Pharnext — Clinically healthy

Pharnext (PAR: ALPHA)

Last close As at 28/03/2024

EUR0.10

0.03 (42.86%)

Market capitalisation

EUR1m

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Research: Healthcare

Pharnext — Clinically healthy

The past weeks have been eventful for Pharnext, with the company releasing its H121 results, announcing multiple C-Suite appointments, and conducting its R&D day. On the business front, the financing situation appears manageable following the June 2021 convertible debt financing, and the pivotal Phase III PREMIER trial remains on track to conclude enrolment in Q222. However, the continued stock price softness (triggered by the financing) remains an overhang. We believe there is the possibility for a sentiment reversal and stock price re-rating following positive progression towards the commercialisation of PXT3003.

Jyoti Prakash

Written by

Jyoti Prakash

Analyst, Healthcare

Healthcare

Pharnext

Clinically healthy

Research update

Pharma & biotech

3 December 2021

Price

€0.09

Market cap

€4m

Net debt (€m) at end H121

6.5

Shares in issue

48.3m

Free float

23%

Code

ALPHA

Primary exchange

Euronext Paris

Secondary exchange

OTC Pink

Share price performance

%

1m

3m

12m

Abs

(46.0)

(89.1)

(97.6)

Rel (local)

(44.7)

(89.0)

(98.0)

52-week high/low

€3.98

€0.09

Business description

Pharnext is developing new therapies for both rare and common neurological disorders using its proprietary Pleotherapy platform, which unearths new therapeutic effects from drug combinations. Its lead programme is PXT3003 for Charcot-Marie-Tooth disease type 1A, which has entered pivotal Phase III trials. It also has PXT864 for Alzheimer’s disease, which has completed Phase IIa but has been deprioritised.

Next events

Phase III PREMIER trial recruitment

Q222

Additional data from the PLEO-CMT-FU extension study

Q222

Top-line data from the animal factorial study

Q123

Analyst

Jyoti Prakash, CFA

+91 981 880 0393

Maxim Jacobs, CFA

+1 646 653 7027

Pharnext is a research client of Edison Investment Research Limited

The past weeks have been eventful for Pharnext, with the company releasing its H121 results, announcing multiple C-Suite appointments, and conducting its R&D day. On the business front, the financing situation appears manageable following the June 2021 convertible debt financing, and the pivotal Phase III PREMIER trial remains on track to conclude enrolment in Q222. However, the continued stock price softness (triggered by the financing) remains an overhang. We believe there is the possibility for a sentiment reversal and stock price re-rating following positive progression towards the commercialisation of PXT3003.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/19

3.6

(23.4)

(1.61)

0.00

N/A

N/A

12/20

2.8

(21.4)

(1.17)

0.00

N/A

N/A

12/21e

3.6

(27.7)

(0.68)

0.00

N/A

N/A

12/22e

3.9

(30.8)

(0.64)

0.00

N/A

N/A

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

R&D day update on the PREMIER Phase III trial

The pivotal Phase III PREMIER study (a double-blinded, placebo-controlled study enrolling 350 patients across two arms), which commenced in March 2021, remains on-track with 40 of the 50 clinical sites being activated, patient enrolment expected to complete in Q222 and the 15-month study to conclude in Q323. Dosing for the high-dose arm will be undertaken using twice the low-dose amount in the previous PLEO-CMT trial and will be dispensed using individual 5ml stick packs (to mitigate the high-dose arm related formulation issues with the first Phase III study). As a reminder, PXT3003 remains the most clinically advanced asset for the treatment of Charcot-Marie-Tooth Disease type 1A (CMT1A) (>$1bn market) and holds the orphan drug designation in the United States and Europe.

Sufficient headroom but dilution concerning

The June 2021 convertible-bond funding (OCEANE-BSA), worth €81m across 35 tranches, could provide Pharnext a sufficiently long cash runway to take the clinical study to its conclusion although we expect a need to raise a further c €15m to commercialise the asset. By the end of November 2021, the company drew down the first five tranches totalling €17.5m and we estimate that tranche six (€3m) will be drawn down in December 2021. We note that at current trading levels, the financing remains highly dilutive, and we do not rule out alternative options to secure financing at better terms.

Valuation: €273.6m or €5.7 per basic share

Our total valuation goes down slightly to €273.6m from €287.7m due to a lower pro forma net cash position (net debt of €6.5m at the end of H121 offset by the subsequent conversion of €9.2m of debt to equity up to 30 November). However, the basic per share valuation comes down significantly to €5.7 (from €13.1), following additional equity issued to cover for the conversion of the initial tranches of the June 2021 convertible debt.

R&D day highlights: The PREMIER trial

Pharnext held its R&D day on 27 October 2021, and provided an update on the pivotal Phase III PREMIER trial for PXT3003 in CMT1A. The trial is a randomised, two-arm (high-dose PXT3003 arm from the previous PLEO-CMT trial versus control in a 1:1 ratio), double-blinded, placebo-controlled study evaluating 350 patients across a range of functional assessments over a 15-month period. The trial will enrol subjects between 16 and 65 years of age with genetically confirmed mild-to-moderate CMT1A (CMTNS-V21 score >2 and ≤18). The first participant was randomised at the end of March 2021.

  Charcot-Marie-Tooth Neuropathy Score version 2

The company indicated that patient enrolment has not been affected so far by COVID-19 and remains on track for completion in Q222. Of the 50 recruited trial sites (Exhibit 1) 40 sites have been activated, which reassures us on the company’s ability to meet its study completion target of Q323.

Exhibit 1: Clinical trial sites by location

Country

No. of trial sites

United States

20

Canada

5

France

6

Germany

5

Italy

4

Spain

4

Belgium

1

Netherlands

1

Denmark

1

Israel

3

Country

United States

Canada

France

Germany

Italy

Spain

Belgium

Netherlands

Denmark

Israel

No. of trial sites

20

5

6

5

4

4

1

1

1

3

Source: Pharnext R&D day presentation, October 2021

The primary endpoint, as advised by the FDA and EMA, continues to be the improvement on the 12-point Overall Neuropathy Limitations Scale (ONLS) score over the trial duration. The secondary endpoints will comprise the 10-meter walk test (10mWT), quantified muscular testing of the hand and foot, Patient Global Impression of Severity (PGI-S), Patient Global Impression of Change (PGI-C) and CMTNS-V2. The company has stated that the PREMIER trial has been 90% powered to demonstrate efficacy (0.4-point ONLS change) even with a 20% dropout rate. As a reminder, the FDA indicates that powering should be above 80% for pivotal studies.

The company also provided an update on the dosage, formulation and administration of the drug. The formulation (12mg baclofen, 1.4mg naltrexone, 420mg sorbitol) will be administered as a 10ml oral dose twice a day for a period of 15 months (titration dose of 5ml twice a day for the first two weeks) (Exhibits 2 and 3). The key takeaway, however, is the series of measures the company has taken to mitigate the chemistry, manufacturing and control (CMC) issues related to the high-dose batch in the previous Phase III trial (precipitation and crystal formation in some batches due to a reaction between baclofen and paraben), which led to the premature discontinuation of the high-dose arm. Instead of using the high-dose formulation of the PLEO-CMT trial, the PREMIER trial will use twice the amount of the low-dose formulation (from that study) and for which the company faced no manufacturing issues during the first Phase III trial as well as in the previous Phase II trial and subsequent open-label extension study following the first Phase III trial. Moreover, the drug dispensation will be done using individual 5ml stick packs versus the 100ml bottles used previously, for better convenience and compliance. We are encouraged by these improvements and expect them to de-risk the manufacturing issues faced earlier by the company.

Exhibit 2: PREMIER trial study design

Exhibit 3: Study drug administration

Source: Pharnext R&D day presentation, October 2021

Source: adapted from Pharnext R&D day presentation, October 2021

Exhibit 2: PREMIER trial study design

Source: Pharnext R&D day presentation, October 2021

Exhibit 3: Study drug administration

Source: adapted from Pharnext R&D day presentation, October 2021

In addition to the PREMIER trial, the company will also be conducting a 12-week multi-factorial study in an animal model (a critical requirement for a marketing application filing in case of combination therapeutics to showcase that the combination is more effective than the individual constituents in the tested disease area). Pharnext will be conducting the animal factor study under good laboratory practice (GLP) conditions and will use the same animal model of CMT1A disease as the preclinical factor study previously conducted at the Max Planck Institute in Germany. The study is expected to commence in H122 with top-line data to be announced in Q123.

PLEO-CMT data: Promising despite disruption

Pharnext also published study data from its first Phase III trial (PLEO-CMT) in the Orphanet Journal of Rare Diseases. Key highlights from the study were discussed by key opinion leader (KOL) and the US lead investigator of the PLEO-CMT study Dr Florian Thomas (Hackensack Meridian School of Medicine) during the R&D day. As a reminder, the PLEO-CMT trial was a randomised, double-blinded study evaluating 323 patients with mild-to-moderate CMT1A across three arms: low-dose PXT3003, high-dose PXT3003 and placebo. While the study managed to achieve statistical significance of improvement in its primary endpoint (ONLS) in that ‘high dose’ arm versus placebo among the target population defined as the modified full analysis set (mFAS) of 235 patients (mean difference: 0.37 points improvement; p value = 0.008) (Exhibit 4), certain manufacturing issues in some high-dose batches (crystal precipitation; c 2% by volume) led to the premature discontinuation of the high-dose arm and reduced the statistical power of the study (75%) below the threshold 80% as well as the originally planned 90%, resulting in the FDA mandating another follow-up pivotal trial.


Exhibit 4: PLEO-CMT Phase III trial results

Source: Pharnext R&D day presentation, October 2021. Note: *Dose 4 vs placebo. **ANCOVA with multiple imputation (missing data implemented by multiple imputations following the placebo trend). ***Average of 12 and 15 months, or 12 months if 15 months is missing. ONLS is a 12-point scale assessing functional ability in the legs and hands. 10mWT = assessing locomotor ability and gait over a 10-meter walking distance.

One of the key aspects highlighted by Dr Thomas was the rationale behind ascertaining a small 0.3-point improvement versus placebo on the ONLS scale as clinically meaningful (given the lack of a benchmark as no therapies have been approved thus far for CMT1A). He explained that over 90% of the CMT1A population fell in the mild-to-moderate range (score of 2–4 on the 12-point ONLS scale; the higher the score the more debilitating the condition) and a 0.3-point improvement translated into a material 10% improvement in the ONLS score for the target patients. Dr Thomas also indicated that given the progressive nature of the disease, even stabilising or halting the disease progression may present a meaningful result, an observation we concur with given the high unmet need in the CMT1A space.

Extrapolating the results from the 15-month study over the lifespan of the effected individuals could translate into substantial gains in our opinion, if clinically validated. Pharnext has been undertaking an open-label extension study (PLEO-CMT-FU) and recently presented 4.5 years’ worth of trial data, wherein PXT3003 has continued to show a sustained benefit to CMT1A patients (Exhibit5). Interestingly, patients across all arms (placebo, low-dose and high-dose) of the initial PLEO-CMT trial have maintained a meaningful improvement in the ONLS scale, after transitioning to the open-label, high-dose extension trial (PLEO-CMT-FU).

Exhibit 5: PLEO-CMT-FU study results over 4.5 years

Source: Pharnext R&D Day presentation, October 2021

Sizeable commercial opportunity on clinical validation

CMT is the most common inherited peripheral neuropathy and one of the most common inherited neurological disorders, affecting approximately 126,000 individuals in the United States. CMT1A is well established as the most common genetic subtype of the disease, comprising 40–50% of all CMT patients. Pharnext estimates its target patient population to be 100,000 (mild-to-moderate CMT1A across the US and EU5), translating into a market potential of $1bn. Given that there are currently no approved drugs for the treatment of CMT1A (indicating high unmet need) and PXT3003 is the most clinically advanced asset currently undergoing trials in the space, the opportunity remains sizeable for Pharnext. The closest competitors to PXT3003 are all in early clinical trials (Engensis/Helixmith (Phase 1/2a) and IFB-088/Inflectis (Phase I). PXT3003 also holds orphan drug designation in the United States and EU, which should provide seven years of market exclusivity and an unchallenged run following approval, in our opinion. We estimate peak sales potential of c $600m for the drug following approval.

The company recently announced multiple senior-level appointments – appointing Raj Thota as chief manufacturing officer and head of CMC, Abhijit Pangu as the head of regulatory affairs and promoting Xavier Paoli to chief operating officer – to support ongoing development of PXT3003. We see this as a positive development, highlighting the company’s efforts towards managing any compliance/regulatory issues (as was seen in the PLEO-CMT trial) assuming the asset transitions from the clinic towards commercialisation. The recent departure of the chief medical officer and head of R&D, Adrian Hepner, to join Coya Therapeutics will likely require the company to manage a quick transition to the newly appointed CMO Dr Burkhard Blank to ensure that the trial progression stays unaffected.

Financials: H121 results in line with expectations

Pharnext’s H121 results were in broadly in line with our expectations. Revenue for the period stood at c €2.0m, almost entirely attributable to R&D tax credits, mirroring the trend over the last few years. The operating loss stood at €11.2m, up from €7.8m in H120, driven by higher R&D expenses related to the commencement of the pivotal PREMIER Phase III trial in March 2021. The R&D expenses stood at €9.9m in H121 (€5.5m in H120) and accounted for c 75% of the company’s operating expenses for the period. Administrative expenses remained largely stable (€1.0m versus €0.9m) while marketing expenses declined slightly (€2.3m from €2.7m). We have increased our projection for FY21 R&D expenses to €20.8m (from €16.6m), which has resulted on our estimated net loss for the year to increase to €27.8m from the earlier €25.2m. Our estimates for FY22–23 have also been tweaked accordingly.

The company ended the period to June 2021 with net debt of €6.5m (€7.7m cash and €14.1m in debt, excluding repayable advances). The post-reporting cash position has been supplemented by the drawdown of four additional tranches (tranches 2–5) of the OCEANE convertible loan raised in June 2021 (discussed in more detail below) worth €3m each in July, August, September and November 2021 for total proceeds of €12m as per last available information. We expect another drawdown in December 2021 to help fund the pivotal trial (tranche six worth €3m). The OCEANE convertible loan agreement provides financing up to €81m for a period of up to 36 months (we project the company will draw down c €34.5m in FY22 and the remaining €26m in FY23), which should be sufficient to complete the PREMIER study, but we expect the need to raise a further c €15m in 2023 to fund launch-related activities as well as honour c €9m worth of repayable advances due between 2023 and 2025. We are currently modelling all future raises as debt, but reiterate that subsequent conversion to equity would result in further dilution.

OCEANE convertible debt analysis

In June 2021, Pharnext entered into an agreement to raise up to €81m in gross proceeds by issuing convertible bonds to Alpha Blue Ocean. The agreement comprises 35 tranches totalling 8,100 OCEANE-BSAs with a par value €10,000 each (for a total gross value of €81m), which can be drawn down over a period of 36 months. Each OCEANE has a maturity of 12 months. If not converted to equity within the stipulated period, the OCEANE will be automatically converted into shares at a conversion price equal to 94% of the lowest daily volume-weighted average price during the 15 days preceding the date of receipt of the conversion notice. As per latest available information, Pharnext had drawn down the first five tranches (first tranche worth €5.5m and subsequent tranches worth €3m each) of the loan totalling €17.5m by the end of November 2021. While the first two tranches have been fully converted into equity, the third tranche is partially converted as of 30 November 2021 (€10.5m of the debt was converted to equity in total, including €9.2m in H221 to date). We expect another €3m tranche to be drawn down in December 2021 (tranche 6). While the convertible debt financing provides Pharnext with adequate funds to progress the clinical progression of PXT3003, the variable pricing means that the financing has been highly dilutive for the company on conversion to equity, a situation that has been exacerbated by the steep decline in the company’s share price since the funds were raised. While we see this sustained softness as an overhang, we continue to believe in PXT3003’s potential and scope for re-rating on positive clinical development.

Valuation

We have updated our valuation to reflect the H121 financials as well as the OCEANE convertible debt raised in June 2021. We maintain a 70% probability of success for PXT3003, and our risk-adjusted net present value (NPV) for the asset remains largely unchanged at €270.8m. The pro forma net cash figure stands at €2.75m (net debt of €6.45m at the end of H121, offset by a subsequent €9.2m decrease in debt to reflect a conversion of this amount of debt to equity after 30 June). Our overall valuation for the company goes down slightly to €273.6m from €287.7m. The per share valuation, however, sees a significant change following conversion of the first few tranches of the OCEANE convertible debt (€5.7 vs €13.1 previously). The shares outstanding currently stand at 48.3m versus 22.4m prior to the convertible financing (tranches 1 and 2 are fully converted, whereas tranche 3 is partially converted as of 30 November 2021).

Exhibit 6: Pharnext valuation

Development programme

Indication

Clinical stage

Probability of success

Launch year

Patent/exclusivity protection

Launch pricing ($/year)

Peak sales (US$m)

rNPV
(€m)

PXT3003

CMT1A

Phase III

70%

2024

2031–34

55,000

626

270.8

Total

270.8

Net cash/(debt) (end of H121) (€m)

2.8

Total firm value (€m)

273.6

Total basic shares (m)

48.3

Value per basic share (€)

5.7

Dilutive options and warrants (m)

7.9

Total diluted shares (m)

56.1

Value per diluted share (€)

5.1

Source: Pharnext reports, Edison Investment Research

Exhibit 7: Financial summary

€'000

2019

2020

2021e

2022e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

3,597.4

2,810.5

3,591.3

3,945.3

Cost of Sales

0.0

0.0

0.0

0.0

Gross Profit

3,597.4

2,810.5

3,591.3

3,945.3

R&D

(15,178.1)

(13,548.4)

(20,837.3)

(25,155.4)

Admin & Marketing

(8,444.6)

(8,175.6)

(8,059.8)

(8,140.4)

EBITDA

 

 

(19,501.6)

(18,159.2)

(25,190.6)

(29,312.0)

Normalised operating profit

 

 

(20,093.0)

(18,716.5)

(25,108.7)

(29,153.5)

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

Share-based payments

67.7

(197.0)

(197.0)

(197.0)

Reported operating profit

(20,025.3)

(18,913.5)

(25,305.7)

(29,350.5)

Net Interest

(3,283.9)

(2,650.5)

(2,546.6)

(1,692.1)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(23,376.9)

(21,367.0)

(27,655.3)

(30,845.5)

Profit Before Tax (reported)

 

 

(23,309.2)

(21,564.1)

(27,852.3)

(31,042.6)

Reported tax

0.0

0.0

0.0

0.0

Profit After Tax (norm)

(23,376.9)

(21,367.0)

(27,655.3)

(30,845.5)

Profit After Tax (reported)

(23,309.2)

(21,564.1)

(27,852.3)

(31,042.6)

Minority interests

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

Net income (normalised)

(23,376.9)

(21,367.0)

(27,655.3)

(30,845.5)

Net income (reported)

(23,309.2)

(21,564.1)

(27,852.3)

(31,042.6)

Basic average number of shares outstanding (m)

14.5

18.2

40.7

48.3

EPS - normalised (c)

 

 

(161.08)

(117.33)

(67.87)

(63.92)

EPS - normalised fully diluted (c)

 

 

(161.08)

(117.33)

(67.87)

(63.92)

EPS - basic reported (€)

 

 

(1.61)

(1.18)

(0.68)

(0.64)

Dividend (€)

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

 

1,526.5

855.4

740.3

701.8

Intangible Assets

12.1

7.4

0.0

0.0

Tangible Assets

293.2

146.3

38.5

0.0

Investments & other

1,221.2

701.8

701.8

701.8

Current Assets

 

 

21,645.1

20,398.4

10,757.9

10,129.4

Stocks

0.0

0.0

0.0

0.0

Debtors

0.0

9,320.2

590.4

648.5

Cash & cash equivalents

16,246.6

11,078.2

10,167.6

9,480.8

Other

5,398.5

0.0

0.0

0.0

Current Liabilities

 

 

(9,959.6)

(15,516.6)

(12,761.3)

(11,172.2)

Creditors

(5,792.7)

(11,302.7)

(7,048.3)

(8,151.8)

Tax and social security

0.0

0.0

0.0

0.0

Short term borrowings

(3,806.3)

(3,926.0)

(5,425.0)

(2,732.4)

Other

(360.5)

(287.9)

(287.9)

(287.9)

Long Term Liabilities

 

 

(20,457.9)

(18,256.2)

(22,831.2)

(54,598.8)

Long term borrowings

(11,181.4)

(8,157.4)

(12,732.4)

(44,500.0)

Other long term liabilities

(9,276.6)

(10,098.8)

(10,098.8)

(10,098.8)

Net Assets

 

 

(7,245.9)

(12,519.0)

(24,094.3)

(54,939.8)

Minority interests

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

(7,245.9)

(12,519.0)

(24,094.3)

(54,939.8)

CASH FLOW

0

Op Cash Flow before WC and tax

(19,569.3)

(17,962.2)

(24,993.6)

(29,115.0)

Working capital

(1,523.1)

1,797.7

4,475.5

1,045.3

Exceptional & other

(476.0)

82.5

0.0

0.0

Tax

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(21,568.4)

(16,081.9)

(20,518.0)

(28,069.6)

Capex

0.0

22.0

0.0

0.0

Acquisitions/disposals

193.5

(83.4)

0.0

0.0

Net interest

(1,412.9)

(1,622.2)

(2,546.6)

(1,692.1)

Equity financing

16,494.9

16,271.7

16,080.0

0.0

Dividends

0.0

0.0

0.0

0.0

Other

0.0

(199.5)

0.0

0.0

Net Cash Flow

(6,292.9)

(1,693.4)

(6,984.6)

(29,761.7)

Opening net debt/(cash)

 

 

16,011.4

(1,258.7)

1,005.7

7,990.3

FX

0.0

0.0

0.0

0.0

Other non-cash movements

23,563.0

(571.0)

0.0

0.0

Closing net debt/(cash)

 

 

(1,258.7)

1,005.7

7,990.3

37,752.1

Source: Pharnext reports, Edison Investment Research

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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

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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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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 2021 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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We believe Oasmia is entering a definitive phase of its transformation in the months ahead. Apealea is due to be launched in Europe (early 2022), enabling an inflow of commercial revenues in 2022. Importantly however, licensee Elevar has notified Oasmia that it is reviewing the previously communicated strategy for Apealea in the United States; we note that accelerating timelines (expected launch 2025) or expansion into indications beyond advanced ovarian cancer could potentially present upside to our current assumptions. Progress on its underlying strategy to further diversify the pipeline will also be key over the near term. In October, Oasmia settled its legal disputes, clearing outstanding litigation risks. We note this has slightly shortened our forecast cash runway and additional financing is now likely to be required before end-2022. Our valuation is unchanged at SEK2.89bn.

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