IRLAB Therapeutics — Positive signs for mesdopetam in Q1 update

IRLAB Therapeutics (OMX: IRLAB-A)

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Research: Healthcare

IRLAB Therapeutics — Positive signs for mesdopetam in Q1 update

IRLAB Therapeutics has reported Q123 results, providing a financial update and highlighting its near-term strategic priorities. The company intends to present further comprehensive data from the Phase IIb mesdopetam study in FY23, while discussions with Ipsen continue regarding the next clinical steps for the drug. Patient recruitment in the PD-Falls Phase IIb pirepemat study continues as planned, with patient enrolment expected by end FY23. We see this as a positive indicator that IRLAB is on track to deliver top-line results in H124. In light of the quarterly results, we have made adjustments to our forecasts and estimate that IRLAB’s net cash position of SEK210.1m at end March is sufficient to fund operations to the end of Q124. The company’s lower net cash position has been offset slightly by rolling our model forward. Our valuation is virtually unchanged at SEK4.90bn or SEK94.7/share (previously SEK4.84bn or SEK93.3/share)

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

IRLAB Therapeutics_resized

Healthcare

IRLAB Therapeutics

Positive signs for mesdopetam in Q1 update

Q123 results

Pharma and biotech

15 May 2023

Price

SEK9.78

Market cap

SEK507m

SEK10.41/US$

Net cash (SEKm) at 31 March 2023
(ex-lease liabilities)

210.1

Shares in issue

51.8m

Free float

68%

Code

IRLABA

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(17.8)

(6.0)

(71.2)

Rel (local)

(17.7)

(5.4)

(72.9)

52-week high/low

SEK41.8

SEK9.0

Business description

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

Next events

IRL757 Phase I ready

H223

Top-line Phase IIb pirepemat data in PD-Falls

H124

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Adam McCarter

+44 (0)20 3077 5700

IRLAB Therapeutics is a research client of Edison Investment Research Limited

IRLAB Therapeutics has reported Q123 results, providing a financial update and highlighting its near-term strategic priorities. The company intends to present further comprehensive data from the Phase IIb mesdopetam study in FY23, while discussions with Ipsen continue regarding the next clinical steps for the drug. Patient recruitment in the PD-Falls Phase IIb pirepemat study continues as planned, with patient enrolment expected by end FY23. We see this as a positive indicator that IRLAB is on track to deliver top-line results in H124. In light of the quarterly results, we have made adjustments to our forecasts and estimate that IRLAB’s net cash position of SEK210.1m at end March is sufficient to fund operations to the end of Q124. The company’s lower net cash position has been offset slightly by rolling our model forward. Our valuation is virtually unchanged at SEK4.90bn or SEK94.7/share (previously SEK4.84bn or SEK93.3/share)

Year
end

Revenue
(SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/21

207.9

91.1

1.76

0.0

N/A

N/A

12/22

61.3

(113.1)

(2.18)

0.0

N/A

N/A

12/23e

0.2

(208.4)

(4.02)

0.0

N/A

N/A

12/24e

0.2

(190.2)

(3.67)

0.0

N/A

N/A

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

Collaboration with Ipsen continues

In its Q123 report, IRLAB highlighted that it remains in discussions with Ipsen (the licensee for mesdopetam) about the future, potentially registrational, clinical path for mesdopetam. However, Ipsen has still not been confirmed whether it intends to progress the drug into later studies. We note that Ipsen is currently conducting preparatory work including pharmacokinetic studies and upscale manufacturing, which, together with mesdopetam’s clinical results to date, IRLAB believes marks the drug as a Phase III-ready asset.

Cash runway to end Q124

In the light of IRLAB’s quarterly results, we have adjusted our forecasts. We now estimate FY23 R&D expenses of SEK169m (previously SEK132m) and operating losses of SEK208m (previously SEK160m). We attribute the increase in R&D expenses to ongoing patient recruitment in the Phase IIb pirepemat study, as well as development activities associated with preparing IRL757 and IRL942 for Phase I studies. We estimate that IRLAB’s net cash position of SEK210.1m at end Q123 provides an operating cash runway to end Q124.

Valuation: SEK4.90bn or SEK94.7share

We value IRLAB at SEK4.90bn or SEK94.7/share (previously SEK4.84bn or SEK93.3/share). Our valuation is largely unchanged, but is affected by the lower net cash position, which has been slightly offset by rolling our model forward by three months.

Financials and valuation

Following IRLAB’s Q123 report, we have updated our financial estimates and forecast FY23 operating losses of SEK208m (previously SEK160m), with net cash outflows from operating activities of SEK200m (previously SEK156m). The increase in operating expenses has been attributed to costs associated with the ongoing Phase IIb pirepemat study, as well as preparatory Phase I activities for IRL757 and IRL942. We expect operating losses to reduce slightly in FY24 to SEK190m due to winding down the Phase IIb mesdopetam trial by end FY23 and forecast operating cash outflows of SEK187m. As such, we estimate that IRLAB’s net cash position of SEK210.1m at end March 2023 is sufficient to fund operations to end Q124.

We estimate that IRLAB will need to raise SEK750m before becoming self-sustainable in FY28 with the projected launches of mesdopetam and pirepemat. We account for this funding as illustrative debt in our model and have distributed the raise (SEK250m per year) across three consecutive years (FY24–26). Alternatively, if funding is realised through an equity issue instead (assuming at the current trading price of SEK9.78/share), IRLAB would need to issue 76.7m shares, resulting in our per-share valuation decreasing to SEK38.1 from SEK94.7 currently (the number of shares outstanding would increase from 51.8m to 128.6m). As part of IRLAB’s licensing agreement with Ipsen for mesdopetam, it could potentially receive up to US$335m in development, regulatory and sales-based milestones, which would have an impact on its financing requirements. However, as a result of the Phase IIb mesdopetam study missing its primary endpoint, the timings of such payments are uncertain.

Our valuation of IRLAB remains largely unchanged at SEK4.90bn or SEK94.7/share (previously SEK4.84bn or SEK93.3/share). Our valuation is based on a risk-adjusted NPV calculation for the company’s lead clinical assets, mesdopetam and pirepemat (applying a 12.5% discount rate), and reflects a net cash position of SEK210.1m at end December 2022. A breakdown of our rNPV valuation is shown in Exhibit 1.

Exhibit 1: IRLAB rNPV valuation

Product

Launch

Peak

Peak sales ($m)

Value
(SEKm)

Probability

rNPV (SEKm)

rNPV/share (SEK)

Mesdopetam – PD-LIDs

2028

2034

1,268.5

5,276.8

40%

2,125.3

41.0

Mesdopetam – PD-Psychosis

2029

2035

493.7

2,316.0

30%

715.8

13.8

Pirepemat – PD-Falls (postural hypotension)

2028

2034

1,062.1

6,260.5

30%

1,853.7

35.8

Net cash at end-March 2023

 

 

210.1

100%

210.1

4.1

Valuation

 

 

14,063.4

 

4,904.8

94.7

Source: Edison Investment Research

Exhibit 2: Financial summary

Accounts: IFRS, year-end: 31 December, SEK000s

 

 

2020

2021

2022

2023e

2024e

PROFIT & LOSS

 

 

 

 

 

 

 

Total revenues

 

 

404

207,906

61,277

223

163

Cost of sales

 

 

0

0

0

0

0

Gross profit

 

 

404

207,906

61,277

223

163

Total operating expenses

 

 

(91,862)

(155,330)

(174,386)

(208,427)

(190,325)

Research and development expenses

 

 

(75,989)

(129,748)

(146,178)

(168,579)

(156,053)

EBITDA (reported)

 

 

(89,202)

56,050

(108,330)

(205,063)

(187,004)

Operating income (reported)

 

 

(91,458)

52,576

(113,109)

(208,204)

(190,162)

Operating margin %

 

 

N/A

N/A

N/A

N/A

N/A

Finance income/(expense)

 

 

(195)

(795)

(297)

(230)

(6)

Exceptionals and adjustments

 

 

0

0

0

0

0

Profit before tax (reported)

 

 

(91,653)

51,781

(113,406)

(208,434)

(190,168)

Profit before tax (normalised)

 

 

(91,394)

91,131

(113,147)

(208,434)

(190,168)

Income tax expense (includes exceptionals)

 

 

0

0

0

0

0

Net income (reported)

 

 

(91,653)

51,781

(113,406)

(208,434)

(190,168)

Net income (normalised)

 

 

(91,394)

91,131

(113,147)

(208,434)

(190,168)

Basic average number of shares, m

 

 

47.7

51.7

51.8

51.8

51.8

Basic EPS (SEK)

 

 

(1.92)

1.00

(2.19)

(4.02)

(3.67)

Adjusted EPS (SEK)

 

 

(1.92)

1.76

(2.18)

(4.02)

(3.67)

Dividend per share (SEK)

 

 

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

 

 

 

 

 

 

 

Tangible assets

 

 

4,317

8,348

8,009

5,161

2,296

Intangible assets

 

 

82,010

42,661

46,862

46,862

46,862

Other non-current assets

 

 

0

0

0

0

0

Total non-current assets

 

 

86,327

51,009

54,871

52,023

49,158

Cash and equivalents

 

 

277,009

401,897

252,776

51,550

114,248

Inventories

 

 

0

0

0

0

0

Trade and other receivables

 

 

6,732

19,543

15,908

13,522

13,522

Other current assets

 

 

0

0

0

0

0

Total current assets

 

 

283,741

421,440

268,684

65,072

127,769

Non-current loans and borrowings

 

 

0

0

0

0

250,000

Non-current lease liabilities

 

 

1,270

3,566

381

315

315

Other non-current liabilities

 

 

0

0

0

0

0

Total non-current liabilities

 

 

1,270

3,566

381

315

250,315

Accounts payable

 

 

3,683

4,634

0

0

0

Non-current loans and borrowings

 

 

0

0

0

0

0

Current lease liabilities

 

 

1,657

3,034

3,595

2,762

2,762

Deferred Income

 

 

0

42,576

0

0

0

Other current liabilities

 

 

15,578

19,158

28,748

31,623

31,623

Total current liabilities

 

 

20,918

69,402

32,343

34,385

34,385

Equity attributable to company

 

 

347,880

399,481

290,830

82,396

(107,772)

CASH FLOW STATEMENT

 

 

 

 

 

 

 

Operating income

 

 

(91,458)

52,576

(113,109)

(208,204)

(190,162)

Depreciation and amortisation

 

 

2,256

3,474

4,779

3,141

3,158

Share based payments

 

 

0

0

0

0

0

Other adjustments

 

 

(195)

38,295

(297)

(230)

(6)

Movements in working capital

 

 

183

34,296

(33,985)

5,195

0

Cash from operations (CFO)

 

 

(89,214)

128,641

(142,612)

(200,099)

(187,010)

Capex

 

 

(394)

(708)

(2,876)

(293)

(293)

Acquisitions & disposals net

 

 

0

0

(500)

0

0

Other investing activities

 

 

0

0

0

0

0

Cash used in investing activities (CFIA)

 

 

(394)

(708)

(3,376)

(293)

(293)

Net proceeds from issue of shares

 

 

257,706

(180)

0

0

0

Movements in debt

 

 

(1,616)

(2,865)

(3,134)

(833)

250,000

Other financing activities

 

 

0

0

0

0

0

Cash from financing activities (CFF)

 

 

256,090

(3,045)

(3,134)

(833)

250,000

Cash and equivalents at beginning of period

 

 

110,527

277,009

401,897

252,775

51,550

Increase/(decrease) in cash and equivalents

 

 

166,482

124,888

(149,122)

(201,225)

62,697

Effect of FX on cash and equivalents

 

 

0

0

0

0

0

Cash and equivalents at end of period

 

 

277,009

401,897

252,775

51,550

114,248

Net (debt)/cash

 

 

277,009

401,897

252,776

51,550

(135,752)

Source: Edison Investment Research, IRLAB company accounts

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 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

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 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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JDC Group — On track for a strong FY23

JDC Group (JDC) reported Q123 results in line with management’s expectations. Despite the relatively low year-on-year revenue growth of 1.4% in Q1, JDC reiterated its FY23 guidance for revenue of €175–190m based on cooperation agreements that have been signed. This translates to 17% top-line growth at the midpoint of guidance. EBITDA is still expected to be in the range of €11.5–13.0m. We have made no changes to our estimates, which are more or less at the midpoint of guidance. JDC trades at an FY24e EV/EBITDA multiple of 12.0x on our estimates, which we believe is undemanding for what is essentially a fast-scaling platform business.

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