Active Biotech Q4 2022: Laquinimod Ready for Phase II
Research Update
2023-02-09
10:44
Redeye comments on Active Biotech's report for the fourth quarter and discusses events and the status of the clinical programs.
RR
Richard Ramanius
Contents
Phase I with laquinimod completed
In January, Active Biotech reported that the new eye drop formulation was safe and well tolerated at single doses and repeated doses for up to 21 days. We consequently raise the likelihood of approval to 24% (22%). The full data from the trial will be published in H1 2023. The next step will be a phase II trial in which laquinimod is tested on patients. We await information about the design and funding of this trial.
Other projects
Active Biotech is approaching other catalysts in the near term. The phase I part of the combination trial of taquinimod + ixazomib, lenalidomide, dexamethasone is set to be completed in H1 2023, after which an expansion cohort at the selected dose will begin. The myelofibrosis proof-of-concept with tasquinimod study will start in H1 2023. And, finally, phase Ib data from the phase I/IIa trial (n=59) conducted by NeoTX with naptumomab and durvalumab in solid tumours is expected in early 2023, after which the phase II part can be initiated.
Valuation
Redeye raised its Base Case to SEK3.0 (2.8) as it raised the likelihood of approval of laquinimod after the successful phase I trial. The Q4 report does render any changes. The cash position was SEK42m at the end of the quarter, which, according to the company, should finance continued operations through 2023.
| SEKm | 2021 | 2022 | 2023e | 2024e |
| Revenues | 0.00 | 0.00 | 0.00 | 145.9 |
| Revenue Growth | -100% | nm. | nm. | nm. |
| EBITDA | -49.9 | -57.8 | -42.0 | 106.9 |
| EBIT | -49.9 | -57.8 | -42.0 | 106.9 |
| EBIT Margin | nm. | nm. | nm. | 73.3% |
| Net Income | -49.9 | -58.4 | -42.0 | 106.9 |
| EV/Revenue | nm. | nm. | nm. | 1.2 |
| EV/EBIT | -4.6 | -4.0 | -6.5 | 1.6 |
Case
Three drug candidates with clinical data readouts and new trial initiations in 2023 will drive the share
Evidence
Repurposed, well-studied compounds reduce risks
Challenge
Diluation risk
Challenge
Early-stage projects
Valuation
Large upside, risk spread over three projects
Events
The most important event since our Q3 update was the successful completion of laquinimod's phase I trial. During the fourth quarter, Active Biotech was also granted a US patent related to use of laquinimod as treatment of eye diseases associated with excessive vascularization that lasts until 2040. There has also been some progress with tasquinimod. Active Biotech (through partners) is investigating tasquinimod in three indications. It is or will be testing tasquinimod in clinical trials in multiple myeloma and myelofibrosis. MD Anderson is also performing preclinical tests with tasquinimod in myelofibrosis. Furthermore, Active Biotech is performing pre-clinical testing in myelodysplastic syndrome together with the University Hospital in Dresden. Tasquinimod is believed to work as an inhibitor of S100A9, which is an alarmin that activates inflammation. New data were presented at ASH in Q4 2022, which showed that tasquinimod reprogrammed mesenchymal stromal cells (MSCs) in the bone marrow to support haematopoiesis (i.e. the formation of blood) and reduced inflammatory signalling. Malfunctioning MSCs are believed to be the cause of myelodysplastic syndrome. This supports further development of tasquinimod in this indication and is further confirmation of its mechanism of action.
Financial results
The company had no revenues in Q4. Operating costs were slightly higher than the previous quarter at SEK 15.2m (the Q3 figure was 13.3m). The cash position at the end of the quarter was SEK42m.
According to the financial discussion of the Q4 report, Active Biotech can fund continued operations through 2023. This would mean slightly less spending compared to 2022 (that had operating costs of -SEK57.9m)). This assumes that external financing for laquinimod's phase II trial can be found. Active Biotech has a slim organization with 9 employees, so fixed costs are low.
Valuation
Redeye raises its Base Case slightly to 3.0 (2.8) compared with our Q3 update due to an increase in the LOA of laquinimod to 24% (22%). We have also made some minor alterations to our cost forecasts, but these do not have an impact on the Base Case. Our Bull Case is SEK 4.4 while our Bear Case is SEK 1.7.
People: 3
Business: 3
Financials: 0
| Income statement | ||||
| SEKm | 2021 | 2022 | 2023e | 2024e |
| Revenues | 0.00 | 0.00 | 0.00 | 145.9 |
| Cost of Revenue | 0.00 | 0.00 | 0.00 | 0.00 |
| Operating Expenses | 49.9 | 57.8 | 42.0 | 39.0 |
| EBITDA | -49.9 | -57.8 | -42.0 | 106.9 |
| Depreciation | 0.00 | 0.00 | 0.00 | 0.00 |
| Amortizations | 0.00 | 0.00 | 0.00 | 0.00 |
| EBIT | -49.9 | -57.8 | -42.0 | 106.9 |
| Shares in Associates | 0.00 | 0.00 | 0.00 | 0.00 |
| Interest Expenses | 0.00 | 0.70 | 0.00 | 0.00 |
| Net Financial Items | 0.00 | -0.60 | 0.00 | 0.00 |
| EBT | -49.9 | -58.4 | -42.0 | 106.9 |
| Income Tax Expenses | 0.00 | 0.00 | 0.00 | 0.00 |
| Net Income | -49.9 | -58.4 | -42.0 | 106.9 |
| Balance sheet | ||||
| Assets | ||||
| Non-current assets | ||||
| SEKm | 2021 | 2022 | 2023e | 2024e |
| Property, Plant and Equipment (Net) | 0.00 | 6.3 | 6.3 | 6.3 |
| Goodwill | 0.00 | 0.00 | 0.00 | 0.00 |
| Intangible Assets | 0.00 | 0.20 | 0.20 | 0.20 |
| Right-of-Use Assets | 0.90 | 0.00 | 0.00 | 0.00 |
| Other Non-Current Assets | 0.00 | 0.40 | 0.00 | 0.00 |
| Total Non-Current Assets | 0.90 | 6.9 | 6.5 | 6.5 |
| Current assets | ||||
| SEKm | 2021 | 2022 | 2023e | 2024e |
| Inventories | 0.00 | 0.00 | 0.00 | 0.00 |
| Accounts Receivable | 0.00 | 2.3 | 1.2 | 11.7 |
| Other Current Assets | 2.7 | 0.00 | 0.00 | 11.7 |
| Cash Equivalents | 53.1 | 41.8 | -0.23 | 108.1 |
| Total Current Assets | 55.8 | 44.1 | 0.97 | 131.5 |
| Total Assets | 56.7 | 51.0 | 7.5 | 138.0 |
| Equity and Liabilities | ||||
| Equity | ||||
| SEKm | 2021 | 2022 | 2023e | 2024e |
| Non Controlling Interest | 0.00 | 0.00 | 0.00 | 0.00 |
| Shareholder's Equity | 47.9 | 34.5 | -7.5 | 99.4 |
| Non-current liabilities | ||||
| SEKm | 2021 | 2022 | 2023e | 2024e |
| Long Term Debt | 0.00 | 0.00 | 0.00 | 0.00 |
| Long Term Lease Liabilities | 0.00 | 0.00 | 0.00 | 0.00 |
| Other Long Term Liabilities | 0.00 | 2.9 | 2.9 | 2.9 |
| Total Non-Current Liabilities | 0.00 | 2.9 | 2.9 | 2.9 |
| Current liabilities | ||||
| SEKm | 2021 | 2022 | 2023e | 2024e |
| Short Term Debt | 8.7 | 0.00 | 0.00 | 10.9 |
| Short Term Lease Liabilities | 0.00 | 0.00 | 0.00 | 0.00 |
| Accounts Payable | 0.00 | 0.00 | 0.00 | 17.5 |
| Other Current Liabilities | 0.00 | 12.1 | 12.1 | 7.3 |
| Total Current Liabilities | 8.7 | 12.1 | 12.1 | 35.7 |
| Total Liabilities and Equity | 56.6 | 49.5 | 7.5 | 138.0 |
| Cash flow | ||||
| SEKm | 2021 | 2022 | 2023e | 2024e |
| Operating Cash Flow | -46.2 | -54.9 | -42.0 | 108.4 |
| Investing Cash Flow | 0.00 | -0.20 | 0.00 | 0.00 |
| Financing Cash Flow | 74.1 | 43.7 | 0.00 | 0.00 |
Disclosures and disclaimers
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