Ablynx OutlookL Start Of An Important 6 Months

Ablynx (ABLX.BR) recently reported promising data from the Phase II open-label extension study with ATN-103 in rheumatoid arthritis (RA), which could reignite interest in the product among major pharma companies. But even if this Nanobody is only partnered with regional companies, or not at all, Ablynx still offers an attractive investment. Phase II data on ALX-0061 in RA and Phase I data on the inhaled ALX-0171 are due in H212. Ablynx could also form new alliances as the benefits and capabilities of Nanobodies become more apparent. We have raised our valuation by €31m to €479m.


New data on ATN-103 increase licensing prospects
Data from the Phase II open-label extension (OLE) study (n=266) in RA suggest that ATN-103’s safety and efficacy is at least comparable to that of other TNFα inhibitors and could even be better, because of lower immunogenicity. Ablynx hopes that the new data, together with the low production costs, stability and potential dosing advantages, will convince a major pharma company to in-license ATN-103. Ablynx will provide an indication on how partnering discussions are proceeding by the year end.

Clinical data on ALX-0061 and ALX-0171 in H212
Proof-of-concept Phase II data on ALX-0061 (anti-IL-6R) in RA and results from the Phase I with Ablynx’s first inhaled Nanobody, ALX-0171 (anti-RSV), are due in H212. The former could result in ALX-0061 being partnered. There could be much interest in this product because of Roche’s data on Actemra, which also targets IL-6R, that showed that Actemra has significant advantages over TNFα inhibitors in RA.

Unique platform and deals
The strengths of Ablynx’s Nanobody platform are becoming clearer, which could result in Ablynx forming more partnerships. Novartis is about to start a Phase I study with TAS266 (anti-DR5). Previous attempts to activate DR5 with monoclonal antibodies have been unsuccessful. ALX-0171 shows that Nanobodies do not need to be injected. The low immunogenicity observed in the OLE trial should remove any worries about using a llama-derived product.

Valuation: €479m based on DCF
We have increased our valuation from €448m to €479m. If ATN-103 is excluded, we value Ablynx at €260m, suggesting that there is considerable upside to the current market cap of €123m, even if Ablynx is unable to partner ATN-103. The company has a strong balance sheet and could operate into 2015 without raising capital.

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