AT220, which we believe to be Fresenius’s Tyenne (tocilizumab), was discussed in detail during management’s Q324 results call. In its first year post-launch in Europe it has gained impressive clinical traction, posting a 19% share within the EU5 markets. The US is also performing well, following FDA approval in March 2024, with keen interest from major buying institutions. The product-specific Q-code was granted in late-October, opening the gateway to greater uptake as prescribing hurdles are reduced. The meeting tone was upbeat, with expectations that Tyenne would be able to capitalise on being the first approved tocilizumab biosimilar. However, the timing of the Q-code means our expected adoption has been pushed out by a quarter. Adjusting for this, and uncertainty over Ogluo’s sales following the packaging issues, means we trim our forecasts for FY24 and FY25. The flow through in our rNPV model, modestly decreases valuation to £155m, or 410p/share, from £157m, or 415p/share.
| Year-end: December 31 | 2022 | 2023 | 2024E | 2025E |
| Revenues (£m) | 2.4 | 4.6 | 5.7 | 9.1 |
| Adj. PBT (£m) | (12.0) | (10.7) | (8.0) | (6.1) |
| Net Income (£m) | (9.3) | (8.6) | (9.1) | (7.1) |
| EPS (p) | (0.3) | (0.3) | (8.0) | (6.2) |
| Cash (£m) | 12.8 | 6.8 | (0.2) | (0.2) |
| EBITDA (£m) | (10.2) | (8.7) | 3.8 | 0.3 |
Update
12 November 2024
| Price | 76.0p |
| Market Cap | £28.7m |
| Enterprise Value | £24.9m |
| Shares in issue | 37.8m |
| 12-month range | 62.6p-199.0p |
| Free float | 36.4% |
| Primary exchange | AIM London |
| Other exchanges | N/A |
| Sector | Healthcare |
| Company codes | AREC.L |
| Corporate client | Yes |
Company description
Arecor Therapeutics is a clinical stage drug developer, with a well-balanced portfolio of in-house and partnered assets, and an internal focus on diabetes. Its proprietary Arestat formulation platform results 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
During the recent Q324 results presentation Fresenius management provided an upbeat update on Tyenne, its first in class biosimilar tocilizumab which references Roche’s IL-6 monoclonal antibody Actemra. Although it has not been confirmed by either Arecor or Fresenius management, we believe AT220 to be Fresenius Kabi’s tocilizumab (February 2024 Lighthouse). Notably, Tyenne is the first commercial product that incorporates the Arestat technology.
The key message is that strong momentum is building, with solid share gains across Europe, where it has now been launched in 17 countries. The share in the EU5 (as of August 2024) was 19%, with Spain at 26%, Germany 24%, UK 19%, France at 13% and Italy 3% (where it was launched in April). In the US ,the FDA approved both the IV (intravenous) and SC (subcutaneous) formulations in March 2024, with subsequent launches of the IV formulation in April and the SC version in late-June. Order shipping has already taken place with 35 major client agreements, including a number of large PBMs and IDNs (pharmacy benefit managers and integrated delivery networks, with the latter also representing large hospital groups), with new contracts being added continuously. A permanent product-specific Q-Code and pass-through payment status has been granted by CMS, which enables more efficient billing processes and a more rapid reimbursement for providers, with this billing code activated in October.
The US forms a large element of our expectations as Tyenne appears to be well positioned to capture a material market share, benefiting from being the first biosimilar available and a channel strategy that addresses a particularly receptive institutional audience. We view the Q-code grant as a major step in accessing the larger institutions and, while we retain confidence in our expectations, the timing of Q-code activation prompts us to push our US adoption curve out by around a quarter. We expect that Fresenius’ payment of the royalties owed will follow a typical ‘quarterly in arrears’ arrangement, so the change to our revenue line for FY24 is minor, but somewhat larger for FY25 (as sales grow quarter by quarter). We have also taken the opportunity to trim our expectations for Ogluo, reflecting the lack of visibility on the supply disruptions caused by the packaging issue, as we await confirmation that this has been successfully remedied and product is available again.
Arecor’s investment case centres on the prospects for its development stage diabetes and obesity franchise; in particular, on its innovative ultra-rapid ultra-concentrated insulin AT278. AT278 has the potential to enable next-generation insulin pump delivery systems allowing both miniaturisation and longer wear time, which should drive their uptake, including by Type II diabetes patients where adoption is low. Arecor is not a revenue story, hence the importance of these changes to our revenue expectations is relatively small. Nevertheless, for completeness, the effect of our changes is to reduce our FY24 revenue forecast from £6.2m to £5.7m, and FY25 revenues from £10.4m to £9.1m. Forecast net cash now stands at £3.8m and £0.3m for the 2024 and 2025 year ends respectively; this does not include any contribution from potential partnerships or deals. Our detailed forecasts are shown on Exhibit 1 (overleaf). The flow-through consequence is to reduce modestly our rNPV valuation from £157m, equivalent to 415p per share, to £155m, or 410p per share.
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