Active Biotech has collaborated with a research group at MD Anderson, where the American phase II study is planned. Positive pre-clinical tasquinimod from this collaboration data were presented orally at ASH 2023. It was demonstrated that tasquinimod depleted acute myeloid leukaemia cell lines – myelofibrosis can develop into this cancer. Tasquinimod showed synergy with ruxolitinib in myeloproliferative neoplasm cells. Treatment with tasquinimod alone or in combination with ruxolitinib significantly improved the survival of mice engrafted with post-myeloproliferative neoplasm cells, while also normalising spleen size.

A poster describing how tasquinimod improves erythropoiesis and mitigates bone loss in myelodysplastic mice was also presented at ASH. It demonstrated how treatment with tasquinimod improved red blood cells and hemoglobin in transgenic mice with a myelodysplastic neoplasm mutation (the precursor stage of myelofibrosis); it also had a positive effect on the bone phenotype.

Active Biotech also released an overview of the external research that led to the agreement with Oncode Institute. The research presented is quite compelling. It suggests that mutated stem cells drive fibrosis through alarmins, the dimer complex S100A8/A9, which activate fibroblasts, a type of cell that creates fibrosis. Furthermore, alarmin expression is correlated with disease severity and could be used as a biomarker for myelofibrosis. As tasquinimod is an inhibitor of S100A9, it was an obvious candidate to use, potentially inhibiting the inflammatory signals from the cancerous cells. In mouse models, previously shown by Active Biotech, tasquinimod prevented fibrosis and normalised spleen size (an oversized spleen is the primary adverse symptom of myelofibrosis).

We judge the preclinical work presented both in Europe and the US to provide a strong foundation for clinical studies. Clearly, the researchers are of this opinion as their organisations will sponsor one study in Europe and one in the US.

Four JAK inhibitors are now available for myelofibrosis patients, since Ojjaara (momelotinib) was approved for myelofibrosis patients with anemia in the US in September. A disadvantage of the other JAK inhibitors is their contribution to anaemia, which is also a symptom of the disease itself. Tasquinimod, to the contrary, has demonstrated a positive effect on the number of red blood cells in preclinical models of related diseases.

Costs (shown below) increased sequentially from Q3 due to an increase in R&D expenditure. The cash position of SEK36m should last around three quarters, assuming expenditure remains on the same level as in 2023. This should bring the company through the start of both myelofibrosis studies and potentially the completion of the clinical ocular biodistribution study.

We have added one year to the development time of naptumomab, as a phase III trial would likely take at least three years and could probably not start before 2025, which means it could launch in 2029. NeoTX needs funding for its planned expansion cohort in oesophagal cancer and an additional phase I trial with Keytruda (pembrolizumab), which might delay development further. This has a negative impact on the valuation.

Due to the increased interest in tasquinimod in the US and Europe, with research institutes now funding two studies that will provide data on tasquinimod’s efficacy in various settings, we have increased the assumed total deal value to USD650m (USD580m). We expect the two studies to take three years to complete, with interim readouts, and a subsequent phase III study would take at least two years. We therefore expect a potential launch in 2030 (2029). The changes have a positive impact on the valuation.

Due to the change of years, we have prolonged our forecast period, which has a minor impact on the valuation. The result of these changes is a a restatement of our base case of SEK1.9.