Saniona Q4 2022: Transformational year
Research Update
2023-02-24
14:15
Redeye returns with a research update following the Q4 report and recent events in the company. We reiterate our base case and conclude that 2022 was a transformational year for the company, for both good and bad. We see good prospect for positive momentum in the share during 2023 if Saniona delivers on its agenda.
FT
Fredrik Thor
Contents
Building the pipeline
Ion Channel Platform
Valuation
Investment thesis
Quality Rating
Financials
Rating definitions
The team
Download article
We conclude that the financial report came in as expected, with revenues of SEK3.3m (2.9m) and an operating loss at SEK-22.6m (-125.7m), which indicate continued cost control following the significant changes made to the organization in 2022.
In Q4, we saw additional pre-clinical progress with drug candidate SAN903, that has compelling anti-inflammatory and anti-fibrotic properties. Potential indications include inflammatory bowel disease and fibrotic disorders such as chronic kidney disease and idiopathic pulmonary fibrosis (“IPF”). The company now guides that it is ready to start the regulatory process for a first clinical study.
In the report, CEO Feldthus reiterates the company’s focus on partnering in order to secure non-dilutive funding. The company hopes to close two licensing agreements during 2023, including one in H1 2023. This would be an impressive achievement to deliver. The company states that interest in the company’s assets remain strong and that there have been several dialogues and set up data rooms for potential partners to review. We believe that Saniona has a strong track record in this area and consider this a feasible option. However, we acknowledge that licensing agreements are uncommon in the Scandinavian sector, and the timing, data, and target indication must be appropriate for both parties. In our base case, we reiterate our prognosis of one licensing agreement (SAN711) (risk adjusted) the upcoming year, and will make upward revisions to our valuation if Saniona delivers two agreements.
SEKm | 2022 | 2023e | 2024e |
Revenues | 15.3 | 80.2 | 79.1 |
EBIT | -225.7 | -5.6 | 19.2 |
Net Income | -245.4 | -7.6 | 19.2 |
We continue to be impressed by the many programs and drug candidates within Saniona’s portfolio. In December, the company announced a new candidate, SAN2219, which is the first preclinical candidate from the GABA-A A2/A3 activation program, that has shown encouraging preclinical data in for example epilepsy. Furthermore, Saniona announced exciting progress in the joint venture Cephagenix, targeting mainly migraine. According to the report, Cephagenix has identified “the first generation of novel highly selective inhibitors of the specific KATP channel subtype expressed in the intracranial arteries and demonstrated that these compounds are effective in relevant in vivo animal models”.
Saniona possesses a proprietary drug discovery engine that focuses on modulating ion channels - a well-established and validated target for several successful drugs on the market. The company’s in-house team has unique competencies and methods, resulting in a library of over 20,000 proprietary molecules that target different types of ion channels. Last year, Saniona achieved a significant milestone when its first candidate from the platform, SAN711, entered clinical trials, which were completed last year. Another potential drug candidate, SAN903, with the ability to inhibit inflammation and fibrosis, has also progressed well during 2022.
Ion channels are unique proteins that regulate the passage of charged ions across the lipid membrane that surrounds all cells. These membrane proteins are expressed in all types of cells, including the central and peripheral nervous systems. Despite being a high-potential target, ion channels are highly heterogeneous and, as a result, are often seen as difficult to explore. Saniona's value proposition lies in developing "highly selective, subtype-specific, state-dependent ion channel modulators and inhibitors," which utilize its "ionbase" database as the backbone of drug discovery. Saniona's in-house expertise allows it to develop modulators specific to a particular ion channel, enabling the desired effect without affecting other channels and potentially leading to adverse effects. Additionally, the company has a defined and sometimes unique set of methods, including imaging technology, assay design, and electrophysiological approaches.
While ion channel drug discovery is complex, we believe investors should view the platform as an increasingly critical part of Saniona's equity story, ultimately providing the company with additional drug candidates over time.
We largely reiterate our view of Saniona from our Q3 comment but do some housekeeping (adjust FX; adjust our WACC due to a change in our Redeye Rating). We reiterate our base case of SEK6.5 per share. In 2023, we maintain our belief that a licensing agreement will remain the primary value driver in the mid-term, as it would serve as further confirmation of Saniona's new business development-focused model.
Case
Turn Around Case with Plenty of Value
Evidence
Validated Platform and History of Collaborations
Challenge
Regaining Investors’ and Market Confidence
Challenge
Funding Needs Remain
Valuation
Strong value proposition in Saniona
People: 3
Business: 3
Financials: 0
Balance sheet | |||
Assets | |||
Non-current assets | |||
SEKm | 2022 | 2023e | 2024e |
Property, Plant and Equipment (Net) | 5.7 | 5.7 | 5.7 |
Goodwill | 0.00 | 0.00 | 0.00 |
Intangible Assets | 6.7 | 6.7 | 6.7 |
Right-of-Use Assets | 10.0 | 10.0 | 10.0 |
Other Non-Current Assets | 3.1 | 3.1 | 3.1 |
Total Non-Current Assets | 26.4 | 26.4 | 26.4 |
Current assets | |||
SEKm | 2022 | 2023e | 2024e |
Inventories | 0.00 | 0.00 | 0.00 |
Accounts Receivable | 4.6 | 0.00 | 0.00 |
Other Current Assets | 11.0 | 6.4 | 6.3 |
Cash Equivalents | 111.7 | 156.3 | 100.6 |
Total Current Assets | 127.3 | 162.7 | 106.9 |
Total Assets | 153.7 | 189.1 | 133.3 |
Equity and Liabilities | |||
Equity | |||
SEKm | 2022 | 2023e | 2024e |
Non Controlling Interest | 0.00 | 0.00 | 0.00 |
Shareholder's Equity | 52.7 | 95.1 | 114.4 |
Non-current liabilities | |||
SEKm | 2022 | 2023e | 2024e |
Long Term Debt | 75.7 | 75.7 | 0.70 |
Long Term Lease Liabilities | 0.00 | 0.00 | 0.00 |
Other Non-Current Lease Liabilities | 2.4 | 2.4 | 2.4 |
Total Non-Current Liabilities | 78.1 | 78.1 | 3.1 |
Current liabilities | |||
SEKm | 2022 | 2023e | 2024e |
Short Term Debt | 5.8 | 5.8 | 5.8 |
Short Term Lease Liabilities | 0.00 | 0.00 | 0.00 |
Accounts Payable | 14.1 | 0.00 | 0.00 |
Other Current Liabilities | 3.0 | 10.0 | 10.0 |
Total Current Liabilities | 22.9 | 15.8 | 15.8 |
Total Liabilities and Equity | 153.7 | 189.1 | 133.3 |
Cash flow | |||
SEKm | 2022 | 2023e | 2024e |
Operating Cash Flow | -18.3 | -5.4 | 19.3 |
Investing Cash Flow | -0.68 | 0.00 | 0.00 |
Financing Cash Flow | -20.5 | 50.0 | -75.0 |
Disclosures and disclaimers
Contents
Building the pipeline
Ion Channel Platform
Valuation
Investment thesis
Quality Rating
Financials
Rating definitions
The team
Download article