Company Overview: Bionomics Limited (ASX: BNO) is a small-cap but well known clinical-stage biopharmaceutical company with presence in Australia, France and the United States. The company develops drug candidates for treatment of central nervous system (CNS) disorders and cancer and is also into Contract services. The key product candidates of the company include BNC210, BNC375, BNC101 and BNC105, and the core technologies centre around ionX and MultiCore. The lead drug candidate is BNC210, which was lately under Phase 2 for the treatment of agitation and for post-traumatic stress disorder. BNO is under a strategic partnership with Merck & Co., Inc.
 

BNO Details

BNC210 Profile – Key Growth Driver: Bionomics Limited (ASX: BNO) is a small-cap biopharmaceutical company with the market capitalization of circa $231.74 Mn as of July 24, 2018. Recently, the group initiated and recruited the first patient for a Phase 2 study of BNC210 for agitation in elderly patients in the hospital setting. Under this, the 40-patient study is randomized, double-blind, placebo-controlled with a 5-day treatment period and designed to evaluate the effect of BNC210 on the resolution of agitation in hospitalized elderly patients as well as assess the safety and tolerability in this elderly patient population, and current options include benzodiazepines and antipsychotics which might have severe adverse effects in elderly patients including sedation, stroke, and sudden death, and hence their usage is heavily restricted. However, the company has designed the trial for short-term treatment and quick recruitment which will assess the impact of BNC210 on the resolution of agitation in hospitalized elderly patients and evaluate the safety and tolerability of BNC210 in the elderly patient population. The results of this clinical trial are expected to be available in Q1 CY19. According to the management, the group has entered an important period with the results of two ongoing Phase 2 trials now expected in the near term. Further, there are no approved treatments for agitation and the group found an unmet medical need with approximately 5 million cases in the U.S. alone. The research, which involved the input of some 30 clinical key opinion leaders and up to seven health insurers, puts the US market opportunity for PTSD at US$4.7 billion per annum and agitation at US$1.6 billion per annum. We expect that the company has a bright scope to scale up its BNC210 profile for agitation resulting in topline growth in the upcoming period.


BNC210 in a new phase 2 trial for the treatment of agitation (Source: Company Reports)

Completion of Phase II PTSD Study Treatment – To Support Top-line growth: The group announced that it had completed treatment in its 193-patient Phase II clinical study of BNC210 for post-traumatic stress disorder (PTSD). The RESTORE clinical study completed the treatment phase on time and aims to provide topline data by the end of the third quarter CY18. Following this, the group had enrolled 193 patients under RESTORE trials at it 25 clinical sites in the US and Australia. During the trial period, the patients were evaluated by using the Clinician-Administered PTSD Scale for DSM-5 (CAPS-5) as the primary endpoint. The study was also about examining the anxiety and depression level, which could provide insight into other avenues of treatment for the drug.


CNS Focussed Pipeline (Source: Company Reports)

BNC210’s potential to address multiple psychiatric disorders – An Opportunity: BNC210 has a novel anxiolytic mechanism that has previously been unexplored for the treatment of Phase 2 Post Traumatic Stress Disorder (PTSD). BNC210 is a first-in-class, negative allosteric modulator of the alpha-7 nicotinic acetylcholine receptor, that that has been implicated in the stress response, but has previously not been targeted in the clinic. As of now, the group focuses on to evaluate BNC210 in two Phase 2 studies for the agitation and PTSD indications, which follow a Phase 2 in general anxiety that had positive topline results. We are of the view that these studies will further build the potential synergy to catalyse a partnering deal with favourable terms to Bionomics.


BNC210’s Competitive Advantages (Source: Company Reports)

Quarterly Activities Report: During the quarter ended June 2018, the group has progressed well in both strategy i.e., development pipeline of innovative therapies and its business objectives. Recent clinical developments have progressed BNC210 to near-term catalysts with a Phase 2 trial in Agitation commenced and the treatment phase in the Phase 2 Post Traumatic Stress Disorder (PTSD) trial completed. The group is in a strong position to fund its current clinical programs. Cash balance at 30 June 2018 was $24.930 million (vs. 31 March 2018: $32.254 million) with net operating cash outflow during the quarter ended 30 June 2018 of $7.385 million. Cash receipts for the period included receipts from customers totalling $2.819 million for the current quarter ending 30 June 2018. Rise in cash outflow reflected the investment in the ongoing Phase 2 clinical trial of BNC210 in PTSD and initiation of the Phase 2 clinical trial of BNC210 in Agitation. Further, the group estimated cash outflow for the next quarter which will be incurred approximately $8,171k, comprising of R&D expenses ($7,019k), leased assets ($39k), employee cost ($801k), administrative and corporate costs ($312k).


Expected Cash Flow for the next Quarter (Source: Company Reports)

Monetisation through Drugs BNC101 and BNC105: The group is currently undertaking a formal process to divest or out-license both BNC101 and BNC105 as the company completes its transition to a focused Central Nervous System (CNS) disorders’ treatment company. The BNC101 data presented at the annual American Association for Cancer Research conference (AACR) in Chicago, included the data consistent with a pharmacodynamic effect of BNC101 in colorectal cancer patients. The new data presented were on the potential pharmacodynamic effect of BNC101 wherein the ratio of MMP-9 to TIMP-1 levels in blood plasma was decreased following treatment with BNC101. The new data sets are expected to assist the process. Besides this, BNC105 data was also presented and demonstrated as a high potential inducer of apoptosis and cell death in patient-derived AML cells, targeting leukaemic progenitor cell populations, and was more potent than competing developmental candidate drugs. Hence, the management expects that the clinical investigation of BNC105 is warranted for AML treatment in a patient population with high unmet need. Both drugs i.e., BNC101 and BNC105 are undergoing a formal monetization process and the management remains confident of a value accretive outcome in the upcoming period as the new data provided the supportive evidence of this process.


BNC105 Overview (Source: Company Reports)

Financial Highlights: The group’s half-year revenue was up 1% for the period ended December 31, 2017, but loss after tax amounted to about $8.85 million against $9.69 million of the prior corresponding period (pcp). It posted consolidated revenue growth at a significant CAGR (close to 50%) over FY13 to FY17. However, profit marked a negative CAGR impacted by the rise in R&D and other operating expenses during the same period. Revenue consisted of collaboration income, royalties, sales income, rental income and interest income received because of ordinary activities. Net operating and investing cash outflows for the period ($12.30 million) were up by 412 per cent as on corresponding period in the prior year. Moreover, the company enjoys virtual debt-free status along with decent cash & cash equivalent reserve. The current ratio and quick ratio stood at 6.17x and 6.11x, respectively in 1HFY18, representing adequate liquidity to fulfill any shortcoming liability in near future.


1HFY18 -  Consolidated P&L Statement (Source: Company Reports)

Positive Outlook: The group has a brighter prospect ahead at the back of expanding the clinical study of BNC210 for the treatment of agitation and other ongoing developments. Besides this, the group has built a globally competitive business with integrated drug discovery and development expertise to support strategic partnerships and clinical development of its drug candidates. Apparently, the group is progressing ahead with potential partnership/divestment discussions and the monetization of non-core assets i.e., BNC101 and BNC105. Moreover, the group has continued to work closely with JV Partner MSD, enabling MSD to reach clinical trial milestones. Further, the group also continues to progress well on several early stage ion channel programs targeting pain, depression, cognition, PTSD, and epilepsy. The group targets for identification of a potential therapeutic candidate in the second half of CY2018.


Outlook (Source: Company Reports)

Stock Performance: The company seems to be poised for exponential growth in the forthcoming years at the back of balance sheet position, robust pipeline of core and non-core assets, secured strategic partnerships and licensing agreements, and capital market support and exposure. Moreover, the company has a clear strategy to invest in developing its drug candidates to a stage that both interests big pharma and generates good potential returns for shareholders in the long-run. The Group lately issued 14,000 shares at an issue price of $0.3576 to exercise the options that were issued under the Bionomics Employee Share Option Plan. Besides this, Private Portfolio Managers Pty Ltd and its subsidiary ceased to be the substantial holder of the Group since 08 June 2018. Meanwhile, the share price of BNO has risen 29.73% in the past six months but down by 4.95% in past one week as at July 23, 2018. The stock was again up 4.167% on July 24, 2018 at the back of the latest updates. Based on aforesaid facts and expectations, we give a “Buy” recommendation on the stock at the current market price of $ 0.500, by looking at long-term strategic fit and transformation initiatives which are underway.
 

BNO Daily Chart (Source: Thomson Reuters)

 
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