Oncimmune: Reacquisition of IP and distribution rights for Chinese lung cancer test

Oncimmune Holdings plc (LON:ONC) has reacquired IP and distribution rights for its lung cancer diagnostic (EarlyCDT®) that has been recalibrated for enhanced accuracy in Asian populations. Trials are due to complete in H1 2021, with regulatory filing to follow shortly afterwards. We would expect the company to be in advanced discussions with a new licensee/ distributor or acquirer of the geographically-specific test, and that a new licensing agreement or divestment will be net value accretive. We maintain our positive outlook for Oncimmune, based on expectations of strong revenue growth and profitability. Valuation and current forecasts are under review pending an update by a new analyst.

Oncimmune has announced that it is reacquiring the IP and distribution rights for its EarlyCDT® lung cancer diagnostic in the Peoples Republic of China and Hong Kong, originally licensed to the Genostics Company Limited in January 2018. As part of the original deal Genostics made a £10m equity investment in Oncimmune. Genostics currently holds than less than a 5% share in Oncimmune. The cost of reacquisition has not been disclosed, and as such are likely to be relatively nonmaterial (i.e. < £1m).

Since January 2018 Oncimmune and Genostics have been developing a lung cancer test with superior performance given the high prevalence rates of EGFR +ve non-small cell lung cancer in the China and Asia-Pacific regions. The test uses an extended panel of autoantibodies to accommodate variations in the biomarkers expressed on cancer cells that are specific to Asian populations.

In May 2019 Oncimmune announced that the new test had entered a new multicentre case control study, in the People’s Republic of China assessing early detection of lung cancer, study approximately 1,000 early lung cancers at five leading academic health centres across China. The study is due to complete in H1 2021, with the data for the newly validated panel used to support approval of the test by Chinese regulators (the China National Medical Products Administration).

Oncimmune Holdings has been actively pursuing a new licensing partner for EarlyCDT® in China, and we would be surprised if, given that regulatory filing is likely before midmid, the company was not in advanced discussions with either a new licensee, or even a potential acquirer. We would expect a new licensing agreement or divestment to be net value accretive. We note that a reduced dependency on China as part of overall corporate strategy may be beneficial given Oncimmune’s intention. Going forwards, to increase its focus on the US, both in terms of operations and capital markets. We maintain a positive outlook on the stock, although our valuation and current forecasts are currently under review pending an update by a new analyst

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