Molecure — An important year for R&D approaches

Molecure (WSE: MOC)

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Last close As at 30/01/2023

PLN17.32

0.62 (3.71%)

Market capitalisation

PLN234m

Research: Healthcare

Molecure — An important year for R&D approaches

In Molecure’s recent R&D day presentation, management highlighted the progress of OATD-01 and OATD-02 as the company prepares to begin important clinical trials for sarcoidosis and solid tumours, respectively, in 2023. Details from the presentation show Molecure is planning to maximise the potential of both assets, in our view. Pre-clinical animal model data for OATD-01 suggest it could have potential use in non-alcoholic steatohepatitis (NASH), a fibrotic disease with unmet needs, however we note that animal data is not generalisable to humans. Further, the trial design for the upcoming Phase I study for OATD-02 confirms the company will target cancers where immune checkpoint inhibitors (ICIs) have had limited success, an area where we believe OATD-02/ICI combinations could have an impact. In our view, this is supportive of Molecure’s development strategy as the company approaches key trial initiations in 2023.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Molecure

An important year for R&D approaches

Pharma and biotech

Spotlight - Update

8 December 2022

Price

PLN15.3

Market cap

PLN215m

Share price graph

Share details

Code

MOC

Listing

Warsaw Stock Exchange

Shares in issue

14.03m

Cash (PLNm) at 30 September 2022

80.7

Business description

Molecure is a clinical-stage biotechnology company. It uses its medicinal chemistry and biology capabilities to discover and develop first-in-class small molecule drug candidates that directly modulate the function of RNA and underexplored protein targets designed to treat multiple incurable diseases.

Bull

Two assets to enter clinical development by end-FY23.

OATD-01 has potential for disease-modifying action in interstitial lung disease.

Pipeline supported by pre-clinical assets and technology platform.

Bear

Delays or disruptions to timelines could affect management’s estimated cash runway.

Unvalidated mechanisms of action increase development risk.

Additional funding needed to complete Phase II development.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Harry Shrives

+44 (0)20 3077 5700

Molecure is a research client of Edison Investment Research Limited

In Molecure’s recent R&D day presentation, management highlighted the progress of OATD-01 and OATD-02 as the company prepares to begin important clinical trials for sarcoidosis and solid tumours, respectively, in 2023. Details from the presentation show Molecure is planning to maximise the potential of both assets, in our view. Pre-clinical animal model data for OATD-01 suggest it could have potential use in non-alcoholic steatohepatitis (NASH), a fibrotic disease with unmet needs, however we note that animal data is not generalisable to humans. Further, the trial design for the upcoming Phase I study for OATD-02 confirms the company will target cancers where immune checkpoint inhibitors (ICIs) have had limited success, an area where we believe OATD-02/ICI combinations could have an impact. In our view, this is supportive of Molecure’s development strategy as the company approaches key trial initiations in 2023.

Historical figures

Year end

Revenue
(PLNm)

PBT

(PLNm)

EPS*

(PLN)

DPS
(PLN)

P/E

(x)

Yield
(%)

12/19

124.9

73.7

4.64

0.0

3.30

N/A

12/20

1.2

(13.6)

(0.98)

0.0

N/A

N/A

Source: Company accounts. Note: *EPS are diluted.

OATD-01’s potential expanding

For OATD-01, the company’s first-in-class CHIT1 inhibitor, Molecure presented details on the planned Phase II proof-of-concept trial in sarcoidosis, which it expects to commence in mid-2023. Molecure also presented encouraging pre-clinical rationale for the drug’s use in NASH, a fibrotic disease with no medical treatment options and considerable unmet medical needs. We continue to view the demonstration of a disease-modifying profile in sarcoidosis as important in establishing OATD-01’s clinical potential

Oncology trials to enrol imminently

The company’s second asset, OATD-02, the dual ARG1/2 inhibitor, is expected to begin enrolment for a Phase I solid tumour trial in Q123, following approval from the Polish authorities in November 2022. Details of the trial design confirm that Molecure will target indications where ICIs have low response rates, namely, pancreatic cancer, colorectal cancer, platinum-resistant serous ovarian cancer and renal cell carcinoma. We expect results from this trial will inform the design of a Phase I/II trial in combination with ICIs in solid or potentially hematopoietic tumours.

Pre-clinical pipeline supports long-term goals

Management also highlighted the company’s pre-clinical pipeline, which comprises a ubiquitin-specific protease 7 (USP7) programme and novel RNA-targeting small molecule platform, among others. While near/medium-term investor focus will remain clinical development, we view the pre-clinical candidates as potential drivers of longer-term value.

OATD-01 on track to begin Phase II development

OATD-01 is a first-in-class chitinase inhibitor developed by Molecure to be taken as a once-a-day pill for the treatment of inflammatory and fibrotic conditions. Following the return of the global rights for OATD-01 to Molecure in June 2022 by partner Galapagos after a shift in corporate strategy and portfolio review, Molecure will develop the drug’s use in sarcoidosis. At its R&D day, Molecure provided details of the trial design (Exhibit 1) for the upcoming global Phase II study, which it believes could provide proof-of-concept not just for OATD-01’s use in sarcoidosis but also in other fibrotic diseases. The trial will be a double-blind, randomised, placebo-controlled study and will be run at 20–30 sites in the European Union and United States.

Exhibit 1: OATD-01 Phase II trial design

Importantly, management asserts that the inclusion of biomarker imaging endpoints (reduction of granulomatous inflammation as measured by PET/CT) will give the company the best chance of detecting any disease-modifying action, which we believe is crucial to maximising the commercial impact of OATD-01. We note that the inclusion of other endpoints such as corticosteroid escape and quality of life measurements (King’s Sarcoidosis Questionnaire) will provide further, clinically relevant data on OATD-01’s use. Molecure expects to begin enrolling sarcoidosis patients in mid-2023 (expected full enrolment n=90) and it expects to report top-line data in Q125.

Potential in other fibrotic diseases could broaden utility

In addition to the clinical update, Molecure has presented pre-clinical data highlighting OATD-01’s potential utility in NASH, an inflammatory liver disease that can result in fibrosis, cirrhosis and liver failure/cancer. Currently there are no drugs available to treat NASH and the disease is commonly managed through a combination of weight loss and diet modifications. For patients in which the disease has resulted in fibrosis or cirrhosis of the liver, there is no option for reversing the damage and serious cases require a liver transplant. Considering NASH has an estimated annual prevalence rate of 2.8% in the United States, this leaves a considerable unmet medical need.

The data presented by Molecure show that OATD-01 was able to reduce the hallmarks of non-alcoholic liver disease in mouse models (STAM, DIAMOND) and fibrosis in rat and mouse models (CDHFD, STAM), which is shown by the data points highlighted in the purple boxes in Exhibit 2. The company also reported information, gathered during the collaboration with Galapagos, which implies OATD-01 acts on pathways that experience dysregulation in models of NASH, such as the acetyl-CoA metabolic process, collagen fibril organisation and macrophage migration, further suggesting the drug could have applications in these indications.

Exhibit 2: OATD-01 effect in mouse/rat models of NASH

Source: Molecure R&D day presentation December 2022

While the data presented is pre-clinical animal model data, and therefore not generalisable to a human population, it continues to build the case for OATD-01’s potential in inflammatory and fibrotic diseases outside of sarcoidosis. We view the drug’s potential in NASH and idiopathic pulmonary fibrosis (IPF, discussed in our initiation report) as a considerable opportunity for the company, given the serious unmet medical needs in these conditions. However, a key factor to OATD-01’s success will be the demonstration of a disease-modifying profile in these conditions. Hence, we see the PET/CT measured biomarker imaging endpoints from the upcoming Phase II sarcoidosis trial as an important readout for establishing OATD-01’s clinical potential.

OATD-02’s clinical oncology journey begins

OATD-02, Molecure’s dual ARG1/2 inhibitor, was granted Polish regulatory approval in November 2022 to conduct a clinical trial, and management now expects to begin enrolment for a Polish Phase I trial in Q123. The company will investigate OATD-02’s use in oncology, where it believes ARG1/2 inhibition could help restore antitumour immune responses by interacting with immunosuppressive tumour microenvironments. Details released at the recent R&D day confirm that the open-label, single-arm Phase I trial will assess the safety and tolerability of OATD-02 as a monotherapy in pancreatic cancer, colorectal cancer, platinum-resistant serous ovarian cancer and renal cell carcinoma patients at three sites in Poland. The study will employ a Bayesian optimal interval design (which management assert may allow the company to reach the recommended Phase II dose faster and with greater confidence) and aims to enrol 30–40 patients. Management expects the study will last for one and a half years before reporting top-line results in H224. Secondary endpoints will focus on efficacy measures (response and survival) and PK/PD biomarker data.

We expect results from this trial will inform the design of a Phase I/II trial of OATD-02 in combination with ICIs in solid or potentially liquid tumours. We note that all the cancer types eligible for enrolment in this Phase I are indications where ICIs have limited use and hence OATD-02 could have a potentially important impact, in our view. Management expects to spend PLN11m over the course of the trial, with PLN4–5m potentially covered by development grants the company expects to apply for in FY23. We see the commencement of this Phase I trial in Q123 as the next catalyst for Molecure.

General disclaimer and copyright

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

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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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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.

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1185 Avenue of the Americas

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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 Molecure and prepared and issued by Edison, in consideration of a fee payable by Molecure. 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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