vervolg
ARGX-113
ARGX-113 could be used against many autoimmune diseases. But the first autoimmune diseases that Argenx is going to test it on are Myasthenia Gravis (MG) and Immune Thrombocytopenia (ITP). MG is the name of a condition that leads to the failure or insufficient functioning of the muscles (range: 20 people per 100,000). ITP is a relatively rare blood disorder in which the blood does not clot well (range: 3 people per 100,000).
The phase Ia study with single ascending doses and the phase Ib study in which Argenx uses multiple ascending doses of ARGX-113 were very positive and indicated that ARGX-113 was well tolerated by the human body and therefore is safe to use. We expect that the Phase II trials for ARGX-113 will also be successful due to strong proof-of-concept studies.
ARGX-110
ARGX-110 is designed for the blocking of CD70. CD70 is a protein expressed on highly activated lymphocytes (like in T- and B-cell lymphomas). It is therefore suggested that anti-CD70 antibodies might be a possible treatment for CD70 positive lymphomas as normal lymphocytes do not express a lot of CD70.
In understandable words: CD70 often occurs in blood cancers (lymphoma and leukemia), multiple solid tumors and auto-immune diseases, but rarely in healthy cells. ARGX-110 is supposed to have a triple function: It blocks the growth of tumor cells, it kills cancer cells and activates the immune system of the patient to attack the tumor.
ARGX-110 is also sponsored by the Leukemia & Lymphoma Society for the Development of WM (Waldenstrom's macroglobulinemia), a rare lymphoma.
A Phase I/II combination study of the potential combination of ARGX-110 with another drug (Romidepson) against CTCL (cutaneous T-cell lymphoma) is currently being launched and tested. Phase I trials were already positive.
We are very positive about the phase II study of ARGX-110 and expect a favorable outcome here (also due to very strong proof-of-concept studies).
ARGX-115
Earlier this year, Argenx managed to close a major alliance with pharma giant AbbVie (NYSE:ABBV) to develop ARGX-115 (cancer treatment). Argenx immediately received 40 million USD in cash and can - if it successfully continues its research - receive up to 645 million USD. Many considered this deal as a first major recognition of Argenx's technology. We believe this is wrong.
ARGX-109
We believe that Argenx's received huge recognition for its technology in 2012 as Argenx managed to close a deal on Gerilimzumab (ARGX-109) with RuiYi (currently Bird Rock Bio). The terms of the deal were never shared with investors (as Argenx wasn't a public company at the time), but Bird Rock Bio has a lot of confidence in ARGX-109 as a potential alternative treatment for rheumatoid arthritis (a disease that's affecting > 20 million people, and generates more than 35 billion USD sales). More so, Bird Rock Bio hopes to put Gerilimzumab in the market as a disruptive medicine (as it would require fewer treatments and is much cheaper than regular RA drugs).
Due to the global scale of rheumatoid arthritis, combined with an aggressive pricing plan, we believe that ARGX-109's revenue potential is huge. The first tests with Gerilimzumab on healthy humans were completed earlier this year. The results were very positive and Bird Rock Bio plans on doing some vital pivotal phase II studies soon.
Partnerships
Next to these partnerships, Argenx also closed partnerships with Shire (NASDAQ:SHPG) (for the discovery of antibodies that treat rare diseases) and Leo Pharma (to find better treatments for skin conditions).
As a young biotech company, the total amount that Argenx could receive after reaching crucial milestones is already more than 2 billion EUR.
Cash burn
Argenx's cash position stood at ~109 million EUR at the end of H1 2016. This piggy bank will enable Argenx to continue its developments for at least a few years. Currently, Argenx burns around 15 million EUR per year (although we expect its cash burn to accelerate due to the commencement of several phase II studies).
Valuation
Galapagos Argenx Ablynx
Market value 2.66 billion EUR 296 million EUR 655 million EUR
Enterprise value 1.70 billion EUR 187 million EUR 460 million EUR
Clinical pipeline 8 products 4 products 9 products
Phase III 1x Filgotinib 0x 1x Caplacizumab
Phase II 4x 2x 5x
Phase I 3x 2x 3x
When comparing Argenx to its two Belgian peers: Ablynx and Galapagos (NASDAQ:GLPG), one quickly sees that Argenx has the smallest pipeline and therefore also receives a lower valuation from investors.
We believe however, that Argenx should probably be worth half the market size of Ablynx, which would lead to a 327 million EUR market cap at current prices.
By comparing the three companies, one might also argue that the upside potential for Argenx is much higher than for the other two companies and is therefore a better buy.