The backbone of Uppsala-based DexTechs operations consist of the CDC platform GuaDex, which can be compared to a molecular Lego box. The main piece in the building kit is the carbohydrate molecule dextran, which is then combined with other active substances to produce drugs aimed at treating cancer.
In the main project OsteoDex The treatment targets castration-resistant prostate cancer (mCRPC), an advanced form of prostate cancer where metastases have taken hold in the bones. The goal of the treatment is to prevent the vicious cycle that occurs when the cancer interacts with bone cells and grows strong, while the bones break down.
Clear impact results
In 2018, the company was able to present positive efficacy data from a phase IIb study, which was then confirmed in a two-year follow-up in 2020. At the follow-up, the majority of patients who responded to OsteoDex treatment were still alive, which should be seen as good results in patients with advanced cancer.
The results had a major impact on the share price, which in 2018 was up and nosediving at SEK 129. The positive tone reflected the market's hopes that the study results would relatively soon lead to a value-enhancing licensing agreement for the company.
DexTech CEO Anders R Holmberg However, since then, has been careful to remind that such an agreement process can take time, and that it is more important for the company to get the right agreement than for it to go quickly.
Declining value despite maintained project status
But the market is notoriously impatient and the company's share price has seen a downward trend since the beginning of 2019, and with the recent stock market turmoil, DexTech's decline has been accentuated. The market capitalization currently amounts to approximately SEK 130 million, which can be compared to the peak listing in 2018 when the market capitalization measured SEK 1,9 billion.
From an investment perspective, it may be interesting to compare the company's market capitalization with other drug development players in the oncology field. While it may be difficult to make direct comparisons between biotech companies as there are many aspects to consider, it does provide an indication of how the market values this type of project in the current climate.
A fairly close example is RhoVac, which also has a candidate targeting prostate cancer and which has a market capitalization of just over SEK 600 million. Here the market is currently awaiting phase IIb results, so at the time of writing they are one step behind DexTech in the clinical development ladder. Another example is Spectracure, a prostate cancer-focused company that, like RhoVac, is currently conducting a phase II study and is valued at approximately SEK 740 million.
Significant willingness to pay
By looking at completed deals in the sector, it can also be seen that there is a willingness to pay among the larger players to add the right prostate cancer project to their portfolio. An example of this is Bayers purchase of Norwegian Algae for $2,9 billion in 2013, which gave them access to the prostate cancer drug Xofigo. This deal is interesting from a DexTech perspective. Professor Stone Nilsson, co-founder of DexTech, was involved in designing and conducting the clinical studies with Xofigo, which also has a similar mechanism of action to OsteoDex.
Widened pipeline
In addition to its results in mCRPC, DexTech has chosen to investigate OsteoDex's potential in multiple myeloma, which would open the door to another large treatment market and add a new project to the company's pipeline. Here too, the willingness to pay of major players is high, and an example of this was seen last year when the French Sanofi signed a licensing agreement with an American Eureka Therapeutics worth approximately 1 billion USD.
High ratings in myeloma
In Sweden, DexTech has several noted industry colleagues with treatments within the indication. The most prominent example is perhaps Oncopeptides, as with the candidate Pepaxto has targeted patients with relapsed or refractory multiple myeloma. However, it stopped here last year in phase III, which forced a major repositioning. It is now winding down most of its commercial operations and returning to being a research company, with a focus on developing new drug candidates based on its PDC platform.
Despite the setback, Oncopeptides today has a market capitalization of over SEK 700 million and it is worth mentioning that in its best moments the company was valued at almost SEK 15 billion.
Comparison can provide guidance
As previously mentioned, it is difficult to directly compare biotechnology companies, as they differ in parameters such as portfolio breadth, intended target market, development stage, treatment concept, etc. At the same time, the market values of other companies can be seen as benchmarks. After all, how other players are valued is an indication of the market's expectations for a successful candidate within the company's indication areas. Previous agreements within the same treatment landscape also indicate potential takers' interest in the segment, which in turn affects possible contract values going forward.
Agreement to reflect the full potential of OsteoDex
What is positive for DexTech is, as we have mentioned, that it has positive phase IIb results behind it. It is also working to further strengthen the value of the portfolio with the myeloma investment, where it intends to shortly conduct a clinical proof-of-concept study in approximately 20 patients. We will be able to see the results of the investment early and continuously as the study is unblinded. The company will communicate interim results continuously during the planned myeloma study.
The fact that a potential agreement now appears to be delayed further may certainly be weighing heavily on some investors, who have been waiting for a deal since 2018. However, the company's message is clear. It will not enter into a licensing agreement that does not reflect the potential it believes it sees for OsteoDex in both mCRPC and multiple myeloma.
For those who are prepared to wait, DexTech will offer a prostate cancer project with positive phase IIb data and an investment in multiple myeloma at a package price of SEK 130 million (at the time of writing). Whether this is a high or low valuation for DexTech remains to be seen, but what we can conclude is that there are similar projects elsewhere that the market is currently paying significantly more for.