Molecure — Q323 report highlights clinical progress

Molecure’s lead asset, OATD-01, is an oral, first-in-class inhibitor of CHIT1, a human chitinase enzyme that is implicated in the body’s immune response. Pathologically activated immune cells, such as macrophages and neutrophils, secrete CHIT1 as part of the body’s natural immune response. This may make CHIT1 an attractive therapeutic target for inflammatory and fibrotic diseases. The drug has already demonstrated a favourable safety profile in Phase I, and we note that the candidate has been granted Orphan Drug designation (ODD) for its use in sarcoidosis and idiopathic pulmonary fibrosis (IPF). Molecure is currently focused on the launch of its Phase II trial for OATD-01 in pulmonary sarcoidosis, but management believes OATD-01’s mechanism of action may also be applicable to the treatment of IPF, a progressive disease that leads to lung scarring and fibrosis that hampers the lungs’ ability to adequately transport oxygen.

Sarcoidosis is a systemic inflammatory disorder of unknown origin, characterised by non-caseating granulomas in various organs, including the eyes, joints, heart, kidneys and lungs, among others. This condition can lead to irreversible organ damage and a reduced lifespan. It may result from factors such as HLA genes, epigenetic changes, other underlying diseases or exposure to unidentified antigens (eg observed in a high incidence among 9/11 firefighters). Diagnosis typically involves a combination of radiographic, clinical and histopathologic findings. Sarcoidosis has an overall prevalence of ~180,000 in the United States, although it exhibits regional variations, with a higher prevalence in the southern regions and a predilection for female and Black populations. Consequently, more cases are seen in places like Florida compared to Oregon. Sarcoidosis affects the lungs in about 90% of cases.

Despite several decades of research, treatment options are limited and often non-specific to the condition for treating sarcoidosis. The primary approach involves using corticosteroids as the first-line treatment, with NSAIDs and biologics considered as alternative options (according to sarcoidosis treatment guidelines). However, the use of steroids can lead to dependency and severe short- and long-term side effects.

The diagram below shows the current and investigational treatments for sarcoidosis based on pathogenesis. Given sarcoidosis is a disease that mainly affects the lungs, preserving or improving lung function is a crucial goal in managing the disease. Many of these drugs do not improve forced vital capacity (a measure of lung function), on an absolute basis or when compared to steroids, and have yielded mixed results. Also, many alternatives to steroids are associated with greater infection risks and malignancies.

In preclinical studies OATD-01 reduced fibrosis (measured by the Ashcroft fibrosis score) in mice with induced lung fibrosis (through exposure to bleomycin). The drug has so far also demonstrated a good safety profile in Phase I studies and Molecure is progressing development into a Phase II study. In July 2023 the FDA accepted the company’s IND application and, in September 2023, the company submitted applications to the EMA and MHRA to conduct studies in Europe. The Phase II trial (KITE) is intended to be a multi-centre (20–30 sites in the US and Europe), randomised, double-blind, placebo-controlled study (expected total n=90). The primary endpoint will assess the efficacy of the drug in sarcoidosis patients after 12 weeks of administration, based on change from baseline in levels of granulomatous inflammation assessed by PET-CT imaging. The first patient for the KITE trial is scheduled to be dosed in the US in Q423. As this is the company’s flagship programme, the results for the study (expected by mid-2025) could represent a significant catalyst for investor attention, in our view

The company’s second drug candidate is OATD-02, an oral, first-in-class inhibitor of ARG1/2, arginine-depleting enzymes associated with immunosuppressive tumour microenvironments. OATD-02 is currently being evaluated as a monotherapy in a Phase I clinical trial in patients with advanced and/or metastatic solid tumours. This is an open-label, multi-centre (three sites in Poland) study undergoing dose escalation, to assess the safety and tolerability of the drug. Additional objectives include preliminary efficacy (response and survival), pharmacokinetic and pharmacodynamic biomarker data, and establishing a maximum tolerated dose (MTD). Management has communicated that the trial will recruit 30 to a maximum of 40 patients, focusing on indications where checkpoint inhibitors have had low response rates, such as colorectal cancer, ovarian cancer, pancreatic cancer and renal cell carcinoma. The first patient was dosed in March 2023 with 2.5mg, and in April 2023 an independent committee recommended increasing the dose to 5mg, based on the a positive assessment of this first patient and a lack of tumour progression. Treatment of additional patients at 5mg is ongoing, and the committee has recommended that subsequent patients may be escalated to 10mg, as per the Bayesian optimal interval design. We anticipate updates on the progress of this trial early in 2024 (previously H223), and note that Molecure may explore combination studies with checkpoint inhibitors in the future to maximise the potential of OATD-02.

As outlined in our prior note, Molecure recently shared its strategic objectives for 2023–25, which aim to enrich and diversify its clinical pipeline. These objectives include: 1) continuing the clinical development of OATD-01, aiming for therapeutic efficacy in a Phase II trial for pulmonary sarcoidosis by mid-2025 and exploring CHIT1 as a therapeutic target in additional indications; 2) advancing OATD-02’s Phase I trial in patients with solid tumours to determine safety and MTD, with potential expansion into haematological cancers and combination studies; 3) identifying lead compounds for unexplored protein targets in its preclinical portfolio; and 4) generating by the end of 2023 supportive data that could demonstrate small molecule binding to mRNA targets, and potentially lead to securing partnerships in 2024/25. Additionally, Molecure plans to enhance early-stage drug development efficiency through AI collaborations and reduce its validation to clinical candidate selection time and cost by 50% by 2025.

For the first nine months of FY23 (9M23), Molecure reported total revenue (including other operational revenue) of PLN1.3m, mainly comprising domestic research grants. Total operating expenses at PLN16.3m in 9M23 were PLN4.3m higher than the prior-year period, due to increased research costs associated with the advancement of the company’s clinical development pipeline, higher personnel expenses and enhanced costs of external research services. We estimate Q323 operating expenses were c PLN5.4m.

As a result, the net loss for the 9M23 period was PLN11.5m (vs PLN9.4m in 9M22) and c PLN4.1 in Q323. As of 30 September 2023, the company had a cash balance of PLN85m, which includes the equity raise in July of c PLN50m (c $12m). Based on the H123 cash position of PLN49.6m, we estimate a Q323 overall cash burn rate of around PLN15m (which we estimate was accentuated by offering costs associated with the Q323 financing). As part of its strategic plans for 2023–25, Molecure has expanded its development pipeline into several early-stage projects, hence, we expect increased clinical activity over the medium term. An initial indication of the costs incurred on research work on such early-stage projects is shown in the table below (Exhibit 2). We note that the company plans to oversee the advancement of these projects up to the early stages of clinical-stage development, and intends to then monetise and/or out-license the related programmes (ie it does not plan to continue funding the later stages of development required for regulatory approval and commercialisation).

At end Q323, the company’s cash balance stood at PLN85m, which includes the PLN50m fund-raise (gross value) by the issue of series H shares in Q323. However, Molecure estimates that the company might require about PLN250m to complete both its clinical trials and continue the development of its early-stage projects. Hence, the company may continue to seek more sources of funds in the form of upfront payments from license agreements, grants and subsidies, share issues and debt instruments. Exhibit 3 explains in detail the budgeting expectations previously disclosed by the company in its H123 report.