Q4's operating loss was higher than expected, mainly due to continued higher R&D spending as well as costs related to the change of CEO. The 005-study has been concluded and the company's full attention should now be on bringing arfolitixorin to market. We estimate continued high R&D spending going forward as more sites are expected to be opened. We have tweaked our estimated fair value to SEK14-42 (SEK18-49).

Isofol reported a Q4 operating loss of cSEK55m. The reported loss was above our estimate of cSEK38m due to increased spending on R&D and higher personnel costs. The increase in personnel costs was attributed mainly to a one-off due to the management change, with severance pay for the resigning CEO. The R&D increase related to the intensified work with the ongoing phase III study. Isofol had an end-Q3 cash position of cSEK127m with a quarterly burn rate of cSEK63m.

Continued progress in phase III study - first patient in Japan included. The ongoing phase III study AGENT is progressing and has randomised 200+ of the planned 440 patients. The first patient has been included in Japan and the study is now being run at 80+ clinics in the US, Canada, Europe, Australia, and Japan with the aim of adding 19 additional sites in Japan and Australia. At the current recruitment rate, we are likely to see 330 patients included in Q2 2020, which are required for the interim analysis. We are likely looking at a potential positive trigger with the communication of interim data around end-2020. The company is evaluating options to secure medium- and long-term financing and we see it as likely that a capital raise will occur following the interim readout.

ISO-CC-005 concluded - expects to present data at ESMO. During the quarter, Isofol decided to conclude its 005-study as the study had fulfilled its purpose of establishing an effective and safe dose for AGENT, as well as generating additional safety and efficacy data. The company plans to present data from the study at ESMO 2020 in September. We believe this is a sound decision as, given that the trial has achieved its objective, resources and focus can be dedicated fully to the development of the AGENT study.

We have adjusted our fair value assessment for Isofol to SEK14-42 (SEK18-49). Following the Q4 report, we have raised our R&D estimates to better reflect the ongoing clinical development. Increased spending on R&D is to be expected from a company at Isofol's stage of development, and we view it as positive that more resources are being committed to bring arfolitixorin to market.

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Best regards 
 

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Patrik Ling | DNB Markets | Equity Research | Senior Analyst Healthcare
DNB Bank ASA
Regeringsgatan 59 | Stockholm | Sweden

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David Martinsson | Markets | Equity Research | Healthcare

DNB Bank ASA, Filial Sverige
Regeringsgatan 59 | Stockholm | Sweden

https://news.cision.com/isofol-medical/r/dnb-markets--isofol-medical-fully-focused-on-agent,c3039701

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