Annexin Q2 - No surprises

Annexin’s Q2 report did not offer any surprises, as expected for a pre-revenue biotech company. Operating expenses amounted to SEK-14.5m, which was more or less as expected. The cash position amounted to SEK37m, and the company mentions in the report that it has extended the cash runway to the end of Q1 2025, rather than the previously communicated Q4, as a few activities have been postponed. We have a positive interpretation of this decision as it should give the company some additional time for partnering discussions, which we expect will accelerate following the top-line readout. In line with previous communication, the company mentions that it aims for a global deal but also considers regional agreements. We have mainly focused on a regional deal (Japan) and that Annexin retains the rights in the rest of the world in our valuation. As RVO is a relatively small indication, we argue that there are several options to reach the market (regional agreements, in-house development and global license). However, the company would, in the end, need distribution. From a valuation perspective, a global licensing agreement (depending on terms) would not necessarily lead to a higher valuation, at least theoretically (more rights would be given away). Still, we think that a strong global deal with a partner with a strategic interest in RVO (and potentially oncology) would further derisk the case, especially the commercialization. As also mentioned in the CEO letter, Merck recently acquired EyeBio for up to USD3bn, including with a very significant upfront payment of USD1.3bn, to give some perspective on numbers. In the report, the company further writes that it has received increased attention, for example, at international congresses, and we again get the impression that Annexin has a strong standing amongst academics and specialists and that the results in RVO are well received so far.

Regarding the phase II RVO study: The final patient was treated in April, and the company writes in the report that the final patient concludes the last visit to the physician now in July. Results are expected later this summer (we assume August), and the company has previously stated it will finalize the study report and detailed analyses by Q3.

Rights issue fully subscribed

In late May, it was announced that the subscription rate in Annexin Pharmaceuticals' rights issue amounted to 100% and that no guarantees were needed. As a result, the company received SEK45.1m before issue costs.

We were impressed by the rights issue, which we argue signals that the majority owners and management/board have conviction in the case, including the upcoming readout in the phase II RVO trial. As the rights issue was fully subscribed, it is also clear that this view is reflected amongst other shareholders as well. From a share price perspective, it is clear that the strong outcome was a catalyst, as the share price has rallied very significantly since the end of May, likely also due to the phase II RVO readout is closing in.

Reiterate our valuation

We do some minor model housekeeping (FX, cash position) but reiterate our base case for now. We expect to return to Annexin and our model assumptions soon, as top-line data from the phase IIa RVO is expected this summer.