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Vicore Pharma Holding AB (VICO-SE): Novel approach to tackle fibrotic orphan diseases
Recommendation: OUTPERFORM
Target Price: SEK43.00
Current Price: SEK15.80 (cob on 21^st March 2018)

KEY TAKEAWAY

We initiate coverage of Vicore Pharma with an OUTPERFORM recommendation and a TP of SEK43, nearly three times the current share price. Vicore is a clinical-stage Swedish biotech company focused on fibrotic orphan diseases. The key driver is lead asset C21, a highly selective small molecule agonist of the angiotensin II type 2 receptor ("AT2R"), in development for idiopathic pulmonary fibrosis ("IPF"), a rapidly progressing, fatal lung disease with few, sub-optimal treatment options that nevertheless generated c.$1.8bn in 2017E sales. C21 is due to start a Phase IIa proof-of-concept trial in IPF in April / May and could enter a pivotal trial in 2020E, paving the way for regulatory approval in 2023E. We forecast peak sales of c.$1.4bn in 2030E and assume that Vicore enters a licensing deal in 2022E including $1bn in total upfront and milestone payments plus double-digit royalties on sales.

Stimulating the AT2R to enhance its tissue-protective and antifibrotic effects

Vicore focuses on stimulating the AT2R, a novel target within the blood pressure-regulating renin-angiotensin-system that mediates many tissue-protective, anti-inflammatory and antifibrotic effects. It opposes the actions of the AT1R, whose excessive activation causes high blood pressure, fibrosis and inflammation, and has therefore yielded many drug targets and therapies for over 40 years. C21 is the first metabolically stable agonist of the AT2R to have been synthesised in 2004 and has since revolutionised the field, leading to >200 peer-reviewed research papers.

Initial focus on the c.$1.8bn, high-growth IPF market

Characterised by the formation of fibrosis (scar tissue) in the lungs, IPF leads to the irreversible loss of lung function, with a prognosis worse than for most cancers. Only two drugs have been approved: Roche/InterMune's Esbriet (pirfenidone) and Boehringer Ingelheim's Ofev (nintedanib). Neither increases survival, with efficacy limited to a slowing of disease progression. Both cause debilitating gastrointestinal side effects which >30% of patients are unwilling to endure. Nevertheless, the drugs have been highly successful commercially. The need for novel therapies remains high and experts predict that future treatment will consist of combination therapy.

C21: first-in-class AT2R agonist with c.$1.4bn sales potential in IPF

C21 has demonstrated potent anti-inflammatory and antifibrotic effects in multiple preclinical disease models including pulmonary fibrosis, making it an ideal candidate for IPF. Favourable safety and tolerability were confirmed in three Phase I studies, and a Phase IIa proof-of-concept trial in IPF is due to start in April / May, with data expected in Q3/2019E. We model approval in 2023E and 2030E sales of c.$1.4bn, based on 15% penetration in the US and Europe and pricing in line with current therapies. Our valuation is entirely based on C21 revenues and hence the key risk to our recommendation is failure of the compound in Phase IIa.

Kind regards,

Brigitte de Lima, PhD, CFA | Analyst
goetzpartners Healthcare Research Team | Research Team

goetzpartners securities Limited

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