Abliva Q3’20: Energizing Interactions

The Road is Set for KL1333

During Q3, the most important event was the FDA’s feedback regarding the clinical development of KL1333. As previously reported, the regulator recommends a placebo-controlled pivotal Phase II/III trial as the next step. Thus, the FDA does not require a preceding “proof of concept” phase II trial. The implication is a shortened clinical development, and lower costs. Abliva plans to recruit the first patients in H2 2021 and expects the program to run for about two years. The British MHRA has also concurred with this development plan.

The primary endpoint will be the patient-reported outcome (PRO) of fatigue. This endpoint differs from the recently discontinued pivotal trial for elamipretide (by Stealth Biotherapeutics) in Primary Mitochondrial Myopathy. Here, exercise tolerance (the six-minute walk test) was a co-primary endpoint. Arguably, the absence of an objective clinical primary endpoint could be viewed as a lower bar for KL1333. Abliva estimates the cost for a Phase II/III study to USD 30-40m.

To prepare for the pivotal trial, NeuroVive has recently started a Drug-Drug Interaction Study in healthy subjects. In parallel, Abliva has recently included the first patient in the Phase Ib trial.

Financials – No Surprises in Q3

The Q3 financials were in line with our expectations. Costs fell to SEK -10m (-15) due to lower preclinical costs, and the cash position at the end of the period was SEK 73m.

Promising Signs for NeuroSTAT

Regarding the non-core asset NeuroSTAT,  Abliva reported initiating preliminary discussions with the US public-private TRACK-TBI network, regarding a Phase II trial in traumatic brain injury .

TRACK TBI is running several programs financed by the Department of Defence, including the “Precision Medicine Project”. One aim is to eventually initiate Phase II trials in Traumatic Brain Injury financed by grants from the US Army. We understand that there will be a study to value imaging and blood-based biomarkers for subsequent clinical trials. According to the TRACK TBI homepage, “The [TRACK-TBI Precision Medicine] project […] will conduct a multicenter, double-blind, placebo-controlled exploratory clinical trial comparing the impact of cyclosporine A on blood-based and imaging biomarkers of DAI and neuro-inflammation in moderate/severe TBI patients”. From the face of it, it bodes well for a possible inclusion of NeuroSTAT (a new formulation of cyclosporine A.)

We have not yet included NeuroSTAT in our valuation but are encouraged by the apparent increase in interactions with the TRACK TBI. Investigator-initiated clinical development is usually a slow process. Therefore, ideally, a collaboration should involve a commercial partner as well.

Good Momentum – Additional Financing for KL1333 needed

In light of the clearer regulatory pathway for KL1333, we see a reason to delve deeper into the asset and review our assumptions in a future update. We also see potential upside if a collaboration structure for NeuroSTAT falls into place.

At the same time, Abliva needs substantial additional financing for the pivotal Phase II/III trial for KL1333. We believe Abliva will address this issue in H1 2021, likely following the Phase I trial read-out. The board has stated that it intends to target international capital markets, i.e., it plans a directed issue as an element of a capital raise. Backed by positive regulatory feedback, we believe Abliva is in a strengthened position compared to recent financing rounds.

We reiterate our base case of SEK 1.4 following the report. We see an upside to our current project valuation; however, the impact of likely financing in 2021 is still uncertain on a per-share basis.