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Equity Research Update Kancera, Q3 2023: Pending decisive outcome

3 Dec 2023

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Carlsquare Equity Research believes that the minor delays reported in recruitment and data analysis for the cancer and heart attack programs do not significantly affect our view of the projects. Considering lower costs and other adjustments, we raise our valuation slightly. The reading of the FRACTAL study, expected in December, is anticipated to drive valuation and sentiment.

FRACTAL study outcome determines the way forward

In December, Kancera is expected to present the initial top line results from the controlled study in myocardial infarction patients undergoing coronary angioplasty (FRACTAL). A key question is whether the promising signs of biological efficacy demonstrated with Kancera’s fractalkine inhibitors in previous preclinical and clinical studies will translate into clear (if not statistically significant) signals of clinical efficacy. Since Kancera is likely unable to pursue further development in myocardial infarction on its own, a larger partner must be willing to step in. Therefore, the bar for what is a sufficiently successful result is high. External studies with other anti-inflammatory treatments in the same indication have been quite promising overall. We believe that competition in practice is limited as these studies have largely been investigator-initiated. This underlines the great potential if clinical development is successful given that 100,000 patients undergo PCI procedures annually. We anticipate the stock could more than double in the short term if there are signs of clinical efficacy (as reflected in our bull case). Even if the efficacy endpoints in myocardial infarction turn out difficult to interpret, the totality of data may still support further studies in other indications. However, these possibilities represent potential leads in clearly earlier development.

Cancer program up and running after prolonged start

Recruitment to the KANDOVA study in ovarian cancer has been slow due to inclusion criteria in the study protocol that have been too strict. Kancera has modified the criteria applied for an amended study protocol, which, together with the collaboration with NGSO, a leading Nordic network for clinical trials in gynaecological oncology, indicates a better pace of recruitment in 2024. The KANDOVA study is an exciting step, not least because Kancera is investigating a combination nation with an established treatment (carboplatin) in a relevant patient population. The clinical development of the next-generation fractalkine inhibitor KAND145 started in October. It is a critical piece of the puzzle for the cancer program, as KAND145 can be formulated in higher oral doses than KAND567.

Earnings and cash flow in Q3 surpassed our earlier expectations, attributed to lower-than-anticipated clinical activity as described above, coupled with a focus on costs.

Delays behind volatile share price

The share price experienced significant fluctuations in the last quarter, aligning with the delays in results compilation and recruitment announced in recent months. The postponement of the FRACTAL results raised concerns. However,  it appears to be attributed solely to administrative factors at the main external sponsor, the NHS. We are adjusting our base and bull scenarios slightly, increasing them by nine and six per cent, respectively. This adjustment is influenced by lower costs and our revised expectation of a somewhat earlier step-wise form of licensing, aligning with the company’s strategy.



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Equity Research Update Kancera, Q3 2023: Pending decisive outcome