Company overview

Saniona: Short-term Setback, Long-term Opportunities

Redeye Research Note timeStamp 2020/11/06

Saniona presented some pipeline news yesterday, which we follow up on. Our headline in this research note speaks for itself. While the discontinuation of the NS2359 phase 2 study and the termination of the first collaboration with Boehringer Ingelheim (BI) is disappointing and hurts our Base Case, it creates mid- to long-term opportunities. Perhaps a bit ironically, it is more aligned with the updated corporate strategy to develop proprietary assets in rare eating disorders.

Background
BI collaboration
Saniona has regained full global rights to the GABAa5 negative allosteric modulator program (BI1 going forward) after BI terminated the collaboration for strategic reasons. A second collaboration with BI, initiated earlier this year, is ongoing.
Saniona had previously received EUR 9 million in milestones from BI1. The most advanced compound in BI1 was in preparation for clinical trials. However, we haven’t taken part in any updates since 2018, and we are not overly surprised by this news. BI1 encompasses 800 molecules focused on GABAa5.

NS2359
Saniona has also regained all rights to NS2359, a triple monoamine reuptake inhibitor in phase 2 development for cocaine addiction. Similar to the BI1 news, we were not overly surprised by this. We haven’t heard anything from this phase 2 study since the beginning of 2019.

 

Reflections
Saniona will now assess the BI1 molecules and NS2359 applicability on rare eating disorders. Even though both are disappointing news and hurts the project value in the short-term, it actually fits well into Saniona’s strategy to focus on proprietary assets in the rare eating disorders space. The regaining of rights, an in-house assessment, and a potential development path forward will take some time, though, we judge. Further, BI1 nor NS2359 were part of our core equity story. We have rather seen them as peripheral projects in Saniona’s pipeline.

 

Impact on Valuation
Both BI1 and NS2359 were included in our SOTP. NS2359 contributed with some SEK 5 per share to our Base Case, BI1 contributed with some SEK 1-2 per share. Both are excluded until further notice. It leaves us with a new Base Case of SEK 65 per share.

Sum-of-the-parts valuation

With our updates in SOTP, we now have SAN711, SAN903, the GABAa5 NAM molecules, and NS2359 on our watchlist, all of them being proprietary compounds. It is worth reminding investors how we view our SOTP in terms of including and excluding projects. Below are some key aspects:

  • Funding in place
  • Aligned with the corporate strategy
  • Preferably in clinical development
  • A defined and targeted indication – a prerequisite to put a value on the project

 

Of those on the watchlist, SAN711 is probably nearest to be included in our valuation. Phase 1 studies could potentially start in H1’21. However, it is in early development and shouldn’t contribute that much to our Base Case initially.
It should also be emphasized that we stand ready to review both the PWS and HO programs and have started to do first-hand research. The next milestone is OLE data in HO (due to present in this quarter)
As stated above, both NS2359 and BI1 were projects outside the core of Saniona’s current strategy. When we do our scenario analysis, we base the modeling on tesomet outcomes in rare eating disorders. Accordingly, our Bear and Bull Case are both unchanged.

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