SymBio Pharmaceuticals

Earnings andregulatory update

Treakisym label expansion submitted

Pharma & biotech

SymBio announced on 11 May 2020 that it submitted an application to
expand the label for Treakisym in Japan to include the treatment ofrelapsed and refractory diffuse large B-cell lymphoma (DLBCL) in
combination with rituximab. This follows the positive results seen in the
Phase III study for the combination reported in November 2019. We expect
this label expansion to more than double the sales potential for the drug.

Year end
12/18
12/19
12/20e12/21eRevenue
(¥m)
3,836
2,838
2,608
9,228

PBT*
(¥m)
(2,749)(4,377)(5,256)
1,090

EPS*
(¥)
(166)
(189)
(181)
19

DPS
(¥)
0
0
0
0

P/E
(x)
N/A
N/A
N/A
22.8

Yield
(%)
N/A
N/A
N/A
N/A

Note: *PBT and EPS are adjusted, excluding D&A and exceptional items.

19 May 2020

Price

¥434

Market cap¥14.8bn¥110/US$Net cash (¥m) at 31 March 2020 +subsequent exercises

5,584

Shares in issue

34.1mFree float

92.5%

Code

4582

Primary exchange

TYO

Secondary exchange

OTC US

Share price performance

DLBCL key to future growth
Treakisym (bendamustine) is currently approved in Japan for low-grade nonHodgkin lymphoma (NHL) or mantle cell lymphoma and chronic lymphocytic
leukemia. We estimate the label expansion would approximately double the target
market with 11,200 second-line DLBCL patients. While the company did not publish
detailed results from its Phase III study, it reported that it met its primary endpoints
and the combination has established efficacy in the literature.

Label expansion part of multi-pronged strategy
The label expansion is one aspect of the company’s ongoing strategy to reachprofitability. The drug is currently sold by Eisai, with SymBio regaining full control at
the end of 2020, after which the product will be sold by an internal salesforce. The
company has also licensed the rights to two proprietary formulations ofbendamustine from Eagle Pharmaceuticals and plans to convert providers to thenew, more convenient formulations prior to the October 2020 loss of exclusivity forthe current formulation.

Supply issues continue to affect sales, margins
The company reported with Q120 results that quality control issues of Treakisym
sourced from Astellas have continued to affect the ability of the company to deliverproduct to Eisai. This problem has persisted since mid-2019. The company
reported revenue of ¥551m for the quarter, down from ¥1,611m for Q119, and agross profit of ¥128m (down from ¥609m), citing lack of inventory as the cause.

%

1m

3m

12m

Abs

29.6

(24.8)(40.1)

Rel (local)

28.1(14.1)(36.2)¥791¥264

52-week high/low

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. And brincidofovir was
licensed from Chimerix in 2019.

Next events
Rigosertib Phase III results
Treakisym RTD approval decision

Valuation: Increased to ¥39.0bn

AnalystWe have increased our valuation to ¥39.0bn ($354m) from ¥37.2bn ($338m)
previously, although it is lower on a per share basis: ¥1,144 ($10.40) from ¥1,351($12.28). We estimate a cash balance of ¥5.58bn following multiple recent rights
exercises (¥1.71bn raised since Q120 cash of ¥3.88bn). We expect this to be
sufficient for the company to deliver on its strategy to reach profitability in 2021.

Nathaniel Calloway

H120
October 2020

+1 646 653 7036

healthcare@edisongroup.com
Edison profile page

SymBio Pharmaceuticals is a
research client of Edison
Investment Research Limited

Treakisym DLBCL label expansion submitted
SymBio announced in May 2020 that it had completed and submitted its application to the PMDA toexpand the addressable indications for Treakisym to include relapsed and refractory DLBCL (incombination with rituximab). SymBio previously announced that it had met is primary endpoint in its
Phase III study of Treakisym (bendamustine). The primary endpoint was overall response rate, with
progression free survival and overall survival as secondary endpoints, but a detailed report was notpresented. The study was open label and single arm, but this may be able to support a label
expansion for the drug to this indication considering the well-demonstrated activity in other studies.
Although bendamustine is not approved explicitly for DLBCL in the US (although it is approved forindolent NHL), it has been demonstrated to have activity when combined with rituximab,1 similar tothe company’s pivotal study. The company previously announced an overall response rate (ORR) of
62.7% and complete response (CR) of 37.3% was observed in the earlier Phase II study. We
estimate a target market of 11,200 second-line DLBCL patients in Japan, which would
approximately double the current addressable market. We expect an approval decision from the
PMDA within 12 months.

Frustrating quality control issues continue
The quality control issues the company has experienced with shipments of bendamustine from its
supplier Astellas continue unabated. This has significantly affected the ability of the company todeliver drug to Eisai and the associated revenue from that agreement. The company reported
revenue of ¥551m for Q1 (Q119: ¥1,611m), and a gross profit of ¥128m (Q119: ¥609m).
This has been an issue since mid-2019, which the company first identified quality issues inshipments of drug from Astellas. SymBio has repeatedly sought to resolve the issue, but apparently
to no effect. We have lost confidence that this issue can be resolved in a timely manner and have
reduced our forecasted revenue for 2020 to ¥2,608m from ¥3,433m previously, and our gross profit
to ¥652m from ¥1,030m.
However, the company has planned to transition to using the formulations licensed from Eagle once
they are approved. We expect a decision on the approval of the ready-to-dilute (RTD) formulationby the end of September 2020.

Valuation
We have increased our valuation to ¥39.0bn ($354m) from ¥37.2bn ($338m) previously, although it
is lower on a per share basis: ¥1,144 ($10.40) from ¥1,351 ($12.28). The increase in total valuation
is from rolling forward our NPVs. Although we now forecast lower revenue in 2020 than previously,
this impact is limited to the current year (FY20), dampening the overall effect on the valuation. The
increase in shares outstanding is driven by the recent large rights exercises in the ongoing rights
offering: 5.61m new shares to date in April and May, bringing the total outstanding to an estimated
34.1m. We expect to update our valuation with the top-line results from the Phase III study ofrigosertib (in development at and licensed from Onconova) expected in H220 (delayed from H120
previously).

1

Arcari A. et al. (2014) Safety and Efficacy of Rituximab Plus Bendamustine in Relapsed or Refractory
Diffuse Large B-Cell Lymphoma Patients. Blood 124, 3074.

SymBio Pharmaceuticals | 19 May 20202

Exhibit 1: Valuation of SymBio
Product

Indication

Treakisym
Low grade NHL/MCL (r/r and 1st line); CLLTreakisym (DLCBL)
r/r DLBCL
Rigosertib (IV)r/r HR-MDS
Rigosertib (oral)
LR-MDS (mono) or First-line HR-MDS (combo)
BrincidofovirvHC
Net cash (March 2020 + subsequent exercises)
Valuation

Launch Peak sales
(¥m)
2010
8,600
2021
9,600
2023
3,800
2025
7,500
2025
4,200

NPV Probability(¥m)
19,571 100–95%
13,383
90%
2,909
50%
4,302
15%
3,383
30%
5,584
100%
49,132rNPV(¥m)
18,724
11,975
1,365
436
882
5,584
38,967

rNPV/share(¥/share)
549.8
351.6
40.1
12.8
25.9
164.0
1,144.2

Source: SymBio Pharmaceuticals reports, Edison Investment Research

Financials
The company ended the quarter with ¥3.88bn and subsequently raised ¥1.71bn in equity throughrights exercises. We expect this to be sufficient cash for the company to continue its commercial
buildout in preparation for the 2021 relaunch of Treakisym, and we expect sustained profitability
thereafter. We previously included ¥607m in additional capital needed to provide a cash buffer
going into the launch, which has been removed given the raised cash. Other changes to ourforecasts (besides those described above) include adjusting 2020 SG&A spending (¥3,325m from
¥3,525m), other minor changes to reflect Q120 results, and an update to our tax treatment to alignbetter with Japanese GAAP and tax law changes. We have slightly increased 2021 expected
revenue (¥9,228m from ¥9,159m) to reflect warehoused patients unable to get treatment with thecurrent supply issues.

SymBio Pharmaceuticals | 19 May 20203

Exhibit 2: Financial summary
Accounts: JPN GAAP, year-end: 31 Dec, ¥m
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 shares - basic (m)Basic EPS (¥)
Adjusted EBITDA
Adjusted EBIT
Adjusted PBTAdjusted EPS (¥)
Adjusted diluted EPS (¥)
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
CASH FLOW STATEMENT
Profit before tax
Depreciation and Amortisation
Share based payments
Other adjustments
Movements in working capitalInterest 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
Opening net (debt)/cash
Cash and equivalents at end of period
Net (debt)/cash
Movement in net (debt)/cash over period

2016
2,368
(1,464)904(1,364)(1,667)00(2,127)5
7(195)(2,309)(4)(2,313)9.8(235.27)(2,101)(2,127)(2,317)(236.02)(236.02)

2017
3,444
(2,413)
1,031(1,961)(3,018)0
0(3,947)3
3(33)(3,974)(4)(3,978)12.5(319.14)(3,917)(3,947)(3,977)(319.35)(319.35)

2018
3,836
(2,663)
1,173(1,996)(1,833)00(2,656)1(0)(93)(2,749)(4)(2,753)16.6(165.54)(2,621)(2,656)(2,749)(165.54)(165.54)

2019
2,838
(1,973)865(2,725)(2,442)00(4,302)0
4(75)(4,372)(4)(4,376)23.2(189.03)(4,264)(4,302)(4,377)(189.22)(189.22)

2020e
2,608
(1,956)652(3,325)(2,603)00(5,276)20
0
0(5,256)(4)(5,260)29.0(181.42)(5,179)(5,276)(5,256)(181.42)(181.42)

2021e
9,228
(1,619)7,609(5,772)
(765)
0
0
1,072
19
0
0
1,090
(437)
653
34.1
19.17
1,165
1,072
1,090
19.17
18.94

2022e
11,484(2,261)
9,223(6,397)(1,040)
0
0
1,786
28
0
0
1,814
(571)
1,243
34.1
36.47
1,883
1,786
1,814
36.47
36.03

2023e
12,769(1,904)
10,864(7,542)(1,815)
0
0
1,507
57
0
0
1,564
(555)
1,008
34.1
29.59
1,613
1,507
1,564
29.59
29.23

2024e
14,048(2,097)
11,951(7,440)(1,547)
0
0
2,964
96
0
0
3,061
(801)
2,259
34.1
66.30
3,081
2,964
3,061
66.30
65.50

2025e
15,395(2,299)13,096(8,005)
(866)
0
0
4,226
177
0
0
4,403
(1,024)
3,379
34.1
99.16
4,356
4,226
4,403
99.16
97.96

75
0
42
77
193
5,719
273
487
205
6,685
450
0
1
451
322
0
620
942
5,485
0

47
0
69
100
216
2,947
363
490
237
4,037
0
0
1
1
604
0
407
1,011
3,239
0

57
0
71
73
201
4,821
534
412
272
6,038
0
0
1
1
726
0
610
1,336
4,902
0

75
0
241
70
386
3,911
0
549
427
4,887
0
0
2
2
121
0
751
872
4,400
0

80
0
211
70
362
1,875
220
286
427
2,808
0
0
2
2
479
0
751
1,231
1,937
0

136
0
191
70
398
1,855
182
1,011
427
3,476
0
0
2
2
530
0
751
1,281
2,591
0

201
0
178
70
449
2,801
254
1,258
427
4,741
0
0
2
2
603
0
751
1,355
3,833
0

263
0
169
70
503
3,812
214
1,399
427
5,852
0
0
2
2
760
0
751
1,512
4,842
0

323
0
163
70
557
5,824
236
1,540
427
8,027
0
0
2
2
729
0
751
1,480
7,101
0

380
0
159
70
609
8,970
258
1,687
427
11,343
0
0
2
2
718
0
751
1,470
10,4810(2,309)
26
137
197
(13)
6
(4)
(1,960)
(28)
0
(16)
(44)
3,226
450
(18)
3,658
(196)
1,458
4,261
5,719
5,269
1,008

(3,974)
30
121
42
(35)
3
(4)
(3,817)
(57)
0
(20)
(78)
1,164
0
0
1,164
(42)
(2,772)
5,719
2,947
2,947
(2,322)(2,749)
35
148
61
184
1
(4)
(2,325)
(40)
0
14
(26)
4,272
0
0
4,272
(47)
1,874
2,947
4,821
4,821
1,874

(4,372)
38
0
229
(242)
1
(4)
(4,351)(217)(5,256)
97
0
(20)
402
20
(4)
(4,761)
(72)

1,090
93
0
(19)
(637)
19
(437)
110
(129)

1,814
98
0
(28)
(246)
28
(571)
1,095
(149)

1,564
106
0
(57)
56
57
(555)
1,171
(160)

3,061
117
0
(96)
(193)
96
(801)
2,183
(171)

4,403
130
0
(177)
(181)
177
(1,024)
3,329
(183)

0
(216)
3,738
0
2
3,740
(83)
(911)
4,821
3,911
3,911
(911)

0
(72)
2,797
0
0
2,797
0
(2,036)
3,911
1,875
1,875
(2,036)

0
(129)
0
0
0
0
0
(20)
1,875
1,855
1,855
(20)

0
(149)
0
0
0
0
0
946
1,855
2,801
2,801
946

0
(160)
0
0
0
0
0
1,011
2,801
3,812
3,812
1,011

0
(171)
0
0
0
0
0
2,012
3,812
5,824
5,824
2,012

0
(183)
0
0
0
0
0
3,146
5,824
8,970
8,970
3,146

Source: SymBio Pharmaceuticals reports, Edison Investment Research

SymBio Pharmaceuticals | 19 May 20204

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SymBio Pharmaceuticals | 19 United
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