EU approval

The share price dropped 35% upon the negative recommendation for EU approval. Partner EISAI requested a renewed CHMP decision for EU approval. The decision, expected in 2024, would have a significant impact on the share price. Valuation is pressed due to the current uncertainty.

Blood marker diagnostics

Alzheimer disease diagnostics is simplified with blood tests and the use of AI in the analysis of scans. This allows for earlier (pre-symptomatic) detection which makes the medication more effective for a growing patient population with early Alzheimer. The improved diagnostics are a potential growth driver.

LEQEMBI (lecanemab)

Alzheimer medication is marketed as LEQEMBI through a global partnership with EISAI. The drug is approved in major markets; US, Japan, China and the UK.

EU approval received a negative recommendation in July 2024.

Based on EISAI sales forecast BioArctic is expected to turn profitable in 2025, and realize >1Bkr profit in 2026 from 9% royalties. EISAI mid-term revenue forecast is 290B yen ($2B) in 2026. With the potential for substantial long-term growth as current market leader towards $5B revenue (2028).

Neuro degenerative diseases

Project portfolio with drugs to address Parkinson's disease (completed Phase 1) and other Central Nervous System (CNS) disorders like ALS (pre-clinical). After the Lecanemab success the company is well positioned for attractive strategic partnerships with global pharmaceutical companies.

Brain transporter

Long-term potential in pre-clinical Brain-transporter (BT) to transport anti-body proteins into the brain for third-parties. A patented technology (until 2037) to generally improve transportation of pharmaceuticals across the blood-brain barrier for improved efficacy to target brain diseases with reduced side-effects.

Parkinson

Phase 2 for Parkinson disease drug Exidavnemab is planned to start in 2024. Abbvie ended its partnership with BioArctic in 2022 in favor of its own medication. The FDA has however already twice declined approval of the medication.

It can be expected that BioArctic will seek a new partnership for Parkinson disease. Given the strong cash position the company has time to select the right partner.

Earnings expectations

Revenue is mainly driven by LEQEMBI royalties and some outstanding milestones. In the coming years new partnership deals are expected related to other portfolio drugs. These partnership deals will also include new milestone(s) revenue.

As the company grows the operational costs, including R&D, are increasing. In 2026 the net earnings should be near 10kr per share, which gives a forward PE of 16x. The multiple indicates that market expectations are positive for the EISAI sales targets.

Cash balance

Strong cash position of 900Mkr in Q2'24 which gives at least 2 year runway at the current burn-rate. It should be noted that cash generation from royalties is trailing revenue reporting. Additional funding by shareholders is unlikely.

Eli Lilly's Kisunla

Kisunla (Donanemab) is competing drug developed by Eli Lilly approved in July 2024. The medical results are similar to LEQEMBI although for some patient groups effects are higher, but also are the bi-effects. It would be a risk when effect proves to be significantly higher without a higher patient risk profile or treatment would be significant cheaper.

Donanemab is more effective in removing amyloid plague, but does not prevent plague. The dual effect of LEQEMBI clears plaque and protofibrils. LEQEMBI has a clinical advantage in that it continuous to clear protofibrils that damage neurons.

ARIA

In the clinical trial 12% of patients developed a form of ARIA. Since approval a few patients died due to ARIA during the treatment with LEQEMBI. Its is a risk that patient safety could be insufficient although only a few safety problems have been reported so far (far less than in the clinical trials).

Patent expiration

The patent portfolio contains 13 patent families and 240 applications. The Lecanemab patent expires in 2032 although market exclusivity could be up to 12 years (2035). The long-term growth and value depends on wider development of the portfolio to generate revenue in 2030's.