Our new People rating is 2 (3). This is partly due to a new version with different questions being used (2.2), but mainly due to expected changes in ownership from the rights issue in 2023.

We believe the safety data presented in Lipigon’s phase I trial thus far are positive, though the doses have been somewhat low compared to other antisense drugs. The new 144mg dose in the SAD part will be interesting as will the last multiple dose of 36mg. The last patient visit is scheduled for May, after which analysis of the data can commence. Although the trial is a safety study in healthy volunteers, Lipigon could potentially communicate early efficacy measures, which it has not done yet. Assuming Lipisense does in fact work as intended, higher doses such as multiple doses of 36mg or higher might be needed, although we need to wait for the phase I data to know more. Competing products have typically used higher doses.  

The warrant TO2 can be exercised either in December 2023 or upon the treatment of the first patient in the planned phase II trial. The warrant TO2 can be exercised in May-June 2024 or upon the last patient visit in the phase II trial. This gives the timeframe in which the phase II trial is planned.

In the Q4 report, Lipigon commented that it is conducting discussions with potential partners and that there might be an interest in the asset after the conclusion of the phase I study. However, the deal value would be substantially larger after a phase II trial. This is what the rights issue is intended to fund.

Lipigon is working on its other projects (P2, P3 and P4) in parallel. Positive preclinical results were obtained in project P4 in three animal models in acute respiratory disease syndrome. As the potential to finance these projects is limited, we have only included P2 in our valuation, as it is outlicensed to Combigene.

Operating costs were SEK-9m (SEK-6.9m), while the cash flow was SEK-6m due to a positive effect from working capital (which will have to be compensated for in Q1 in the opposite direction). This is in line with previous quarters (as can be seen below). The cash position was SEK9.6m. It would likely at most last through Q1, but the rights issue will finance the company for the rest of the year. Assuming an 80% subscription rate and deducing fees, Lipigon will receive around net SEK25m. Costs should decrease in 2023 as the phase II trial should cost less than the phase I trial.

TO2 can be subscribed to in December 2023 and TO3 in May 2024. The strike prices are discounted with 30% from the volume-weighted share price for ten days, though within certain limits (at most SEK0.5 for TO2 and SEK0.8 for TO3). Therefore, TO2 can provide SEKm6.8-30.5 to SEKm while TO3 can provide SEKm3.2-24.3 before transaction costs. These warrants should fund the company to some extent going forward (depending on the subscription rates), though at the cost of even more dilution.

Our main change to the project valuation is a reduction of the assumed cost of the phase II trial to SEK15m. Our Base Case assumes that Lipigon outlicenses Lipisense after a phase II trial. In order to finance this trial, the money from the rights issue should be enough. Assuming an 80% subscription rate, our Base Case becomes SEK 5.0. However, we also have to factor in the warrants TO2 and TO3 to arrive at a fully diluted Base Case. Assuming 49 million TO2 and 24 million TO3 are subscribed at their highest strike price (since this is a simple assumption to work with), we arrive at a fully diluted Base Case of SEK 2.9. This is a material decline from our previous Base Case of SEK5.4 and is explained by more dilution than we anticipated, mainly due including TO2 and TO3.

We have used a WACC of 15.5% and a USD/SEK exchange rate of 10. We have reworked our Bull Case since the previous one has lapsed. We keep it simple and double the peak sales to around USD1.5bn, assuming excellent efficacy and safety data in both the phase I and planned phase II trial. We thus calculate a Bull Case of SEK3.9. We keep our Bear Case of 0.