Analytical Report- Molecure – WSE:MOC
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Two programs in the clinical phase
In this report, we update our valuation for Molecure. Our new FV is PLN 17.4ps, implying 7% upside vs. the current price. We maintain a HOLD recommendation. Molecure has reached an important milestone in the development of the OATD02 as the project has been approved to enter the clinical phase. In our opinion, OATD-02 is the most valuable asset in Molecure's pipeline, on our forecasts accounting for approximately 60% of the company's FV. By late 2023, Molecure should be able to provide early efficacy data, while we believe the partnering window for this project is already open. On the other hand, for OATD-01, we don't expect any major efficacy or partnering news anytime soon. In our view, the risk of uncertainty for this compound is likely to persist until the clinical trial report in 2025E, and it should be difficult to partner on this project before this milestone is reached. The uncertainty and lack of a short-term partnering perspective on this project limits the upside potential of the share price.
OATD-01 to start phase II trial in sarcoidosis in 2023E. We assume that OATD-01 Phase II clinical trials in sarcoidosis will start next year and will last until 2025E. We assume a partnership contract in 2025E based on the results of Phase II clinical trials, with an upfront payment of USD 45m. We assume a probability of success of 10% due to the uncertainty surrounding Galapagos’ termination. The eventual success of Phase II clinical trials could remove the large discount from the OATD-01 valuation and unlock a large upside potential for the stock.
OATD-02 has been given the green light for starting clinical trials. In November, Molecure received regulatory approval to begin clinical trials of OATD-02. The company plans to conduct a Phase I, dose-escalation study, on up to 30-40 patients recruited at three Polish centers with advanced or metastatic solid tumors. The company said that the cost of the study should amount to approximately PLN 11m, depending on the number of cohorts and patients. We assume that Molecure will sign a partnership agreement in 2024E after the completion of Phase I (cumulative success probability: 69%). However, in our opinion, the partnering window is already open and the company could commercialize OATD-02 earlier, in Phase I, which we see as a potential upside to our valuation.
Share issue risk looms in the mid-term. During the last quarterly presentation, Molecure said that it has secured funding for 20 months, until May 2024, i.e. before the expected completion of the next clinical phases of OATD-01 and OATD-02. We believe that Molecure will first look for non-dilutive financing: grants for the OATD-01 clinical trial, venture capital financing or partnering (OATD-02 or one of the early projects), while a new share issue is the last resort.
Recommendation and valuation. We reiterate our HOLD rating for Molecure with a new FV set at PLN 17.4, implying 7% upside vs. the current price.
Analyst: Åukasz Kosiarski lukasz.kosiarski@ipopema.pl + 48 882 108 382
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