As reported yesterday, Roche (SIX:ROG) has decided to discontinue the development of ORY-1001 (a selective LSD1 inhibitor) and return the rights to Oryzon (MC:ORY), according to which the decision was due to Roche reprioritising its portfolio and not driven by data. The process may take several months and during this period Roche will also finalise a dose-finding Phase I study in small cell lung cancer (SCLC) and hand the data over to Oryzon. The company is now free to initiate planning for further clinical activities, although it will likely take some time to present updated ORY-1001 development plans. Oryzon also mentioned that around the time when ORY-1001 was out-licensed to Roche in April 2014, it was contacted by several other companies interested in epigenetic programmes in oncology. In our view, this suggests that the company could potentially replace Roche with another partner interested in epigenetics and LSD1 inhibition.
ORY-1001 entered a Phase I/IIa trial in acute leukemia in January 2014 and in April 2014 it was licensed to Roche, which up until now has paid $21m in upfront and milestones to Oryzon. Under the terms of the agreement, Oryzon was responsible for finalising the Phase I/IIa studies. In December 2016, Oryzon reported supportive preliminary efficacy results in this trial. In parallel, Roche, which was responsible for the global development of ORY-1001, initiated the currently ongoing clinical trial in SCLC. While the stock is down almost 30% on the news and this is clearly a setback in business development for Oryzon, in our view, ORY-1001’s potential has not been compromised in either of these two indications, which we have already included in our valuation. We therefore expect to maintain these projects in our model; our revision will focus on the potential to establish new partnership deal, additional investment and timelines.
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