Kazia Therapeutics Ltd (ASX:KZA, NASDAQ:KZIA) has received the nod from two research houses, with the Maxim Group LLC initiating coverage with a ‘buy’ recommendation and Edison increasing its valuation to A$2.83 from A$2.68 per basic share.
The Maxim Group has also put a 12-month target price of US$18 per American Depository Share (ADS), which is also listed on NASDAQ.
Maxim Group believes that while glioblastoma multiforme (GBM) represents a challenging indication, the current stock price reflects the risks around GBM and not the upside potential.
Kazia is developing two novel oncology drug candidates: paxalisib for brain cancers and EVT801 for solid tumours.
Supports higher valuation
Maxim Group noted that while there were now five approved PI3K inhibitors on the market, paxalisib could be 'best-in-breed' with a differentiated PI3K profile.
“While most PI3K inhibitors cannot cross the blood-brain barrier and have been plagued with safety issues, paxalisib’s safety profile has been modest to date,” the report said.
Paxalisib is in nine clinical trials for CNS-based cancers, including the groundbreaking pivotal GBM AGILE study.
Kazia is advancing paxalisib in 1L GBM patients.
“We think continued positive readout in GBM could read positive to other CNS indications such as brain metastases.”
Maxim Group has modelled a peak of around US$275 million global market opportunity (partially partnered) in GBM.
“We believe more positive data from the ongoing studies in 2021/2022 should further de-risk the drug’s safety/efficacy profile and, accordingly support a higher valuation,” the broker added.
Edison hikes valuation
Edison believes that brain metastases are one of the most interesting indications for which paxalisib could potentially be used.
The drug is being investigated for this indication in three clinical studies – one Phase 1 and two Phase IIs – sponsored by Sloan-Kettering, Alliance Group and Dana Farber respectively.
Some initial data from these studies are expected in the fourth quarter of 2021.
Edison has raised its valuation of the company to A$375 million or A$2.83 per basic share from $A346 million or A$2.68 per basic share mainly due to the rolling forward of its net present value (NPV).
Kazia reported net cash of A$27.6 million as at the end of June 2021.
Edison estimates Kazia’s funding requirement is A$60 million, including the A$30 million needed in FY23, up from the A$50 million pencilled in due to R&D spending hikes.