Price: 11.80 SEK
Shares outstanding: 8 255 875
Market cap: 205M SEK
Cash: ~ 52M SEK
Enterprise value: 153M SEK
Date: May 17, 2017
Biovica is a Swedish biotech company that develops and commercializes blood-based biomarker assays that improve the monitoring of modern cancer therapies and better predict patient outcome. The primary focus of Biovica is breast cancer, but they are researching other indications as well. The company is collaborating with world-leading cancer institutes as well as pharmaceutical companies launching next-generation therapies.
The company was introduced to Nasdaq First North Stockholm on March. 29 in 2017. The IPO offering consisted of 4.8 million new shares at a price of 12.50 SEK. The IPO resulted in net proceeds of approximately 54 million SEK after expenses.
Biovica have a clear strategy moving forward; Go through with and complete current ongoing clinical studies, complete product development to meet regulatory requirements, apply for regulatory approval and establish a cost compensation plan for their DiviTum technology.
The board and executives currently own 37.8% of the shares in the company and they have a lock-up agreement for one year.
In June. 9 2015 the company announced they had been selected as one of the few companies to receive support from the Horizon 2020 program in both Phase I and II. Biovica was supported with 6.5 million SEK over a period of 72 months and up until now the company has received 2.2 million SEK. The European Commission received 614 proposals, and only 42 were selected.
Biovica’s technology, DiviTum, is an ELISA-platform based biomarker developed to monitor and predict therapeutic response in solid tumors. DiviTum measures the activity of the enzyme thymidine kinase-1 (TK) in blood serum or cell cultures. Thymidine kinase-1 can be found in two places of our bodies, one in the cytosol and one in mitochondria of cells. The cytosolic enzyme is highly active in proliferating cells during the S phase. It has been found that elevated blood serum levels of TK correlates with metastatic capabilities of cancer and thereby can be used to detect malignant types of cancer.
It works very similar to many of the biomarkers we use today in cancer prognosis such as CEA, CA15-3 or AFP. The problem with some of these biomarkers, is that many times we often have to use them in combination with something else. They are not able to differentiate non-metastasized and metastasized tumors, there is not enough sensitivity and specificity for the tumor we’re looking for or it’s not predictive enough. DiviTum is highly sensitive for TK which allows it to recognise very low levels of activity in blood.
Another issue with biomarkers and other diagnostic tools in general, is time. In a myocardial infarction patient we can do a simple blood test and measure troponin levels. Elevated levels is not definitive, but a fairly accurate indication of MI. It’s quick and easy. Other biomarkers, blood culture, magnetic resonance, computer tomography, x-ray etc, they are all resource- and time consuming, expensive, and sometimes theres a risk involved, for instance, radiation or contrast. For radiologic imaging, patients can walk around for weeks or months waiting on their turn for a scan. This is common practice for non-acute patients.
When a patient has cancer and starts a treatment, it’s normal to do radiological imaging or measure biomarkers in order to evaluate the disease progress. Is the tumor growing, is it metastasized or is the patient getting better? If the tumor is metastazating, radiological imaging won’t help in roughly 40% of cases as it can’t be seen on imaging. Depending on the type of cancer, one might need several months of waiting before any visible changes can be seen after starting treatment. Biovica’s solution with DiviTum allows physicians to measure TK activity on a regular basis and evaluate the progress. A normal DiviTum result takes around two weeks to recieve. One of the major benefits of DiviTum is that it’s a non-invasive blood test that is performed on routine blood samples. This not only speeds up the process, but is much more beneficial for not only the patient, but health personell as well.
And then there’s the cost issue. The choice of biomarkers is mainly guided by the scientific question and financial resources. Cost is always a concern. In a scientific setting, the cost may be low in a small clinical trial, but in an epidemiological study which includes hundreds of subjects the cost can be quite high. In general hospitals and health care institutions, biomarkers are readily available and its inclusion in daily practice and research is essential for positive outcomes. In addition to the benefits of patients, there is potentially a benefit in developing robust biomarkers, especially for oncology. Developing a new drug is not cheap, and there is a substantial risk of failure as the drug progresses from Phase I–III. During these phases, a growing number of patients are needed which is particularly evident in oncology where many Phase II/III trials are conducted in late-stage patients. With the help of biomarkers, there is a potential of creating a solid cancer drug that would otherwise fail in a population, and thus cause financial loss to the company as well as discontinuing the drug. As far as costs and trial research, I do not know how Biovica stands in this regard compared to its competitors. I have not found a price for a single DiviTum test, therefore, I’m leaving it out of the discussion for now. Biovica is however participating in several studies where the progress can be followed with the help of DiviTum, which serves as a major benefit for future revenue if proven successful.
Next to the ELISA platform, the company is developing a realtime analysis of TK-activity based on TaqMan-probe technique. The ELISA platform only measures activity during a single point in a reaction and is handled manually. The realtime analysis technology has the benefit of registrating data automatically and is presented immediately after the analysis is done. Development and completion of this new platform will create another significant advantage for Biovica.
In a study by Alegre MM et al; ”Thymidine Kinase 1: A Universal Marker for Cancer”, they found that TK could be seen in blood serum even before clinical symptoms began to show. This suggest that if TK is found in blood serum, it would allow quicker treatment before the cancer becomes too developed. Thyrimidine kinase has therefore been making a growing impact in the cancer research community of late.
Dr. Cynthia Ma presented her studies on CDK4/6-therapy in San Antonio in Dec. 2016 at the Breast Cancer Symposium. Cycling-dependant kinase complex (cyclin-CDK) are protein complexes most known for their role in the cell cycle. CDK4/6 is active in the transition phase from G1/S phase. She showed there is a clear connection between the function of CDK4/6, the G1/S phase and the expression of TK.
In cancer, the genes necessary to slow down the growth of tumors are down regulated or inactivated. The tumor can therefore keep on growing until it causes symptoms and eventually harm us. Today we have several drugs focused on inhibiting the cell cycle genes to slow down the growth of tumors. Dr. Cynthia Ma’s results clearly showed that there is a significant relationship between the tumor suppressor effect of the drug Palbociclib (Pfizer) and TK levels using DiviTum, only two weeks after initiated treatment. There are several new drugs on the market that slows down the tumor growth where TK activity have a strong scientific reason to be valid as a biomarker.
Biovica is currently evaluating serum TK activity as a biomarker for CDK-inhibitors in cancer therapy in six studies.
PYTHIA is a randomized, double-blind, placebo-controlled Phase II study set up jointly with the International Breast Cancer Study Group. The study was initiated in May 2016 and is estimated to be completed by Jan. 2020. The purpose of this study is to determine whether Palbociclib in combination with Fulvestrant is more effective than placebo plus Fulvestrant in prolonging progression-free survival in 120 post-menopausal women with hormone-receptor-positive advanced breast cancer. DiviTum will be used to measure TK activity in blood taken from the patients before and during therapy to explore whether the results can assist physicians in evaluating which patient will respond to which theraphy, as well as in monitor the efficacy of the drug during treatment. The strength of this trial lies in the conduct in conjunction with another study, the AURORA study, which systematically evaluates a panel of biomarkers in tissues and blood. Currently there are eight hospitals in the UK participating, seven hospitals in Italy and seven hospitals in Belgium.
PREDIX LumA is a Phase II randomised trial evaluating response-guided treatment in early-stage breast carcinoma. The study started in Oct. 2015 and estimated to be completed by Dec. 2024. The study is currently enrolling and will follow 200 women and evaluate efficacy and toxicity of Palbociclib when added to standard endocrine treatment. The study will be conducted at the department of oncology at Karolinska University Hospital, Sweden.
Both of these studies are state-of-the-art studies and the results will be crucial for Biovica’s future and outcome. FDA granted Palbocilib accelerated approval in Feb. 2017 for the treatment of hormone receptor positive (HR+) and human epidermal growth factor receptor 2 (HER2) negative advanced or metastatic breast cancer. In Feb. 2015 it was approved in the treatment of oestrogen receptor (ER) positive and HER2-negative advanced breast cancer in postmenopausal women. The synergy between DiviTum and Palbocilib is clearly interesting for not only scientists, but maybe Pfizer as well.
The main question I’m asking myself is; Do Pfizer see Biovica as a potential takeover target in the future if it is concluded that DiviTum was a major contributor to the end-result? The question remains to be answered. Pfizer currently run a program called ”Precision Medicine” which is a part of their external R&D innovation department, and it is represented on their website with the following:
”We are focused on Precision Medicine as an approach to discovering and developing medicines and vaccines that deliver superior outcomes for patients, by integrating clinical and molecular information to understand the biological basis of disease. This effort leads to better selection of disease targets and identification of patient populations that demonstrate improved clinical outcomes.”
I believe this is something to keep in the back of your mind moving forward.
Biovica have four more ongoing studies, three for breast cancer at the University of Pennsylvania, Prato University Hospital and City of Hope in Los Angeles. The final study is in collaboration with the Dana Farber Cancer Institute, USA. This is the first study with lung cancer as an indication. This could be the first study proving the broad spectrum of cancer indications Biovica might have a potential market share in.
Biovica currently holds two patent families in several countries. In addition to patents for the ELISA platform-based technology, development of the real-time analysis of TK activity is in progress. On May. 9 2017 the company announced that they received a patent in China as well as patent extension for the technology in U.S. The company is awaiting approval in Japan, Brazil, India, Norway.
Breast cancer & Market
Breast cancer is the most common cancer for women overall and has the second highest mortality after lung cancer. The past few years have seen a decrease in cases most likely through screening, increased awareness, as well as better treatment. The American Cancer Society estimates that in 2017 around 250.000 new cases will be diagnosed, and roughly 40.000 women will die from breast cancer. In terms of upcoming breast cancer treatments, the overall pipeline is very strong with several hundred of products. Despite this, the late-stage breast cancer treatment pipeline is still very weak, with only a few procent of candidates in Phase III development. The global breast market is estimated to reach $17.2 billion annually by 2021. Biovica’s focus will be on HR+ breast cancer, and they are estimating a potential market of 6 billion SEK. This is however, only calculated for breast cancer alone and not for other indications. This number would increase tenfold if the ongoing and future studies show it’s reliable in other indications as well.
Biovica with its technology might be well on their way to a global market if they can push through and finalize their goals the following quarters. Recall that TK is expressed in many variants of cancer. The total market for biomarkers are estimated at around $40 billion.
Successful commercialisation requires that the company creates demand, ensures access to key markets and establishes partnerships for DiviTum. The company has to be effective in ensuring key markets with the help of physicians and via recommendations. It is also necessary that the test is subject to cost compensation and that it finally becomes regulatory approved.
It seems to me that the company has a clear, tunnel vision plan on how to execute. My biggest worry are the ongoing discussions on Medicare and Medicaid. They are two major cost compensation plans via state health insurance that are of outmost importance for Biovica. In my opinion we just have to wait and see what happens since the Trump administration has decided to make some changes, but I doubt it will have any major consequence.
Biovica has entered into agreements with several physicians, The Dana Farber University, Washington University, Baylor College of Medicine and City of Hope National Medical center, to evaluate and document the clinical use of DiviTum. This forms the basis of commercialisation and should be enough to create a demand with the ongoing studies as a referral. I except Biovica will receive an updated CE certification in Europe later this year and potentially start creating some revenue in the second half of 2018, or in 2019 as expected by the company.
The revenue model of Biovica consists of two parts; DiviTum sales in price per kit, and analysis service sales in price per analysis. The end customer will be the oncologists who order directly from the specific lab conducing the research. Sales in Europe will be directed through clinical laboratoriums and diagnostic companies. The aim is to increase market penetration to hospital laboratoriums after Biovica reaches regulatory approval.
In May 4. 2017 Biovica received their second largest order yet for DiviTum from a global contract research company, commissioned by a global pharmaceutical company to study the effectiveness of new cancer drugs. The value of the order was approximately one million SEK. The news did not specifically say which company, but my guess is Pfizer as discussed previously.
The biomarker market is highly competitive. Biovica is competing with several Swedish and International companies focused on diagnostics of disease. According to Amplion, a major biomarker database, the current FDA-cleared and approved novel biomarkers over the past 12 years are led by companies such as Nanostring, with a total of 45 novel biomarkers on the market. It is important to remember that Nanostring’s list of biomarkers are in one panel for prognosing breast cancer. Of the major big pharma companies, only Abbot Diagnostics and Roche Diagnostics are on the top 10 list of biomarker companies. Interestingly, the majority of the leaders of biomarkers are smaller companies, which could indicate that Biovica is a contender for future market shares.
The current companies also active in TK diagnostics are Diasorin, Beckman-Coulter, SSTK Bio, AroCell and USCN Life science. From what I found, some of these companies are working on technology that measures TK levels in the blood, which is vastly different than measuring TK activity in the blood. From what I understand, only Diasorin and Beckman-Coulter act as direct competitors with similar technology.
Diasorin, a $3.73 billion dollar company was compared against DiviTum with its product Liaison in a study by Nisman et al; “Comparison of diagnostic and prognostic performance of two assays measuring thymidine kinase 1 acitivy in serum of breast cancer patients” – Published in Clinical Chemistry and Laboratory Medicine, July 2012. The study showed that DiviTum was more sensitive, more precise and had a wider range of measurement than Liaison. The study did however conclude that both technologies can be used to measure recurrence of preoperative evaluation of breast cancer. If we only measure technology versus technology, DiviTum had the upper hand.
Another study was done and published in 2014 comparing DiviTum versus Beckman-Coulter’s product, TK REA kit, and again DiviTum came out as more sensitive with a higher range of measurement.
Comparing the products and evaluating the current market; both studies showed that DiviTum was slightly better. Even though the company is much younger than competitors, even a small market penetration would yield a substantial amount of potential revenue for Biovica.
Completion of current studies
Complete product development
Apply for regulatory approval
Establish commercial partnerships
Further develop future application areas
New patent approvals
The company currently have a cash balance of roughly ~ 53 million SEK and no debt. With a quarterly burn rate of roughly 7.5 million SEK they are well funded moving forward. We have to await the next interim report for an update.
When reviewing companies, I look for certain specifics. Usually smaller companies with a market cap below $150 million, a low share price, insider holdings more than 20%, low debt and positive cash flow. I believe this company is currently flying under the radar from many investors. Biovica is a very early stage company, but compared to many other early-stage companies they have already entered into several Phase II studies because their technology allows them to do so. It might not have the multiple shots on goal I generally look for, but I find the long term perspective very interesting. The compound of six clinical studies could rapidly lead to a mighty market penetration in 2018/2019 which will escalate the company to a billion dollar market.
It does not have positive cash flow, but the company have started receiving orders. The low debt certainly helps. The global pharmaceutical company ordering products is very interesting. Like mentioned I believe this is Pfizer. And as mentioned further up in the analysis, Biovica is already a possible takeover target by Pfizer. If any of the upcoming studies show benefits of DiviTum in cancer treatment, I would not be amazed if Pfizer picked this company up as a part of their portfolio.
Next to a potential takeover target, it is important as I highlighted, that DiviTum can serve as a potential instrument in creating better drugs with targeted therapy in oncology. You might remember Bristol-Myer’s failure with Opdivo for lung cancer? After that, Bristol-Myers changed it’s strategy and AstraZeneca soon followed with its PLD-1 inhibitor. The importance of biomarkers needs to be highlighted, and I believe this is a vertical where Biovica stands a major chance of success in the near future.
Assuming some of this is potentially true, and evaluating the global market for Biovica, I find this company very interesting. The estimated market for biomarkers today is $40 billion, and the cancer biomarker market is estimated to $16 billion by 2020. Biovica might only focus on a single indication as of today, but if thymidine kinase-1 as a marker proves itself, Biovica might find its way to the top with several indications increasing their market tenfold.
My standard base case scenario of 5-10% market penetration would yield a target market of $800 – 1600 million annually. I have not researched the direct competitors in detail, but a quick look at their valuations of $1 – 3.38 billion, could indicate that Biovica has a substantial upside with a current market cap of 205 MSEK.
Risks include competition, financials and potential dilution, failure of clinical trials and cost compensation issues and general market and economic risks.
Disclosure: This article is for information purposes only. There are risks involved with investing including loss of principal. I make no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made. There is no guarantee that the goals of the strategies discussed will be met.
I wrote this article myself, and it expresses my own opinions. I have no business relationship with Biovica International mentioned in this article. Not investment advice. I am not an investment adviser.