London listed Evgen Pharma is a clinical stage drug development company whose lead programmes are in breast cancer and subarachnoid haemorrhage, a type of stroke. Evgen Pharma’s core technology is Sulforadex® (SFX-01), a means of synthesising and concurrently stabilising the naturally occurring compound sulforaphane. Sulforaphane is an established anti-cancer agent that benefits from a huge amount of peer-reviewed scientific literature identifying both its anti-cancer and neuroprotective characteristics. However, its commercial development as a potential prescription medicine has been prevented by the instability of the compound. Evgen Pharma’s Sulforadex® technology overcomes this problem by creating a stable version of sulforaphane, which can be delivered as a tablet or capsule.

SFX-01 is currently undergoing two Phase II trials for both subarachnoid haemorrhage and ER+ metastatic breast cancer, with readouts from both trials expected around the end of 2018. Both subarachnoid haemorrhage and ER+ metastatic breast are considered strategic entry portals for other uses in neurology and oncology.

The ER+ metastatic breast cancer trial (STEM) is an open label study targeting patients which have previously responded to hormone therapy (tamoxifen, aromatase inhibitors or fulvestrant) for at least six months but have then been diagnosed with progressive disease, indicating secondary resistance to the hormone therapy. Patients in the STEM trial continue on their hormone therapy but also receive SFX-01. They have six-weekly scans and are discontinued from the study as soon as a scan shows disease progression or progress is evident on symptomatic grounds. The maximum period on the trial is 24 weeks; patients who respond to the drug can access SFX-01 after that time via a compassionate use programme. In early June Evgen announced a positive interim update on the trials progress, with SFX-01 proving to be well tolerated and no safety concerns have arisen. In addition SFX-01 has shown encouraging early signs of anti-tumour activity with four patients having their disease stabilised for the full duration of the study.

The subarachnoid haemorrhage (SAS) clinical trial is a double-blind, placebo-controlled study assessing the safety, tolerability, pharmacodynamics (PD) and pharmacokinetics (PK) of SFX-01 in patients affected by a type of aneurysmal stroke called subarachnoid haemorrhage (SAH). SFX-01 is administered alongside nimodipine, the standard of care that possesses a different mode of action. Evaluation of the clinical benefit will be measured by ultrasonography of blood flow in the brain. The trial will enroll a total of 90 patients, and consists of two arms, 45 patients receiving nimodipine, the current standard of care, and placebo and 45 patients receiving SFX-01 (300mg bid), in addition to nimodipine.

The results of the SAS trial are due around the end of the year and will be the most significant results in terms of returns for shareholders, this is due to the fact that Evgen has been granted orphan drug designation by the FDA for the use of stabilised sulforaphane for the treatment of subarachnoid haemorrhage. The orphan drug designation programme provides orphan status to drugs and biologics for rare diseases or disorders affecting fewer than 200,000 people in the USA. Orphan drug designation gives SFX-01 the potential for US market exclusivity for seven years from the date of marketing approval but more importantly the FDA has demonstrated previously that under the correct circumstances it’s possible for an orphan drug to be approved following a successful Phase 2 study such as the one currently being undertaken by Evgen Pharma. If approval can be obtained for SFX-01 following the current SAS trial this would provide a quick route to market and allow significant revenues to be generated whilst a Phase 3 study is conducted.

Analysts at Northland Capital currently have a price target of 113p on the shares, providing over 500% upside from today’s share price. The global market opportunity in metastatic breast cancer alone for SFX-01 is estimated to be between US$6 to US$7bn/year, with this in mind it’s easy to see why analysts expect the shares perform so well. In addition to subarachnoid haemorrhage and ER+ metastatic breast cancer pre-clinical work is currently being undertaken to assess the viability of SFX-01 to treat several other diseases including multiple sclerosis, ischemic stroke, bone and joint disease, autism and triple negative breast cancer. Analysts haven’t yet provided market opportunity estimates for these conditions but if SFX-01 is proven to provide benefits for multiple conditions it doesn’t seem a stretch to say that SFX-01 has the potential to one day become a top selling drug. Whilst Evgen Pharma might not make you a millionaire in 2019 if you can stomach the the risk and are patient enough to ride the journey out, the potential is certainly there for it to do so in the years ahead.

It looks like investor’s are starting to wake up to the potential that Evgen offers with the shares having risen from 13.5p to 18.75p in the last five days. Whilst a 38% rise in five days is significant the company still only has a market cap of around £18 million, when you consider the vast potential for SFX-01 in metastatic breast cancer and other conditions the company looks significantly undervalued. Personally I’m expecting the shares to continue rising steadily until the results as word spreads and more investors hop on board.

Evgen is expected to partner with a larger pharmaceutical company if the current trials are successful, it is anticipated that the partner will take on all development costs going forward and in return Evgen will receive royalty payments in the region of 30-35% of sales along with several milestone payments. Analysts are forecasting that the first milestone payment will be received in 2020 and could potentially be in the region of $50-$100 million, illustrating just how undervalued Evgen Pharma is with a current market cap of £18 million.

One thing to bear in mind is that investing in clinical stage drug development companies such as Evgen is extremely high risk. A high proportion of drugs fail during the clinical trial process, if the results do turn out to be negative in both of Evgen’s current trials it’s difficult to see any value left for Shareholders. This risk is somewhat mitigated by the fact that so much peer-reviewed research has already been undertaken on sulforaphane showing its potential benefits and the positive results the STEM trial has shown in the interim update but with high risk shares such as this one it’s important to make sure you don’t invest more than you’re willing to loose, Id’e recommend only allocating a small portion of your overall portfolio so the damage is limited if the results do turn out to be negative.

Disclosure: The author owns shares in Evgen Pharma and plans to buy more.

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