QPT.V - Pending approval.

Updated: Apr 8


Quest Pharma Tech Inc. (QPT.V) specializes in cancer and pharmaceutical therapies.


QPT.V has a 45% ownership interest in OncoQuest Inc. which it sold its immunotherapy technology assets to on April 20, 2020. Once the sale is finalized, shares of OQP are intended to be distributed to OncoQuest shareholders which would provide Quest with a direct ownership interest in OncoQuest Pharmaceuticals.


QPT.V also has a 24% ownership interest in OncoVent, a Chinese joint venture developing antibody-based immunotherapeutic products for cancer for the Greater China territory. QPT.V further has a 20% ownership interest in Bioceltran which is focused on SP Technology™ for transdermal delivery of drugs and photosensitizers for pharmaceutical and cosmetic purposes.


In addition, QPT.V is developing a mutant EGF technology licensed from Stanford University for chronic wound healing applications, and an antibody (AR 9.6) against truncated O-glycans on MUC16, licensed from University of Nebraska, for targeted solid tumour therapy applications.


Previous coverage May 2017, April 2018, September 2018, April 2019, October 2019, and July 2020.


News Releases


Nov. 9 - OncoQuest Pharmaceuticals Inc. Doses First Patient in Phase 3 Clinical Trial, FLORA-5, of Company's Lead Investigational Drug, Oregovomab, in Frontline Ovarian Cancer and appoints Dr. Sunil Gupta as Chief Medical Officer.


OncoQuest Pharmaceuticals, Inc., Seoul, South Korea (078590.KQ) ("OQP") has begun dosing patients in the USA for the Phase 3 clinical trial of oregovomab. This trial is expected to enroll 602 patients from 140 clinical sites in 17 countries.


The Phase 3 clinical trial: FLORA-5/GOG-3035, is a double-blind, placebo-controlled, multicenter clinical study to compare the safety and efficacy of oregovomab versus placebo when administered in combination with specific cycles of a standard six-cycle chemotherapy regimen (paclitaxel and carboplatin) for the treatment of newly diagnosed patients with advanced epithelial ovarian, fallopian tube or peritoneal carcinoma, along with optimal debulking surgical resection.


The FLORA-5 trial is being conducted in collaboration with the Gynecologic Oncology Group Foundation in the US and IQVIA (a clinical research organization). Greater China area clinical trials are conducted in collaboration with OncoVent, a Shenzhen Hepalink Pharmaceuticals Group Company, the commercialization license holder of oregovomab for China.

Information on the clinical trial can be found on clinicaltrials.gov with the identifier: NCT04498117.


OQP also appointed Dr. Sunil Gupta as Chief Medical Officer. Dr. Gupta, MBBS, FRCPC has over 30 years of senior leadership experience in clinical development, medical and regulatory affairs focused on oncology drug development.

Jan. 5 - Update on Immunotherapy Asset Transfer Between OncoQuest Inc. and OncoQuest Pharmaceuticals Inc.


Provides update to its June 4, 2020 news release to announce that one of its equity investee companies, OncoQuest Inc. ("OncoQuest"), completed the transfer of the immunotherapy technology assets to OncoQuest Pharmaceuticals, Inc, a KOSDAQ traded company ("OQP", 078590.KQ) on November 7, 2020.


However, due to COVID-19 related Korean courts restrictions, final payment of 65,229,709 shares of OQP to OncoQuest has been delayed by one month from December 31, 2020 to January 31, 2021. In addition, a 6 month extension has been added for redemption of US$62.5 million of the Convertible Bonds which may now be redeemed for cash not later than June 30, 2021 and could be used by OncoQuest, in part, to pay for the costs of the transaction, including income taxes.


OncoQuest has already received US$125 million worth of Convertible Bonds including the above mentioned US$62.5 million Convertible Bonds with put option and US$8,387,503 in cash from OQP.


On a corporate matter, Quest announces the granting of 1,500,000 stock options to two Officers, all at an exercise price of $0.23 per common share, expiring 10 years from the date of grant, subject to TSX Venture Exchange approval.


Feb. 2 - Update on Immunotherapy Asset Transfer Between OncoQuest Inc. and OncoQuest Pharmaceuticals Inc.: The final payment of 65,229,709 shares of OQP to OncoQuest has been delayed beyond the previously anticipated outside date of January 31, 2021. The share issuance requires Korean Court approval which has been applied for but not yet been received. OncoQuest and OQP management are working diligently to facilitate approval of the Korean Courts and final payment of the shares however, the timing for any such Court approval and share issuance remains uncertain.


Mar. 26 - Update on Immunotherapy Asset Transfer Between OncoQuest Inc. and OncoQuest Pharmaceuticals Inc.: A second closing of the transaction has now occurred at which time all legal title and registrations for OncoQuest's immunotherapy assets were transferred to OQP.


Under the terms of the transaction, the second closing entitled OncoQuest to receive the final payment of 65,229,709 shares of OQP with an ascribed value in the transaction of USD$175 million, subject to all regulatory approvals.


Although OncoQuest and OQP management continue to work diligently, Korean regulatory approval for the share payment has been further delayed and still has not been received. The delay relates to the audited financial statements for its most recently completed financial year. This delay has also resulted in trading in the shares of OQP on the KOSDAQ Exchange being halted effective March 24, 2021. It remains uncertain at this time as to whether regulatory approval will ultimately be received or the timing of any such approval.


Pending regulatory approval for the final share payment, OncoQuest has received a 1% interest-bearing unsecured OQP corporate bond with a face value of USD$175 million which is due on February 24, 2022 and can be extended annually for up to five years. OncoQuest and OQP have agreed that the corporate bond will be replaced with the OQP shares if and when the shares are approved by regulatory authorities to be issued to OncoQuest.


OQP and OncoQuest continue to focus on the execution of the Phase 3 clinical trial for oregovomab which has already received regulatory approval to proceed in the US, Canada, Taiwan, Spain, the Czech Republic, Hungary and Argentina, with 9 other countries pending. Currently, there are 28 clinical sites in the US and Canada that have started patient enrollment for the study. For more information, please go to clintrials.gov (NCT04498117, FLORA-5).


Shareholders are cautioned that OncoQuest's ability to monetize the consideration received in the transaction with OQP will be dependent upon OQP's ability to fund the repayment of any bonds that become due or that could be redeemed (USD$62.5 million of the perpetual bonds have a put option) and a liquid trading market being available for any shares of OQP that are received as consideration or issued upon the conversion of perpetual bonds held. Monetization of some of the consideration will be necessary for OncoQuest to fund Canadian income tax obligations from the transaction.


Summary


Oregovomab Phase 3

According to clinicaltrials.gov, phase 3 trial were initiated on August 25, 2020, In early November, QPT.V reported that OncoQuest Pharmaceuticals, Inc., Seoul, South Korea (078590.KQ) ("OQP") had initiated dosages in the USA.


Trial are expected to include 602 patients from 140 clinical sites in 17 countries including China with OnCovent. Recently, QPT.V reports that both OQP and OncoQuest continue to focus on the execution of Phase 3 clinical trial.


QPT.V has reported that OncoQuest had received regulatory approval to proceed in the US, Canada, Taiwan, Spain, the Czech Republic, Hungary and Argentina, with 9 other countries pending. Thus far, 28 clinical sites in the US and Canada that have started patient enrollment for the study.


Asset Transfer Between OncoQuest Inc. and OncoQuest Pharmaceuticals Inc.

In early January, QPT.V announced that it had completed the transfer of the immunotherapy technology assets from OncoQuest Inc. ("OncoQuest") to OncoQuest Pharmaceuticals, Inc. ("OQP", 078590.KQ) on November 7, 2020. However, Korean courts restriction had delayed the final payment of 65,299,709 shares of OPQ from Dec. 31, 2020 to Jan 31, 2021.


In addition, a 6 month extension was added for redemption of US$62.5 million of the Convertible Bonds which may now be redeemed for cash not later than June 30, 2021. OncoQuest has already received US$125 million worth of Convertible Bonds including the above US$62.5M Convertible Bonds with put option and US$8,3M in cash from OQP.


In early February, QPT.V announced another delay, regarding the OncoQuest transaction. The Korean Court approval which had been applied for has yet to be received; The timing of the approval and share insurance "remains uncertain".


Finally in late March, QPT.V disclosed that the second closing of the transaction has now occurred at which time all legal title and registrations for OncoQuest's immunotherapy assets were transferred to OQP. However, regulatory approval from the Korean Court were needed. Moreover, this lead to delayed audited financial statement and the suspension of OQP on the KOSDAQ Exchange being halted effective March 24, 2021. QPT.V once again cautioned that it was unable to predict; whether regulatory approval will ultimately be received or the timing of any such approval.


Pending regulatory approval for the final share payment, OncoQuest has received a 1% interest-bearing unsecured OQP corporate bond with a face value of USD$175 million which is due on February 24, 2022 and can be extended annually for up to five years. OncoQuest and OQP have agreed that the corporate bond will be replaced with the OQP shares if and when the shares are approved by regulatory authorities to be issued to OncoQuest.


In short (not really this time)

Overall, Oregovomab Phase 3 Clinical Trials are off to a decent start. About 20% (28 out of 140) Clinical Sites and 41% ( 7 out of 17) countries targeted have been recruited. OQP also appointed Dr. Sunil Gupta as Chief Medical Officer.


Dr. Gupta has led several clinical trial programs in oncology that led to regulatory approvals with FDA, EMA and other agencies worldwide during his pharmaceutical industry career. In a leadership role he has secured registration of 2 molecules, Eloxatin (oxaliplatin) for colorectal cancer and Jevtana (cabozitaxel) for advanced prostate cancer, with successful FDA, EMA, and other health agency interactions worldwide.


However, while the transfer of immunotherapy assets is complete, the financial portion is not. The delay is further exacerbated by the fact that the OPQ shares are now halted.


It's clear that QPT.V's valuation has been impacted by the delay from OQP in completing the financial portion of the transaction to OncoQuest. However, OQP's site reveals more details (note the following is via google translate).

Regarding the refusal of audit opinion to shareholders and related parties


On March 23, 2021, the Company received an audit report on the financial statements for 2020 in which no external auditors have expressed their opinions. In accordance with Article 29 of the KOSDAQ Market Listing Regulations and Article 29 of the Detailed Enforcement Regulations, the rejection of an audit opinion by an external auditor is a reason for delisting.

We deeply apologize for concern to our shareholders and business partners due to the unfavorable situation that has occurred to us.


The main reason for the refusal of the audit opinion stated by an external auditor is that the Company decides to pay part of the price of the bio new drug development intangible assets acquired from Canada OncoQuest to OncoQuest. For the payment, OncoQuest decided to invest the bonds (in kind) that OncoQuest will receive from the Company, but the application for in-kind investment approval was rejected in February and new shares were not issued. After completing the asset transfer contract by changing issuance and payment to general bonds instead of new stocks, it was decided to issue stocks to OncoQuest by investing in kind of bonds issued by the Company. It is said that the auditor was not able to obtain sufficient audit evidence because it is currently not known whether it is accredited by the Korean court.


Despite the fact that our company has been making efforts to complete the transfer of assets, clinical management, development of new business, and auditing through day and night last year, we once again apologize to our shareholders and related parties for this situation and take the following actions. We will receive an improvement period for resuming transactions by submitting an objection to the notification of the reason for delisting to the Korea Exchange. In addition, we will take measures such as whether to re-audit the financial statements in 2020, select an external auditor for re-audit, and resolve reasons for refusal of opinion. In addition, we will report the company's financial strength and productivity regardless of the audit results to our clients (Hyundai Motor Company) to secure orders and sales without disruption.


Currently, our treatment,'Oregobomab', is smoothly undergoing a global phase 3 clinical trial of the US FDA for new ovarian cancer patients through IQVIA, a global clinical contract agency (CRO). A total of 50 sites were opened, including 49 sites and one site in Canada, and in Korea, 6 hospitals including Catholic University, Seoul St. Mary's Hospital, Yonsei Severance Hospital, Bundang Seoul National University Hospital, National Cancer Center, Korea University Anam Hospital, and Seoul Asan Hospital. We are planning to proceed, and I would like to inform you that we are proceeding with the global clinical trial phase 3 without any problems regardless of the opinion of the audit.


This refusal of audit opinion has caused inconvenience and concern to shareholders and stakeholders, but we promise that all executives and employees of the company will make every effort to take all measures and work to minimize this, and through this, we will do our best to be reborn as a more evolved company.


Thank you.

OncoQuest Pharmaceutical Co., Ltd.

CEO Chang-Hyeon Lee


Also noted from the OQP site (also via google translate):


Correction-Notification of convocation of regular shareholders' meeting (announcement). I wish the shareholders' health and peace in the house.


As the schedule of the regular shareholders' meeting, which was notified on March 16, has been changed, we will be notifying you of the revised meeting.


1. Date and time

① Before change: March 31, 2021 (Wed) 08:0 am

② After change: April 14, 2021 (Wed) 08:00 am

③ Reason for schedule change: On March 23, the Company received an audit report that did not express the opinion of an external auditor on the financial statements for 2020, and the reason for delisting occurred in accordance with Article 29 of the KOSDAQ Market Listing Regulations and Article 29 of the Detailed Enforcement Regulations. As of around 17:00 on March 23rd, the trading of our stocks has been suspended.


We are preparing an objection to the notification of the reason for delisting on the Korea Exchange, and we plan to file an objection before April 13, 2021, which is the deadline for submitting the application. The Company is in the process of discussing detailed measures with external auditors to resolve the reason for delisting, and the company's improvement plans to be included in the objection. To explain, we inevitably want to postpone the schedule of the shareholders' meeting to April 14, so we ask for the benefit of our shareholders.


As depicted above, buying intangible assets from OncoQuest is at issue. Korean Courts have not approved the deal and OQP auditors were not being able to express an opinion which in turn has led to the de-listing. OQP has indicated planning on filing an objection before April 13 pertaining to its delisting and conducting an AGM on April 14.


Overall, OQP's AGM and trading resumptions may not necessarily resolved the issue for QPT.V shareholders. The resolution of the financial portion of the deal is dependent on the approval of Korean Courts. However, OQP's public claims that it is working to resolve the issue and moving forward Oregobomab' phase 3 clinical trials is encouraging.


Source: Morningstar.com


Looking at the above chart, the timing of the investment in OncoQuest appears to have led to a permanent re-evaluation of 078590 (OQP). In contrast, QPT.V valuation has been volatile. QPT.V's last MD&A (December 23, 2020):


The Company also recognized a fair value gain of $112,840,155 (US$85,002,000) on its investment in OncoQuest during the 9-month period ended October 31, 2020, based on a private placement of OncoQuest shares at US$20 per common share. Quest holds 4,250,100 common shares of OncoQuest.


Again, QPT.V's May 29, 2020 release offers a good synopsis of the terms of the Oncoquest deal with Dual (now OQP).


On May 20, 2020, the parties completed a first closing (the "First Closing") under the transaction whereby Dual confirmed that it had met its condition for having USD$75 million available to meet Phase 3 clinical trial expenses. Ownership of the immunotherapy development assets was transferred from OncoQuest to Dual at the First Closing.


A second closing of the transaction (the "Second Closing") will occur upon completion of all transfers of legal title and registrations for OncoQuest's drug portfolio to Dual. As a result of the agreements and completion of the First Closing, OncoQuest has received or is entitled to the following consideration for the sale of its assets:

As of March 26 2021, QPT.V completed the second closing. Under normal circumstances, this should have triggered the financial asset transfer. However, Korean Courts need to be satisfied. Until then, the deal is pending approval.



DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.

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