Molecure — Ramp-up in preparation for busy clinical year

Molecure (WSE: MOC)

Currency in PLN

Last close As at 22/09/2023

PLN19.18

−0.10 (−0.52%)

Market capitalisation

PLN275m

Research: Healthcare

Molecure — Ramp-up in preparation for busy clinical year

In preparation for Molecure’s forthcoming clinical and preclinical R&D activities, management has secured (secondary) financing with a gross value of around PLN50m (c $12m). The Phase II trial for OATD-01, which was recently FDA approved for clinical studies as an Investigational New Drug (IND), is top priority. The company will seek EMA approval in the coming weeks so that it can proceed with Phase II studies in both the US and EU in parallel. It will also employ the proceeds to support the ongoing Phase I trial of OATD-02 in patients with solid tumours (updates expected in H223), and intensify efforts on its early-stage programmes, specifically focused on small molecule drug candidates designed to modulate underexplored protein targets and the function of mRNA. We view the capital raise as a positive development in light of the challenging macro environment.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

molecure01

Healthcare

Molecure

Ramp-up in preparation for busy clinical year

Pharma and biotech

Spotlight Update

27 July 2023

Price

PLN19.1

Market cap

PLN269m

Share price graph

Share details

Code

MOC

Listing

Warsaw Stock Exchange

Shares in issue (excluding 2.78m Series H shares from July 2023 financing)

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 designed to 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

Jitisha Malhotra

+44 (0)20 3077 5700

Molecure is a research client of Edison Investment Research Limited

In preparation for Molecure’s forthcoming clinical and preclinical R&D activities, management has secured (secondary) financing with a gross value of around PLN50m (c $12m). The Phase II trial for OATD-01, which was recently FDA approved for clinical studies as an Investigational New Drug (IND), is top priority. The company will seek EMA approval in the coming weeks so that it can proceed with Phase II studies in both the US and EU in parallel. It will also employ the proceeds to support the ongoing Phase I trial of OATD-02 in patients with solid tumours (updates expected in H223), and intensify efforts on its early-stage programmes, specifically focused on small molecule drug candidates designed to modulate underexplored protein targets and the function of mRNA. We view the capital raise as a positive development in light of the challenging macro environment.

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

4.78

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: *Diluted EPS.

Equity raise through secondary public offering

Molecure has announced the closing of a secondary public offering of 2,776,000 Series H shares at an issue price of PLN18 per share, resulting in a gross value of c PLN50m (c $12m). Management expects the funding to contribute to the implementation of its strategic plans for 2023–25. Considering the challenging nature of the current market environment, we view this capital raise as a positive step for Molecure, and believe it is supportive of the company’s ongoing R&D activities and potential for growth.

FDA gives green light for OATD-01 in Phase II

Molecure’s lead clinical asset, OATD-01, is an oral, first-in-class CHIT1 inhibitor in clinical development for the treatment of sarcoidosis. The drug has the potential to be the first disease-modifying therapy for this indication, which EvaluatePharma projects will be worth c $452m by 2028. Management also believes that the drug could expand to larger indications such as idiopathic pulmonary fibrosis (IPF) and non-alcoholic steatohepatitis (NASH). Molecure has announced that the FDA has accepted its IND application, which permits the start of clinical studies in the US. The Phase II trial, due to commence in Q423, will be a multi-centre, randomised, double-blind, placebo-controlled study (n=90) to assess the efficacy, pharmacokinetics, pharmacodynamics and safety of OATD-01 in pulmonary sarcoidosis patients. Molecure also recently announced that is has signed an agreement with contract research organisation Simbec-Orion for the Phase II trial. The agreement states that Simbec-Orion will be responsible for organising and executing the Phase II trial in full. In our view, the results of the trial (anticipated in H125) could be a significant catalyst for investor attention.

Proceeds raised to support strategic plans for 2023–25

On 18 July, Molecure announced that it had completed an equity offering, entering into subscription agreements for all 2,776,000 Series H shares (economically equivalent to common shares) offered by private placement, and within its authorised capital. The Series H shares were subscribed for by 35 investors, consisting of both new investors, and existing institutional and individual investors. The company experienced a high level of investor interest, and the offer was oversubscribed. The issue price was set at PLN18 per share, bringing the gross value of the offering to c PLN50m (c $12m). Management has communicated that it will use the capital raised to co-finance the implementation of Molecure’s strategic plans for 2023–25. Given current market conditions, we believe that the success of this equity offering is a notable achievement. Moreover, the observed interest is supportive of the company’s ongoing clinical development programmes, in our view.

Molecure’s strategic objectives for the period 2023–25 aiming to enrich, expand and diversify its clinical development pipeline are as follows:

For OATD-01 (a first-in-class CHIT1 inhibitor), Molecure aims to continue the clinical development of the asset and demonstrate therapeutic efficacy in the Phase II proof-of-concept trial in patients with pulmonary sarcoidosis.

Following FDA approval of the IND application, the Phase II study also aims to validate CHIT1 as a target and could provide data to suggest the drug may be used in additional indications such as IPF and NASH. The study is expected to commence in Q423 and final readouts are expected once the study has been completed in H125.

For OATD-02 (a first-in-class ARG1/2 dual inhibitor designed as a treatment for cancer), Molecure is determining the safety, tolerability and maximum tolerated dose (MTD) of the drug in the ongoing Phase I study in patients with advanced and/or metastatic solid tumours. We anticipate an update on the progress of this study in H223.

Once the MTD is established, Molecure plans to expand Phase I studies into haematological cancers such as acute myeloid leukaemia. After the completion of Phase I, the company may also consider combination studies, for example with checkpoint inhibitors, in selected solid tumour indications. It may either pursue this alone, or with a partner.

In the preclinical space, Molecure hopes to identify one or two advanced lead compounds for development against previously unexplored protein targets.

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. By 2025, it aims to have four to five projects in the discovery stage, and one to two projects in preclinical development.

Molecure intends to maintain focus on its platform for the discovery of small molecules which modulate mRNA translation for a multitude of diseases previously considered undruggable.

By end 2023, Molecure plans to confirm binding of several small molecules to at least one selected mRNA target, and observe the expected inhibition of translation (in vitro). By 2025, it hopes to have signed a partnership agreement in the mRNA platform space.

Molecure aims to increase the efficiency of early-stage drug development.

The company plans to pursue this goal in collaboration with a commercial partner specialised in generative artificial intelligence (AI) methods. It may also explore an AI-driven drug discovery engine approach for both mRNA and new protein targets. As a result of this already ongoing collaboration (the details of which have not yet been disclosed), Molecure intends to cut 50% of the time and cost associated with the process of therapeutic target validation to clinical candidate selection by 2025.

Molecure aims to secure at least one high-value partnership agreement within this period to support these plans. Management has also 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. In our opinion, while these goals are ambitious for a relatively short period, they may represent significant growth for the company, provided it can secure a partnership agreement to license the further development and sale of any drug candidates.

Financials

As discussed in a previous update note, in FY22 Molecure recorded total revenue growth (including other operational revenue) of 12.2% y-o-y to PLN1.64m, 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 total operating expenses, were significantly up by 49.7% y-o-y to PLN6.03m in FY22, due to increased clinical activities related to OATD-01 and OATD-02. 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 of preclinical work progressing towards the clinic. Notably, Molecure capitalises parts of its R&D expenditure, which stood at PLN30.31m in FY22 versus PLN16.38m in FY21. As at end FY22, the company reported a cash position of PLN65.62m, from PLN102.04m at end FY21, reflecting PLN36.42m in total cash outflows during the year.

Now that Molecure has revealed details of its strategy for the period 2023–25, management estimates that the execution of these plans will require capital expenditure of c PLN250m. This is approximately broken down into clinical development programmes for OATD-01 and OATD-02 (c PLN100m), discovery and preclinical development programmes (c PLN75m), general and administrative expenses (c PLN50m) and mRNA platform (c PLN25m). With existing cash and cash equivalents at c PLN50m (estimated for 30 June 2023 by management), the company needs to raise c PLN200m to complete clinical trials for OATD-01 and OATD-02 and to continue to progress its early-stage projects. Management has communicated that potential financing sources include transaction revenues such as upfront payment(s) from one or more licensing agreements, grants and subsidies, issuing new shares and/or venture debt instruments. Molecure plan to use non-dilutive sources of funding as efficiently as possible. To implement its strategic plans for 2023–25, management assumes that the required PLN200m will be financed from existing and future non-dilutive grants and subsidies (c PLN75m) and financing from capital markets and revenue from at least one partnering transaction (c PLN150m). This should leave Molecure with an excess of c PLN25m by end 2025, provided it is successful in obtaining these funds.


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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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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