science-1336663

IND approved by the FDA, preparing for Ph II/III

Abliva 13 January 2022 Update
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Abliva

IND approved by the FDA, preparing for Ph II/III

Company update

Pharma & biotech

13 January 2022

Price

SEK0.55

Market cap

SEK222m

Net cash (SEKm) end-Q321

65.1

Shares in issue

403m

Free float

80%

Code

ABLI

Exchange

Nasdaq Stockholm

Share price performance

%

1m

3m

12m

Abs

(7.0)

0.1

(27.0)

Rel (local)

(7.2)

(7.3)

(42.4)

52-week high/low

SEK0.9

SEK0.5

Business description

Abliva is a Swedish biotech company with deep expertise in mitochondrial medicine. Its focus area is primary mitochondrial diseases with lead assets KL1333, an NAD+ modulator (Phase II/III ready), and NV354, a succinate prodrug (preclinical). It plans to start a pivotal Phase II/III trial with KL1333 in selected primary mitochondrial disorders this year.

Next events

Updates on the preparations for the Phase II/III for KL1333

H122

Updates on the next development steps for Phase I ready NV354

2022

EGM to approve the convertible loan

14 January 2022

Updates on funding round for the Phase II/II trial with KL1333

H122

Analyst

Jonas Peciulis

+44 (0)20 3077 5728

Abliva is a research client of Edison Investment Research Limited

With the investigational new drug (IND) application approved by the FDA, Abliva is getting ready for the pivotal Phase II/III trial for its lead drug candidate KL1333, NAD+ modulator expected to increase cellular energy production in primary mitochondrial disorder (PMD) patients. Phase Ia/b data with first findings from treating patients were published in 2021. Abliva is now focused on finalising the regulatory approvals in other countries. Another major focus for the management is to establish funding for the Phase II/III study, which should start sometime in 2022. The recently announced planned convertible loan should provide bridge funding until then. Our valuation is little changed at SEK1.25bn or SEK3.11/share.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/19

3.6

(74.6)

(0.43)

0.0

N/A

N/A

12/20

1.9

(57.4)

(0.23)

0.0

N/A

N/A

12/21e

0.2

(110.4)

(0.32)

0.0

N/A

N/A

12/22e

0.2

(128.6)

(0.32)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

IND approval paves the way for the Phase II/III trial

In November 2021, the FDA approved Abliva’s IND application for KL1333, which paves the way for the initiation of the pivotal Phase II/III trial, recently named FALCON. This will be the first time Abliva’s trial will enrol US-based patients. The fact that the FDA agreed with the IND data package is a good indication KL1333 is ready for the pivotal trial and other regulators in Europe will likely have no issues with the proposed trial design. The next step is to finalise regulatory discussions in other countries where the trial will be recruiting patients.

Trial design details revealed

The FALCON study will enrol up to 180 PMD patients, who will be randomised to receive treatment with KL1333 or placebo twice daily for 12 months. The trial results should be known in 2024. There will be two endpoints, a fatigue endpoint and a functional endpoint. In 2021, Abliva completed a qualitative study focused on validating a patient-reported outcome for fatigue that is sensitive to the PMD patient condition (there were no such scales before) and has proposed it to the FDA. Although it took some time to complete the qualitative study after the last KL1333 data were reported in May 2021, it is key that the regulator accepts the endpoints, otherwise the whole trial could be compromised.

Valuation: SEK1.25bn or SEK3.11 per share

Our valuation is SEK1.25bn or SEK3.11 per share after making no major changes since we last published. Abliva has indicated it will seek new funds early this year. One of management’s major focuses is initiating conversations with banks, investors and potential partners to raise the financing for the Phase II/III study. A convertible loan of SEK26m should provide bridging funding until then (an extraordinary general meeting, EGM, to consider the approval of the issue directed to the main shareholder is to be held on January 14). In our model we include $30m for the Phase II/III study. Our peak sales projections for KL1333 are $670m, but a sensitivity analysis (see below) shows it also has blockbuster potential.

Flagship Phase II/III FALCON trial with KL1333 to start

The IND application for KL1333 approved

The FALCON study will be the first time an Abliva trial has enrolled US-based patients. Given the unified healthcare provision and a relatively large pool of mitochondrial disease patients, the United States is a strategically important market for any biotech employing an orphan drug development strategy. The fact that the FDA agreed with the IND data package is a good indication KL1333 is ready for the pivotal trial and other regulators in Europe will likely have no issues with the proposed trial design (the key regulators are the European Medicines Agency and from the UK’s Medicines and Healthcare Products Regulatory Agency).

Exhibit 1: Status of the core assets

Product

Stage

Indication

Status and upcoming events

KL1333

NAD+ modulator
oral; chronic treatment

Phase II/III- ready

MIDD-MELAS, KSS-CPEO and MERRF

In-licensed from Yungjin Pharm (South Korea) in May 2017. Phase I development finished. The IND was approved by the FDA in November 2021. The trial is expected to start in 2022. Orphan drug designation.

NV354
succinate prodrug
iv and oral alternative energy source

Phase I ready

Complex I disorders

Preclinical development is completed and the drug candidate could enter clinical development in 2022.

Source: Edison Investment Research, Abliva

Trial design

The clinical trial design has not been published yet, but Abliva has provided some details. The company strategically chose to target three specific mitochondrial conditions: MIDD-MELAS (encephalomyopathy, lactic acidosis and stroke-like episodes), KSS-CPEO (progressive paralysis of certain eye muscles, pigmentary retinopathy, cardiomyopathy and arrhythmia) and MERRF (myoclonic epilepsy, ataxia, weakness and dementia) syndromes. Although the symptoms of these syndromes vary significantly depending on the organ system affected, all patients will have chronic fatigue and muscle weakness (a detailed discussion about the biology of mitochondria, energy production and PMDs is in our last published report).

This focus will allow the investigators to evaluate the primary endpoints in a more homogenous patient population, which should improve the statistical analysis. However, we note that KL1333 theoretically could be beneficial in other PMD conditions as well; PMD is a group of diverse conditions and all are rare or ultrarare. So, if the efficacy is proven in MIDD-MELAS, KSS-CPEO and MERRF, label expansion with bridging trials in other conditions is possible.

The FALCON study will be a randomised, double-blind and placebo-controlled trial in up to 180 patients, who will be randomised to receive peroral treatment with KL1333 twice daily or placebo (60% will receive KL1333 and 40% will receive placebo) for 12 months. The study timeline envisages:

patient enrolment starts in 2022;

interim futility analysis is planned in 2023; and

data readout in 2024.

There will be two endpoints, a fatigue endpoint and a functional endpoint (30-second sit to stand test). Because PMDs are very rare conditions with no effective treatment, there are no standard measures to evaluate the efficacy of any potential new drug. Of the many different symptoms PMD patients experience, Abliva has identified fatigue as the most common and one that could be reliably quantifiable. The FDA also agreed this symptom can be used for the primary endpoint. In 2021, Abliva conducted a qualitative study focused on validating a patient reported outcome for fatigue that is sensitive to the PMD patient condition. There are other fatigue scales recognised by regulators, however, Abliva did not want to use these off-the-shelf solutions and has developed its own, with hopes that this will increase the specificity. We note that Abliva has a long history of working with PMD patient associations (eg World Mitochondrial Disease Week 2021 event), which, in our view, is key to understanding the day-to-day challenges PMD patients face. This, we believe, will ensure the informed selection of an appropriate endpoint for the Phase II/III trial.

The next step now the IND is approved in the United States is to finalise regulatory discussions in other countries where the trial will be recruiting patients.

Financials and valuation

From a funding perspective, Abliva has indicated, in conjunction with the December 2021 resolution proposing the issue of a convertible loan through a directed issue of convertible bonds, it will aim to seek new funds early in 2022. In its Q321 report, management also stated a major focus is initiating conversations with banks, investors and potential partners to raise the financing for the Phase II/III study. In our model we include $30m for the Phase II/III study. There are approximately 40k patients in the target group for KL1333 in Europe and the United States. Assuming an orphan drug price tag ($110k in the United States, 50% discount in Europe) and a 20% market penetration we calculate KL1333’s peak sales of $670m. Given the lack of benchmark drugs, the market penetration is an uncertain estimate. Presuming KL1333 shows a good clinical effectiveness, the penetration could be much higher. Exhibit 3 provides a sensitivity analysis of KL1333 peak sales. More detailed discussion about our valuation assumptions can be found in our last published report.

According to Abliva’s latest quarterly report, in 9M21 the operating loss was SEK86.6m, higher year-on-year (SEK46.9m in 9M20) due to increased R&D spending. We forecast a FY21 operating loss of SEK113.0m, which should increase further in the coming years as clinical trials are initiated for both assets (our FY22 and FY23 operating loss estimates are SEK128.6m and SEK136.3m, respectively).

At end-Q321, cash was SEK65.1m. In Q421 Abliva announced a planned issue of convertible bonds amounting to SEK26m directed to the company’s largest shareholder Hadean Ventures. The convertibles carry an annual interest rate of 10% of their nominal value. The term is 12 months with a maturity date of 20 December 2022.

The announcement also states, ‘the conversion price will either be (i) same price as other investors in a potential capital raise conducted before 22 May 2022, or (ii) 10-day VWAP prior to conversion request date’. This indicates the loan serves as bridge financing to the potential share issue sometime in H122. At full conversion calculated as of the date of the announcement, the dilution would amount to approximately 10.7% (using 10-day VWAP). The issue is still subject to investor approval (an EGM is due on 14 January 2022).

Our valuation is SEK1.25bn or SEK3.11 per share, slightly higher than our previous SEK1.21bn or SEK3.11 per share as rolling the model forward has offset the lower cash. We do not yet include the convertible loan in our valuation model, which is underpinned by the two lead assets KL1333 and NV354.

Exhibit   2: Abliva sum-of-the parts valuation

Product

Launch

Peak sales
($m)

NPV
(SEKm)

NPV/share (SEK)

Probability
(%)

rNPV
(SEKm)

rNPV/share (SEK)

Core assets

KL1333

2025

670

4,631.2

11.49

25%

1,106.3

2.75

NV354

2028

470

2,913.1

7.23

5%

80.5

0.20

Net cash, last reported (Q321)

65.1

0.16

100%

65.1

0.16

Valuation

 

 

7,609.3

18.9

1,251.9

3.11

Source: Edison Investment Research. Note: WACC = 12.5% for product valuations.

Exhibit 3: Peak sales sensitivity to market penetration and pricing

Source: Edison Investment Research

Exhibit 4: Financial summary

SEK'000s

 

2019

2020

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

3,634

1,864

200

200

Cost of Sales

0

0

0

0

Gross Profit

3,634

1,864

200

200

EBITDA

 

 

(72,317)

(54,955)

(107,865)

(126,102)

Operating Profit (before amort. and except.)

 

 

(74,696)

(57,513)

(110,400)

(128,640)

Intangible Amortisation

0

0

0

0

Exceptionals

(2,379)

(2,558)

(2,558)

0

Other

0

0

0

0

Operating Profit

(77,075)

(60,071)

(112,958)

(128,640)

Net Interest

75

77

0

0

Profit Before Tax (norm)

 

 

(74,621)

(57,436)

(110,400)

(128,640)

Profit Before Tax (reported)

 

 

(77,000)

(59,994)

(112,958)

(128,640)

Tax

0

0

0

0

Minority Interests

(6)

(5)

(5)

(5)

Profit After Tax (norm)

(74,621)

(57,436)

(110,400)

(128,640)

Profit After Tax (reported)

(76,994)

(59,989)

(112,953)

(128,635)

Average Number of Shares Outstanding (m)

171.6

249.7

349.6

403.0

EPS - normalised (SEK)

 

 

(0.43)

(0.23)

(0.32)

(0.32)

EPS - normalised fully diluted (SEK)

 

 

(0.43)

(0.23)

(0.32)

(0.32)

EPS - reported (SEK)

 

 

(0.45)

(0.24)

(0.32)

(0.32)

Dividend per share (SEK)

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

88,573

87,506

87,579

87,255

Intangible Assets

74,686

74,021

74,094

73,770

Tangible Assets

99

41

41

41

Investments

13,788

13,444

13,444

13,444

Current Assets

 

 

59,919

63,157

30,126

3,514

Stocks

0

0

0

0

Debtors

0

0

0

0

Cash

58,319

61,643

28,612

2,000

Other

1,600

1,514

1,514

1,514

Current Liabilities

 

 

(20,337)

(10,209)

(10,209)

(10,209)

Creditors

(20,337)

(10,209)

(10,209)

(10,209)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(361)

(92)

(92)

(101,796)

Long term borrowings

0

0

0

(101,704)

Other long term liabilities

(361)

(92)

(92)

(92)

Net Assets to shareholders and minority interests

 

 

127,794

140,362

107,404

(21,236)

CASH FLOW

Operating Cash Flow

 

 

(72,367)

(67,528)

(110,423)

(126,102)

Net Interest

(46)

(30)

0

0

Tax

0

0

0

0

Capex

(69)

0

0

0

Acquisitions/disposals*

0

0

0

0

Financing

107,780

72,564

80,000

0

Other

(2,930)

(1,682)

(2,608)

(2,214)

Dividends

0

0

0

0

Net Cash Flow

32,368

3,324

(33,031)

(128,316)

Opening net debt/(cash)

 

 

(25,951)

(58,319)

(61,643)

(28,612)

HP finance leases initiated

0

0

0

0

Other

(0)

0

0

0

Closing net debt/(cash)

 

 

(58,319)

(61,643)

(28,612)

99,704

Source: Abliva accounts, Edison Investment Research


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This report has been commissioned by Abliva and prepared and issued by Edison, in consideration of a fee payable by Abliva. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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New Zealand

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United Kingdom

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General disclaimer and copyright

This report has been commissioned by Abliva and prepared and issued by Edison, in consideration of a fee payable by Abliva. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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