VICORE PHARMA HOLDING AB Biotechnology 25 April 2019 08:01 BST FLASH NOTE Vicore Pharma Holding AB (VICO-SE) OUTPERFORM Scleroderma the second indication for VP01 (C21) Target Price SEK42.00 Current Price SEK16.65 KEY TAKEAWAY Vicore announced that it has selected diffuse systemic sclerosis ("dSSc") as the second rare disease indication for lead asset VP01 (C21), which is already in development for idiopathic pulmonary fibrosis ("IPF"). Phase IIa proof-of-concept trials for both indications are expected to start in H2/2019E, with data possible in mid-2021E. Based on the estimated prevalence and limited therapeutic options, our preliminary analysis suggests that dSSc could represent a sales opportunity for VP01 close to that in IPF, for which we forecast c.$1.5bn in peak sales in 2034E. Our valuation and hence SEK42 / share target price for Vicore only reflect risk-adjusted net present values ("rNPVs") for VP01 in IPF and for VP02 in IPF cough; hence, there is upside to our forecasts for development in additional indications. We reiterate our OUTPERFORM recommendation. Diffuse systemic sclerosis is a rare disease with high unmet need Systemic sclerosis ("SSc") - or scleroderma - is a chronic autoimmune disease mediated through fibrotic proliferation of connective tissue. It is characterised by skin thickening, and sometimes spreads to inner organs such heart, lungs and kidneys, as well as the musculoskeletal and digestive systems. It is 3 - 4 times more common in women than men. The prevalence is estimated at 150 - 400 individuals per million. There is no curative treatment and disease management therefore focuses on symptom alleviation using e.g. phototherapy, physiotherapy and glucocorticoids. Vicore intends to target the c.20% of patients presenting with the severe diffuse form and that are often treated with potent immunomodulatory drugs or autologous stem cell transplantation. Their disease can be life-threatening, depending on pulmonary, cardiac and renal involvement. Rationale for development is upregulation of AT2R, the biological target of VP01 Angiotensin II plays an important role in dSSc and the angiotensin II type 2 receptor ("AT2R") is known to be upregulated in dSSc patients. VP01 is a small molecule agonist of the AT2R that increases signalling through the receptor, thus augmenting its antifibrotic, anti-inflammatory and tissue-protective effects, as demonstrated in many relevant preclinical disease models. Market opportunity for VP01 in dSSC may be as large as in IPF While the overall SSc patient population is similar to IPF, Vicore will focus on the approx. 20% of patients with severe diffuse disease. That said, we expect the market EQUITY environment to be less competitive. There are no approved therapies - in contrast to two in IPF, Ofev (nintedanib) and Esbriet (pirfenidone) plus a few in late-stage clinical development - and to our knowledge only one compound is currently undergoing regulatory review following the submission of nintedanib to the FDA in March 2019 for RESEARCH SSc associated interstitial lung disease. Hence, if successful, VP01 could capture a higher market share in SSc than the 15% we currently assume for IPF, a market that was worth c.$2.2bn in 2018. New indication represents upside to valuation BRIGITTE DE LIMA, PHD, CFA Our fair value for Vicore only includes rNPVs for VP01 in IPF (c.70%) and VP02 in IPF cough Research Analyst (c.22%) in addition to net cash at YE2019E. Assuming a similar timeline and comparable T +44 (0) 203 897 6663 R&D costs for VP01 in dSSc as in IPF should lead to a significant increase to our valuation. [email protected] We intend to update our forecasts in due course. GOETZPARTNERS HEALTHCARE RESEARCH TEAM Research Team T +44 (0) 203 859 7725 [email protected] ERLAND STERNBY Marketing Sales T +44 (0) 203 859 7725 [email protected] This is a marketing communication. For professional investors and institutional use only. The information herein is considered to be an acceptable minor non-monetary benefit as defined under FCA COBS 2.3A19(5). GPSL is authorised and regulated by the Financial Conduct Authority (FRN 225563). GPSL does and seeks to do business with companies / issuers covered in its research reports. As a result, investors should be aware that GPSL may have a conflict of interest that could affect the objectivity of this research report. Investors should consider this research report as only a single factor in making their investment decision. GPSL has a formal client relationship with Vicore Pharma Holding AB. Please see analyst certifications, important disclosure information, and information regarding the status of analysts on pages 1 - 4 of this research report. Page 1 FINANCIAL CALENDAR COMPANY DESCRIPTION 15-May-2019: Q1/2019 results Vicore Pharma is a clinical-stage Swedish biotech company focused on the development of therapies 23-Aug-2019: Q2/2019 results for fibrotic lung diseases with no or limited treatment options. Vicore has designed, synthesized 18-Oct-2019: Q3/2019 results and patented a unique collection of small, non-peptide molecules that stimulate the angiotensin II type 2 receptor ("AT2R") within the renin angiotensin system ("RAS"). The RAS plays a critical role in maintaining blood pressure, as well as fluid and salt balance. The lead asset is VP01 (C21), a small molecule AT2R agonist in Phase IIa development for idiopathic pulmonary fibrosis ("IPF") and diffuse systemic sclerosis ("dSSc"). Vicore is leveraging its strong scientific heritage in discovering and developing AT2R agonists to both identify additional orphan indications for VP01 as well as novel follow- on compounds for development in non-orphan indications. Through the acquisition of INIM Pharma in July 2018, Vicore expanded its pipeline with the immunomodulatory imide drug ("IMiD") technology to develop local treatments for fibrotic lung diseases. The first target indication is IPF-related cough. Vicore completed its initial public offering on the Nasdaq First North Stockholm on 10 December 2015 and intends to apply for admission of trading of its shares on the Nasdaq Stockholm's main market during the course of 2019. SCENARIOS Base Case - GP Investment Case Bluesky Scenario Downside risk VP01 (C21) successfully completes the Phase VP01 demonstrates a survival benefit in VP01 fails in Phase IIa or the trial needs to be IIa proof-of-concept trial in H2/2021E and the pivotal trial in IPF and becomes stopped early due to safety issues. The VP02 enters a pivotal trial in 2022E, leading to US standard of care with peak sales >$3bn. Phase I study unexpectedly fails due to safety and European approval for IPF by YE2025E VP02 demonstrates a functional benefit issues or VP02 fails to provide a meaningful and launch in 2026E. VP01 demonstrates comparable to approved drugs allowing for benefit in IPF cough. Vicore is unable to raise similar efficacy to current treatments but an comparable pricing and hence higher peak additional funds in 2022E required to take improved safety profile and achieves peak sales. both VP01 and VP02 through to approval. sales of c.$1.5bn. VP02 enters a pivotal trial in IPF cough in 2022E and both approval and launch occur in 2025E. Peak sales exceed $700m based on an improvement in quality of life only. Vicore commercialises both products on its own. Peer Group Analysis SWOT INDUSTRY EXPECTATIONS Strengths: Novel, patented approach for Idiopathic pulmonary fibrosis is a relatively the treatment of fibrotic orphan diseases. "common" orphan disease with high unmet Strong scientific rationale and preclinical medical need, since the two current data supporting the development of VP01 in treatment options are associated with IPF. VP02 is a new formulation of a validated limited efficacy and poor tolerability. IMiD that has shown activity in the lead The IPF market was worth c.$1.8bn in indication (IPF cough). 2017E (up c.25% YoY), experiencing high growth since Esbriet (pirfenidone) and Ofev Weaknesses: Both lead pipeline assets (nintedanib) were approved in 2011 and are early stage (Phase I and preclinical). 2014, respectively. We expect combined Company is dependent on raising further sales to exceed $2.3bn in 2018E. Experts funds to finance the full development of its predict that the future treatment paradigm lead assets. will consist of combination therapy, which should allow multiple therapies with Opportunities: Develop VP01 for other complementary mechanisms of action to be fibrotic orphan indications beyond IPF, successful. follow-on compounds in non-orphan indications with support from partners, and VP02 for IPF. Threats: A competitor drug demonstrates a survival benefit in pivotal trials and enters the market before VP01, potentially limiting its market opportunity. Drugs in development for IPF also show a significant, clinically meaningful effect on IPF cough. This is a marketing communication. For professional investors and institutional use only. The information herein is considered to be an acceptable minor non-monetary benefit as defined under FCA COBS 2.3A19(5). GPSL is authorised and regulated by the Financial Conduct Authority (FRN 225563). GPSL does and seeks to do business with companies / issuers covered in its research reports. As a result, investors should be aware that GPSL may have a conflict of interest that could affect the objectivity of this research report. Investors should consider this research report as only a single factor in making their investment decision. GPSL has a formal client relationship with Vicore Pharma Holding AB. Please see analyst certifications, important disclosure information, and information regarding the status of analysts on pages 1 - 4 of this research report. Page 2 Important Disclosures: Non-Independent Research Analyst Certification I, Brigitte de Lima, PhD, CFA, hereby certify that the views regarding the companies and their securities expressed in this research report are accurate and are truly held. I have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this research report.