IRLAB Therapeutics — SEK55m loan enhances headroom past key catalysts

IRLAB Therapeutics (OMX: IRLAB-A)

Last close As at 15/06/2024

SEK13.85

−0.15 (−1.07%)

Market capitalisation

SEK726m

More on this equity

Research: Healthcare

IRLAB Therapeutics — SEK55m loan enhances headroom past key catalysts

IRLAB Therapeutics has announced a new loan facility of up to SEK55m with Formue Nord to support its development programmes. Provided the facility is fully drawn down, we estimate it will extend IRLAB’s cash runway through Q324, past key inflection points (top-line results from the pirepemat Phase IIb trial and the results from the end of Phase II meeting with the FDA, both expected in H124). Considering the market environment, we view the transaction as practical as it provides increased liquidity with limited potential dilution. The first tranche (SEK30m) is paid out on signing the agreement and the second (SEK25m) can be drawn down at IRLAB’s discretion between 22 May and 22 August 2024, provided the company’s market cap exceeds SEK550m (c 40% premium over the current SEK389m market cap). The facility is due for repayment on 22 May 2025 and SEK10m of the loan can be converted to equity. We will update our estimates for this new funding but anticipate no material changes to our valuation.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

IRLAB Therapeutics_resized

Healthcare

IRLAB Therapeutics

SEK55m loan enhances headroom past key catalysts

Financing update

Pharma and biotech

2 January 2024

Price

SEK7.50

Market cap

SEK389m

SEK9.99/US$

Net cash (SEKm) at end September 2023 (ex-lease liabilities)

118.8

Shares in issue

51.9m

Free float

68%

Code

IRLABA

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

Business description

Based in Sweden, IRLAB Therapeutics is focused on developing novel drugs for treating neurodegenerative diseases using its ISP technology platform. Its two lead assets are in late-stage clinical trials for the symptomatic treatment of Parkinson’s disease: mesdopetam (D3 antagonist) and pirepemat (PFC enhancer).

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

IRLAB Therapeutics is a research client of Edison Investment Research Limited

IRLAB Therapeutics has announced a new loan facility of up to SEK55m with Formue Nord to support its development programmes. Provided the facility is fully drawn down, we estimate it will extend IRLAB’s cash runway through Q324, past key inflection points (top-line results from the pirepemat Phase IIb trial and the results from the end of Phase II meeting with the FDA, both expected in H124). Considering the market environment, we view the transaction as practical as it provides increased liquidity with limited potential dilution. The first tranche (SEK30m) is paid out on signing the agreement and the second (SEK25m) can be drawn down at IRLAB’s discretion between 22 May and 22 August 2024, provided the company’s market cap exceeds SEK550m (c 40% premium over the current SEK389m market cap). The facility is due for repayment on 22 May 2025 and SEK10m of the loan can be converted to equity. We will update our estimates for this new funding but anticipate no material changes to our valuation.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/21

207.9

91.1

1.76

0.0

3.8

N/A

12/22

61.3

(113.1)

(2.18)

0.0

N/A

N/A

12/23e

7.2

(184.0)

(3.55)

0.0

N/A

N/A

12/24e

0.2

(202.5)

(3.90)

0.0

N/A

N/A

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

As per the announcement, the SEK55m loan facility is divided into two tranches. The first tranche of SEK30m is paid out on signing the agreement and the second tranche of SEK25m will be available to be drawn between 22 May and 22 August 2024 at IRLAB’s discretion, provided the company’s market capitalisation is greater than SEK550m. The loan is subject to a set-up fee of 5% of the loan facility (SEK1.5m for the first tranche) and carries an annual interest rate of STIBOR 3M + 10% (which translates to c 14%) to be repaid quarterly, at the end of each calendar quarter. The maturity date has been set for 22 May 2025. We note that the lender, Formue Nord Fokus, holds the right to convert SEK10m of the loan into shares at 130% of the volume-weighted average price during 10 days of trading before the date of signing the loan agreement, which we calculate would be approximately SEK7.8/share (the shares were SEK7.58 on 28 December 2023). We also note that the drawdown of the second SEK25m tranche counts on material share price appreciation (c 40%) over the next 6–8 months, which we believe is possible, provided results from the upcoming data readouts and/or FDA meeting are positive.

We calculate that this new facility, if fully drawn down, will extend IRLAB’s cash runway through Q324, providing sufficient headroom to navigate through upcoming inflection points for pirepemat and mesdopetam, with limited potential dilution for shareholders. We will update our model based on this new fundraise but expect limited impact on our valuation.

IRLAB has also announced an extension to the appointment term of Gunnar Olsson. Gunnar was originally appointed as interim CEO in February 2023 and the latest announcement states the process to replace him is ongoing. We do not expect any changes to management to affect IRLAB’s clinical development timelines.

General disclaimer and copyright

This report has been commissioned by IRLAB Therapeutics and prepared and issued by Edison, in consideration of a fee payable by IRLAB Therapeutics. 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 2024 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

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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

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by IRLAB Therapeutics and prepared and issued by Edison, in consideration of a fee payable by IRLAB Therapeutics. 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 2024 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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