Free to access research and investor meetings in a post-MiFID2 world.

This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.

Published to the market and investors on 13^th June 2019 @ 8.28am (BST).

Vivoryon Therapeutics (PBD-NA): Fresh funding for AD. Immuno-oncology optionality explored.
Recommendation: OUTPERFORM
Target Price: EUR 20.00 (reduced from EUR 71.00)
Current Price: EUR 5.25 (CoB on 12^th June 2019)

KEY TAKEAWAY

Vivoryon Therapeutics AG (previously known as Probiodrug AG) recently raised EUR8.2m in equity and won a $15m grant from the US NIH to partially fund the US Ph IIb trial in early Alzheimer's disease ("AD") for lead asset PQ912, a small molecule inhibitor of the two glutaminyl cyclase ("QC") isoforms QPCT and QPCTL. This has extended the cash runway to end Q1/2020E and given the company the financial means to start enrolling patients into the PQ912 Ph IIb trial in AD. Separately, a recent Nature Medicine paper (Mar-2019) identified QPCTL as a novel target for immuno-oncology ("I-O") in the context of the CD47 / SIRPα immune checkpoint and highlighted PQ912 as the only clinical-stage QPCTL inhibitor. Vivoryon is in a unique position to benefit from pharma's appetite for novel mechanisms of action in I-O and we see room for potential licensing deals for PQ912 or follow-on molecules. We set a new target price ("TP") of EUR20/share on revising our forecasts for PQ912 in AD. Retain OUTPERFORM.

EUR8.2m equity raise and $15m NIH grant trigger patient recruitment into Ph IIb in AD

PQ912 showed promising efficacy in a 120-patient, 12-week Ph IIa trial in patients with early AD, including: (1) Proof-of-mechanism, reaching 90% target occupancy; (2) significant effects on synaptic function; and (3) improvement of working memory, with significant results on the "one card back" test. Preparations for a Ph IIb trial designed to show proof-of-concept ("PoC") in early AD are ongoing, but patient recruitment has been on hold due to limited financial resources. This changed following the fundraise and the NIH award, with enrolment now scheduled to begin in Q1/2020E (Europe & US). Management previously estimated that the 250-patient, 12-month European trial would cost c.$25m and the 460-patient, 18-month US trial c.$50m, equating to c.EUR64m in total. Hence, another c.EUR40m would be required to complete the Ph IIb programme, which the company intends to raise through equity and potential pharma licensing deals.

PQ912 licensing deal for AD possible in 2022E following EU data. Approval in 2025E

The rationale behind carrying out two AD trials simultaneously is that while each one alone would provide clinical PoC in early AD, both would be required for conditional (EU) / accelerated (US) approval. Given recent events in AD including the failure of Biogen's aducanumab in Ph III in Mar-2019, we now think that it may be challenging for Vivoryon to find a licensing partner prior to PoC data. However, we believe that positive data from the shorter European trial in Q3/2022E could trigger a lucrative licensing deal. A positive outcome for the US trial in Q2/2024E would then allow the company and its potential partner to discuss conditional / accelerated approval, which could translate to market entry in 2025E. We have updated our forecasts and now forecast peak sales of c.$11.5bn in 2035E (US & Europe).

Nature paper highlighting potential of PQ912 in I-O could trigger pharma deals

A paper published in Nature Medicine describes a critical role for QPCTL in the CD47 / SIRPα immune checkpoint. Tumour cells express CD47 on the cell surface to escape destruction by the immune system, as binding of CD47 to SIRPα on myeloid cells triggers a "don't eat me" signal. The authors showed that: (1) QPCTL catalyses an important modification of CD47 at the SIRPα binding site required for the interaction; (2) interference with QPCTL activity leads to a major increase in cell killing by human neutrophils and macrophages; (3) small molecule inhibition of QPCTL with PQ912 prevents the CD47 / SIRPα interaction and enhances tumour cell killing comparable to that achieved by genetic deficiency of the CD47 checkpoint or CD47 inhibitors.

TP of EUR20 per share reflects updated forecasts for PQ912 in AD

We have updated our Vivoryon model and valuation to reflect the updated timelines for the development of PQ912 in early AD, the absence of a licensing deal until after first Ph IIb PoC data, a higher discount rate (18%) to take into account the challenging backdrop in AD, the equity fundraise and the NIH grant. The recent financing events have increased visibility on the AD programme, and we see room for upside from potential licensing deals in I-O, which are not yet captured in our valuation.

Kind regards,

Brigitte de Lima, PhD, CFA | Research Analyst

goetzpartners Healthcare Research Team | Research Team

goetzpartners securities Limited

The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.

T +44 (0) 203 859 7725 | brigitte.delima@goetzpartners.com / healthcareresearch@goetzpartners.com / londonoffice@goetzpartners.com

www.goetzpartnerssecurities.com

goetzpartners securities LinkedIn page - view updates, comments and news from goetzpartners securities Limited Healthcare Team.

Registered in England No. 04684144.

Managing Directors: Dr. Stephan Goetz and Ulrich Kinzel.

goetzpartners securities Limited - Team Members

Senior Management - Ulrich Kinzel, Brigitte de Lima and Paul W. Dunne.

Equity Research Analysts - Brigitte de Lima, Chris Redhead, Martin Piehlmeier and Kieron Banerjee.

Sales - Danny De jong.

Corporate Finance - Ulrich Kinzel, Wolf Dornbusch and Youchen Xin.

Corporate Access - Tanya Tracey and Danny De jong.

Compliance & Research Production - Paul W. Dunne.

Click here to see our privacy policy.

GPSL has a formal client relationship with Vivoryon Therapeutics AG (previously known as Probiodrug AG).

GPSL publishes and distributes "Corporate Issuer Sponsored" Research. Our Corporate Issuer Sponsored Research and investor meetings (e.g. NDRs, 1 to 1 meetings) are free to access and attend and is not classified as an inducement in a post-MiFID2 world, this is because the issuer is paying GPSL. GPSL does not offer any execution or market making services. This is a marketing communication as defined by the Financial Conduct Authority ("FCA"). The information herein is considered to be an acceptable minor non-monetary benefit as defined under FCA COBS 2.3A19(5).

If our contractual relationship with clients ceases, then please be advised that we will no longer publish equity research on the specific client and any recipients of our equity research publications should not rely on our forecasts / valuation that have previously been published in the last full company research publication. Please note that GPSL will not publish a cessation of coverage notice to the market. Also, in accordance with the provision of MiFID2 - if our clients are not contractually paying GPSL to write and publish equity research, then we will not publish any future equity research publications to the market on the issuer until all of our unpaid fees have been paid.

In accordance with the General Data Protection Regulation ("GDPR") - if you would like to be removed / unsubscribed from our CRM (also please note that you are free to contact GPSL at any time in the future to have your e-mail subscription amended), please e-mail:
londonoffice@goetzpartners.com

About GPSL: goetzpartners securities Limited is a member of the goetzpartners group, and a leading pan European investment bank and research company. We bring together a wide range of expertise, insights and innovations to advance the interests of our clients around the world. The fast-changing environment brings challenges for businesses and investors. Research innovation, digital transformation and disruptive business ideas reshuffle the corporate world at a relentless pace. Our sector knowledge and our global footprint bring together corporate intelligence and a deep understanding of the industry with a wide network of top decision makers. These collective insights help our clients to stay at the leading edge of change.

This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.

This communication (including any attachments) from goetzpartners securities Limited ("GPSL") is confidential and may contain information which is proprietary, privileged or otherwise legally protected against unauthorised use or disclosure. If you receive this communication in error or are not the intended recipient of this communication, please delete and destroy all copies in your possession, notify the sender that you have received this communication, and note that any review or dissemination of, or the taking of any action in reliance on this communication is expressly prohibited. GPSL shall not be liable for the improper or incomplete transmission of the information contained in this communication nor for any delay in its receipt or damage to your system. GPSL does not guarantee that the integrity of this communication has been maintained nor that this communication is free of viruses, interceptions or interference and makes no warranties in relation to these matters. This is not an offer or a solicitation to buy or sell securities or investment products, or an official confirmation. GPSL record electronic and phone communications in accordance with FCA and MiFID2 regulations, they will be monitored for regulatory and training purposes. GPSL is authorised and regulated by the Financial Conduct Authority of the United Kingdom (Firm Reference Number: 225563).

Click on the following link for the GPSL MiFID2 Investor Guidance Notice

GPSL Equity Research publications are available on the following aggregators and via news distribution circuits (For Institutional Use Only): AlphaMetry, AlphaSense, Bloomberg (GOET), Capital IQ, EQS, FACTSET, ResearchFN, Research Tree, RNS Reach, Sentieo and Thomson Reuters.

Please copy the below link and paste it into your browser for the full pdf version of the equity research report:

https://gp.bluematrix.com/sellside/EmailDocViewer?encrypt=9bdb5ac2-4687-4c72-b102-95aff2df6299&mime=pdf&co=gp&id=paul.dunne@goetzpartners.com&source=libraryView

Free to access research and investor meetings in a post-MiFID2 world.

This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.