Company Overview: Bionomics Limited is a clinical-stage biopharmaceutical company engaged in discovery and development of drug candidates focused on the treatment of central nervous system (CNS) disorders and cancer by using its platform technologies. The Company's segments include Drug discovery and development, and Contract services. The Drug discovery and development segment includes the discovery, development and commercialization of compounds to match a target product profile. The Contract services segment includes the provision of scientific services on a fee for service basis to both external and internal customers. Its product candidates include BNC210, BNC375, BNC101 and BNC105. The Company provides treatments for CNS disorders, such as anxiety, depression and Alzheimer's Disease. Its oncology approach targets cancer stem cell therapies in solid tumors. Its technologies include ionX and MultiCore. It operates in three geographical areas, such as Australia, France and the United States.


BNO Details

Bionomics Ltd (ASX: BNO) a clinical-stage biopharmaceutical company, is engaged in the discovery and development of novel drug candidates for the treatment of central nervous system disorders and cancer in Australia, France, and the United States. The company’s product pipeline includes BNC210, a novel and proprietary negative allosteric modulator, which is in Phase II clinical trial for the treatment of generalized anxiety disorder, as well as is in a Phase II clinical trial in patients with post-traumatic stress disorder. Lately, Bionomics highly anticipated Phase II PTSD data with BNC210 delivered disappointing results as the study did not meet its primary endpoint on the standard PTSD endpoint while other endpoints demonstrated encouraging results for antidepressant effects in the high dose group and anxiolytic effects. It is to be noted that while PTSD study was a crucial and significant one, the investment case also takes into account the earlier randomized Phase 2 in generalized anxiety disorder (GAD) and CCK4 panic attack clinical data with upcoming Phase 2 in elderly agitation. The focus now shifts to potential partnering and strategic moves and one to two additional pipeline candidates being moved from discovery platform by June 30, 2019. With adjustments made on latest PTSD result, and in the launch of pipeline projects with positive delivery in the space of generalized anxiety disorder and elderly agitation, the group is still expected to witness an upside to the current stock price while the clinical trials related risks are borne in mind.


Market Potential (Source: Company Reports)

Phase 2 Post Traumatic Stress Disorder Trial update for PTSD symptoms: BNO stock plunged heavily by 69% and reached 52 week low when a top-line data from its Phase 2 clinical trial of BNC210 failed to meet primary endpoint of decrease in Post-Traumatic Stress Disorder (PTSD) symptoms. BNC210 is known to be a novel, and first in class negative allosteric modulator of alpha 7 nicotinic acetylcholine receptor in patients with Post Traumatic Stress Disorder (i.e., PTSD). The latest trial, in a convincing manner assessed symptoms in 193 patients with PTSD across 25 sites in the US and Australia. The company found that BNC210 showed excellent tolerability and safety as measured by the Clinician-Administered PTSD Scale (CAPS-5), which had added to the safety picture for BNC210, administered for the first time over a prolonged 12 weeks treatment period. Under the secondary endpoints, measurement of impact from components of CAPS-5 and PTSD symptom clusters was done with measures of anxiety and depression, sleep, well-being, and safety. While BNC210 was expected to show clear beneficial effects on improving PTSD symptoms, by supporting further development of the drug as a new treatment for this condition; however, trial results did not reflect the broad benefits, underscoring the complexity and heterogeneity of PTSD symptoms across patients. This has been a disappointment for BNO that the primary endpoint in this trial was not met. The company is now moving forward and will be focusing on the completion of the ongoing Phase 2 trial of BNC210, which the company had commenced in May 2018, in hospitalised, elderly patients suffering from agitation and the first trial results are expected in the first quarter of calendar year 2019. Meanwhile, the agitated behavioral disturbance in elderly patients is a major unmet clinical problem, which causes distress to both the patients and other patients and interfers with therapeutic procedures. There are no approved treatments for agitation in the elderly and the usage of benzodiazepines and antipsychotics are extremely restricted because of the risks of falls, strokes and even sudden death. In any event, it is projected that only 9% of patients suffering agitation receive any drug treatment. Bionomics has flagged for putting a halt on all other work on BNC210 until the time the aforementioned studies show some positive results.


Bionomics’ CNS Focused Pipeline (Source: Company Reports)

Disinvestments: BNO has an ongoing process for the divestment of the two oncology assets and multiple confidential discussions are in progress. The company expects an outcome that will deliver value for shareholders. Last year, due to the finite resources it was not possible to continue to develop the clinical stage cancer assets BNC101 and BNC105. These programs are no longer part of the company’s core strategy which is focused on CNS disorders.

Financial Performance in FY18: BNO for FY18 has reported 79% decline in the Consolidated revenue for the year to 30 June 2018 to $3,953,990. Other income for the year to 30 June 2018 had fallen by 12% to $8,502,456, and was majorly related to the Research and Development (R&D) Tax Incentive, foreign government grants and interest income. This is compared with revenue of $18,606,356 and other income of $9,645,501 for the year to 30 June 2017. The operating loss after tax of the Group for the year to 30 June 2018 has widened to $25,085,564 compared with the prior year after tax loss of $6,749,615. The company’s cash position at 30 June 2018 was $24,930,461 with restricted cash of $550,000 and $384,000 classified as current and non-current other financial assets respectively. In 2017, the company’s cash position was $42,873,656 with restricted cash of $550,000 and $384,000 classified as current and non-current other financial assets respectively. This cash balance partly reflects the receipt of a $6.788 million R&D incentive refund that the company received from the Australian Government in January 2018.


Financial Performance (Source: Company Reports and Thomson Reuters)

Contract with WG Partners: During the FY18, the Company had contracted with WG Partners LP (“WG Partners”), related party to Mr David Wilson. This transaction is of arm’s length within the meaning of Section 210 of the Corporations Act 2001 and therefore shareholder approval is not required. As per the contract between the Company and WG Partners, WG Partners offers BNO with general financial advisory services in Europe and the US for a retainer of A$10,000 per month (plus GST), which can be terminated on one months’ notice.

Outlook: BNO has ongoing drug discovery programs that are expected to deliver up to two new therapeutic candidates in FY19. BNO also has a strategic partnership with Merck & Co., (known as MSD outside the United States and Canada), to assess a cognition therapy candidate in an ongoing Phase 1 program, which has entered clinical development and triggered a US$10 million milestone payment last year. This deal according to the company has a potential value of up to US$506 million in terms of the upfront payments, R&D payments and milestone payments, plus additional annual royalties on net sales of licensed drugs. Moreover, BNO has an ongoing process to monetize its oncology programs, BNC101 and BNC105, as the company completes its transition to a focused Central Nervous System (CNS) disorders company. Meantime, BNO is progressing with a number of early stage ion channel programs to target pain, depression, cognition, PTSD and epilepsy, with identification of a potential therapeutic candidate was slated for the second half of CY2018.

Compliance: BNO is subject to the environmental regulations and other licenses with respect of its facilities in Australia and France. The company is subject to regular inspections and audits by responsible State and Federal authorities. The company was in compliance with all the necessary environmental regulations throughout the FY18 and no related issues had arisen in FY18.

Stock Recommendation: BNO stock has fallen 64.58% in three months as on October 22, 2018 after a top-line data from its Phase 2 clinical trial of BNC210 failed to meet primary endpoint of decrease in Post-Traumatic Stress Disorder (PTSD) symptoms as measured by Clinician-Administered PTSD Scale (CAPS-5) at 12 weeks. In FY18, BNO had reduced costs by closing the US operations and reducing overall headcount. In May 2018, BNO has initiated a Phase 2 clinical trial of BNC210 in elderly patients with agitation in the hospital setting. The result of this trial is expected by first quarter of FY19. Meantime, the company has planned to stop all other work on BNC210 until that time. Moreover, Bionomics needs to focus on financials as the loss had widened in FY18 and the cash position has fallen in FY18 compared to FY17.  The company has few products in pipeline but their results are yet to be seen. The failing of the company’s flagship product for PTSD has decreased the confidence of the investors; however, the licensing prospects for the drug look to be intact and planned trial can support a significant deal prospect for BNC210. At the moment, factors including monetization of its clinical stage noncore assets, a probable second milestone of about USD 20m from Merck, and results from Phase 2 agitation trial in elderly patients with BNC210 can play a crucial role and FY19 earnings per share may end up in a positive zone with EV/EBITDA ratio in low single digit. We give a “Speculative Buy” recommendation on the stock at the current price of $ 0.165.
 

BNO Daily Chart (Source: Thomson Reuters)
 
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