Equity research update Kancera: Heart infarction results expected soon

Equity research Kancera

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Imminent clinical milestone heralds a large price movement

Kancera’s fractalkine project is facing a very important milestone when top line results from the FRACTAL study in heart infarct patients are expected to be presented shortly (Q4). We believe that there is a good scientific rationale behind the project and that the preclinical results are promising. At the same time, cardiovascular disease is a challenging indication for clinical development. The clinical evidence for KAND567 is so far relatively limited. Overall, it is difficult to predict the outcome. The primary objective is safety, but the results will be scrutinized and assessed based on signs of clinically relevant effect that could justify further clinical development in myocardial infarction. If signals of a relevant effect are absent, we believe that the Kancera share will be severely punished (we predict a ~50 percent drop from current levels).

Conversely, the upside in the stock is significant if the FRACTAL results show a promising trend for the clinical parameters infarct size and heart function. There are currently no approved drugs to prevent injuries caused by inflammation following percutaneous coronary intervention in acute myocardial infarction. In a positive scenario, Kancera’s fractalkine inhibitors can therefore compete to achieve a prominent role in a completely new emerging market. Further clinical studies will be needed before Kancera or a major partner possibly reaches this point, but we believe that the share price can more than double in the short term if there are signs of clinical effect (which is reflected in our bull case).

Broadened clinical program and minor delays

As planned, Kancera initiated a clinical study in advanced ovarian cancer (KANDOVA) during the second quarter. A broadened clinical program to cancer makes the fractalkine project less dependent on a single indication. We view the KANDOVA study as an exciting step, not the least because Kancera is already in the phase Ib study investigating a combination with an established treatment (carboplatin) in a relevant patient population. The first top-line results are expected in the second half of 2024.

In the interim report, Kancera also communicated some minor delays in terms of reporting from the myocardial infarction study and the start of the first clinical study with the second-generation fractalkine inhibitor KAND145. The delays appear due to external factors and are, in our opinion, manageable provided the new timelines hold. Kancera predicts that the cash flow will remain at the same level for the rest of the year, which is in line with our expectations. The cash amounted to SEK 67m on June 30, 2023. The utilization of the warrants that expired in May was low, as the share price traded below the subscription price. However, given that Kancera can report positive results in FRACTAL, the prospects for future financing, for example through a partnership, should improve significantly.

We reiterate our valuation

We reiterate the valuation range and leave the fair value in the base case largely unchanged. However, the base case will be reviewed in conjunction with the FRACTAL results.

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