e-Therapeutics: Key Milestones Achieved

e-Therapeutics has defined its maximum tolerated dose (MTD) in the current UK Phase 1a solid tumour study for ETS2101. The drug discovery and development company has also completed the oral dosing study for its solid tumour drug candidate (ETS2101) and revealed that the data from this study, along with the continuing work by the company, suggest that the development of an oral dose may be possible. We see the MTD event as a key milestone as it allows the drug candidate to move into the next stage of the study, Phase Ib, further investigating the positive characteristics of ETS2101 as a potential cancer treatment and bringing it a step closer to commercialisation. With these two events in-line with our expectations, we update our forecasts slightly, and classify the company as a growth stock.

Maximum Tolerated Dose Achieved

Following the completion of the most recent dose-escalation cohort and review by the Cohort Review Committee (CRC), the dosing of the Phase Ib cohorts can commence, as planned, in Q1 2015. The Phase Ib studies will concentrate on specific solid tumours, the first two of which will be hepatocellular carcinoma (HCC) and pancreatic cancer.

Oral Dosing Completion

The oral dosing study has provided data on pharmacokinetics, absorption and bioavailability via an oral route of administration up to high doses. The company will undertake further preclinical investigation before deciding whether to progress an oral formulation into clinical development.

Forecasts

As the company seeks to make the most of the opportunities provided by its platform and pipeline, we continue to expect to see a further ramp up in investment in discovery and development. For FY15, we are forecasting R&D expenditure to grow to £9.0m (previously £11.0m), leading to an operating loss of £10.5m. For FY16, we expect the group to maintain its investment momentum and are forecasting an R&D expenditure of £10.0m (previously
£8.5m), leading to an operating loss of £11.5m. We remain of the belief that the current cash position, together with expected receipts from R&D tax credits and interest, will be sufficient to fund all of its planned discovery and development activities into CY19.

Valuation

The addressable market of its two drug candidates is significant, and we estimate could reach a combined peak annual market sales of $995m. Assuming a 12.5% discount rate, we estimate the company could be worth $346.94m (£211.02m) or 80p per share.