BioLineRx Ltd (BLRX)

[midastouch017]

BioLineRX: Update And Preview Of The Company's Q4 And FY 2016 Financial Results On March 23, 2017

http://seekingalpha.com/article/4057076-biolinerx-update-preview-companys-q4-fy-2016-financial-results-march-23-2017

Mar. 22, 2017 10:18 AM ET|22 comments| About: BioLineRx Ltd. (BLRX), Includes: MRK, NVS, RHHBF, RHHBY

Leny Hettmansperger
Medium-term horizon, long only, tech, biotech

(975 followers)
Summary

The company reported positive Phase 2 stem-cell mobilization results for its lead drug candidate BL-8040 on March 20, 2017.

The March 20, 2017, interim results suggest that BL-8040 could someday become the standard of care in this lucrative $9B/year market.

BioLineRX will discuss a very busy and productive 2016 from the clinical standpoint and will reiterate funding adequate through 2019 in its 4Q FY 2016 financial release March 23, 2017.

BioLineRx (NASDAQ:BLRX) is an Israel-based clinical-stage biotech company currently advancing its lead drug candidate BL-8040 in several oncology indications, ranging from leukemia to solid tumors. The company in-licenses novel drug candidates from academic institutions and biotech startups, screens these candidates through a rigorous process, develops the best candidates through pre-clinical and clinical stages, and then partners with large pharma companies.

In the last two years, and in 2016 in particular, the company has inked major collaborations with leading pharma companies like Novartis (NYSE:NVS), Merck (NYSE:MRK), and Genentech/Roche (OTCQX:RHHBY) (OTCQX:RHHBF).

The strategic collaboration with Novartis is for the co-development of selected Israel-sourced novel drug candidates. The company announced on December 16, 2014, that Novartis bought a 12.8% stake in BioLineRx as part of a multi-year collaboration deal. Novartis invested an initial $10 million by acquiring 5 million BLRX shares in a private transaction at $2.00 a share. Through the partnership, once a project is selected, Novartis pays BioLineRx an option fee of $5 million and funds half the remaining development costs in the form of an additional equity investment in the company.

With Merck, the company is running a Phase 2a study in pancreatic cancer using the combination of its lead compound BL-8040 and Merck's KEYTRUDA. Through the collaboration agreement with Genentech, the company is investigating the combination of BL-8040 and Genentech's atezolizumab in several Phase 1b studies for multiple solid tumor indications and AML.

BioLineRX Reports Positive Interim Phase 2 Stem Cell Mobilization Results

On March 20, 2017, the company reported that a single injection of BL-8040 "mobilized sufficient amounts of cells required for transplantation at a level of efficacy similar to that achieved by using 4-6 injections of G-CSF, the current standard of care." G-CSF drugs stimulate the bone marrow to make more stem cells. These stem cells then mobilize from the bone marrow into the bloodstream, where they can be collected to be used in a transplant.

These findings are very significant but the market did not appreciate their importance, and the stock sold off after an initial minor spike.

The reported results are very important for the company and its shareholders for the following reasons:

1) BL-8040 continues to deliver positive results in a wide range of oncology indications, from hematological disorders to solid tumors.

2) From a commercial standpoint, the stem-cell-mobilization market is a multi-billion dollar opportunity with many G-CSF drugs fighting for a share of it, including Granocyte, Accofil, Neupogen, Nivestim, Ratiograstim, Zarzio, TevaGrastim, and Neulasta.

BL-8040, potentially being an effective one-day monotherapy for collection of sufficient stem cells for hematopoietic cell transplantation, is a major improvement over currently available procedures. These procedures are lengthier and sometimes require the combination of several agents and multiple time-consuming apheresis sessions.

Philip Serlin, Chief Executive Officer of BioLineRx, stated:

We are very encouraged by these initial results of the Phase 2 clinical trial for assessing BL-8040, our lead oncology and hematology platform, as a single agent for hematopoietic stem cell mobilization for allogeneic transplantation. Hematopoietic stem cells are increasingly used as part of the treatment regimen for certain types of hematological cancers, as well as for severe anemia and immune deficiency disorders. These results, supporting BL-8040 as a one-day dosing and up-to-two-day collection regimen, for rapid mobilization of substantial amounts of stem cells, represent a significant improvement over the current standard of care, which requires four-to-six daily injections of G-CSF and one-to-four apheresis sessions."
The following are some statistics that will help investors appreciate the size of this market:

More than 1.1 million people in the US are suffering from hematologic malignancies.
Worldwide total cost of cancer has been estimated to be as high as $895 billion.
Hematopoietic stem cell transplantation can be used to treat several cancers and other diseases, with more than 50,000 transplants worldwide each year and growing.
Stem cell mobilization failures with traditional strategies are common and often result in delays in treatment and increased cost and resource utilization.
The value of current mobilization regimens is limited by their high failure rates, which are estimated to be between 5% and 30%.
The stem cell therapeutic market is forecast to reach $8.9 billion by 2020.
On January 24, 2014, BL-8040 received Orphan Drug Designation for its novel mechanism for stem-cell-mobilization applications.

As a shareholder, I was a bit disappointed that the press release did not provide quantitative data instead of mentioning "sufficient cell mobilization" several times. This is in contrast to the press release reporting Phase 1 results as follows:

In the second part of the Phase 1 study, eight healthy participants received a single injection of BL-8040 at the highest dose of 1 mg/kg, and four hours later underwent a single, standard leukapheresis procedure. Robust and rapid stem-cell mobilization was evident in all treated participants, supporting a novel approach to stem-cell collection. The median level of collected stem cells was higher than 11 x 106 cells per kg, and the level of HPSCs in the peripheral blood circulation 24 hours after injection of BL-8040 enabled an additional apheresis on Day 2, if needed. These data support the use of BL-8040 as a single-agent, single-injection, one-day regimen for the collection of stem cells."
Perhaps the company intends to report quantitative interim results of Phase 2 at the American Association for Cancer Research - AACR, on April 1, 2017.

Preview of 4Q FY 2016 Financial Results and Corporate Update on March 23, 2017

I believe the main reason for the post-data-release sell-off is investor's fears of ugly surprises coming out of the upcoming earnings release and conference call scheduled on March 23, 2017.

I, however, expect the corporate update to be bullish as the company is likely to emphasize a very busy and successful 2016 from the clinical standpoint. I expect updates on ongoing clinical trials, updates on large-pharma partnership developments, new drug development, and plans to move forward the extensive pipeline in 2017 and beyond. The following slide taken from a recent investor presentation shows the current pipeline:



From the financial standpoint, I am not too concerned about whether BioLineRx misses or beats analysts' estimates. The key figure I am interested in, is the cash on hand at December 31, 2016. As of September 30, 2016, the company had $38.9M in cash, cash equivalents and short-term bank deposits. I expect this figure to range between $34 to $35M, which would be in line with 2016's average burn rate of $3M to $4M/quarter. CEO Serlin is a financial guy who runs a tight ship. It also helps that partners fund much of the costs of the joint clinical trials such as Novartis paying up to 75% of the development costs for its drug candidates.

Updated Milestone and Catalyst Table

Now shown in the table below are upcoming presentations at AACR on April 1 and at ASCO on June 2, 2017:

Date in 2017

Milestone/Catalyst

Drug Candidate/Collaborator

Condition

1Q 2017 (Done)

Interim results Phase 2 Stem-cell Mobilization (Allogeneic)

BL-8040/Washington University School of Medicine

Hematology Oncology

Mid-2017

Planned Phase 1b study in maintenance AML

BL-8040/Tecentriq (Genentech)

Leukemia

2H 2017

Interim results Phase 2a

BL-8040/KEYTRUDA (Merck)

Pancreatic Cancer

2H 2017

Planned start Phase2b Stem-cell Mobilization (autologous)

BL-8040/Washington University School of Medicine

Hematology Oncology

2H 2017

Planned start Phase 1

BL-8040/Tecentriq (Genentech)

Pancreatic Cancer

2H 2017

Planned start Phase 1

BL-8040/Tecentriq (Genentech)

Gastric Cancer

2H 2017

Planned start Phase 1

BL-8040/Tecentriq (Genentech)

Non-small Cell Lung Cancer

Undetermined

Preclinical Studies

BL-1210/Novartis

Nonalcoholic Steatohepatitis

Undetermined

Preclinical Studies

BL-1220/Novartis

Various Liver Failure Diseases

Undetermined

Preclinical Studies

BL-1230/Novartis

Dry Eye Syndrome

Undetermined

Phase 1/2

BL-7010

Celiac Disease

Undetermined

Preclinical Studies

BL-9020/JHL Biotech

Type 1 Diabetes

Risks and Uncertainties

As with any biotech in the clinical-development stage, there are several potential risks that should be considered:

Failure of clinical trials.
Large collaborators opting out of current agreements for several reasons like restructuring, buyout, disappointing clinical results, etc.
Collaborator exit could cause and increase cash burn that would cause the company to seek equity financing, thus diluting shareholders.
Loss of key talent to the competition.
Acts of terrorism, war, or natural disasters.
Conclusions

BioLineRx is deeply undervalued as its market cap is only $30M above the company's cash. The company has rich partnerships with large pharma, a rich and expanding pipeline, and a potentially blockbuster oncology drug candidate, BL-8040.

The positive interim Phase 2 stem-cell-mobilization results reported this week suggest that BL-8040 could someday become the standard of care in this $9B market. BL-8040, potentially being an effective one-day monotherapy for collection of sufficient stem cells, is a major improvement over currently available procedures using G-CSF drugs. These procedures are lengthier and more expensive, and often requiring the combination of several agents and multiple time-consuming apheresis sessions.

I am personally excited about BL-8040's proven ability to flush out cancer cells from their hiding places. By doing this, immnunotherapy agents such as Genentech's Tecentriq and Merck's KEYTRUDA will be able to kill solid tumors more effectively. During 2H 2017, the company will start reporting data on clinical trials involving BL-8040 and immunotherapy agents.

The company has a solid balance sheet and it's funded through 2019. Therefore, there shouldn't be fears of near-term equity offerings that are so damaging to small biotech valuations.

I expect BioLineRx management to be bullish on the company's present and future in the upcoming 4Q and FY financial release and conference call scheduled for the morning of March 23, 2017.

The current analyst recommendation is a "Buy" rating with an average $3.02 price target. The highest PT is $7/share. The most recent recommendations were given as a "Buy" with a $3/share PT by Rodman & Renshaw on February 13, 2017, and on February 15, 2017, by H.C. Wainwright.

Investors interested in BLRX shares are encouraged to evaluate all the risks and uncertainties found in the most current 10Q and 10K filings with the SEC.

Disclosure: I am/we are long BLRX.