IRLAB Therapeutics — All steady as key catalyst approaches

IRLAB Therapeutics (OMX: IRLABA)

Currency in SEK

Last close As at 02/02/2023

SEK11.90

−0.02 (−0.17%)

Market capitalisation

SEK617m

Research: Healthcare

IRLAB Therapeutics — All steady as key catalyst approaches

The Phase IIb trial of mesdopetam (partnered with Ipsen) in levodopa-induced dyskinesias in Parkinson’s disease (PD-LIDs) remains a key value driver for IRLAB and top-line data is on track to be reported around the year end 2022. Following the Ipsen deal in 2021, the company has, in our view, further demonstrated the utility of its Integrative Screening Process, progressing pirepemat into Phase IIb trials in PD-related falls and selecting two new preclinical candidates (IRL942 and IRL757). The company recorded SEK32.5m in revenue in H122, primarily relating to the Ipsen licensing agreement and services provided. R&D expenses over the period rose to SEK75.7m (85% of total operating costs) from SEK38.5m in H121, as pirepemat Phase IIb clinical trials commenced and preparations for Phase I trials with preclinical assets began. At end-H122, IRLAB had net cash of SEK322.6m which, at the current burn rate (H122: SEK77.8m) we anticipate will fund the company into FY24. We value IRLAB at SEK6.40bn or SEK123.7per share (previously SEK6.13bn or SEK118.5/share).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

IRLAB Therapeutics

All steady as key catalyst approaches

H122 update

Pharma and biotech

25 August 2022

Price

SEK35.8

Market cap

SEK1,850m

US$/SEK10.70

Net cash (SEKm) at 30 June 2022 (ex-lease liabilities)

322.6

Shares in issue

51.7m

Free float

58%

Code

IRLABA

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.7)

(8.0)

(41.5)

Rel (local)

1.1

(4.8)

(25.9)

52-week high/low

SEK59.0

SEK29.4

Business description

Based in Sweden, IRLAB Therapeutics is focused on developing novel drugs for the treatment of neurodegenerative diseases utilising its ISP technology platform. Its two lead assets are in late-stage clinical trials for the symptomatic treatment of Parkinson’s disease (PD): mesdopetam (D3 antagonist) and pirepemat (PFC enhancer).

Next events

Top-line Phase IIb mesdopetam data in PD-LIDs

Year end 2022

Top-line Phase IIb pirepemat data in PD-Falls

H223

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Harry Shrives

+44 (0)20 3077 5700

IRLAB Therapeutics is a research client of Edison Investment Research Limited

The Phase IIb trial of mesdopetam (partnered with Ipsen) in levodopa-induced dyskinesias in Parkinson’s disease (PD-LIDs) remains a key value driver for IRLAB and top-line data is on track to be reported around the year end 2022 . Following the Ipsen deal in 2021, the company has, in our view, further demonstrated the utility of its Integrative Screening Process, progressing pirepemat into Phase IIb trials in PD-related falls and selecting two new preclinical candidates (IRL942 and IRL757). The company recorded SEK32.5m in revenue in H122, primarily relating to the Ipsen licensing agreement and services provided. R&D expenses over the period rose to SEK75.7m (85% of total operating costs) from SEK38.5m in H121, as pirepemat Phase IIb clinical trials commenced and preparations for Phase I trials with preclinical assets began. At end-H122, IRLAB had net cash of SEK322.6m which, at the current burn rate (H122: SEK77.8m) we anticipate will fund the company into FY24. We value IRLAB at SEK6.40bn or SEK123.7per share (previously SEK6.13bn or SEK118.5/share).

Year end

Revenue
(SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/20

0.4

(91.4)

(1.92)

0.0

N/A

N/A

12/21

207.9

91.1

1.76

0.0

N/A

N/A

12/22e

62.1

(112.9)

(2.18)

0.0

N/A

N/A

12/23e

0.3

(122.7)

(2.37)

0.0

N/A

N/A

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

Pipeline activity expected to increase

Over H122, IRLAB selected two new preclinical candidates, IRL942 and IRL757, which are now in preparation for Phase I trials in cognitive function and apathy, respectively. As such, we expect R&D-related costs to be high in H222/H123 compared to previous periods. However, we anticipate this will be partially offset in H123, as full R&D responsibility for mesdopetam will be transferred to Ipsen, assuming Phase IIb results are positive.

Funded past key readouts

IRLAB reported a net cash position of SEK322.6m at 30 June (it has no debt) and an H122 cash burn rate of SEK77.8m (cash outflow from operations of SEK76.8m and capex of SEK0.99m), a significant increase from H122 (cash burn rate SEK46.2m). Considering this, in addition to the expected changes in the R&D pipeline, we estimate that IRLAB will be funded past key clinical readouts in FY22/23 into FY24.

Valuation: SEK6.40bn or SEK123.7 per share

We value IRLAB at SEK6.40bn or SEK123.7 per share (previously SEK6.13bn or SEK118.5 per share) based on a risk-adjusted NPV of mesdopetam and pirepemat using a 12.5% discount rate and including net cash of SEK322.6m at end H122. Value uplift was realised by rolling our model forward by six months and updating our FX assumptions. We have updated our estimates in light of the H122 results, but our underlying valuation assumptions are unchanged.

Exhibit 1: Financial summary

Accounts: IFRS, year-end: 31 December, SEK’000s

 

 

2019

2020

2021

2022e

2023e

PROFIT & LOSS

 

 

 

 

 

 

 

Total revenues

 

 

448

404

207,906

62,142

317

Cost of sales

 

 

0

0

0

0

0

Gross profit

 

 

448

404

207,906

62,142

317

Total operating expenses

 

 

(96,296)

(91,862)

(155,330)

(174,977)

(122,667)

Research and development expenses

 

 

(79,381)

(75,989)

(99,014)

(124,014)

(62,083)

Exceptionals

 

 

0

0

(39,091)

0

0

Amortisation

 

 

(1.0)

(0.3)

(0.3)

(0.3)

0.0

Other operating expenses

 

 

(16,914)

(15,873)

(17,224)

(50,962)

(60,584)

EBITDA (reported)

 

 

(92,916)

(89,202)

56,050

(109,095)

(118,870)

Operating profit/(loss)

 

 

(95,848)

(91,458)

52,576

(112,835)

(122,351)

Operating margin %

 

 

N/A

N/A

25.3%

N/A

N/A

Finance income/(expense)

 

 

(272)

(195)

(795)

(364)

(364)

Financial exceptionals and adjustments

 

 

0

0

0

0

0

Profit before tax (reported)

 

 

(96,120)

(91,653)

51,781

(113,198)

(122,715)

Profit before tax (normalised)

 

 

(95,121)

(91,394)

91,131

(112,939)

(122,715)

Income tax expense (includes exceptionals)

 

 

0

0

0

0

0

Net income (reported)

 

 

(96,120)

(91,653)

51,781

(113,198)

(122,715)

Net income (normalised)

 

 

(95,121)

(91,394)

91,131

(112,939)

(122,715)

Basic average number of shares, m

 

 

40.6

47.7

51.7

51.7

51.7

Basic EPS (SEK)

 

 

(2.37)

(1.92)

1.00

(2.19)

(2.37)

Adjusted EPS (SEK)

 

 

(2.34)

(1.92)

1.76

(2.18)

(2.37)

Dividend per share (SEK)

 

 

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

 

 

 

 

 

 

 

Tangible assets

 

 

5,919

4,317

8,348

5,418

2,488

Intangible assets

 

 

82,270

82,011

42,661

42,402

42,402

Other non-current assets

 

 

0

0

0

0

0

Total non-current assets

 

 

88,189

86,328

51,009

47,820

44,890

Cash and equivalents

 

 

110,527

277,009

401,897

251,647

129,792

Inventories

 

 

0

0

0

0

0

Trade and other receivables

 

 

9,351

6,732

19,542

19,542

19,542

Other current assets

 

 

0

0

1

0

0

Total current assets

 

 

119,878

283,741

421,440

271,189

149,334

Non-current loans and borrowings

 

 

0

0

0

0

0

Non-current lease liabilities

 

 

2,900

1,270

3,566

3,566

3,566

Other non-current liabilities

 

 

0

0

0

0

0

Total non-current liabilities

 

 

2,900

1,270

3,566

3,566

3,566

Accounts payable

 

 

8,438

3,683

4,634

6,968

4,898

Non-current loans and borrowings

 

 

0

0

0

0

0

Current lease liabilities

 

 

1,643

1,657

3,034

3,034

3,034

Deferred income/contract liability

 

 

0

0

42,576*

0

0

Other current liabilities

 

 

13,259

15,578

19,158

19,158

19,158

Total current liabilities

 

 

23,340

20,918

69,402

29,160

27,090

Equity attributable to company

 

 

181,826

347,879

399,481

286,283

163,568

CASH FLOW STATEMENT

 

 

 

 

 

 

 

Operating income

 

 

(95,848)

(91,458)

52,576

(112,835)

(122,351)

Depreciation and amortisation

 

 

2,932

2,256

3,474

3,740

3,481

Share based payments

 

 

0

0

0

0

0

Other adjustments

 

 

(244)

(195)

38,296

(364)

(364)

Movements in working capital and contract liability

 

 

1,959

183

34,296

(40,242)

(2,070)

Cash from operations (CFO)

 

 

(91,201)

(89,214)

128,642

(149,700)

(121,304)

Capex

 

 

(137)

(394)

(708)

(551)

(551)

Acquisitions & disposals net

 

 

0

0

0

0

0

Other investing activities

 

 

0

0

0

0

0

Cash used in investing activities (CFIA)

 

 

(137)

(394)

(708)

(551)

(551)

Net proceeds from issue of shares

 

 

68,970

257,706

(180)

0

0

Movements in debt

 

 

(1,547)

(1,616)

(2,865)

0

0

Other financing activities

 

 

0

0

0

0

0

Cash from financing activities (CFF)

 

 

67,423

256,090

(3,045)

0

0

Cash and equivalents at beginning of period

 

 

134,442

110,527

277,009

401,898

251,647

Increase/(decrease) in cash and equivalents

 

 

(23,915)

166,482

124,889

(150,251)

(121,855)

Effect of FX on cash and equivalents

 

 

0

0

0

0

0

Cash and equivalents at end of period

 

 

110,527

277,009

401,898

251,647

129,792

Net (debt)/cash

 

 

110,527

277,009

401,897

251,647

129,792

Source: IRLAB Therapeutics, Edison Investment Research. Note: *Deferred income from Ipsen deal, company expects to record fully by end-FY22.

General disclaimer and copyright

This report has been commissioned by IRLAB Therapeutics and prepared and issued by Edison, in consideration of a fee payable by IRLAB Therapeutics. 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).

Australia

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

General disclaimer and copyright

This report has been commissioned by IRLAB Therapeutics and prepared and issued by Edison, in consideration of a fee payable by IRLAB Therapeutics. 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).

Australia

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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