goetzpartners securities Limited
09-Apr-2018 / 15:47 GMT/BST
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4SC AG (VSC-DE): Rising from the East
4SC’s Japanese partner Yakult Honsha’s (Yakult) decision to join the RESMAIN study looks a significant endorsement of the resminostat programme. While CTCL (Cutaneous T-Cell Lymphoma) is probably not itself a substantial opportunity in Japan, with Yakult’s prime focus on the more Asian-prevalent biliary cancer, it clearly demonstrates commitment from a partner that already knows the product well. Outside Japan, prospects for 4SC also look bright. Its clinical programmes appear to be progressing well. Strong news flow, including the first read out from its proof-of-concept phase II for 4SC-202 in H2/2018E, should maintain momentum for the stock over the next 6 months and beyond. Adding in the potential upside from Yakult in Japan and the expected news flow, we reiterate our OUTPERFORM recommendation and increase our target price to EUR10 (from EUR7.50).
Sound endorsement of Resminostat – While CTCL is a significantly smaller opportunity in Japan than in Europe or particularly the US (less than 25% the prevalence), Yakult’s decision to join the trial is a significant endorsement of the safety and efficacy of resminostat from a partner that has been on board since 2011.
Large Asian opportunity in biliary cancer – Yakult recently announced that they are going to initiate a phase II proof-of-concept trial with resminostat in the treatment of biliary tact cancer (“BTC”). More uncommon that in the West, BTC affects around 5400 in Japan and is even more common in parts of SE Asia and China.
News flow from pipeline – 4SC’s clinical pipeline appears to be moving forwards well. First interim read out from the 4SC-202 phase II in melanoma in combination with the check point inhibitor expected in H2/2018E with the RESMAIN CTCL trial due to report in 2019E.
Prospects for partnering – 4SC has indicated that it anticipates entering combination trials with partners in H2/2018E. Positive interim data in melanoma would certainly boost the probability of licensing for development in potential blockbuster indications.
Remains undervalued – Although the stock has performed well, given the recent endorsement from a major partner and the prospect of strong news flow, we are optimistic for more to come. Our current DCF analysis suggest a fair value of EUR8.7 rising to EUR14.6 with news flow. We reiterate our OUTPERFORM recommendation and increase our target price to EUR10 (from EUR7.50).
Dr. Chris Redhead | Analyst
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