Kancera Q4: Active in 2025, FRACTIVE in 2026
Research Update
2025-02-25
08:34
Redeye returns following Kancera's Q4 report. We note that 2025 is shaping up to be a pivotal year, laying the foundation for the planned start of the FRACTIVE phase 2b study in 2026.
FL
Filip Lindkvist
Martin Wahlström
Contents
Investment Thesis
Download article
Kancera's expenses decreased to SEK9.9m (19.4) in Q4, SEK2m lower than our estimates. The cost reduction is primarily attributed to lower study activity than the corresponding quarter. Cash was SEK46.4m, and Kancera states it is financed for the “upcoming twelve months”, which we deem reasonable. Cash burn amounted to SEK11.8m (13.0), in line with our estimates.
In the report, the company provided further details on the upcoming phase 2b study, which will be named FRACTIVE. The primary plan appears to be conducting a two-arm study in c250 patients instead of a more extensive three-arm study. However, Kancera will await input from the FDA and EMA before moving forward with a trial, and feedback from the regulators is expected in Q3 2025 and Q1 2026, respectively. This is later than we expected, and after reviewing the timeline, we push the market launch within myocardial infarction (MI) to 2032e (2031e).
We reiterate our base case of SEK1.5, bull case of SEK4.4 and bear case of SEK0.2. Model changes include postponing the market launch within MI, and the revised timeline increases the required capital to reach results from the phase 2b study. However, Kancera's intention to conduct a two-armed study, and its comments on potential arrangements with CMOs and CROs make us keep our share issue approximation at SEK100m. Furthermore, we recognise that our previous approach to Kancera’s tax deficit and data exclusivity protection was too conservative, which is why we are making upward adjustments to these assumptions. We note that Kancera’s capital requirements may continue to act as a wet blanket on the share. However, potential licensing deals (one estimated in 2025) constitute potential triggers and may significantly impact our valuation range, potentially making our bull case our base case.
| Key Financials | ||||
|---|---|---|---|---|
| SEKm | 2024 | 2025e | 2026e | 2027e |
| Total Revenue | 0.14 | 32.1 | 29.8 | 0.14 |
| EBITDA | -46.0 | -2.9 | -26.2 | -55.3 |
| EBIT | -46.0 | -2.9 | -26.2 | -55.3 |
| Net Income | -44.4 | -2.9 | -26.2 | -55.3 |
Case
Upcoming events show the way forward
Kancera has promising results from the FRACTAL phase 2a study, showing safety, tolerability, and efficacy signals for KAND567 in patients with high-risk ST-elevated myocardial infarction (STEMI). Key catalysts going forward include partner deals, news regarding the design of a phase 2b study and the outcome of an anticipated pre-IND (pre-investigatory new drug) meeting with the FDA, which we expect in H1 2025e. This will clarify the size, and thereby cost, of a phase 2b study. We also see trigger potential in regional licensing deals in Asia, which can help fund a trial together with a plausible share issue. We think the current valuation is undemanding compared to peers on an EV basis but argue that the financing situation could act as a wet blanket. To close the gap to our base case, we argue that its balance sheet must first be strengthened. Once sorted, we believe more interest for the long-term case could increase.
Evidence
Supportive clinical data
The double-blinded, placebo-controlled FRACTAL study met the primary endpoint of safety and tolerability. The trial also showed effects on key biomarkers, including reduced intramyocardial haemorrhage (IMH). IMH is strongly associated with increased mortality and major adverse cardiovascular events (MACE) - a biomarker the FDA endorses. These biomarkers align with anticipated efficacy in future phase 2b/3 studies, supporting KAND567’s potential to address unmet needs in STEMI management.
Challenge
Capital need
Although we judge that Kancera’s cash runway extends throughout 2025e, we anticipate a share issue in H1 2025e for Kancera to partly fund its new clinical development plan, with a phase 2b study anticipated to start in 2026e. The company also works towards landing a deal in an Asian country (Japan, China or South Korea) to partly finance the study, and we have added a risk-adjusted one in 2025e. If no deal is made, we anticipate Kancera will have to raise more capital before such a trial.
Inherent high-risk due to clinical development
As with all pre-revenue biotech companies, Kancera faces significant development risks, and we estimate the likelihood of approval for its head candidate within myocardial infarction to be 18%. However, Kancera has shown favourable safety and tolerability profiles and effects on key biomarkers in a phase 2a study.
Valuation
Undemanding valuation - but uncertainties in the short-term
We base our valuation of Kancera on a DCF model using a WACC of 16% and a forecast period between 2024e-2042e. With a share issue included, our base case comes in at SEK 1.5, with respective bull and bear cases of SEK4.4 (7.3) and SEK0.2 (0.8) per share. We think the current valuation is undemanding, but argue that the financing need could act as a wet blanket. To close the gap to our base case, a strengthened balance sheet is needed. We estimate peak sales to USD1.7b (in the US, Europe and Japan) in 2039e, and we assume a peak market share of 30%. This is a relatively high figure, but as the aimed indication lacks treatments today, and our adressable patient population is precisely defined, we view this as plausible.
We also highlight that the implicit expectations in the share price are low on a fundamental level (EV around SEK72m). Given the early clinical stage, the risk is high (11-18% likelihood of success), and securing capital (through deals or share issues) is key for the share price development in the short to mid-term.
Disclosures and disclaimers