Karolinska Development: Progress With Umecrine Cognition

Earlier this morning, we published a research note following the disappointing news about Aprea’s phase 3 top-line results (link). As Aprea is such an important holding for KD, there was a major impact on our valuation, and we landed in a new Base Case of SEK 1.2 per share.

In the note from this morning, with regards to Umecrine Cognition, we wrote under the news flow section:

“Establish a clinical development path for golexanolone (Umecrine Cognition) and corresponding funding”

Today, we learned that half of this had been fulfilled. Umecrine Cognition has established a clinical development plan for golexanolone in hepatic liver encephalopathy.
We look forward to learning more about the clinical path in this indication, and the capitalization of this holding. KD bears a too large stake (74% ownership) in Umecrine Cognition, in our view. We want to see that KD syndicates this holding with other investors to fund a phase 2b trial with golexanolone.

Based on this news, we change our probability rate to 20% (14%) for golexanolone in this indication. Before we feel entitled to raise the probability further, and treat it as a pure phase 2b asset, we also want to see funding in place and that the study initiates. We expect that to materialize in 2021. As can be seen in our updated SOTP-model below, Umecrine Cognition carries the vast majority in our valuation of the investment company.

Our updated Base Case is SEK 2 per share.