Pharma Equity Group (“PEG” or “the Company”) announced on Friday, December the 13^th, the board of directors’ decision on a new execution strategy and prioritization of clinical areas regarding the Company’s subsidiary Reponex Pharmaceuticals A/S (“Reponex”).

PEG conducts continuous evaluation of the clinical pipeline in regards to Reponex based on several fundamental commercial criteria, including medical need, patient recruitment, regulatory requirements, likelihood of success, and requirements for both human and monetary capital. Based on this evaluation, Reponex has prioritized the following development programs going forward:

• RNX-051 for Colon Adenomas and Colon Cancer
• RNX-011 for the Treatment of Peritonitis
• RNX-041 for the Treatment of IBD (Pouchitis)

The abovementioned drug candidates have demonstrated relevant, informative, and clinical data, with patent protection secured in the most critical geographical regions for the Company.

Development of RNX-051 and RNX-011

In recent months, PEG and the Company’s clinical partners have allocated significant resources to finalize study protocols in preparation for the submission of Phase 2 clinical trial applications to regulatory authorities. The trial applications for RNX-011 and RNX-051 are expected to be submitted at the beginning and end of Q1-25, respectively. During Q1-25, Reponex will implement laboratory models using blood samples from patients with peritonitis to confirm the disease mechanisms affected by RNX-011. These results will help to determine the correct dosage of the drug and generate an ongoing data package. This initiative will not only support clinical studies but also enable the individualization of treatment for patients with peritonitis.

Development of RNX-041

Regarding RNX-041, the drug candidate is actively included in Part 2 of the ongoing Phase 2 proof-of-concept clinical study for the treatment of pouchitis. The studies are conducted as investigator-initiated trials (IITs), designed in compliance with FDA and EMA guidelines, as well as anticipated requirements from future industrial licensing partners. Furthermore, the study design enables continuous analysis and timely data release.

Recent activities

The Company is also working to establish strategic partnerships, a process that will continue throughout the completion of the abovementioned studies. Additionally, Reponex has unblinded the proof-of-concept study with RNX-021 for the treatment of chronic venous leg ulcers. As anticipated, data from the study have provided significant and valuable insights for further formulation work, with a focus on optimizing drug candidates regarding future clinical studies involving RNX-022 and RNX-023. Moreover, the Company’s drug candidates for the treatment of chronic leg ulcers (RNX-022, RNX-023) and Crohn’s Disease (RNX-041) remain of great clinical and commercial interest. These programs will continue to advance through strategic clinical and industrial collaborations.

Analyst Group’s view of the new execution strategy and prioritization of clinical areas

“Analyst Group views the new execution strategy and prioritization of clinical areas as a positive step, enabling the Company to allocate resources to drug candidates with the shortest routes to market. Prioritizing these programs, supported by robust clinical data and patent protection, enhances the regulatory and commercial potential, which may accelerate the path to licensing agreements and cash flows.

The colorectal cancer market, which PEG addresses through RNX-051, was valued at USD 19bn in 2022 and is estimated to witness a 4.0% CAGR from 2022 to 2030, reaching USD 26bn by 2030.¹ In the year 2020, approximately 12.7% of new cancer diagnoses and 12.4% of cancer-related deaths were attributed to colorectal cancer in EU-27 countries – this positioning marks it as the second most prevalent cancer, following breast cancer, and the second leading cause of cancer-related mortality, after lung cancer.² Hence, the need of new innovative treatment methods in regards to colorectal cancer can be included in effective cancer treatment is more urgent than ever.

Looking at the market that RNX-011 targets, secondary peritonitis poses an increasing challenge and burden for individuals as well as the healthcare system, constituting 1% of urgent hospital admissions and ranking as the second most common cause of sepsis (blood poisoning).³ The global peritonitis treatment market is expected to grow at a CAGR of 6.1% from 2020 to 2028, driven by a rising prevalence and increased investments in R&D to develop permanent and adequate treatment options, originating from both public and government sectors.⁴

Additionally, the need adequate treatment methods for pouchitis speaks in favor of RNX-041, where a heightened preference for effective yet less invasive symptomatic therapeutics and biologics are fueling the market growth. The global inflammatory bowel disease (IBD) market had, according to ReportLinker, an estimated value of USD 21.3b in 2023 and is expected to experience a 4.8% CAGR during 2023-2027, thereby reaching USD 25.7bn by 2027.⁵  

In summary, Analyst Group believes that focusing on drug candidates with the most favorable near-term outlook and efficiently allocating time and capital is the right approach. With a strengthened balance sheet following the recent directed share issue of.. , a more streamlined focus, and several potential triggers anticipated in early 2025, PEG is well positioned to make significant progress toward licensing agreements in the coming year.”

1. https://www.databridgemarketresearch.com/reports/global-colorectal-cancer-treatment-market

2. https://ecis.jrc.ec.europa.eu/sites/default/files/2023-12/Colorectal_cancer_en-Mar_2021.pdf

3. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6889898/?report=printable

4. https://www.databridgemarketresearch.com/reports/global-peritonitis-treatment-market

5. https://www.reportlinker.com/p06317616/Inflammatory-Bowel-Disease-Treatment-Global-Market-Report.html?utm_source=GNW

Pharma Equity Group (“PEG” or “the Company”) published its Q3 report for 2024 on the 15^th of November 2024. The following are key events that we have chosen to highlight in the report:

• Patent Protection in Japan (RNX-051)
• Solid Cost Control
• Receivable from Portinho S.A. – Valued at DKK 58m
• Directed Share Issue Strengthens the Balance Sheet

Obtained Patent Protection in Japan for RNX-051

Following the end of the third quarter, the Company’s subsidiary Reponex obtained patent protection in Japan for the treatment of colorectal cancer with RNX-051, valid until 2039. The granting of a patent covering the Japanese market is a significant milestone for Reponex, which has now obtained patent protection for the RNX-051 treatment method in both Europe and Japan – two of the Company’s primary focus markets. Analyst Group assess that the patent protection is an important milestone, given that the patent not only offers legal protection for the Company’s drug candidate but also strengthens PEG’s position as a valuable asset in negotiations with prospective licensing partners.

Robust Cost Control

During Q3-24, the Company’s operating costs totaled approx. DKK 5.2m (5.7), a decrease of -8% Y-Y and an increase of 5% Q-Q. Breaking down the OPEX more in detail, it’s evident that the R&D costs have decreased by -29% Y-Y and -3% Q-Q, while the administrative costs have witnessed a Y-Y increase of 8%,  and a sequential increase of 10% Q-Q. Hence, PEG demonstrates a solid cost control Y-Y, and the increased cost base Q-Q is in line with the Company’s maintained guidance for the full year 2024, with EBT expected to be in the range of DKK -24 to -29m (excl. potential gains/losses related to the Portinho receivable).

Receivable from Portinho S.A.

At the end of Q3-24, the receivable from Portinho S.A. was valued at DKK 58m on the balance sheet, similar to the end of the previous quarter. As commented in previous reports, PEG filed a summons with the Maritime and Commercial High Court against Portinho S.A. for the recovery of the receivable of EUR 9.55m plus interest in Q2-24. Analyst Group has excluded the receivable from PEG’s valuation, considering it as an option. If successfully redeemed, this could play a crucial role in supporting the Company’s financial stability and adding further upside to the Company’s valuation, serving as a trigger ahead.

Directed Share Issue Strengthens the Financial Position

After the end of the third quarter, PEG issued 204,592,776 new shares in a directed issue, with gross cash proceeds of approx. DKK 51.1m, including the conversion of convertible debt of approx. DKK 12.6m. Given that the conversion of convertible debt does not involve an actual cash inflow, DKK 38.5m was received in cash. PEG used DKK 25.8m to reduce financial debt and strengthen the balance sheet, thereby resulting in a net cash proceed of DKK 12.7m following the rights issue.  The subscription price was DKK 0.25 per share, which corresponded to a premium of approx. 19% in relation to the closing price of the previous trading day, DKK 0.21 on October 3^rd. Through the capital increase, the Company achieves a strengthened and more robust capital structure, including an enhanced capital base.

PEG has shown an operational burn rate of approx. DKK -4.5m (-2.7) during Q3-24, equivalent to DKK -1.5m/month, marking an increase from the previous quarter’s monthly burn rate of DKK -1.3m. The increased burn rate stems from a somewhat higher cost base, a natural step as PEG progresses in development, taking further steps towards lucrative licensing agreements. Although PEG reports a slightly increased burn rate, Analyst Group believes PEG manages the operational cost on a good level. With the reported cash balance at the end of Q3-24 (DKK 3.8m), net cash proceeds of DKK 12.7m and a reduced debt burden following the capital raise in October, PEG’s enhanced balance sheet creates more financial flexibility, a key pillar to pursue potential licensing agreements and continue with clinical development.

In summary, the directed share issue was a crucial milestone for PEG, ensuring the continuation of the promising development of the Company’s drug candidates. It also allows PEG to expedite the transition from early discussions with potential licensing partners to formal commercial agreements, which could significantly drive value in the future. Furthermore, we regard the terms of the share issue as highly favorable, particularly the 19% premium on the subscription price, which demonstrates strong confidence from the investors involved in the capital raise. With a strengthened financial position, solid cost control and patent obtained in a key market, PEG has a robust foundation for further clinical progress for the Company’s strong pipeline of candidates.

We will return with an updated equity research report of PEG.

Pharma Equity Group (“PEG” or “the Company”) announced on Wednesday, October the 23^rd, that the Company’s subsidiary Reponex Pharmaceuticals A/S (“Reponex”) has obtained patent protection in Japan for the treatment of colorectal cancer with RNX-051, valid until 2039.

The granting of a patent covering the Japanese market is a significant milestone for Reponex, which has now obtained patent protection for the RNX-051 treatment method in both Europe and Japan – two of the Company’s primary focus markets. Patent protection is seen as a key value driver and a crucial parameter in the future negotiations on the conditions for a potential license agreement.

Colorectal cancer is a significant public health problem in Japan, with both incidence and prevalence increasing in recent decades. It’s the most common cancer type in Japan, driven by an aging population, lifestyle changes, including changes in dietary habits, such as increased consumption of red meat and processed foods, as well as limited physical activity.

“We are very pleased that the Japan Patent Office has granted a patent for our innovative treatment method covering the Japanese market, which will thus be included as a significant positive parameter in our investment rationale of continued clinical development and our dialogue with future license partners,” says Thomas Kaas Selsø, CEO of PEG.

Internationally, there is increasing scientific recognition of the link between the presence of biofilms and the development of colorectal cancer. The biofilm has a major negative impact on the immune system’s ability to detect and fight cancer cells. To give a deeper context, PEG announced positive final results from the Phase II clinical proof-of-concept trial of the drug candidate RNX-051 in Q2-24. In connection to receiving the positive results, Reponex’s management concluded that its patented medicinal product RNX-051 appears to be highly effective for its intended purpose, and just a single local application drastically reduces tumor-associated biofilm. Additionally, a single local application can even totally eliminate the cancer-promoting Fusobacterium nucleatum in the tumor one week after the treatment.

Analyst Group’s view of the obtained patent

“Analyst Group views the approval of the patent application as a significant milestone in PEG’s IP and out-licensing strategy. The patent not only offers legal protection for the Company’s drug candidate but also strengthens PEG’s position as a valuable asset in negotiations with prospective licensing partners.

The colorectal cancer market was valued at USD 19bn in 2022 and is estimated to witness a 4.0% CAGR from 2022 to 2030, reaching USD 26bn by 2030.¹ In the year 2020, approximately 12.7% of new cancer diagnoses and 12.4% of cancer-related deaths were attributed to colorectal cancer in EU-27 countries – this positioning marks it as the second most prevalent cancer, following breast cancer, and the second leading cause of cancer-related mortality, after lung cancer.² Hence, the need of new innovative treatment methods in regards to colorectal cancer can be included in effective cancer treatment is more urgent than ever.

In summary, the indication area targeted by RNX-051 presents immense potential, offering PEG a substantial market share opportunity. A granted patent not only strengthens PEG’s IP portfolio but also opens doors to strategic partnerships, potential royalty streams, and consequently, profitability.”

Analyst Group’s View of Pharma Equity Group

Pharma Equity Group (“PEG” or “the Company”), through the Company’s subsidiary, Reponex, employs a drug repositioning strategy, which involves finding new uses for active substances used in previous recognized treatments, thus allowing the Company to circumvent phase I trials. PEG has a pipeline of six candidates in Phase II, targeting therapeutic areas such as Peritonitis, Chronic Wounds, IBD, and Colorectal Cancer, where there is currently no adequate treatment. The business strategy involves out-licensing the programs after Phase II to a pharma company capable of bringing the drugs to the market. PEG’s strategy enables a capital-light and highly scalable business model, offering a shorter route to market with equivalent upside potential, yet mitigating the typical risks associated with the pharmaceutical industry.

¹https://www.databridgemarketresearch.com/reports/global-colorectal-cancer-treatment-market

²https://ecis.jrc.ec.europa.eu/sites/default/files/2023-12/Colorectal_cancer_en-Mar_2021.pdf

Pharma Equity Group (“PEG” or “the Company”) announced on Friday, October 4^th, that the Company’s board of directors has resolved to issue 204,592,776 new shares in a directed issue, with expected gross cash proceeds of approx. DKK 51.1m, including the conversion of convertible debt of approx. DKK 12.6m. As a result, the expected net cash proceeds are approx. DKK 38.5m before issue costs, given that the conversion of convertible debt does not involve an actual cash inflow. The subscription price is DKK 0.25 per share, which corresponds to a premium of approx. 19% in relation to the closing price of DKK 0.21 on October 3^rd, and the new shares are subscribed by a limited group of new investors and existing shareholders. The dilutive effect following the issuance of new shares amounts to approx. 17% for existing shareholders. Through the capital increase, the Company achieves a strengthened and more robust capital structure, including an enhanced capital base.

Analyst Group’s View of the Capital Increase

“We view the directed issue as a highly positive sign, as it strengthens PEG’s balance sheet substantially, thereby creating financial flexibility and more room for pursuing the development of the Company’s drug candidates. What stands out in particular is that the issue is being conducted at a 19% premium compared to the closing price on October 3^rd, which is uncommon in the current market climate and sends a strong signal, as it indicates robust confidence in PEG’s future by the investors participating in the directed issue.

With gross cash proceeds of approx. DKK 51.1m, of which approx. DKK 12.6m stems from the conversion of convertible debt, PEG not only reduces the debt substantially but also has net cash proceeds of approximately DKK 38.5 million before issue costs, resulting in an enhanced financial position and a stronger balance sheet. Considering PEG’s total debt at the end of Q2-24, which amounted to approx. DKK 43.5m, the Company could potentially, with the gross proceeds of approx. DKK 51.1m, diminish the debt and still have net proceeds of approx. DKK 7.6m, all else being equal. Analyst Group views it as likely that PEG will use part of the proceeds to further strengthen the balance sheet by paying the outstanding debt. However, we also deem it likely that a portion of the net proceeds will be used to support further clinical advancements of the Company’s drug candidates in Phase II, as well as to provide the financial capacity to explore potential licensing agreements.

To summarize, Analyst Group views the capital increase as a vital step in enabling PEG to continue the development of the promising studies of the Company’s drug candidates. Additionally, it enables PEG to accelerate the conversion of initial discussions with potential licensing partners into commercial licensing agreements, which could serve as a substantial value driver going forward. Moreover, we view the terms of the directed share issue as favorable, particularly the 19% premium of the subscription price, which sends strong signals from investors participating in the capital raise. This is especially notable in light of the fact that many other small-cap companies are being forced to offer issues at substantial discounts, often coupled with lower subscription commitments, which results in costly underwriting guarantees.”

Analyst Group’s View of Pharma Equity Group

Pharma Equity Group (“PEG” or “the Company”), through the Company’s subsidiary, Reponex, employs a drug repositioning strategy, which involves finding new uses for active substances used in previous recognized treatments, thus allowing the Company to circumvent phase I trials. PEG has a pipeline of six candidates in Phase II, targeting therapeutic areas such as Peritonitis, Chronic Wounds, IBD, and Colorectal Cancer, where there is currently no adequate treatment. The business strategy involves out-licensing the programs after Phase II to a pharma company capable of bringing the drugs to the market. PEG’s strategy enables a capital-light and highly scalable business model, offering a shorter route to market with equivalent upside potential, yet mitigating the typical risks associated with the pharmaceutical industry.

You can access our latest analysis of Pharma Equity Group here, and also watch a recent interview with the CEO, Thomas Kaas Selsø here.

Pharma Equity Group (“PEG” or “the Company”) published its Q2 report for 2024 on the 16^th of August 2024. The following are key events that we have chosen to highlight in the report:

• Positive Final Results from Phase II Clinical PoC Trial (RNX-051)
• Robust Cost Control
• Update Regarding the Receivable from Portinho S.A.
• Evaluating Options for a Capital Increase

Continued Advancement of the Clinical Development

During the quarter, PEG announced that the Company’s subsidiary, Reponex Pharmaceuticals A/S (“Reponex”) has received positive final results from the Phase II clinical proof-of-concept trial of the drug candidate RNX-051, also referred to as the MEFO study. Reponex’s management concludes that its patented medicinal product RNX-051 is highly effective for its intended purpose. Just a single local application drastically reduces tumor-associated biofilm and can even totally eliminate the cancer-promoting Fusobacterium nucleatum in the tumor one week after the treatment. Analyst Group believes that the positive results obtained from the Phase II study are a further demonstration from Reponex that the clinical development is progressing according to plan.

Improved Cost Control Compared to Previous Quarter

During Q2-24, the Company’s operating costs totaled approx. DKK 5m (4.9), an increase of 1% Y-Y and a reduction of -27% Q-Q. Breaking down the OPEX more in detail, it’s evident that the R&D costs have decreased by -27% Y-Y and -28% Q-Q, while the administrative costs have witnessed a Y-Y increase of 30%,  but a sequential decrease of -26% Q-Q. Hence, PEG maintains a costbase on par with the same period last year and a substantial improvement compared to the previous quarter (Q1-24). As mentioned in the report, PEG maintains the Company’s guidance for the full year 2024, with EBT expected to be in the range of DKK -24 to -29m (excl. potential gains/losses related to the Portinho receivable).

Legal Actions to Redeem the Receivable from Portinho S.A.

At the end of Q2-24, the receivable from Portinho S.A. was valued at DKK 58m on the balance sheet, similar to the end of the previous quarter. As of April 15th, PEG filed a summons with the Maritime and Commercial High Court against Portinho S.A. for the recovery of the receivable of EUR 9.55m plus interest, equivalent to EUR 10.8m or DKK 80.5m. The receivable amount, as per the end of Q2-24, including agreed interest, is EUR 11.0m corresponding to DKK 82.1m. Interest rate is agreed to 2% per quarter and amounts to DKK 3.2m for H1-24, which has not recognized as income in the report as it is considered appropriate to defer income recognition of interest until interest has been paid. Analyst Group has not factored in the receivable in the valuation of PEG and views this as an option which, if redeemed successfully, could be of significant importance to sustaining the Company financially and providing additional upside to the valuation.

Exploring Options Regarding Capital Increase

The Company’s cash balance at the end of June 2024 amounted to approx. DKK 0.9m, a decrease of DKK -1.3m compared to approx. DKK 2.2m at the end of Q1-24. PEG has shown an operational burn rate of approx. DKK -3.9m during Q2-24, equivalent to DKK -1.3m/month, marking a substantial decrease from the previous quarter’s monthly burn rate of DKK -2.6m. However, it’s worth mentioning that the working capital cycle has a fluctuating pattern, and the effect often smooths out over the year. Regardless of that, Analyst Group see it as important to keep the burn rate as low as possible until the Company has secured additional financing, which PEG managed to do during Q2-24.

PEG announced during Q2-24 that the Company is exploring the possibilities regarding a directed capital increase at market price. Since then, no directed capital increase has taken place, but the Company has issued additional convertible loans which allow PEG to borrow DKK 2m. The net debt position amounted to DKK 42.7m at the end of June, compared to a net debt of DKK 36.6m at the end of Q1-24, marking an increase of DKK 6.1m in absolute terms. PEG has an unused credit facility amounting to approx. DKK 5m, which could further strengthen the Company’s liquidity position.

With the latest reported cash position (DKK 0.9) and unused credit facility (DKK 5m), Analyst Group deem it likely that PEG will pursue some form of capital increase in the coming quarters to further strengthen the liquidity position, which is in line with the communication from the Company.

In summary, it is of importance to see further positive progress in clinical development, with the positive final results from the Phase II proof-of-concept trial for the drug candidate RNX-051 serving as a testament to this. Examining the operational cost base, it’s evident that the Company has taken important measures in terms of cost control, which is critical until additional financing is secured. Analyst Group believes that the legal actions taken to redeem the receivable from Portinho S.A. are crucial to increasing the likelihood of recovering the cash, although in an ideal scenario, these measures would have been avoided. If the receivable is successfully recovered, it could not only be of significant importance in sustaining PEG financially, but also serve as a trigger for the share price going forward. Going forward, Analyst Group believes it will be crucial to secure additional capital to maintain the financial flexibility needed, particularly for further clinical development and exploring potential licensing agreements. Additionally, further clinical progress for the pipeline candidates is an important aspect to monitor, as positive data will be a key asset in discussions with potential licensing partners.

We will return with an updated equity research report of PEG.

Pharma Equity Group (“PEG” or “the Company”) announced on Friday, April 5^th, that the Company’s subsidiary Reponex Pharmaceuticals A/S (“Reponex”) has received positive final results from the Phase II clinical proof-of-concept trial of the drug candidate RNX-051.

The Phase II trial, also referred to as the MEFO trial, concerns the treatment of patients with right-sided colon cancer and right-sided colon polyps/adenomas (precursors of cancer) with the Company’s drug candidate RNX-051. The trial consisted of two arms: the first in patients with adenomas (the “adenoma arm”) and second in patients with cancers in the right side of the bowel (the “cancer arm”). In the adenoma arm, the main goal of the study, to demonstrate an impact on the bacterial biomass, was reached, with a massive reduction in the biofilm of the bowel lining (more than 30-fold reduction). In the cancer arm, for patients with a high content of bacterial biofilm, there was a statistically significant reduction of biofilm in the tumor periphery.

Reponex’s management concludes that its patented medicinal product RNX-051 appears to be highly effective for its intended purpose. Just a single local application drastically reduces tumor-associated biofilm and can even totally eliminate the cancer-promoting Fusobacterium nucleatum in the tumor one week after the treatment.

Analyst Group’s view

“The positive results obtained from the Phase II study are a further demonstration from Reponex that the clinical development is progressing according to plan. The recently strengthened cash position following the convertible loans provides the Company with additional room to maneuver. Coupled with clinical progression, it de-risks the investment case and reinforces PEG’s negotiation power in discussions with potential licensing partners.

During 2020, approximately 12.7% of new cancer diagnoses and 12.4% of cancer-related deaths were attributed to colorectal cancer in EU-27 countries, making it the second most prevalent cancer, following breast cancer, and the second leading cause of cancer-related mortality after lung cancer.¹ Hence, the demand for an effective and localized treatment solution is critical.

Analyst Group estimates that the potential royalties from RNX-051 will constitute a significant portion of the total pre-risk-adjusted royalties, making it a key candidate for future potential cash flow streams. The figure below illustrates Analyst Group’s estimates for colorectal cancer (RNX-051).”

Analyst Group’s View of Pharma Equity Group:

Pharma Equity Group (“PEG” or “the Company”), through the Company’s subsidiary, Reponex, employs a drug repositioning strategy, which involves finding new uses for active substances used in previous recognized treatments, thus allowing the Company to circumvent phase I trials. PEG has a pipeline of six candidates in Phase II, targeting therapeutic areas such as Peritonitis, Chronic Wounds, IBD, and Colorectal Cancer, where there is currently no adequate treatment. The business strategy involves out-licensing the programs after Phase II to a pharma company capable of bringing the drugs to the market. PEG’s strategy enables a capital-light and highly scalable business model, offering a shorter route to market with equivalent upside potential, yet mitigating the typical risks associated with the pharmaceutical industry. Based on an rNPV-model, a potential present value per share of DKK 1.4 is derived in a Base scenario.

You can access our initial analysis of Pharma Equity Group here, and also watch a recent interview with the CEO, Thomas Kaas Selsø here.

¹https://ecis.jrc.ec.europa.eu/pdf/factsheets/Colorectal_cancer_en-Mar_2021.pdf