To all:
Here is a recent research report that was put out by Union Securities on IGT Pharma. Please take a look at their web site at biotech.bc.ca and call the company at
1 (800) 743-7444 for more information.
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UNION SECURITIES (INTERNATIONAL) LTD.
STOCKBROKERS
19/20 Garlick Hill, London EC4V 2AL
Tel: 0171 236 8899 Fax: 0171 329 3111
Trading Desk Number: 0800 965007
IGT Pharma Inc. (VSE-IGT)
Research Report
20 November 1997 Jim Locke, CFA
IGT Pharma is Vancouver, Canada-based emerging pharmaceutical company focused on developing innovative and cost-effective synthetic processes for new and generic anti-cancer drugs. Currently, the Company is engaged in scale-up trials of its synthetic production technology for Etoposide, a generic anti-cancer drug, and is conducting final pre-clinical studies in preparation of an IND submission for its proprietary anti-cancer compound, Anhydrovinblastine.
Nearing IND submission for anti-cancer compound
Anhydrovinblastine in late stage pre-clinical studies. IGT is conducting late stage pre-clinical studies for Anhydrovinblastine prior to formatting and submitting and Investigational New Drug (IND) application to the FDA in the U.S. and the HPB in Canada. Data compilation following the studies is scheduled for mid-Q1 1998 and will be followed by and IND submission shortly thereafter.
Etoposide scale-up studies in progress. IGT's proprietary technology for the synthetic production of Etoposide, a popular, gerneric anti-cancer drug, is undegoing scale-up trials. These trials will determine the cost of producing Etoposide at a commercial scale prior to the Company seeking any licensing agreements.
Integration of expertise with Precision Biochemicals. IGT's 35% owned affiliate, Precision Biochemicals, has agreed to co-operate on projects with the Company by integrating respective technical capabilites. Precision's strength as a manufacturer of specialty research chemicals will be used in the scale-up study of IGT's Etoposide production technology.
Promising near term milestones leads to buy rating. We believe the scale-up to demonstrate commercial viability of the Etoposide synthetic production technology will be completed in Q2 1998. At the same time, Anhydrovinblastine may be approved to commence clinical trials. Successful attainment of these two milestones indicate, in our view, a greater valuation that what is reflected in th current market capitalization of $8.8 million. We rate the shares a BUY.
Glossary
Anhydrovinblastine - an anti-cancer compound that is derived from IGT's semi-synthetic production process. It is an analog (molecular variation) of Vinblastine that has been shown in pre-clinical studies to date to be more effective and less toxic than Vinblastine itself.
Etoposide - a popular, generic (off patent) anti-cancer drug that is used to treat refractory testicular cancer and small cell lung cancer. The estimated worldwide market is US$250 million with at least six generic versions now available.
Foundation of Syntetic Production Technology
IGT was founded on technology acquired from the University of British Columbia for the production of anti-cancer compounds using synthetic chemistry and plant culture processes. This technology uses less costly starter matericals to derive molecular replacements of select anti-cancer compounds. The end-result is a lower cost version of a specific drug compared to the same drug produced from conventional methods. IGT's objective is to use this technology to develop proprietary lower cost production methods for anti-cancer compounds for licencing to other pahrmaceutical company's and to discover novel anti-cancer compounds that the Company can develop itself.
To date, the Company has finalised the semi-synthetic production of two generic anti-cancer drugs, Vincristine and Vinblastine and is conducting scale-up studies of the synthetic production of Etoposide, a popular, generic, anti-cancer drug. Additionally, IGT is preparing Anhydrovinblastine for entry into clinical trials and conducting screening studies of an Etoposide analog called IGT-13.
Revenue Opportunity from Etoposide Technology
Etoposide is a popular, anti-cancer drug with estimated worldwide sales of US$250 million. Used for treating refractory testicular tumors and small cell lung cancer, this drug is now generic with several competing versions available in the market. IGT's low cost production technology would provide competitive advantage over existing production methods. This technology is being protected by the filing of a patent application in Canada and the U.S.
IGT has successfully produced Etoposide using its synthetic production technology at the laboratory bench level and is now proceeding with scale up studies to determine commercial viability. Precision Biochemicals, IGT's 35%-owned affiliate, has assumed reponsibility for the scale up studies and has already improved on the quantity produced at the bench level. The integration of technical expertise of both Precision Biochemicals and IGT collectively allows seven researchers to work on the scale-up studies and has already improved on the quantity produced at the bench level. The integration of technical expertise of both Precision Biochemicals and IGT collectively allows seven researchers to work on the scale-up study versus only the three chemists employed by IGT. This could significantly shorten the time required to reach the commercial vialbility stage. The Company has projected completion of this study for the end of Q2 1998. If the study is successful, it is anticipated that expressions of interest will be sought from various generic drug manufacturers leading to negotiation of a licencing agreement.
For illustrative purposes, if we assume a US$250 million market for Etoposide and the capture of 20% of the market or $50 million in sales over several years by the licencee of IGT's technology, a royalty stream at 5% of sales could enerate US$2.5 million annually for the Company. These are preliminary figures and a higher market share is possible as are lower worldwide sales from increased competition or alternative treatments. An up-front fee, standard in licencing agreements, may also be in the million dollar plus level.
Anhydrovinblastine in Late Stage Pre-clinical Study
IGT's other major initiative involves anhydrovinblastine ("AVLB"), an anti-cancer compound targeted at cervical and lung cancer. AVLB was discovered as part of the research conducted into the semi-synthetic production of Vincristine and Vinblastine. The production technology for Vincristine and Vinblastine allows for the ability to create new analog compounds of which AVLB is one. This new compound has been subject to extensive pre-clinical studies at the British Columbia Cancer Agency since 1994. AVLB has been shown to be highly effective on a range of tumor types while showing generally reduced toxic side effects. In a comparative laboratory in-vivo study, tumors relating to human cervical cancer treated with AVLB were found to be approximately 10 times smaller than tumors treated with Navelbine, an approved anti-cancer drug sold by Glaxo-Wellcome. Final pre-clinical studies relating to toxicity, pharmokinetics, stability and efficacy will be commencing shortly with completion expected in mid-to-late Q1 1998. An IND submission seeking permission to conduct a Phase I clinical trial into AVLB's use against non-small cell lung cancer is expected to be filed within several weeks of the data compilation. The trial is targeted to commence in Q2 1998 and take 6-9 months. The lead site for clinical trials is expected to be the British Columbia Cancer Agency.
IGT-13, Promising New Compound
The Company is also developing an analog compound to Etoposide, named IGT-13. This compound is still in preliminary screening studies prior to commencement of formal preclinical trials. Early results indicate that IGT-13 appears to be superior to Etoposide although much more study is required.
Conclusion
We think IGT shows substantial promise for a company of its size and market capitalistion. Although relatively small and operating on a modest budget, the Company appears to have made significant progress in advancing its projects. Specifically, the Etoposide initiative may result in a licencing opportunity in the second half of 1998 and preliminary data from the AVLB clinical trial may show promising results by year-end 1998. The risks at this stage, as for any emerging company, are concerned with sufficient working capital to fund its activities and the likelihood of its projects becoming commercially viable. Should the Etoposide technology become successfully licenced and AVLB enter into Phase I clinical trials, we believe that a significant upward revision of the market cpaitalisation will be warranted. We rate the shares a BUY but note that there may be little substantive news regarding the Etoposide and AVLB projects until Q2 1998.
This document is issued for information purposes only and is prepared specifically for and issued to institutional investors. This investment report is not available to private customers. The information contained in this report is drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does Union Securities (International) Ltd. assume any responsiblitlity or liability. Union Securities (International) Ltd. and its affilates, directors, officers and employees may from time to time have a position in the securites mentioned herein. This report is not to be construed as an offer to sell or the soliciation of an offer to buy the above securities.
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