Pharma Equity Group A/S (“PEG” or “the Company”), listed on the Nasdaq Copenhagen Stock Exchange, places a strong emphasis on its subsidiary, Reponex Pharmaceuticals A/S (“Reponex”). Through the Company’s repositioning strategy, Reponex finds new uses for active substances that are being used in other treatments. Currently, Reponex has a pipeline of six product candidates in Phase II, targeting therapeutic areas such as Peritonitis, Chronic Wounds, IBD (Crohn’s Disease and Pouchitis), and Colorectal Cancer. PEG’s strategy is to out-license the clinical programs after the Phase II trial to a pharmaceutical company capable of bringing the drugs to market.
Press releases
Clinical Development Progression and Strengthened IP-Portfolio
Pharma Equity Group (“PEG” or “the Company”) presented a Q4-report marked by advancements in the clinical development, the addition of two well-experienced board members, and a bolstered IP portfolio. As PEG’s broad Phase II-pipeline progresses further towards potential licensing agreements, the cost base and burn rate are on the rise, as evidenced by the R&D and administrative costs, marking a 26% and 15% increase Q-Q, respectively. PEG has taken critical measures to reinforce the balance sheet and to ensure a solid financial position going into 2024. These measures include the utilization of convertible loans and the securing of a new credit facility after the end of Q4-23. Analyst Group derives a potential present value of DKK 1,448, equivalent to DKK 1.4 (1.4) per share in a Base scenario.
- Clinical Progression Remains on Track
During Q4-23, the Company unveiled encouraging preliminary findings from the Phase II clinical trial of the drug candidate RNX-051, successfully achieving the trial’s primary endpoints. The comprehensive analysis of the study’s outcomes is anticipated to be disclosed in early 2024, marking a short-term value driver.
- Strengthened IP-Portfolio
Apart from clinical progression, protecting the IP-rights is a cornerstone in the pharmaceutical industry. During the quarter, PEG obtained a granted patent in the US for a method of treatment using its topical wound-healing composition, and following the end of Q4-23, the Company was granted EU patents for drug candidates RNX-051 and RNX-022. Both the US and the EU represent key markets for PEG, and Analyst Group considers these milestones pivotal in the Company’s IP-strategy. A reinforced IP-portfolio not only offers legal protection for the pipeline candidates but also serves as substantial assets during negotiations with potential licensing partners.
- Enhanced Financial Position
During Q4-23 and the beginning of 2024, PEG successfully issued convertible loans totaling DKK 16m and secured a new credit facility, expanding the available credit line to DKK 12.6m. The cash balance at the end of Q4-23 amounted to DKK 4.2m, and with an estimated monthly burn rate of DKK -2.0m, reflecting a period of increased R&D and administrative costs, Analyst Group estimates that PEG will be adequately financed throughout 2024, all else being equal. As PEG relies on external financing until potential licensing agreements materialize, the enhanced financial position is vital.
- Valuation Range Remains Intact
After making slight adjustments to the estimated cost base, Analyst Group maintains the opinion that the vast potential in PEG’s drug candidates is not reflected in today’s valuation. A potential present market value of DKK 1,448m is derived through a rNPV-model, equivalent to DKK 1.4 (1.4) per share.
6
Value drives
1
Historical profitability
7
Management & Board of Directors
7
Risk profile
All analyses of companies from 2020 onwards are rated based on a new rating system - Value Driver, Historical Profitability and Management & Board ranges from 1 to 10, where 10 is the highest rating. The risk profile ranges from 1 to 10, where 10 is to be considered the highest risk. Stock analyses of companies published before 2020 have been rated based on a different model.
Analyst Comments
Share price
N/A
Valuation Range
2024-03-21
Bear
0.5 DKKBase
1.4 DKKBull
2.4 DKKDevelopment
Principal shareholder
Comment on Pharma Equity Group’s Positive Final Results From the Phase II Trial of the Drug Candidate RNX-051
2024-04-05
Pharma Equity Group (“PEG” or “the Company”) announced on Friday, April 5th, 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