Arecor Therapeutics

Acquisition of Tetris Pharma and £6m equity raise

Lighthouse | 01 August 2022

Share this note

  • Arecor intends to acquire Tetris Pharma, a commercial specialty pharma company that sells and distributes injectable specialty products across the UK and EU. Tetris Pharma’s key asset is Ogluo, the first ready-to-use glucagon in an easy-to-use auto-injector pen for severe hypoglycaemia in diabetics. Ogluo is the pan-EU name for Xeris’s Gvoke, where Xeris has retained US rights and granted a minimum 16-year licence agreement to Tetris Pharma. Ogluo is patent protected across EU until at least 2035.
  • An accelerated book build aims to raise c £6m at 300p/share, a modest 3.2% discount to the prior close. The acquisition consists of an initial consideration of 651,726 new shares, with an aggregate value of £2m, with a further earn-out of up to £4m payable on revenue and EBITDA targets being achieved on the first, second, and third anniversaries of deal completion. The £6m raise provides capital to accelerate Ogluo roll-out and funding to Tetris Pharma break even (expected within three years).
  • Ogluo/Gvoke is a stable glucagon formulation available in a pre-mixed, pre-filled autoinjector pen that is administered rapidly through a two-step process vs a complex eight stage process which is the current standard of care for hypoglycaemic emergencies in the UK. The UK reimbursement price is £73 per single-use pen. Ogluo was made available in December 2021 with active launch in March 2022 and 1,729 units sold to date, contributing to Tetris Pharma’s H122 sales of c £600k. Xeris launched Gvoke in the US in Q419; it now has a 22.8% US glucagon market share.
  • Ogluo fits well within Arecor’s formulation & development efforts, which seek to create products that are more effective, easier to use, more stable, clinically optimised, and commercially relevant. Tetris Pharma will now provide a sales/distribution channel that can be used for select products from Arecor’s proprietary specialty hospital franchise. Marketing of Ogluo to diabetic specialists, patient groups, and payors should also provide valuable insights for Arecor’s key AT278 and AT247 diabetes assets.

Trinity Delta view: There are several clear strategic benefits underpinning the Tetris Pharma acquisition, in our view, which we believe offers a low-cost, low-risk way to securing longer-term value for Arecor’s development efforts in Speciality Hospital Products and acceleration of revenue generation from Ogluo roll out. Currently Arecor’s formulation expertise is employed to create a portfolio of proprietary and partnered clinical assets. The partnered assets generate development and commercial milestones, plus royalties or equivalent on sales. The Tetris Pharma acquisition will allow selected future niche products to be marketed directly across Europe, providing an optimal set-up to crystallise value. Importantly, we view the in-house diabetes insulins, AT247 (ultra-rapid) and AT278 (ultra-concentrated ultra-rapid) as the key value drivers. These continue to progress well with their commercialisation strategy unchanged. As usual, we suspend our valuation and forecasts until deal completion.

Lighthouse

01 August 2022

Price310p
Market Cap£88.8m
Primary exchangeAIM London
SectorHealthcare
Company CodeAREC
Corporate clientYes

Company description

Arecor Therapeutics is a revenue-generating clinical stage drug developer, with a well-balanced portfolio of in-house and partnered programmes. Its proprietary Arestat formulation platforms result in enhanced products with lower development risks and less onerous regulatory approvals.

Analysts

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Philippa Gardner
pgardner@trinitydelta.org
+44 (0) 20 3637 5042

Disclaimer

Trinity Delta Research Limited (“TDRL”; firm reference number: 725161), which trades as Trinity Delta, is an appointed representative of Equity Development Limited (“ED”). The contents of this report, which has been prepared by and is the sole responsibility of TDRL, have been reviewed, but not independently verified, by ED which is authorised and regulated by the FCA, and whose reference number is 185325.

ED is acting for TDRL and not for any other person and will not be responsible for providing the protections provided to clients of TDRL nor for advising any other person in connection with the contents of this report and, except to the extent required by applicable law, including the rules of the FCA, owes no duty of care to any other such person. No reliance may be placed on ED for advice or recommendations with respect to the contents of this report and, to the extent it may do so under applicable law, ED makes no representation or warranty to the persons reading this report with regards to the information contained in it.

In the preparation of this report TDRL has used publicly available sources and taken reasonable efforts to ensure that the facts stated herein are clear, fair and not misleading, but make no guarantee or warranty as to the accuracy or completeness of the information or opinions contained herein, nor to provide updates should fresh information become available or opinions change.

Any person who is not a relevant person under section of Section 21(2) of the Financial Services & Markets Act 2000 of the United Kingdom should not act or rely on this document or any of its contents. Research on its client companies produced by TDRL is normally commissioned and paid for by those companies themselves (‘issuer financed research’) and as such is not deemed to be independent, as defined by the FCA, but is ‘objective’ in that the authors are stating their own opinions. The report should be considered a marketing communication for purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. TDRL does not hold any positions in any of the companies mentioned in the report, although directors, employees or consultants of TDRL may hold positions in the companies mentioned. TDRL does impose restrictions on personal dealings. TDRL might also provide services to companies mentioned or solicit business from them.

This report is being provided to relevant persons to provide background information about the subject matter of the note. This document does not constitute, nor form part of, and should not be construed as, any offer for sale or purchase of (or solicitation of, or invitation to make any offer to buy or sell) any Securities (which may rise and fall in value). Nor shall it, or any part of it, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. The information that we provide is not intended to be, and should not in any manner whatsoever be, construed as personalised advice. Self-certification by investors can be completed free of charge at www.fisma.org. TDRL, its affiliates, officers, directors and employees, and ED will not be liable for any loss or damage arising from any use of this document, to the maximum extent that the law permits.

Copyright 2022 Trinity Delta Research Limited. All rights reserved.