Cynata Therapeutics Limited

CYP Details

Progresses Start-Up Activities for Clinical Trial in Critical Limb Ischaemia (CLI): Cynata Therapeutics Limited (ASX: CYP) is a clinical-stage biotechnology company. CYP develops therapies based on Cymerus™, a proprietary therapeutic stem cell platform technology. The company recently informed that Dr. Geoff Brooke has been appointed as an Independent Non-Executive Director. Cynata anticipates conducting the clinical trial at a number of centres in the UK and Australia. CYP received positive advice in relation to the trial from the MHRA (Medicines and Healthcare products Regulatory Agency) in the UK. The clinical trial protocol has arrived now at final draft stage, and experts in the domain have been reviewing and commenting on the same.

Planning has been continued to advance towards an expected commencement during the second half of CY2019. To understand critical limb ischaemia (CLI), it is an advanced stage of PAD (peripheral artery disease), a narrowing of arteries in the limbs. CLI often results in amputation of the affected limb and a key risk factor for cardiovascular problem.

CYP has also engaged a leading CRO (contract research organisation), which focusses on the following activities – (1) Finalisation of the clinical trial protocol, (2) Preparation of other documents required for the trial, including patient information and consent forms, study reference manuals, case report forms and project plans, (3) Clinical site selection and qualification, (4) Establishing data management and pharmacovigilance (safety monitoring) systems, (5) Project team training, (6) Preparation and submission of regulatory and ethics applications. The Company expects to be in a position to commence recruitment in this trial by the fourth quarter of this calendar year.

March 2019 Quarterly Report Highlights: The company remains focussed on commercialisation its proprietary Cymerus™ stem-cell technology.  Fujifilm maintains the right to exercise its licence option in GvHD (graft-versus-host-disease) following an extension of the agreement. The management is in talking terms with multiple potential partners for multiple therapeutic targets.

The company also informed that preparation is underway for three Phase 2 clinical trial programs in 2019 for the treatment of GvHD, CLI and osteoarthritis. Various pre-clinical research efforts are being made by the company to further enhance the potential value of the Cymerus technology.

1H FY19 Performance: The Group recorded losses of $2,980,573 in 1H FY 2019 as compared to a loss of $1,815,701 in 1H FY18. An R&D refund of $1,308,552 was included in the other income.

1H FY19 Highlights (Source: Company Reports)

Outlook: The company has progressed well in CY2018 and set an important platform in CY2019 with three Phase 2 clinical trials likely to start. The company would continue to evaluate the high-potential target areas as well as indications, significantly expanding the commercial opportunities in which it is actively pursuing.

Significant outcomes generated by Phase 1 trial in GvHD provides clear validation of CYP’s MSCs (mesenchymal stem cells) and more broadly for the Cymerus platform.The management believes this development as a support for the continued clinical and eventual commercial development of Cynata’s MSCs in this challenging disease. The endpoints achieved in Phase 1 trial in GvHD trial were the same as those that would be required in a Phase 3 trial.

Hence, this together with fast track approval provisions in Japan, provide a clear and relatively short path to market. There are currently three Phase 2 clinical trials which are expected to commence in 2019, and these represent a substantial milestone as the company move closer to commercialising Cymerus MSC technology.

However, the company will also continue to advance preclinical studies using Cymerus MSCs to identify new indications to add to the target portfolio and to expand the demonstration of utility of the platform. The management will continue to file new patent applications to strengthen the intellectual property portfolio on core aspects of the Cymerus technology both in Australia and in major overseas commercial jurisdictions.

Stock Recommendation: At the current market price of $1.250 per share, market capitalization of the stock stands at ~$122.26 million. The stock is currently trading at EV/sales of 77.2x as compared to the industry median of 34.3x. Price to Book multiple at 8x is also higher than 3.3x of industry level, indicating valuations are stretched at the current level. Company is in a nascent stage of business and we are of the view that most of the favourable are factored in at the current price. Hence, considering the valuations with a low visibility on any near-term catalyst, we advise the investors to book the profit at the current juncture. Hence, we give a “Sell” rating on the stock at the current market price of A$1.250 per share (up 4.167% on 28 May 2019). 
 

CYP Daily Chart (Source: Thomson Reuters)
 

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