and other payables
Other non-current liabilities
Total non-current liabilities
Trade and other payables
Current loans and borrowings
Other current liabilities
Total current liabilities
Equity attributable to company
Non-controlling interest

434
0
585
430
1,449
45,063
2,164
2,413
14,87464,514
0
0
20
20
2,708
0
1,610
4,318
61,625
0

469
0
460
465
1,394
37,712
1,177
2,661
1,164
42,715
0
0
14
14
2,831
0
2,045
4,876
39,220
0

660
0
372
680
1,711
50,613
2,413
4,314
1,818
59,159
3,982
0
12
3,995
2,848
0
5,489
8,337
48,539
0

414
0
610
886
1,909
26,080
3,208
4,335
2,098
35,721
0
0
12
12
5,349
0
3,603
8,951
28,667
0

429
0
762
886
2,076
20,489
2,869
5,095
2,098
30,551
0
0
12
12
3,090
0
3,603
6,693
25,923
0

433
0
849
886
2,168
4,425
2,215
4,405
2,098
13,142
13,1980
12
13,211
3,543
0
3,603
7,146
(5,046)0Cash flow statement
Profit before tax
Depreciation and Amortisation
Share based payments
Other adjustments
Movements in working capital
Net cash from operating activities (pre-tax)
Interest paid / received
Income taxes paid
Cash from operations (CFO)
Capex
Acquisitions & disposals net
Other investing activities
Cash used in investing activities (CFIA)
Net proceeds from issue of shares
Movements in debt
Other financing activities
Cash from financing activities (CFF)
Currency translation differences and other
Increase/(decrease) in cash and equivalents
Cash and equivalents at end of period
Net (debt) cash
Movement in net (debt) cash over period(9,841)112
838(1,830)(688)(11,409)238(34)(11,205)
(961)
0
3,743
2,782
4,818
0
(7)
4,812
1,823
(1,788)45,06345,063(1,788)(23,259)
215
911
231
1,678
(20,226)
156(34)(20,103)(210)
013,38913,178
(16)
0
(7)
(23)
(402)
(7,351)
37,712
37,712(7,351)(20,437)
227
1,212
1,744
(111)
(17,365)53(34)(17,346)
(247)
0
(141)
(388)
28,5503,982(159)
32,373(1,738)12,90250,613
46,631
8,919(35,169)
262
1,073
370
(307)
(33,771)28(34)(33,777)
(505)
0
(181)
(686)
10,3030010,303(373)(24,533)
26,08026,080(20,551)(26,815)
358
1,073
(131)
(2,679)(28,195)
131(34)(28,098)
(525)
0
0
(525)
23,0320
0
23,0320(5,591)
20,48920,489(5,591)(32,008)
437
1,073
(206)
1,798
(28,906)
206(34)(28,734)
(529)
0
0
(529)
0
13,1980
13,1980(16,064)
4,425(8,774)(29,263)

Adjusted EBITDA
Adjusted EBIT
Adjusted PBTAdjusted Earnings per ADR
Adjusted diluted Earnings per ADR

Source: Edison Investment Research and SymBio accounts. Solely for the convenience of the reader the financial summary table has
been converted at a rate of ¥113 to $1. SymBio reports statutory accounts in Japanese yen. These translations should not be
considered representations that any such amounts have been or could be converted into US dollars at the assumed conversion rate.

SymBio Pharmaceuticals | 12 December 20187

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