First Berlin – Cyxone AB Research Update (17/12/2020)

First Berlin Equity Research has published a research update on Cyxone AB (ISIN: SE0007815428). Analyst Christian Orquera reiterated his BUY rating and increased the price target from SEK 12.70 to SEK 16.00.

Cyxone published 9M/20 results. EBIT came in at SEK -37.0m and weaker than our estimate of SEK -33.9m (9M/19: SEK -26.1m) chiefly due to higher spending in the development pipeline. The two lead R&D programmes, Rabeximod for rheumatoid arthritis (RA) and T20K for multiple sclerosis (MS), have made substantial progress. The six-month toxicology study for Rabeximod in RA reported positive results, clearing the way for the phase IIb clinical trial. However, the design of this trial is being reassessed by the company's recently expanded team of experts who see potential to raise product value (e.g. by identifying patients that will benefit the most from the product). Phase IIb trial initiation has thus been postponed to H2/21 (previously: Q1/21). The company also revealed that Rabeximod is the previously undisclosed programme due to undergo clinical development in COVID-19 using Dr Kask's licensed technology. On 8 December, the regulatory authority in Poland approved the initiation of this phase II trial, and enrolment may start within the next few weeks. Further countries, including Slovakia, may be added soon. The results are scheduled for Q3/21. Rabeximod's IP asset base has also strengthened with five recently filed patent applications, four of them in RA and one in COVID-19. If approved, these could provide patent protection until 2041. T20K is set to start its phase I study in H2/21. The company had raised a total of SEK 41m by the end of November to fund pipeline development in the three targeted indications. Based on this news, our revised SOTP valuation model results in a higher price target of SEK 16.00 (previously: SEK 12.70). We reiterate our Buy rating.