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18-Mar-2019

Telix Pharmaceuticals Limited (TLX-AU): Updated PCa imaging guidelines de-risk lead asset

goetzpartners securities Limited

18-March-2019 / 20:05 GMT/BST


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Published to the market and investors on 18th March 2019 @ 7.54pm (GMT).


Telix Pharmaceuticals Limited (TLX-AU): Updated PCa imaging guidelines de-risk lead asset
Recommendation: OUTPERFORM
Target Price: AUD$ 2.50
Current Price: AUD$ 0.86 (CoB on 18th March 2019)

KEY TAKEAWAY

Telix Pharmaceuticals today announced the inclusion of PSMA-PET in the European Association of Urology's ("EAU") clinical guidance for the management of prostate cancer in patients with suspected recurrent disease, which should provide a significant boost to Telix's illumet (68Ga PSMA-11) PSMA-PET imaging agent. Already used as a companion diagnostic in Endocyte's ongoing pivotal prostate cancer Phase III trial and the subject of a distribution deal with Cardinal Health in the US, inclusion of PSMA-PET should facilitate both regulatory approval and adoption of 68Ga PSMA-11 in Europe. Telix's own Phase III-ready radiopharmaceutical TLX-591 shows better efficacy and tolerability compared to Endocyte's 177Lu-PSMA-617. With renal cancer and glioma programmes progressing, Telix looks undervalued, in our view. We reiterate both our OUTPERFORM recommendation and AUD 2.50 target price.

PSMA-PET superior - The subject of many clinical studies, 68Ga PSMA-11 has been recommended for primary staging of high-risk patients and for all secondary staging in prostate cancer by key opinion leaders (Virgolini, 2018). In head-to-head studies it has been found to be superior to other metabolic PET-based diagnostics such as F-18 fluciclovine / FACBC (Axumin(TM)) or choline in the detection and monitoring of recurrent disease (Evans, 2018).

Inclusion in EAU guidelines opens door to regulatory approval - EAU guidelines form an important role in the standardisation of prostate cancer care in Europe, and inclusion of PSMA-PET should facilitate adoption and smooth market approval.

US deals already in place - Available in a convenient 'shake and shoot' format as illumet, the Telix prostate imaging agent is already distributed by market leader Cardinal Health for Investigational use and utilised as a companion diagnostic in the current Endocyte pivotal Phase III trial.

Superior prostate cancer therapy ready for Phase III - With optimised fractionated dosing shown to reduce previous dose-limiting blood toxicities, unpublished cross-trial comparison data indicates that the Telix 591 177Lu-PSMA-antibody may provide a forty month mean overall survival compared to the 13.5 months reported for Endocyte's 177Lu-PSMA-617. A Phase III trial is due begin by YE2019E. The antibody-linked format also avoids debilitating damage to the lacrimal and salivary glands associated with the Endocyte product, opening the door to earlier use and combination with androgen-depletion therapies such as Johnson and Johnson's abiraterone.

Just part of diversified portfolio - With ongoing late stage clinical programmes progressing in renal cancer imaging and therapy as well as glioblastoma, Telix's prostate cancer programme forms just part of a diversified and significantly de-risked product pipeline.

Undervalued - Telix looks undervalued, in our view, just on the basis of $2.1bn paid by Novartis for Endocyte. Our DCF analysis indicates that the current market valuation is largely justified on the basis of the imaging programmes alone and ascribes modest value to therapeutics; despite the quality of data in all three programmes. Our risk adjusted analysis indicates a fair value of AUD 2.50 per share with upside of AUD 4.50 per share should the products achieve their full therapeutic potential.

Kind regards,


Martin Piehlmeier | Analyst

goetzpartners Healthcare Research Team | Research Team

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Last Updated: 18-Mar-2019