Vicore Pharma Holding AB (VICO-SE): Funded through 2021E beyond key inflection points

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Published to the market and investors on 13^th December 2018 @ 9.59am (GMT).

Vicore Pharma Holding AB (VICO-SE): Funded through 2021E beyond key inflection points
Recommendation: OUTPERFORM
Target Price: SEK42.00
Current Price: SEK17.65 (CoB on 12^th December 2018)

KEY TAKEAWAY

Vicore has had a busy few months during which it acquired INIM Pharma and raised SEK242m (c.EUR23m) through a rights issue (SEK82.4m) and a directed share issue (SEK160m), which extended the company's cash runway to YE2021E. By this time Vicore should have reached key inflection points for its two lead assets: Phase IIa proof-of-concept for VP01 (C21) in idiopathic pulmonary fibrosis ("IPF") and Phase I for reformulated immunomodulatory imide drug ("IMiD") VP02 in IPF cough. We expect VP02 to be launched in 2025E, up to one year earlier than VP01, due to its shorter development programme (fewer, smaller and shorter trials). We have updated our models and valuation to include both fundraises, VP02 sales, a delay to the expected launch of VP01, and Vicore's revised strategy to commercialise both assets on its own. Our valuation remains broadly unchanged at SEK42 per share (>130% upside). We maintain our OUTPERFORM recommendation.

Reformulated IMiD (VP02) for local lung delivery adds SEK9 / share to valuation

VP02 is a novel formulation of one of the four marketed IMiDs. It is being developed for IPF cough, the most debilitating symptom associated with the disease affecting c.80% of patients and for which there is currently no approved treatment. The rationale is that first-generation IMiD thalidomide demonstrated a significant, clinically relevant effect on alleviating IPF cough in a 24-patient trial. Vicore plans to conduct an abbreviated development programme. A short Phase I trial due to start in Q1/2020E is expected to be followed by a Phase II trial in Q4/2020E, after which VP02 may enter a registrational Phase II/III trial in H2/2022E. We model approval in the US and Europe in 2025E and peak sales of >$720m by 2038E.

VP01 launch delayed to 2026E due to Phase I extension

New CEO Carl-Johan Dalsgaard conducted a strategic review that resulted in two key changes to the VP01 programme: (1) Extension of Phase I to identify the maximum tolerated dose ("MTD"), and (2) a longer and larger Phase IIa PoC trial to achieve a meaningful functional readout. This has led us to push back the expected launch to 2026E. We also now model that Vicore commercialises VP01 on its own (vs. a licensing deal previously) as this is management's preferred approach. We continue to believe that the molecule's profile should allow it to capture at least 15% of the market and generate peak sales of c.$1.5bn.

SoTP valuation broadly unchanged at SEK42 per share

Based on our estimates, VP01 remains Vicore's most valuable asset, accounting for nearly 70% of our valuation. VP02 accounts for approx. 20% despite the faster path to market and lower development costs, due to lower peak sales expectations compared to VP01 ($732m vs. c.$1.5bn) and a higher risk adjustment (90% vs. 85%).

Kind regards,

Brigitte de Lima | Analyst

goetzpartners Healthcare Research Team | Research Team

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