Pila Pharma

Key figures from today’s report:
<ul>
<li>Revenues amounted to SEK 0.3m (0)</li>
<li>OPEX amounted to SEK -2.6m (-3.2m)</li>
<li>Cash flow from operating activities amounted to SEK -2.1m (-3.5m)</li>
<li>Cash and cash equivalents at the end of the quarter amounted to SEK 5.1m</li>
</ul>
(The numbers in parenthesis refer to the corresponding quarter of last year)
Pila reported minor revenues of SEK 0.3m and slightly lower costs compared to the corresponding quarter of last year, which is in line with figures in the previous quarters.
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At the end of Q3, Pila had SEK 5.1 in cash on the balance sheet, and as we pointed out in previous report comments and the update published in May this year, the financing situation is the most crucial event ahead of the company. We saw a capital need of SEK ~90m to fund operations and the phase llb-trial in 2023 and that Pila would fund this through equity in late 2022. However, acquiring financing has become increasingly difficult. Yesterday, Pila announced a rights issue of SEK 16m at SEK 3 per share (lower than our previous financing assumption) and its intention for another financing option for the remaining funding of the phase llb-trial. This most likely comes on the back of the current stressed market conditions.
Moreover, the net proceeds from the rights issue communicated yesterday are intended to cover the company’s ongoing obligations and costs. To what extent the rights issue has commitments more than that CEO Dorte X. Gram will subscribe for SEK 0.25m does not appear in the press release. Accordingly, to finance the phase llb-trial, a financing need of another SEK ~70m remains. We adjust the previous financing assumptions from one SEK 90m rights issue to take height for yesterday’s announced rights issue and one additional for the remaining SEK ~70m rights issue in 2023. In total, these two rights issues will amount to SEK ~90m in cash through the issuance of ~41m shares.
We update our valuation model to account for a higher USD/SEK exchange rate of 10.5 (9.5) based on the average FX-rate in Q3, the company’s financial position, minor fine-tuning, and the adjusted rights issues described above. In addition, to account for the weak financial situation and to align with rising interest rates, we increase the WACC to 15%. We emphasize that the financing situation for Pila is stressed, and we will closely monitor the development and return with an updated view once we know the subscription rate, which will be crucial for the company&#8217;s financial position.
Key highlights in the quarter include Pila reporting the initial results from the 13-week safety study on rodents and the 13-week study in non-rodents are ongoing. The in-life part of this 2nd part of the 13-week tox package is expected to be completed by the end of 2022 and the complete data package from these toxicological studies is expected to be available in early 2023 and is required before the company can advance XEN-DIA to the clinical phase llb-trial scheduled to commence in 2023.
Valuation. 
The abovementioned changes trim our Base case to SEK 6.1 (7.9), with a Bull- and Bear case of SEK 13 (17), and SEK 0.8 (1.0), respectively.
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