Nanexa’s next proprietary development project, NEX-22, is a long-acting formulation of liraglutide for treatment of type 2 diabetes (T2D). Addressing a growth vertical within the USD 50bn type 2 diabetes market, the project is expected to enter phase I in 2023 and with a blended 5,4% likelihood of approval, NEX-22 alone could add some SEK 2 to per share to our rNPV. Simultaneously, investors return requirements are rising and with another capital raise likely on the horizon, we now find support for a fair value of SEK 6.6-8.1 per share (6.3-7.7), which a potential issue at SEK 2 per share could cut to SEK 4.1, still providing a significant upside with plenty of milestones ahead. Should we however see a first firm license development agreement before that, this could alleviate the need to raise more cash.
Johan Widmark | 2022-09-16 08:00
This commissioned research report is for informational purposes only and is to be considered marketing communication. This research report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and Emergers is not subject to any prohibition on dealing ahead of the dissemination of investment research. This research does not constitute investment advice and is not a solicitation to buy shares. For more information, please refer to disclaimer.
Significant benefit for patients suffering from diabetes
Nanexa has now announced its third proprietary development project, NEX-22, a long-acting formulation of liraglutide for treatment of T2D. With 50 million people diagnosed with T2D in the seven major medical markets it is one of the most common lifestyle diseases and expected to continue to grow. Liraglutide is a so-called GLP-1 (Glucagon-like Peptide-1) analogue. Today, diabetes treatments are a USD 50 bn market, where GLP-1 analogues account for about USD 15 billion, of which Novo Nordisk, makes up over half, and is expected to grow market share fast in the coming years. However, their main liraglutide drug Victoza will go off patent in 2023.
Today patients on liraglutide take a daily injection of the drug, which Nanexa hopes to replace with a monthly long-acting injectable. One study shows that only 50% of patients suffering from T2D is taking their prescribed injections, which means that improving patient adherence could have significant positive effects on treatment efficacy and cost for the healthcare system.
Targeting clinical trials for NEX-22 in 2023
Nanexa already have a plan for pre-clinical and clinical development of NEX-22, with the expectation to start clinical trials already in 2023. With Novo Nordisk’s Victoza (liraglutide) going off patent in 2023, it’s generally expected to see market share drop from 30% in 2019 to 2-3% by 2025. Together with Novo’s other liraglutide drug Saxenda, Victoza account for over a quarter of Novo Nordisk’s GLP-1 revenues, which is why we calculate for a potential peak market share of 5% for NEX-22.
Based on a 10% royalty rate and a 15% discount rate risk adjusted with a blended statistical accumulated likelihood of approval for off-patent, chronic rare and autoimmune diseases of 5,0%, we arrive at a rNPV of around SEK 80m or SEK 1.6 per share.
Eventful year ahead
With the initiation of phase I with NEX-20 (a long acting injectable of lenalidomide for the treatment of multiple myeloma) in Q4’22 and the restart of clinical trials of NEX-18 in 2023, we expect an eventful period ahead. While the new facility will increase costs going forward, we believe it will have a positive effect on the chances for a platform licensing deal for PharmaShell, which would lessen the need for additional financing while also providing an important reference point for the value of the platform, and most likely work as a positive trigger for the share. At present, Nanexa is financed for continued development into H1 2023.
As all early development companies, Nanexa continues to be affected by the general low risk appetite that is rewarding near term cash flows and punishing profits far into the future, pushing up investors’ return requirements. After a hike in model discount rate to 15% we find that a risk-adjusted NPV for NEX-18, NEX-20, NEX-22 and the platform PharmaShell (1.9 + 1.1 + 1.6 + 2.8 SEK per share) provides support for a fair value of SEK 6.6-8.1 (6.3-7.7) per share.
GENERAL DISCLAIMER AND COPYRIGHT
This commissioned research report is for informational purposes only and is to be considered marketing communication. This research does not constitute investment advice and is not a solicitation to buy shares. Information provided here or on Emergers' website emergers.se is not intended to be financial advice. This research shall not be construed as a recommendation or solicitation to invest in the companies described. Emergers cannot be held liable for either direct or indirect damages caused by decisions made on the basis of information in this analysis. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
This material is not intended to be financial advice. This material has been commissioned by the Company in question and prepared and issued by Emergers, in consideration of a fee payable by the Company. Emergers charges a standard fee for the production and broad dissemination of a detailed note following by regular update notes. Fees are paid upfront in cash without recourse. Emergers may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.
Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained herein represent those of the research analyst at Emergers at the time of publication. The company has been given the opportunity to influence factual statements before publication, but forecasts, conclusions and valuation reasoning are Emergers’ own. Forward-looking information or statements contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.
Exclusion of Liability: To the fullest extent allowed by law, Emergers shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained in this material.
No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Emergers’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in this material may not be eligible for sale in all jurisdictions or to certain categories of investors. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
Investment in securities mentioned: Emergers has a restrictive policy relating to personal dealing and conflicts of interest. Emergers does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Emergers may have a position in any or related securities mentioned in this report, subject to Emergers' policies on personal dealing and conflicts of interest.
Copyright: Copyright 2021 Incirrata AB (Emergers)
This document is prepared and provided by Emergers for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.
This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
Emergers relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Emergers does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.