Molecure — Clinical progression ahead in FY23

Molecure (WSE: MOC)

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Research: Healthcare

Molecure — Clinical progression ahead in FY23

Molecure is entering FY23 with two active clinical programmes. OATD-01, the company’s lead proprietary asset, is in development for the treatment of sarcoidosis, but management expects to expand into new indications if the data are supportive. The first patient is due to be dosed in the Phase II trial for this asset in H223. Molecure also recently reported the first dosing in the Phase I trial for OATD-02, a novel drug for the treatment of solid tumours; an update for this study is expected in Q423. The company reported a 22.3% y-o-y increase in operating expenses for FY22, due to higher costs of external services and personnel expenses during the year. With a net cash position of PLN54.0m at end FY22, management anticipates a cash runway into early FY24 (at least 12 months).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

molecure01

Healthcare

Molecure

Clinical progression ahead in FY23

Pharma and biotech

Spotlight Update

5 April 2023

Price

PLN25.5

Market cap

PLN359m

Share price graph

Share details

Code

MOC

Listing

Warsaw Stock Exchange

Shares in issue

14.06m

Cash (PLNm) at 31 December 2022

66

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 underexplored protein targets and the function of RNA to treat multiple incurable diseases.

Bull

Two assets in clinical development (OATD-02 in Phase I; OATD-01 in preparation for Phase II).

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

Pipeline supported by preclinical 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 Arron Aatkar

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Molecure is a research client of Edison Investment Research Limited

Molecure is entering FY23 with two active clinical programmes. OATD-01, the company’s lead proprietary asset, is in development for the treatment of sarcoidosis, but management expects to expand into new indications if the data are supportive. The first patient is due to be dosed in the Phase II trial for this asset in H223. Molecure also recently reported the first dosing in the Phase I trial for OATD-02, a novel drug for the treatment of solid tumours; an update for this study is expected in Q423. The company reported a 22.3% y-o-y increase in operating expenses for FY22, due to higher costs of external services and personnel expenses during the year. With a net cash position of PLN54.0m at end FY22, management anticipates a cash runway into early FY24 (at least 12 months).

Historical figures

Year

end

Revenue
(PLNm)

PBT
(PLNm)

EPS*
(PLN)

DPS
(PLN)

P/E
(x)

Yield
(%)

12/20

124.9

73.7

4.64

0.0

3.08

N/A

12/21

1.5

(13.6)

(0.98)

0.0

N/A

N/A

12/22

1.6

(15.3)

(1.09)

0.0

N/A

N/A

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

OATD-01 expected to enter Phase II in H223

OATD-01 is a novel chitotriosidase 1 (CHIT1) inhibitor under development as the first disease-modifying drug for the treatment of pulmonary sarcoidosis. Following supportive advice from the EMA and FDA, Molecure is preparing for a Phase II trial and expects the first patient to be dosed in H223. Results from this trial may enable the expansion of the drug into additional indications such as idiopathic pulmonary fibrosis (IPF) as well as non-alcoholic steatohepatitis (NASH), provided the data continue to be positive. Given the larger market size in these indications, this could significantly increase the commercial impact of OATD-01, in our view.

Clinical trials underway for OATD-02

In March 2023, Molecure announced an important milestone with the commencement of the Phase I trial for OATD-2, the company’s second asset. To our knowledge, OATD-02 is the first and only inhibitor of arginases 1 and 2, therapeutic targets validated in preclinical studies for a variety of tumours. The Phase I trial is an open-label, multi-centre, first-in-human, dose-escalation study to assess the safety, tolerability and preliminary efficacy of OATD-02 in patients with advanced and/or metastatic solid tumours. We view the initiation of this trial as a key milestone for the company; an update from this study is now expected in Q423.

Cash runway for at least 12 months

Operating expenses for FY22 amounted to PLN18.63m, up 22.3% y-o-y from PLN15.2m in FY21, attributable to higher personnel expenses and external services as the company’s pipeline advances. This resulted in net loss of PLN15.26m for the period, versus PLN13.64m in FY21. With a net cash position of PLN54.0m at end FY22, management expects a cash runway into early FY24.

Looking to expand clinical potential across 2023–25

Molecure currently has two active and ongoing clinical programmes (Exhibit 1): OATD-01 in sarcoidosis, for which Phase II trials are expected to commence in H223, and OATD-02 in solid tumours, for which the first patient was dosed in the Phase I trial in March 2023 and updates are expected in Q423. In the interest of enriching, expanding and diversifying this clinical pipeline, management has communicated four strategic objectives to focus on for the period 2023–25:

Continue to demonstrate clinical proof-of-concept in the development of OATD-01 for patients suffering from pulmonary sarcoidosis.

In the Phase I trial, determine the maximum tolerated dose of OATD-02 for oncology patients, and continue to explore the possibility of this treatment in combination with other anti-cancer therapies.

Identify one or two advanced lead compounds (candidates for pre-clinical development) within this expanding pipeline. Through the initiation of new research projects, based on in-house research, in-licensing and collaborations, Molecure aims to have a balanced project portfolio with high clinical and market potential.

Continue to develop a platform for the discovery of small molecules that modulate the function of mRNA in order to address a multitude of deadly diseases. As a proof-of-concept, in 2023 the company plans to confirm binding of at least one of these small molecules to an RNA fragment and observe the desired modulation of function (in vitro). Molecure believes that achieving this milestone would increase the chances of establishing a partnership. By 2025, the company hopes to have signed a partnering agreement in the mRNA platform space.

Exhibit 1: Molecure’s clinical development pipeline

Source: Molecure 2022 financial report

Management has stated that, based on the current pipeline, it plans to launch or continue three independent Phase I and Phase II clinical programmes in the coming years, and expects to commercialise two of these by end-2025. In our opinion, while these goals are ambitious, they could represent significant growth for the company, provided that a partnership agreement to license the further development and sale of any drug candidates is attained.

Financials

In FY22, Molecure recorded total revenue (including other operational revenue) growth of 12.2% yo-y to PLN1.64m (US$0.39m), which primarily consisted of domestic research grants. Total operating expenses stood at PLN18.63m, 22.3% y-o-y higher than PLN15.22m in FY21, attributed to the continued advancement of the clinical development pipeline, higher personnel expenses and increased costs of external services. Third-party services, accounting for 32% of the total operating expenses, were significantly up by 49.5% y-o-y to PLN6.03m in FY22 due to increased clinical activities related to OATD-01 (first patient dosed in FY22) and OATD-02 (nearing start of Phase II in H223). The company will be running two parallel clinical studies (OATD01 Phase II and OATD-02 Phase I) by end H223, which might result in further escalation in operating expenditure. Salaries (33% of operating expenses) increased by 58.4% y-o-y to PLN6.22m. The company reported a net loss of PLN15.26m in FY22 versus PLN13.64m in FY21.

While the cash outflow from operating activities stood at PLN10.21m in FY22 (PLN13.50m in FY21), the cash outflow from investing activities was materially higher at PLN33.59m (PLN18.82m in FY21) largely due to the ramp up pre-clinical work progressing toward the clinic. Notably, Molecure capitalises parts of its R&D expenditure, which stood at PLN30.31m in FY22, versus PLN16.38m in FY21.

As of the end of FY22, the company reported a cash position of PLN65.62m (US$15.29m), from PLN102.04m at end-FY21, reflecting PLN36.42m in total cash outflows during the year. Considering the increased future cash burn related to two clinical trials, management expects current resources to fund the company’s operations into early 2024 (at least 12 months). Management is also exploring potential sources of non-dilutive funding through various mechanisms including alternative R&D grants and collaborative agreements (cost/profit sharing; milestones). For example, in February 2023, the company submitted a funding application to the Medical Research Agency for the project ‘Development and advancement of the first-in-class approach in treating idiopathic pulmonary fibrosis targeting a novel signalling pathway with high translational potential’ as a part of a competition for the development of targeted or personalised medicine based on nucleic acid and small molecule therapeutic products (ABM/2022/6). Furthermore, if the company can demonstrate the utility of its RNA platform, we see this as a potential source of future revenues, through licensing deals or usage agreements.

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 2023 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.

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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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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