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Initial coverage Modus: Promising Phase I candidate in huge market

31 Oct 2021

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Initial coverage Modus Therapeutics 1 Nov 2021

Modus Therapeutics Holding AB (Modus or the Company) has developed a com-pound that has the potential to revolutionize the treatment of sepsis/septic shock and systemic infection, also known as “blood poisoning”. The Company’s drug candidate sevuparin shows robust data from both preclinical and clinical studies and is now facing an initial Phase Ib study and a Phase IIa proof-of-concept study. Given the few treatment options and high medical need, we model peak sales of sevuparin north of $2.7 billion in 2036. In the light of this, we estimate a fair value per share for Modus of SEK 18.1.

Serious condition with high mortality

Sepsis is one of the most common serious disease conditions in society and despite modern healthcare, mortality from Sepsis remains high. In 2019, an estimated 49 mil-lion people globally developed Sepsis and of these about 11 million died, accounting for about 19.7 percent of all global disease-related deaths.

More people die annually from sepsis/septic shock than from cancer, indicating a huge market potential for sevuparin. In addition, there is currently no specific treatment for patients suffering from sepsis/septic shock. The medical need for new treatments is therefore glaringly high.

Drug candidate that makes a difference

Sevuparin has already undergone a phase II study in sickle cell anemia, with no proven efficacy. Thus, extensive safety data are already available. A successful Phase I pro-gramme has already been conducted with sevuparin. In practice, the candidate data are currently ready for a Phase II study. However, the management believes that an initial Phase Ib study in healthy volunteers with simulated disease is a safer route to go than to immediately start a Phase IIa study. This is because such a Phase Ib study may pro-vide more information on the optimal dosage for further clinical development. With solid clinical evidence behind us, we believe the probability is high for a positive outcome in the upcoming Phase Ib study, where top-line data is expected to be presented in H2 2022 and could act as a clear trigger for the Com-pany’s stock.

Data from previous studies reduce the risk

In sepsis and septic shock, the permeability of fluid in the blood vessels increases, caus-ing fluid to leave the bloodstream and blood pressure to fall. This can lead to organ fail-ure with devastating consequences for the patient. This is where Modus can make a big difference, as sevuparin is designed to stop fluid leakage and thus prevent organ failure. This would significantly improve 30-day sur-vival rates and reduce the number of patients requiring intensive care, with major cost savings for healthcare providers and society.

Low valuation given future opportuni-ties

Using a risk-adjusted DCF model, we model a fair value of SEK 18.1 per share for Modus shares over a 12-month period. We assume a market launch of sevuparin occurs in 2028 in the seven seven largest markets. We esti-mate that the Company signs a partnering agreement after executed phase IIa/b stud-ies, which is expected to occur in 2024. We expect up to USD 300 million in milestones to be received while modeling a royalty payment of 14 per cent of sevuparin’s future revenues. Given the Company’s reported safety data, we believe Modus should be defined and valued like a Phase I/II company. Given the few treatment options and high medical need, we model peak sales of the Company’s candi-date, sevuparin, of more than $2.7 billion in 2036. Given this, we estimate a fair value, at SEK 349 million within the range of SEK 242-420 million.


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Initial coverage Modus: Promising Phase I candidate in huge market