Annexin: Our Q3 Comment
Research Update
2022-11-07
08:48
Redeye comments on Annexin’s Q3 report, which came in as expected, and largely reiterate our view of the company.
FT
Fredrik Thor
Key figures from the report:
- Net sales for the period amounted to SEK 0m (-0m)
- Cash flow from operating activities amounted to SEK -8.56m (-8.1m)
- Cash and cash equivalents at the end of the quarter amounted to SEK 36.7m (8m)
(The numbers in parenthesis refer to the corresponding quarter of last year)
Ongoing Phase II Trial in RVO
In April, it was announced that the company received approval to initiate its phase IIa trial (n=20) with ANXV in RVO (“Retinal Vein Occlusion”). Last week, we learned that initial recruitment has been slow, partly due to external factors, but that the company is working actively to find patients and improve the recruitment pace (our impression is that this could include some tweaks to the inclusion criteria for example). The company still reiterates its goal to get safety data by year-end and efficacy data by H1 2023.
Extended Cash Runway
Partly as a consequence of the slower recruitment pace, the company’s cash runway lasts a bit longer (report says throughout Q2 2023). We are overall positive about the fact that the runway is flexible depending on progress with the clinical trial.
Financing History
Annexin has a history of efficient capital injections, including smaller directed issues/loans from major shareholders before major events (so that the company can raise sufficient cash when it needs to). We think that this has contributed to a more stable share price and valuation. In our base case, we assume that Annexin will raise some SEK 35 million during Q2/Q3 2023 - but a possible alternative is a smaller injection of roughly SEK 20 million during early 2023 followed by a more significant issue in H2.
Share Price Development
Valuation
We largely reiterate our valuation but make some adjustments:
- Increase the SEK/USD rate to 10.55 which has a positive impact on our valuation
- Increase the risk-free rate to 2.5% per Redeye’s policy due to increased market rates and raise our WACC to 15.5% (14%)
- Assume a capital injection of SEK 35 million during H1 2023
- Somewhat tweak our sales estimates and valuation of production process due to updated data and assumptions
We land at a new base case of SEK 2.0 (2.2) per share.
About ANXV
ANXV is a biologics candidate based on recombinant human Annexin A5. This is a
highly conserved, endogenous protein present in all human cells but abundant in
endothelial cells and thrombocytes.
Annexin A5 binds with a strong affinity to a phospholipid, phosphatidylserine (PS). PS
plays a central role in apoptosis, i.e., cells that undergo stress or are dying. In the
apoptosis process, PS externalizes to the outer of the cell membrane and where it
essentially raises a ‘red flag’ that something is not right. In the apoptosis process,
Annexin A5 has demonstrated unique characteristics:
• Immediate ability to repair cell rupture
• Anti-thrombotic and acts as a protective shield
• Long-term acts anti-inflammatory
Annexin A5 has been widely used in the clinic as a diagnostic biomarker. Thanks to its
strong affinity for PS, researchers have better understand apoptosis at a molecular level
when Annexin A5 has been attached to a radionuclide or a fluorescent dye. In the last
10-15 years, we also acknowledge an increasing appreciation for Annexin A5’s
therapeutic properties. In this context, the co-founders of Annexin Pharmaceuticals have
had an incremental role, and is their research that Annexin Pharmaceuticals stem from.
The company develops ANXV to assess its therapeutic properties, with the hypothesis
to supplement ANXV in subacute stages by acting as a missile to its disease target.
People: 3
The People rating could well increase during 2021 if we see consistency (on the CEO seat) and execution abilities by the current management team.
Business: 2
Annexin Pharmaceuticals addresses indications with unmet medical needs. But the business is in the early development stage and is far from obtaining any product revenues.
Financials: 1
Annexin Pharmaceuticals have strong and long-term owners that have been able to back the company. However, there is a need to extend the runway and strengthen its financials as the company moves into more expensive development stages.
Disclosures and disclaimers