Arecor Therapeutics

TRx co-development deal centred on oral GLP-1 product

Lighthouse | 13 March 2024

Share this note

  • Arecor has partnered with TRx Biosciences to develop an oral GLP-1 (glucagon-like peptide-1) receptor agonist product. TRx Biosciences is a private drug development company with technologies that enable difficult to formulate molecules, such as lipophilic or complex compounds, to be delivered orally. This collaboration aims to exploit the complementary elements of Arecor’s Arestat platforms with TRx’s Lipicore oral delivery enabling expertise to improve the oral bioavailability of semaglutide. If this collaboration is successful, it is expected to be extended to develop other high-value peptides in commercially attractive oral delivery formulations.
  • The GLP-1 class was originally conceived to address Type II diabetes, where its proven time in range and HbA1c reduction have seen injectable products, such as Novo Nordisk’s Ozempic (semaglutide) and Eli Lilly’s Trulicity (dulaglutide), effectively supplant long-acting insulin for many patient groups. More recently, extensive clinical data showing significant weight loss have made household names of the leading products, with the commercial potential propelling valuations of the main players to new highs. Estimates vary widely but the GLP-1 receptor agonist market could surpass $100bn by 2030. Sales of the sole approved oral product, Novo Nordisk’s Rybelsus (semaglutide), were $2.8bn in 2023, despite its low oral bioavailability and requirement to be taken on an empty stomach.
  • Oral delivery is an area of unmet need representing a large opportunity, with potential to capture significant value if the key challenges can be overcome. Improved oral bioavailability has several potential benefits from the reduced dose required: lower CoGs, fewer supply constraints, better patient adherence, and potentially reduced GI side effects. Such a profile should stimulate partnering interest, as well as providing proof of concept for the development of other products where oral delivery is desirable.
  • This new deal also complements Arecor’s existing diabetes franchise. This consists of the two wholly owned fast acting insulins AT278 (ultra-rapid, ultra-concentrated) and AT247 (ultra-rapid), which are a key focus for investors given the upside potential. Data from the second Phase I study of AT278 in Type II diabetes patients are on-track for H124. Diabetes remains a huge and growing global problem and advances in insulin pumps require specialist insulins, such as Arecor’s products, to capitalise on their benefits.

Trinity Delta view: Arecor’s formulation expertise underpins both the in-house clinical pipeline and the partnered Specialty Hospital Products programmes. Investor attention is understandably focused on the diabetes franchise, hence the upcoming AT278 Phase I data are eagerly anticipated. Although still at the earliest stages, this partnership with TRx Biosciences for an oral GLP-1 product not only addresses a highly commercially attractive segment but, if successful, could provide complementary approaches that broaden Arecor’s formulation expertise to oral delivery. Our valuation, based on conservative assumptions, is £179m, equivalent to 583p per share.

Lighthouse

13 March 2024

Price135.0p
Market Cap£41.4m
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 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

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 2024 Trinity Delta Research Limited. All rights reserved.