The entire ongoing phase IIa study of fostrox is now fully funded after the rights issue. As patients will be followed for only six months after progressing, the study will be concluded this year. We believe Medivir has chosen it positioning as a second-line treatment with Lenvima very wisely, as there is no established treatment after progressing on Tecentriq plus Avastin. In fact, clinical trials are the recommended treatment option. Lenvima is also a recommendation, but it is not reimbursed in many countries. This makes the combination with fostrox ideal. Recruitment to the phase IIb trial should be rather quick due to this. We also believe Medivir should receive a favourable treatment from medical authorities, including the potential for an accelerated approval, and support from academia and hospitals, as there are no good and established options right now. Furthermore, fostrox has the potential for indication expansions into the first line and loco-regional (non-advanced) liver cancer.

Most Scandinavian biotech companies are dependent on partnering to progress their projects but few succeed. We believe Medivir stands out from the crowd in that it (i) has strong clinical data, (ii) likely a quick regulatory path to the market and (iii) a clear and strong market positioning. All these components are essential for partnering. Strong clinical results alone are not enough. We therefore judge Medivirs to have a good possibility of finding a partner for fostrox (Eisai, the owner of Lenvima, could be a candidate).

Costs were in line with the previous three quarters at around SEK26m. Income was higher than in previous quarters at SEK4.4m due to income from Tango for TNG348. The cash position was cSEK170 with an additional SEK20m added in January, though we expect this to decrease with more than expenses in Q1 due to the large negative operating capital of cSEK40m (including transaction costs which will have to be paid). According to the quarterly report, cash will fund current and planned operations until Q1 2025.

We have made some general changes to our cost forecasts. More specifically, we have made some changes to the Tango program, prolonging it with one year, slightly increasing the likelihood of approval and made the milestones structure more back-heavy, which has a significant and negative effect on the valuation of this project. We increase the expected treatment time with fostrox in the second line to 6 months (5.5 months) due to improving data from the phase IIa study. This leads to a restatement of our base case of SEK10.

In our bull case, we assume 7 months average treatment time, 70% progression rate from 1^st to 2^nd line, 70% market share in the 2^nd line, 15% market share in the 1^st line (this is different from Medivir’s assumptions) and a likelihood of approval of 23% (vs 18% in the base case); this results in a peak sales figure of USD2.7bn. Furthermore, we assume no dilution. This renders a bull case of SEK20.

In our bear case, we consider a failure of fostrox in the short-term highly unlikely, maintaining the LOA of the base case of 18%. Instead, we assume a failure of birinapant and the Tango project, and another rights issue later in 2024 of SEK150m to finance the phase IIb study with a discount of 40% on the current share price (SEK3). This renders a diluted bear case of SEK5.

*For the valuation of fostrox, we have used the patient-based forecasts from Datamonitor (2021) except for China, where we have assumed an incidence of 360,000 cases (Zheng et al. 2030) increasing by 1% per year. Most hepatocellular cancers occur in Asia, so in our forecasts, the Chinese market is the most important one, followed by the US. We assume 70% of all first-line patients progress to the second line in the US and 50% in the rest of the world. We assume 20% of intermediate-stage patients progress into the advanced stage. Our price estimation is USD10,000 per month, based on the price of Lenvima, with a 50% discount in Europe and Japan and a 70% discount in China, assuming an average treatment period of 9 months in the first line and 6 months in the second, and an inflation rate of 2%. We assume the main use will be as a second-line treatment with a market penetration rate of 50% and 5% in the first line.