QPT.V - Probably not.


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

As a reminder, QPT.V operates six subsidiaries with different ownership stakes:


Cancer - OncoQuest (43%), OncoVent (23%), AmrutBio (100%), and OncoCare (45%).

Pharmaceuticals - Madenco (20%), Bioceltran (20%).


Through its investment in OncoQuest and its Chinese joint venture; OncoVent, QPT.V is developing antibody-based immunotherapeutic products for cancer. Specifically, OncoQuest, is developing the high affinity monoclonal antibody Oregovomab (MAb B43.13) for the treatment of ovarian cancer. OncoQuest recently completed a succesful phase 2, randomized, multi-site study, assessing standard of care frontline chemotherapy (carboplatin + paclitaxel) versus simultaneous chemoimmunotherapy (carboplatin + paclitaxel + oregovomab).


The Company is currently planning to launch a Phase 3 trial this year. The planned Phase 3 study is expected to enroll over 600 patients with newly diagnosed, advanced ovarian cancer globally.


Coverage was initiated May 2017, with notes on April 2018, September 2018, April 2019,and October 2019.

News Releases


Mar. 13 - OncoQuest Announces a U.S.$50 Million Investment by KOSDAQ listed Dual Industrial Co. Ltd. OncoQuest Inc., a privately held, cancer immunotherapy company, a subsidiary of Quest PharmaTech Inc. today announced that it has closed a private placement totaling U.S.$50 million at U.S.$20.00 per share.


The investor, Dual Industrial Co. Ltd. (Dual), is a publicly traded Korean company on the KOSDAQ. OncoQuest issued 2.5 million shares in exchange for U.S. $10 million in cash and U.S. $40 million in a bond convertible into Dual shares. The proceeds will be used for expenses related to the oregovomab Phase III clinical trial for the treatment of ovarian cancer.


Mar. 24 - Announces Publication of Two Reports Related to Oregovomab Phase 2 Clinical Trial. OncoQuest Inc. today announced the publication of two reports relating to the recently completed Phase 2 trial conducted in the US and Italy.


The first report appeared in Gynecologic Oncology The study was conducted with a median of 42 months follow up and shows highly statistically significant outcomes for both progression-free and overall survival favoring the chemoimmunotherapy arm. The risk of progression and of death was reduced by more than 50%.


The second report published in Cancer Immunology, Immunotherapy. The report examined translational laboratory outcomes from a subset of the Italian cohort of patients. The report confirms that chemoimmunotherapy increased the presence of CA125-specific CD8+T lymphocytes measured in the peripheral blood compared to chemotherapy, which correlated with favorable clinical outcomes.


"The publication of our Phase II clinical results in peer reviewed journals validates the quality of the clinical data generated from our clinical study", said Dr. Madiyalakan, CEO of OncoQuest "We have discussed our Phase 2 results in an End of Phase 2 meeting with the FDA and based on those discussions are proceeding with our planned Phase 3 registration trial." The Company is currently planning to launch a Phase 3 trial in Q2 2020. The planned Phase 3 study is expected to enroll over 600 patients with newly diagnosed, advanced ovarian cancer globally.


Apr. 22 - OncoQuest Signs a Definitive Agreement to Sell Drug Portfolio to Dual Industrial for U.S. $300 Million and Commitment to Fund the Oregovomab Phase 3 Clinical Trial in Frontline Ovarian Cancer. OncoQuest Inc., has entered into a definitive agreement to sell its clinical and preclinical immunotherapy development assets to Dual Industrial Co., Ltd., in exchange for U.S.$300 million in a combination of Dual common stock and Dual perpetual convertible bonds.

Dual will also be responsible for all the cost of clinical and non-clinical development of the immunotherapy assets after the execution of the Asset Transfer Agreement until a U.S. based subsidiary is set-up to oversee all of the product and clinical development functions.


Dual will secure U.S. 75 million for the development which is expected no later than June 30, 2020 and will trigger the First Closing. At the Execution Date, OncoQuest shall receive U.S. $125 million in a perpetual convertible bond, which is convertible into Dual common stock or may be redeemed by Dual for cash.


Once all necessary transfers and releases have been obtained by OncoQuest, there will be a Second Closing, confirming transfer of all legal title and registrations for OncoQuest's drug portfolio to Dual. In return, Dual will issue U.S. $175 million of Dual common stock to OncoQuest. The Second Closing is expected to occur no later than December 31, 2020.


The consideration received by OncoQuest from the transaction, net of transaction fees and expenses and income taxes, will be distributed to OncoQuest's shareholders, including Quest. Immediately prior to execution of the definitive agreement, Quest was a 36% shareholder in OncoQuest. As part of the asset transfer agreement, Dual has committed to returning its 2.5 million OncoQuest shares. As a result, Quest's ownership interest in OncoQuest will increase to > 40%.


Apr. 22 - IIROC Halt; Pending News.

May 1 - Announces Results from its April 28, 2020 AGM.


May 4 - IIROC Trading Halt; Pending Clarification of Company Affairs.

May 29 - Provides Additional Information on OncoQuest Transaction and Announces Delay in Annual Filings.

At the request of IIROC Market Surveillance, Quest PharmaTech Inc. (TSX-V: QPT) ("Quest" or the "Company") is providing additional information with respect to the proposed asset transfer transaction between 43% owned OncoQuest Inc. and Korean publicly traded Dual Industrial Co., Ltd ("Dual"), announced on April 22, 2020.


The USD$300 million value of Dual securities to be received by OncoQuest under the transaction was arrived at by negotiation between the parties. Dual is also responsible for all of the costs of clinical and pre-clinical development of OncoQuest's immunotherapy assets following the April 20, 2020 execution of the definitive agreements by the parties until a U.S. based subsidiary of Dual is set-up to oversee all of the clinical development functions.


Dual has committed to fund OncoQuest's Phase 3 clinical trial in an amount up to USD$75 million. Dual has raised USD$70 million of the committed funds, USD$10 million of which was advanced to OncoQuest on March 6, 2020 pursuant to a share subscription, and Dual expects to raise the remaining US$5 million by December 31, 2020.


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:


(A) USD$125 million of 30-year perpetual convertible bonds of Dual (the "Perpetual Convertible Bonds") as follows:


(i) KRW48.012 Billion (USD$40 million equivalent) convertible into Dual common shares at 2,119KRW/share; and

(ii) KRW103.445 Billion (USD$85 million equivalent) convertible into Dual common shares at 4,309KRW/share.


Each of the Perpetual Convertible Bonds has a 30-year maturity, bears no interest, and is redeemable at Dual's option for cash. The Perpetual Convertible Bonds are unrated. As of the May 20, 2020 First Closing date, OncoQuest has the right to require redemption of KRW76.0625 Billion (USD$62.5 million equivalent) of Perpetual Convertible Bonds for cash, payable not later than December 31, 2020.


(B) USD$175 Million of Dual common shares as follows:


(i) as of the May 20, 2020 First Closing date, OncoQuest has acquired 7,454,824 common shares of Dual at a price of KRW3,265/share, for an equivalent aggregate subscription price of USD$20 million; and

(ii) OncoQuest has subscribed for and is entitled to receive an additional 57,774,885 common shares of Dual at a price of KRW3,265/share, for an equivalent aggregate subscription price of USD$155 million, which are to be issued on the date of the Second Closing, expected not later than December 31, 2020.


All Dual shares issued to OncoQuest are subject to a 1-year trading restriction from the date of issuance of the shares.


Delay in Annual Filings

The Company also announces that the filing of its annual audited financial statements for the year ended January 31, 2020 . The Company expects the Documents to be filed on SEDAR no later than June 30, 2020.


June 4 - Provide Corporate Update: Dual is currently setting up a U.S.-based subsidiary to oversee all of Dual's clinical development functions, including the oregovomab Phase 3 clinical trial, which was the subject of an End of Phase 2 meeting with the U.S. FDA in late 2019.


The oregovomab Phase 3 clinical trial, now named FLORA-5, is based on a Phase 2 study (QPT-ORE-002), the results of which were recently published (Gynecol Oncol. 2020 Mar;156(3):523-529). The randomized controlled Phase 2 study which enrolled 97 patients was conducted with a median of 42 months follow up and showed highly statistically significant outcomes for both progression-free and overall survival favoring the addition of oregovomab to a standard-of-care chemotherapy combination of carboplatin and paclitaxel. The risk of progression and of death was reduced by more than 50%, and safety data showed that oregovomab did not add incremental toxicity to the chemotherapy regimen.


FLORA-5, is a double-blind, placebo-controlled, multicenter clinical study comparing chemo-immunotherapy (Paclitaxel-Carboplatin-Oregovomab) versus chemotherapy (Paclitaxel-Carboplatin-Placebo) in patients with advanced epithelial ovarian, fallopian tube or peritoneal carcinoma.


Dual is collaborating with the GOG Foundation, Inc. (GOG-F), a leading organization promoting excellence in the quality and integrity of clinical and basic scientific research in the field of gynecologic malignancies, with the support of IQVIA, a eminent global provider of advanced analytics, technology solutions and contract research services to the life sciences industry, to set up and conduct the study. To date, the study has identified 133 sites from 17 countries to enroll over 600 subjects, the first of which is anticipated to occur during the second half of 2020.


Quest also intends to continue with the development of MAb AR9.6 for solid tumors. This targeted therapy technology is based on the original discovery from the laboratory of Dr. Michael Hollingsworth at the University of Nebraska Medical Center. Development of AR9.6 is done in collaboration with U.S.-based company OncoCare Therapeutics, which has the U.S. marketing rights.


Quest also is continuing the development of the mutant EGF technology licensed from Stanford University for chronic wound healing applications. Both these products are in the preclinical stage.


In addition, Quest has a 23% ownership interest in OncoVent, a Chinese joint venture between OncoQuest and Shenzhen Hepalink Pharmaceutical Co., Ltd. OncoVent is developing antibody-based immunotherapeutic products for cancer for the Greater China territory. Quest also has a 20% ownership interest in Bioceltran, a Korean company which is focused on SP Technology™ for transdermal delivery of drugs and photosensitizers for pharmaceutical and cosmetic purposes.



Summary


In early March, a $50M investment in the form of a private placement at USD $20 per share by Dual Industrials Co. Ltd, a publicly traded Korean company on the KOSDAQ, was announced. QPT.V issued 2.5M share for USD $10M in cash along with $40M in a convertible bond into Dual Shares. Proceeds were for Oregovomab Phase III clinical trials.


In late March, QPT.V reported two publications referring to the results of the phase II clinical trials with Oregovomab.

One in Gynecologic Oncology, the other in Cancer Immunology, Immunotherapy.


"The publication of our Phase II clinical results in peer reviewed journals validates the quality of the clinical data generated from our clinical study", said Dr. Madiyalakan, CEO of OncoQuest


In late April, Oncoquest sold its preclinical immunotherapy development asset to Dual for $300M. Under the deal, Dual was to secure USD $75M by June 30,2020 (First Closing). On that date, OncoQuest shall receive U.S. $125 million in a perpetual convertible bond, which is convertible into Dual common stock or may be redeemed by Dual for cash.


Quest was a 36% shareholder in OncoQuest. As part of the asset transfer agreement, Dual has committed to returning its 2.5 million OncoQuest shares. As a result, Quest's ownership interest in OncoQuest will increase to > 40%."


Shortly after the announcement. the stock was halted by IRROC. On May 29 2020. QPT.V provided more details at the request of IIROC Market Surveillance. QPT.V disclosed that the first closing was finalized on May 20, 2020, whereby Dual confirmed that it had met its condition for having USD $75 M available to meet Phase 3 clinical trial expenses. In addition, the ownership of the immunotherapy development assets were transferred to Dual. A second closing of the transaction is expected to occur once all transfers of legal title and registrations is complete.


As per release: The completion of the First Closing, OncoQuest has received or is entitled to the following:

(A) USD$125 million of 30-year perpetual convertible bonds of Dual (the "Perpetual Convertible Bonds")

(B) USD$175 Million of Dual common shares


On June 4, QPT.V provided another update. It advised that Dual was in the process of establishing a US based subsidiary to oversee all clinical trials including Oregovomab. The Phase 3 clinical trial, now named FLORA-5.


Moreover, Dual is collaborating with the GOG Foundation, Inc. (GOG-F) and working in Tandem with IQVIA, to set up and conduct the study. To date, the study has identified 133 sites in 17 countries to enroll over 600 subjects, the first of which is anticipated to occur during the second half of 2020.


In Short

QPT.V has found a non-dilutive avenue to fund its phase 3 clinical trials for Oregovomab. By leveraging its preclinical assets, it has been able to gain access to $300M USD, of which it has been the recipient of $75M USD to date.


Looking at the chart, shows that the market's reaction to this achievement was short lived and almost dismissive. Overall, valuation has moved marginally. The market gives little incremental credits to QPT.V's patented Oregovomab's FDA approval for phase 3 clinical trials. or its capacity to acquire financing in a non-dilutive manner. Surprised?


Per MD&A year end January 31, 2020 : Based on current operating budgets, management believes that the capital resources of the Company should be sufficient to fund operations into the fourth quarter of fiscal 2021.


The Company will seek additional capital through the sale of non-core assets, further equity financings, licensing arrangements involving its core technologies and strategic partnerships.


Again, According to the FDA, 33% of the drugs tested in phase 2 move to phase 3 trials and 25 to 30% of those in tested in Phase 3 move to Phase 4 trials. Hence, QPT.V's Oregovomab phase 3 clinical trials are not risk free.


However, in the last eight months QPT.V has pushed a lot at the center of the table and does not appear to be bluffing. Currently, the market values QPT.V under $0.20 cents. Is that accurate? Probably not.

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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