Small Caps | May 23 2011
– Prima Biomed further testing its CVac cancer vaccine
– Potential in ovarian cancer market significant
– Southern Cross rates company a Spec Buy, lifts price target
By Chris Shaw
Prima Biomed ((PRR)) is moving to a late stage clinical trial of CVac, which is a cellular therapy or cancer vaccine expected to be effective in the treatment of various cancers. Ovarian cancer is the first target, with a Phase III trial due to commence around the middle of this year.
CVac is a form of immunotherapy, which is a medical treatment enabling elements of the human immune system to go after disease causing agents in the body. CVac is a sugar called mannan, conjugated to a common cell surface marker.
According to Southern Cross Equities, which rates Prima Biomed as a Speculative Buy, if upcoming trials are successful CVac could be on the market by 2014 or 2015. There are high hopes the upcoming trial will be successful, as CVac performed well in Phase IIa clinical trials for treating ovarian cancer back in 2007.
The Phase IIa trials showed a reduction in cellular markers of the disease and good disease free survival results, with around half of the patients notionally gaining some benefit and no safety issues. With Phase IIb trials nearing the end of recruitment and with the Phase III trial soon to commence, Southern Cross analyst Stuart Roberts expects further indications of the efficacy of CVac.
The Phase III trials will also open the pathway towards regulatory approval, as Southern Cross notes Prima Biomed has received guidance from the FDA and the EMA that phase IIb and Phase III trials will be sufficient for applying for approval. This removes the usual need for two Phase III trials.
A successful entry into the ovarian cancer treatment market should be lucrative, Southern Cross estimating the market is worth US$2-3 billion. Currently ovarian cancer has a 20% five-year survival rate using the existing standard of care, Taxol, so there is potential for CVac to become the standard of care in the market in Southern Cross's view.
There is also potential for the therapy to be expanded to treat other cancers such as breast, kidney and pancreatic cancer. A Further positive for Prima Biomed, according to Southern Cross, is there are no intellectual property issues for CVac as Prima Biomed owns 100% of the technology and would have to make only modest royalty payments.
Valuing Prima Biomed on CVac alone and using conservative market assumptions and the estimate of a further $60 million capital raising to fund the Phase III trials, Southern Cross has generated a base case valuation of $0.77. This rises to $1.02 using more optimistic assumptions. Upside to this valuation remains from a 7% stake in Canadian biotech Trillium Therapeutics and from other projects being developed by Prima Biomed.
To reflect this, Southern Cross has lifted its price target on Prima Biomed to $0.75 from $0.60 previously. In terms of potential upside, Southern Cross suggests the current market capitalisation of Dendreon of US$5.6 billion is indicative as Dendreon offers a similar treatment approach and is a little further advanced with respect to commercialisation. Prima Biomed has a current market capitalisation of around $276 million.
This market capitalisation limits the attention paid to Prima Biomed, as the FNArena database shows no coverage of the company.
Shares in Prima Biomed today are slightly higher, trading up 0.5c at 34.5c as at 11.00am. Over the past year the stock has traded in a range of 8c to 42c.
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