The combination of an exclusive evaluation agreement and directed share issue to Novo Nordisk, global leader in diabetes treatment, provides both a significant validation of PharmaShell and a 63 MSEK capital injection that secures runway into 2024, thereby eliminating the risk of a previously impending rights issue.
Based on rough assumptions of 20% probability for a licensing deal with Novo Nordisk, an application of PharmaShell on 10% of Novo’s portfolio long-term and a 5% royalty rate, this motivates a new fair value of 6.3-7.9 (6.6-8.1) SEK per share, after adjusting for 17% dilution and a mutual exclusivity between Novo Nordisk and NEX-22. After a +80% surge in the share price after the news, this leaves a significant revaluation potential, where we find support from a broad pipeline of activities moving into 2023.
Johan Widmark | 2022-12-23 09:00
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.
First exclusive evaluation agreement
As a Christmas gift to its tested shareholders, Nanexa has signed a Material Transfer and Feasibility Study Agreement with Novo Nordisk for the evaluation of PharmaShell on Novo Nordisk products. For this, Nanexa will receive payment of 42 MSEK in an upfront for the exclusivity and another 4.4 MSEK for work performed. The exclusivity is limited to an unspecified substance class that is narrow enough not to affect or restrict Nanexa in relation to other evaluation agreements in any meaningful way.
The deal also lets Nanexa continue the development of the proprietary project NEX-22, a long-acting formulation of liraglutide for the treatment of type 2 diabetes, which is in competition with Novo Nordisk’s own portfolio. However, should Nanexa reach a license agreement with Novo Nordisk sometime in the future, NEX-22 would most likely be either included in the deal or shut down, although that is not clear at the moment. See details in our report New project NEX-22 to add significant daily benefits for 50m patient market.
Capital injection alleviates risk of near-term rights issue
In addition, Nanexa also carries out a directed share issue to Novo Nordisk of 10m shares at a price of 1.72 SEK per share, making Novo Nordisk Nanexa’s largest shareholder at 16%. Combined with the exclusivity Nanexa will receive 59 + 4 MSEK, which along with existing cash at the end of Q3’22 at 46 MSEK, will finance all activities through 2023. Interestingly, the price at 1.72 SEK per share means a hefty 33% premium compared to the previous close at 1.23 SEK but a more balanced premium of 10% compared to 20-day VWAP.
Potential Novo license deal > current Market Cap
The deal provides a renowned, strategically important and financially strong shareholder that can bring valuable industry and sector knowledge. This means a significant validation of Nanexa’s scientific thesis and investment case.
Based on rough assumptions of 20% probability for a future license deal with Novo Nordisk, an applicability of PharmaShell on 10% to Novo Nordisk’s portfolio long term, a 5% royalty with upfront and milestones attached, and similar clinical development LOA as in the case of NEX-22, and a 15% discount rate, this corresponds to an rNPV of 187 MSEK or 3.1 SEK per share.
It is worth noting however that a potential license deal with Novo Nordisk and a continued development of NEX-22 on a stand-alone basis are most likely mutually exclusive. But it’s hard to make a meaningful scenario analysis of how that might pan out at this point, which is why of SOTP-valuation range reflect each of those scenarios.
All in all, we now find support for a fair value of SEK 6.3-7.9 per share, and with the recent start of phase I with NEX-20 (a long-acting injectable of lenalidomide for the treatment of multiple myeloma), and phase I with NEX-22 in 2023 and NEX-18 (long-acting injectable azacitidine for myelodysplastic syndrome) in 2023 or 2024, we expect an eventful year ahead.
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.