I think the board is missing some data points when it comes to assessing the value of one trial over another.

For TNBC, I looked up the market size ~2 years ago when Zenith announced the trial partnership with Pfizer and Talzenna/talazoparib.  It was ~$500m then.  Looking around the web today and I found a paper stating the market in 2022 was $671M and is projected to grow to ~$1B in 2031.

https://www.insightaceanalytic.com/report/global-triple-negative-breast-cancer-treatment-market/1038

The paper also identifies 10 Key Players in the TNBC treatment market so it looks very competitive.  The ZEN-3694 + Tala combo is not the clear leader of ORR.  Trodelvy is by 2%.  So to aggressively pursue drug registration to only get a sliver of a $700M global market doesn’t make a lot of sense to me if they have better risk-reward in other indications like Prostate Cancer.  Slide 38 on the RVX AGM deck shows TNBC is just 1 of 5 differenet cancers this combo could treat (Ovarian, PDAC, CRPC, Breast and NSCLC)

Now looking at the size of the Prostate cancer treatment market and I see the paper linked below showing $8.1B in 2021 with projected growth to $12.1B in 2030.  The Prostate cancer market is ~12 X larger than TNBC.

This is also a competitive market.  The paper list 28 key players including Pfizer, Astellas, and Merck which are current partners with ZEN.  Don mentions Keytruda being the best selling cancer drug at $10B annually and how Merck has tried 4 different trials to include Keytruda in the Prostate cancer market which have all failed to achieve the target endpoints.  Now with the triple combo with Zen-3694, they are seeing early results of ~40% ORR compared to 11% on Enza + Keytruda alone.  I’d be quite happy to see Merck write a big cheque and acquire all the rights to ZEN-3694 minus a 5-6% royalty back to Zenith Capital Corp.

https://www.globenewswire.com/en/news-release/2023/01/23/2593434/0/en/Prostate-Cancer-Treatment-Market-Size-to-Reach-USD-12-152-Million-by-2030-Says-Acumen-Research-and-Consulting.html

The paper also mentions some interesting market stats:

Pancreatic Cancer Therapeutics market = $3.6B in 2021 growing to $6.6B in 2030

Global Lung Cancer market = $21.1B in 2021 growing to $67,9B in 2030

Cancer Chemo market = $41B in 2021 growing to $106B in 2030.

Now for the royalty proposal.  Did anyone notice the verbage used on slide 32 with respect to Zenith?  Slide 31 shows the red circle around RVX and “in discussions” and then on slide 32 Zen has the red circle and the verbage says “in discussions, term sheet details requested”. “Term sheet details requested” to me means this proposal has much more traction than the RVX royalty sale.

Then the slide bullets are:

·        Upfront cash (use – final RVX clinical)

·        Continued Value Right (CVR)

·        8% Royalty

My preference is the first bullet, upfront cash.  As I’m a Zenith shareholder, I could see an immediate return in the form of an IPO/Go public exercise or they could distribute a special dividend.  To throw some numbers out there… If ZEN sold the rights for $1 Billion and the float is 200 Million, each share could get $5.  If $5B, each share gets $25.  This is spit balling numbers and not a valuation estimate.

The next question the board has raised and I don’t have an answer to is “how does Zenith provide capital to RVX?”.  Is it a loan?  Is it buying equity where RVX needs at least $50M and at $0.08 = 625,000,000 new shares and makes Zenith the clear majority shareholder of RVX with ~65% of the float?  If RVX is successful in BetOnMace2, Zenith owning 65% of what would have to be at least a $1B market cap on RVX makes the risk-reward on $50M look quite good for this Zenith shareholder.

I think I’d rather see Zenith buy the equity than provide a loan.

What would Warren Buffett do?

Do your own DD

Enjoy the long weekend!