Destiny Pharma is dedicated to the discovery, development and commercialisation of new antimicrobials that have unique properties to improve outcomes for patients and the delivery of medical care into the future.
Plenty of progress in H1
Having navigated the challenge of running a clinical trial during a global pandemic, Destiny has blossomed in mid-2020. It is on track to announce top-line Phase 2b results for XF-73 in the prevention of post-surgical infections in Q1 2021. It has also expanded its pipeline to span the two most contemporary issues in biotech – the microbiome and the prevention of COVID-19 infections.
Destiny’s interim financials demonstrate its continued prudent financial management that underpins these achievements against the backdrop of Covid-19. We leave our FY 2020 financial estimates largely unchanged.
Cash at the end of H1 2020 was £5.6m (£9.1m at the end of H1 2019) and in-line with our estimates. The company’s cash runway now extends to the end of 2021 which should be more than enough time to partner XF-73 after positive Phase 2b results in Q1 2021.
Destiny have weathered the challenges of clinical trial recruitment and management during the global pandemic that led other companies to abandon their studies. The Phase 2b study continues to recruit, with 88 of the 125-patient FDA-agreed target already on board and having breezed through the interim independent safety review.
We value Destiny Pharma at £84.5m, or 193p per share.Download Now Missing Out Get our research first
Yet another string to Destiny's bow
Destiny Pharma have always had a microbiome tilt with their most advanced product, topical XF-73, being developed for the prevention of post-operative infections. But now, with a new collaboration and grant award for the SPOR-COV program, they have taken this even further to encompass the two hot-button issues in anti-infectives: the microbiome and coronavirus infections.
Now Destiny’s discovery efforts and pipeline have been expanded with the SPOR-COV collaboration and grant award with SporeGen and the University of Liverpool. This allows them to investigate (another) preventative effect of, in this case, a nasally delivered Bacillus formulation developed by SporeGen to stimulate the innate immunity against coronavirus.
This positive development plays to Destiny’s strengths in topical (nasal) administration, preventative indications, as well as the cost-effective management of its earlier-stage pipeline which we described in our recent initiation note. The development of SporeGen’s technology as a preventative therapy for COVID-19 has many advantages over traditional vaccines.
There are no changes to our model arising from the announcement of the SPOR-COV early-stage pipeline development. We retain our valuation of Destiny Pharma at £86.3m, or 197p per share.Download Now Missing Out Get our research first
Interview with CEO on Phase 2b trial and outlook
Neil Clark updates that the FDA's decision to lower patient numbers in the ongoing trial will not dilute the quality of the outcome, but will save Destiny money and time - with completion expected this year.
At the same time, Covid-19 has filled hospitals highlighting again the signifcant dangers of post-operative infection given the ever increasing resistance of bacteria to antibiotics ('Superbugs').
Destiny's lead product XF-73 is aimed at preventing infection and Neil discusses commercial options for the group if the trial outcome is as hoped, and also updates on the rest of Destiny's pipeline in development. Video is 18 minutes long.
New Model Anti-infectives
Destiny Pharma is not just developing novel anti-infective drugs - its lead product XF-73 is in the US and European Phase 2b study for a new preventative indication that had not been awarded to any other drug before. The clinical study of XF-73, which has proven antimicrobial activity, is expected to report an interim review in August 2020. As anti-infectives have higher probabilities of success than other therapeutic areas, Destiny’s destiny looks bright.
Many august healthcare organisations such as the World Health Organisation and US Centers for Disease Control and Prevention have warned about the shortage of new antimicrobial agents to fight the global threat of antimicrobial resistance (AMR). However, many biotech companies have fallen into the trap of developing new anti-infective treatments in indications where there is no unmet medical need, or where generic competition already exists. Destiny Pharma’s novel first drug neatly side-steps all of these issues by developing XF-73 for the prevention of post-surgical staphylococcal infections.
Destiny’s fruitful discussions with the FDA have resulted in recruitment recommencing in earnest and is now up to 77 patients. A smart protocol adaption has been agreed which reduces enrolment to 125 patients without compromising the power of the study’s primary endpoint. The study is now about two thirds enrolled. This is a positive development since it saves Destiny money and time; and should ensure recruitment completion by the end of 2020.
We use a risk-adjusted NPV model to value Destiny Pharma based only on the development costs, our expectations of future milestone and licensing revenues for XF-73, and Destiny’s cash. Our fair value of Destiny Pharma is £86.3m or 197p per share.Download Now Missing Out Get our research first
Destiny Pharma’s FY 2019 results featured its ongoing Phase IIb study of its lead drug XF-73 for the prevention of post-operative staphylococcal infections and its prudent cash management. Careful financial management had decreased Destiny’s operating loss to £5.6m (vs. £6.1m in FY 2018) of which, R&D costs were £3.8m (£3.5m in FY 2018).
The coronavirus pandemic has brought swings and roundabouts for Destiny – a pause to the Phase IIb study and therefore a delay in licensing the product, but a raised profile for antimicrobial resistant (AMR) hospital infections, that now make a licensing transaction more likely.
This pause in Destiny’s clinical trial came with 34% of patients so far recruited. However, the probability of success for this active antimicrobial agent in the decolonisation of nasal staphylococcal carriage remains high as demonstrated by the now published Phase I study in 60 healthy volunteers.
Destiny remains well-funded with cash of £7.5m at the end of FY 2019 which provides a runway through Q4 2021 and coronavirus provides an increasingly supportive backdrop to the importance of preventing AMR infections.
Anti-microbial agents with unique properties
Bucking the Big Pharma trend
Extending the clinical pipeline
Clinical progress with XF drug platform
Well-funded and on track for Phase IIb
Destiny Pharma plc (Destiny) is a UK based clinical stage developer of medicines for the prevention and treatment of infections caused by drug-resistant bacteria.
Destiny is delivering the clinical plan for its novel antimicrobial candidate XF-73 (exeporfinium chloride) on target. The initial focus for DEST is in the US where XF-73 has been granted Fast Track Designation by the FDA in the new indication of â€˜Prevention of post-surgical Staphylococcal infectionâ€™. The Fast Track supports speedy development of drugs to prevent life-threatening disease.
Following the recent Investigational New Drug (IND) opening, XF-73 is due to enter Phase IIb studies which should lead to data readout in H219. Destiny recently clarified the development plan for XF-73, which has already been trialled in 166 subjects over the course of five Phase I/II studies, detailing the standard safety studies required by FDA. In our view the three Phase I dermal safety studies detailed represent a relatively low risk hurdle towards completing the Phase III ready package.
The terms of Destinyâ€™s December commercialisation and development agreement with China Medical Systems (CMS) included exchange of Asian rights (ex-Japan) in return for a Â£6m equity stake and data sharing. This validates the XF platform clinical and commercial potential and could help Destiny to accelerate the development of XF-73 and the earlier stage products. China is the worldâ€™s second largest consumer of antibiotics so it has a crucial role in managing the threat of AMR.
Our sum-of-parts DCF valuation of Destiny Pharma, using a 12.5% drug development discount rate, rises slightly to give a current worth of Â£117m (269p/share) after rolling our forecasts forwards and updating for end December 2017 cash. The current market cap implies a low probability of success in the lead program, despite the up to twofold likelihood of success in anti-infection indications vs the average rate.
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