orphazyme - amazon s3 · arimoclomol in npc has obtained orphan drug, fast track, paediatric...

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Update

Equity Research 13 February 2020

KEY STATS

Ticker ORPHA.CO Market Mid cap

Share Price (DKK) 135.0 Market Cap (MDKK) 3236 Net Debt 20E (MDKK) -236 Free Float 53%

Avg. daily volume (‘000)

BEAR BASE BULL 95.0

150.0

230.0

KEY FINANCIALS (DKKm)

2017 2018 2019E 2020E 2021E 2022E Net sales 0 0 0 0 122 303 EBITDA -130 -232 -332 -514 -448 -229 EBIT -131 -232 -335 -515 -461 -242 EPS (adj.)

2017 2018 2019E 2020E 2021E 2022E EPS (adj.) -6.3 -11.5 -16.8 -19.1 16.7 -9.2 EV/Sales N/A N/A N/A N/A 14.9 6.8 EV/EBITDA N/A N/A N/A N/A N/A N/A EV/EBIT N/A N/A N/A N/A N/A N/A P/E N/A N/A N/A N/A N/A N/A

ANALYSTS

Anders Hedlund [email protected] Arvid Necander [email protected]

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Orphazyme

Orphazyme: Home run moves nearer (and with funding in place) The case for Orphazyme continues to strengthen as arimoclomol’s US early access program

reinforces a raft of positive data and regulatory progress over the past year. The company is

now on the verge of starting to harvest its lead project’s USD1bn-plus sales potential, with

launch for NPC likely next year in both Europe and the US.

Increased probability

The open-label data that the company presented recently provided additional insight.

Specifically, the sub-genetic analysis provides a plausible explanation for the lack of

statistical significance in the full data-set. This is a major factor in our increasing

probability of launch to 90% (45%).

Inflection points in the other indications

Besides arimoclomol in NPC, 2020-H1 21 should bring further important inflection points

for the case:

• Phase 2 results in Gaucher disease (H1 20)

• Phase 2/3 results in sIBM (H1 21)

• Phase 3 results in ALS (H1 21)

This update summarizes our expectations for the upcoming data in the current year

(Gaucher).

Further upside

While the share has performed strongly in recent months in response to the positive news,

we see further potential in it. After a review of our estimates, and with funding in place

beyond mid-2021, it supports an increased Base Case to DKK 150 (122) per share. Our Bull-

and Bear Case, which is based on outcomes in the pipeline for the current year, is DKK 230

and DKK 95 per share, respectively.

Orphazyme Sector: Biotech

REDEYE RATING

ORPHA.CO VERSUS OMXS30

FAIR VALUE RANGE

Financials

People

Business

REDEYE Equity Research Orphazyme 13 February 2020

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Pipeline advances

Towards launch in NPC Additional data in open label

Orphazyme has presented top-line results (12 months), a full data set for the 12-month data,

and the latest data: results from the open-label extension (OLE) part (12+12 months). In

short, our overall impression of the 12-month data is that it is promising to see a 74%

reduction in disease progression, supported by biomarker data, and an acceptable safety

profile in NPC patients. Some uncertainties in the data captured our attention, such as the

large variability in the data set and the lack of statistical significance in the full data set for the

primary endpoint (5-domain NPC-CSS: ambulation, speech, swallowing, fine motor, and

cognition). Besides, the co-primary endpoint (Clinical Global Impression of Improvement

Scale/CGI-I) did not statistically support a treatment benefit, although some directional

benefits were seen in a couple of the secondary measures.

The OLE presented at the beginning of January 2020 focused on the primary score, 5-domain

NPC-CSS. In our view, Orphazyme presented a highly plausible explanation for the lack of

statistical significance (see our note here). Statistical significance in the full data set was

observed in a subset of patients aged four years and older. This is initially disturbing as the

disease often has a very early onset. However, the OLE data showed that a genetic impact

(homozygous functional null mutations) was the driving force behind the high variability. All

patients with this genetic type were under the age of four and in the arimoclomol arm. In

Orphazyme’s trial, only 6% of the participants had this genetic mutation. Whether this

represents the overall NPC population remains to be seen, but it could entail Orphazyme

getting a well-defined label that still addresses the vast majority of the patient group. The OLE

data was also encouraging as the efficacy signal with arimoclomol has been externally

validated and as it confirms a sustained treatment effect after 12 + 12 months.

Arimoclomol in NPC has obtained orphan drug, fast track, paediatric disease, and

breakthrough therapy designations from the regulators. In January 2020, Orphazyme also

announced the availability of an early access program (EAP) in the US, which offers access to

an investigational drug before commercial launch. While the EAP is not automatically tied to

approval in the indication, we argue that, together with the received designations, it sends a

https://www.redeye.se/research/585141/orphazyme-further-npc-data-provides-further-answers

dsfdsf REDEYE Equity Research Orphazyme 13 February 2020

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signal value and truly highlight the unmet medical need in this devastating, paediatric

disease.

We expect filing in the US in H1 20 and in Europe in H2 20, at which point the regulators will

have their say. We judge the probability to 90% (previously 45%) of gaining approval for

arimoclomol in NPC. In summary, this is what we base our new probability on:

- The OLE data presented at the beginning of January provided a plausible

explanation to the large variability in the full data-set

- The received designations and EAP sends a true signal value, not least in terms of

the unmet medical need and the paediatric nature of the disease

Additional result coming in 2020 Data (ph II) in Neurological Gaucher disease

Study design

We expect to learn the top-line results from the phase II trial during H1 20. The initial

statement from the company was that the results would be presented in H2 19, which

suggests they might be released quite soon.

The phase II trial, initiated in 2018, is a six-month, placebo-controlled study, proof-of-concept

study conducted in India. By evaluating arimoclomol in Indian patients, the study evaluates

the drug in patients who are treatment naïve to the standard drug therapy: enzyme

replacement therapy (ERT).

The trial completed the enrolment of the 39 patients in August 2019. The patients were

randomized 1:1:1:1 into four treatment arms: active treatment at three different doses and

placebo. Following the placebo-controlled period, the patients rollover to a six-month

extension. The primary endpoint is the change of an established Gaucher biomarker,

chitotriosidase (CHIT1), in the serum and cerebrospinal fluid (CSF).

Our expectations

We see a clear rationale in evaluating arimoclomol in Gaucher disease:

- Preclinical data in various models suggest that arimoclomol has the potential to be

on a par with standard treatment in increasing glucocerebrosidase (Gcase) activity

- Arimoclomol is a small molecule with good brain-blood barrier (BBB) penetrance

which is a prerequisite to treat the neurological manifestations

Nonetheless, it is important to note the pure phase II profile of this trial. This is a first proof-

of-concept study that should hopefully show how to design future development in this

indication, not least to capture an efficacious dose range for arimoclomol in this indication.

We want to see a confirmed pharmacodynamic effect and BBB penetrance with arimoclomol.

In terms of the efficacy measure, it a bit more challenging in what to expect. It is good that

biomarkers, which can provide a rather objective measure of efficacy, are widely used in this

indication. However, the approved therapies (ERTs and SRTs, refer to Appendix section) that

have used the established biomarkers are mainly focused on targeting the more common

form of Gaucher disease, the type 1 form (absence of neurological symptoms). Explicit

efficacy on organ involvement and neurological symptoms, the latter is what arimoclomol

specifically targets, could become more challenging. Therefore, we will intake a holistic view


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of the results when they are presented, with biomarkers in CSF and BBB penetrance

assessed with extra scrutiny.

If the read-out is good, we see significant upside rationale for ongoing development, not only

in neurological Gaucher disease but also in a well-defined group of Parkinson’s disease

patients. Mutations in the GBA1 gene, encoding for Gcase, are one of the most well-known

genetic risk factors for developing Parkinson’s disease. An estimated 7-12% of patients with

Parkinson's disease carry a GBA1 mutation. Orphazyme could potentially address this

narrowed Parkinson’s population without necessarily abandoning its pure orphan company

profile.


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Financials Last week, Orphazyme announced the completion of a directed issue and private placement,

raising gross proceeds of DKK 745 million. Institutional and professional investors took part

in the offering, which was oversubscribed. The offering price of DKK 106 per share represents

a very low rebate to the 30 days VWAP.

The stock market reacted positively to the news; the share closed at some +3% on the

announcement day. We argue that the share reaction was well deserved. The capital raise

truly validates the case.

Recently, Orphazyme also presented a preliminary result for 2019 of approximately DKK 335

million. It entails a cash position at year-end of DKK 123 million. The financial outlook for the

current year is an operating loss of DKK 500-540 million. It took us initially by some surprise,

as we forecasted a much lower burn-rate in 2020. However, Orphazyme needs to build up its

sales & marketing organization already this year. This, in combination with three ongoing

trials, makes the burn-rate understandable. With the year-end cash position and proceeds

from the directed issue and private placement, we project that Orphazyme has the financial

muscles to support the planning activities beyond mid-2021.

In the P&L changes presented below, we update our P&L with revenues kicking in from 2021

(2020) and a higher burn-rate in the coming couple of years than previously estimated. We

also present our estimates for sales ramp-up 2020-2025, OPEX 2020-2025, and full P&L

disclosure for 2020-2022.


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Valuation Summary

Key parameters After the successful capital raise, we base our per share valuation on an updater number of

outstanding shares. The tax rate is in accordance with the Danish Law. Our WACC is updated

to reflect a somewhat lower development risk and decreased funding risk. It is important to

acknowledge the parameters we adjust to present a Base- (main scenario), Bull- (optimistic

scenario), and Bear Case (pessimistic scenario). We model Bear and Bull Case primarily

based on outcomes in Gaucher and NPC as those will be at the centre of attention in 2020.

Scenario Analysis Our Base Case constitutes our main scenario and is based on a Sum-of-the-Parts (SOTP)-

model where each pipeline project is valued separately. Based on our review of the case, we

increase our Base Case to DKK 150 per share (122):


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Summary of scenario analysis

Bear Case 95 DKK Base Case 150 DKK Bull Case 230 DKK • We estimate a

somewhat lower initial price of arimoclomol at launch compared to our Base Case

• We factor in a 70% probability instead of reaching the market in NPC, and with somewhat lower market share compared to our Base Case

• The phase II study in Gaucher disease does not demonstrate any convincing data, and we subsequently remove it from our SOTP.

See our SOTP-model above.

• We estimate a somewhat higher initial price of arimoclomol at launch compared to our Base Case

• Arimoclomol in NPC gets approved and gain market access in 2021, and factor in a somewhat higher market share compared to Base Case

• The phase II study in Gaucher disease is highly encouraging and supports continuous development into registration-based studies


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Share price discussion After mainly trading sideways since the IPO (Nov 2017), the share has had strong momentum

in the last three months. Our view is that the share comes from price levels where the case

was largely undervalued and undiscovered, especially compared to its peers. Safe to say,

Orphazyme is fairer valued at present, but we argue that there is more to give. With a recent,

successful capital raise, and a rich news flow that involves multiple late-stage readouts and

possible commercialization in NPC, we see further potential for the share in the mid-term.

Our criterion for the inclusion in the peer-cohort is rather straight-forward; orphan, late-stage,

one lead molecule, and Scandinavian-listed. We also emphasize that our peer comparison

currently has no impact on our fair values.


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Investment Case • Pure-play orphan drug company nears commercial launch

• Set for regulatory filing in NPC

• PRV provides significant, non-dilutive cash opportunity

• Additional read-outs in 2020-H1 21

Orphazyme is a pure-play orphan drug company with a late-stage clinical pipeline. Its lead project, arimoclomol,

represents an attractive commercial opportunity that could come to market in four rare disease indications

(NPC/sIBM/ALS/Gaucher) by 2024, with total peak sales potential above USD 1 billion.

Given its pipeline progress in the last couple of years, as well as the continuing commercial attractiveness of orphan

drug development, Orphazyme is a more attractive M&A target than ever in our view. A highly relevant deal is

Sucampo’s USD 200 million acquisition of Vtesse in 2017, a US biotech with only one asset – a Phase II/III NPC

project. Among the Scandinavian biotech, Alexion’s USD 855 million acquisition of Wilson Therapeutics in 2018 is

also relevant, as it shows how highly valued a more de-risked asset with strong clinical data can be.

Arimoclomol in NPC is nearest to the market. We estimate this indication’s sales potential above USD 150 million.

Orphazyme has presented top-line results (12 months), full data set over the period and, most recently, results from

the open-label extension (OLE) part (12+12 months). The 12-month top-line results showed a 74% reduction in

disease progression, supported by biomarker data. The full data set (presented at the beginning of 2019) and OLE

(presented at the beginning of 2020) gave important answers to some initial uncertainties in the data. In summary,

we now put the probability of reaching the market at a high 90%, with a launch likely in 2021 in the US and Europe.

The FDA has granted arimoclomol inclusion to the rare paediatric disease program for NPC. This means that

Orphazyme could be granted a priority review voucher (PRV) on approval in NPC. PRVs can be sold to third parties,

with recent transactions suggesting a deal size of about USD 100 million, which we factor in for 2021. It provides a

significant, non-dilutive cash opportunity for the company. Alternatively, the PRV can also be used in one of the

other programs to expedite the review process.

Orphazyme has built an ambitious pipeline around arimoclomol. Multiple late-stage readouts can be expected in

2020-2021 besides NPC:

• Phase II results in Gaucher disease (H1 20)

• Phase II/III results in sIBM (H1 21)

• Phase III results in ALS (H1 21)

Those are indications with significant medical needs and a thin treatment landscape where arimoclomol could fit

well. We apply launch probability rates of 25-45% for the three.

Counter-thesis Development risk

Orphazyme targets rare and even ultra-rare disease areas. Data for these are often complex to analyze, and the

regulatory pathway is often new territory.

Commercialization risk

Orphazyme is transforming itself from research and development-driven biotech into a commercial biopharma

company. It requires industry professionals that have undergone this journey before and understand how to harvest

commercial potential fully.


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Catalysts

Pipeline NPC: NDA submission

We expect NDA submissions of arimoclomol in H1 20 (US) and H2 20 (Europe).

IMPACT Downside Upside Time Frame

Significance Likelihood Significance Likelihood Major Unlikely Moderate Highly likely Short

Neurological Gaucher disease: Phase II results

The read-out will be the first clinical data for Gaucher patients and will set the development strategy going forward.


Significance Likelihood Significance Likelihood Moderate Possible Moderate Possible Short

sIBM: Phase II/III results

Enrolment is completed, and we expect results in H1 21.


Significance Likelihood Significance Likelihood Major Possible Major Possible Mid

ALS: Phase III results

As in sIBM, enrolment is completed, and we expect results in H1 21.


Significance Likelihood Significance Likelihood Major Possible Major Possible Mid


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Corporate Priority review voucher

Orphazyme could be granted a priority review voucher (PRV) if arimoclomol is approved for NPC. There is an

opportunity to sell the PRV to a third party. Recent PRV deals have been in the area of USD 100 million.


Significance Likelihood Significance Likelihood Moderate Possible Major Possible Medium

M&A Target

Orphazyme is a highly relevant acquisition target in our view. Recent M&A’s in the orphan space suggests that

pharma is prepared to pay a premium on de-risked assets.


Significance Likelihood Significance Likelihood Moderate Possible Major Possible -


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Appendix – Arimoclomol and the addressed rare diseases Orphazyme’s lead asset is arimoclomol; a first-in-class oral compound acquired from US biotech company Cytrx in

2011. The drug came with a range of pre-clinical and clinical data in ALS. Orphazyme is developing the drug more

broadly, addressing three additional indications to explore its full potential: Niemann Pick Disease Type C (NPC),

sporadic Inclusion Body Myositis, and Gaucher disease.

Arimoclomol acts as a heat-shock protein (HSP) amplifier. HSPs are the body’s natural response to cellular stress.

The production of HSPs is regulated by a transcription factor, heat shock factor 1 (HSF1). HSF1 is inactive under

normal conditions, but cellular stress, such as through protein misfolding, can trigger activation. Arimoclomol

amplifies and prolongs the activation of HSF1, which leads to increased production of HSPs and thereby promotes

the correct folding and disaggregation of proteins.

Arimoclomol is a small molecule that crosses the blood-brain barrier. It is intended as oral administration. It has a

favourable safety profile, as demonstrated in over 500 patients and healthy volunteers so far.

Neuropathic lysosomal storage diseases Niemann-Pick disease Type C (NPC)

NPC is a neurodegenerative disorder with early-onset and fatal outcome. When diagnosed in childhood, the patient

is unlikely to survive beyond the teenage years. The disease occurs through a genetic mutation in NPC1 (95% of

cases) or NPC2 (5% of cases), causing accumulation of lipids. The disease affects the cells of the brain, liver, and

spleen.

NPC manifests in symptoms such as loss of motor function, coordination, speech, and cognition. Due to the

incredibly rare nature of the disease and lack of good treatment options, there is little awareness of NPC among

physicians. Accordingly, the disease is often mis- and/or underdiagnosed. In the US and Europe, the estimated

prevalence is approximately 2,000.

The lack of good treatment options makes the medical need significant. In the US, no drug therapies are approved

for NPC. In Europe, only one drug is approved: Zavesca (miglustat). This works by inhibiting the first step in the

production of complex fats and later acts in the pathway, unlike arimoclomol.

Neurological Gaucher disease

Gaucher disease is a lysosomal storage disorder caused by an inherited deficiency in the lysosomal enzyme acid

beta-glucocerebrosidase (Gcase). The mutation causes an accumulation of waste lipids, particularly in

macrophages called Gaucher cells, leading to organ and tissue damage. Typical symptoms are enlarged organs

(liver and spleen), damage to bone marrow that results in significant bone destruction, anemia, and

thrombocytopenia.

It is a more common lysosomal storage disease than NPC but still with a clear orphan profile. The estimated

prevalence is 10,000-17,000 individuals, of whom up to 30% display neurological conditions affecting cognition.

There are good treatment options for type 1 Gaucher disease patients (the most common form and with the

absence of neurological symptoms) in the form of enzyme replacement therapy (ERT) and substrate reduction

therapy (SRT). Together these therapies constitute a billion-dollar sales market, despite having been approved for

decades in a couple of cases. Neither has a good effect on neurological symptoms though, leaving a true medical

need to treat neurological Gaucher disease.


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Neuromuscular disorders Amyotrophic Lateral Sclerosis (ALS)

ALS is a neurological disorder characterized by the degeneration of motor neurons in the brain and the spinal cord

nerve cells (motor neurons). Motor neurons control muscles throughout the body. When these cells die, the brain

can no longer control muscle movement. Gradually, the patient loses their ability to move, speak, eat, and breathe,

leading to severe disability, paralysis, and death. The average life expectancy after the onset of symptoms is two to

five years.

There are two different types of ALS: sporadic (SALS) and familial (FALS). The most common form is SALS,

accounting for 90-95% of cases. As it does not have a genetic component, it can affect anyone anywhere. The

average age for onset of symptoms for SALS is around 55-65 years of age.

FALS constitutes the remaining 5-10% of cases and is the inherited form of the disease. It has an earlier onset (45-

55 years of age) and more rapid progression than SALS.

According to Datamonitor, the incidence of ALS in Europe and North America was slightly above 10,000 in 2019.

Due to the short life expectancy, the estimated prevalence might only be two to five times that of the annual

incidence.

The main management of the disease is a multidisciplinary approach with neurologists, psychologists, nutritionists,

pulmonologists, physical therapists, speech therapists, and specialized nurses. More than 50 drugs have been

tested for modifying disease progression but only two have reached the market. Neither of these can halt or reverse

the disease pattern to a great extent. Another true medical need in ALS is a more accurate and early diagnosis of

the disease. As an example, there is no established biomarker.

Sporadic Inclusion Body Myositis

Sporadic Inclusion Body Myositis (sIBM) is a slowly but relentlessly progressing muscle-wasting disorder. Although

not considered a direct fatal disease, the patient usually loses their entire mobility in the 10-15 years after diagnosis.

There is no established disease cause to date, but degenerative factors such as misfolded proteins (i.e., inclusion

bodies) play a significant role.

sIBM is the most common muscle-wasting disorder among the elderly population, but it is still a rare condition. The

estimated prevalence in the US and Europe is some 30,000 individuals.

There is no approved drug therapy for sIBM. Available treatment options are supportive and focus on physical,

speech, and occupational therapy.


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Summary Redeye Rating The rating consists of three valuation keys, each constituting an overall assessment of several factors that are rated

on a scale of 0 to 1 points. The maximum score for a valuation key is 5 points.

People: 4

Relatively early in its history, the founder-led company has managed to build a solid team with expertise and experience in the

field. An experienced board backs management.

Business: 4

Orphazyme is a late-stage biotech company, but has no track record of recurring revenues. Arimoclomol represents a large

commercial opportunity in diseases with little direct competition. A potential first approval could come soon, though there are still

some hurdles to clear before sales and earnings materialize.

Financials: 1

Orphazyme (Feb 2020) completed a private placement and directed issue which, together with the current financial position,

supports runway to mid-2021.


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PROFITABILITY 2017 2018 2019E 2020E 2021E ROE 0% -46% -151% -353% 97% ROCE -42% -46% -131% -245% -90% ROIC 0% 1411% 5188% -109124% -19471% EBITDA margin -

3251450% -

5791300% -830085% -

12850900%

-366% EBIT margin -

3270100% -

5791300% -837500% -

12875900%

-377% Net margin -

3149150% -

5740000%

-834612% -12915149

%

369%

Please comment on the changes in Rating factors……

INCOME STATEMENT 2017 2018 2019E 2020E 2021E Net sales 0 0 0 0 122 Total operating costs -130 -232 -332 -514 -570 EBITDA -130 -232 -332 -514 -448 Depreciation -1 0 -3 -1 -1 Amortization 0 0 0 0 -12 Impairment charges 0 0 0 0 0 EBIT -131 -232 -335 -515 -461 Share in profits 0 0 0 0 0 Net financial items -1 -3 -4 -7 -6 Exchange rate dif. 0 0 0 0 0 Pre-tax profit -131 -235 -339 -522 -467 Tax 6 6 6 6 0 Net earnings -126 -230 -334 -517 451

BALANCE SHEET 2017 2018 2019E 2020E 2021E Assets Current assets Cash in banks 632 395 123 295 669 Receivables 11 23 19 20 25 Inventories 0 0 0 0 0 Other current assets 6 6 6 6 6 Current assets 648 423 148 320 700 Fixed assets Tangible assets 2 2 3 4 5 Associated comp. 0 0 0 0 0 Investments 0 0 0 0 0 Goodwill 0 0 0 0 0 Cap. exp. for dev. 0 0 0 0 0 O intangible rights 10 11 10 9 57 O non-current assets 0 3 14 12 10 Total fixed assets 12 15 27 25 72 Deferred tax assets 3 3 3 3 3 Total (assets) 663 441 177 348 774 Liabilities Current liabilities Short-term debt 0 0 2 2 4 Accounts payable 47 53 43 43 43 O current liabilities 0 0 0 0 0 Current liabilities 47 53 45 45 47 Long-term debt 0 0 67 57 32 O long-term liabilities 0 0 11 8 5 Convertibles 0 0 0 0 0 Total Liabilities 47 53 123 110 85 Deferred tax liab 0 0 0 0 0 Provisions 0 0 0 0 0 Shareholders' equity 616 388 54 238 689 Minority interest (BS) 0 0 0 0 0 Minority & equity 616 388 54 238 689 Total liab & SE 663 441 177 348 774

FREE CASH FLOW 2017 2018 2019E 2020E 2021E Net sales 0 0 0 0 122 Total operating costs -130 -232 -332 -514 -570 Depreciations total -1 0 -3 -1 -13 EBIT -131 -232 -335 -515 -461 Taxes on EBIT 5 5 5 5 0 NOPLAT -125 -226 -330 -510 -461 Depreciation 1 0 3 1 13 Gross cash flow -125 -226 -327 -509 -448 Change in WC 31 -7 -6 -1 -5 Gross CAPEX -13 -3 -15 1 -60 Free cash flow -107 -236 -347 -509 -513 CAPITAL STRUCTURE 2017 2018 2019E 2020E 2021E Equity ratio 93% 88% 31% 68% 89% Debt/equity ratio 0% 0% 127% 25% 5% Net debt -632 -395 -54 -236 -632 Capital employed -16 -6 0 2 57 Capital turnover rate 0.0 0.0 0.0 0.0 0.2 GROWTH 2017 2018 2019E 2020E 2021E Sales growth 0% 0% 900% -90% 3,059,1

27% EPS growth (adj) 0% 82% 45% 14% -187%

DATA PER SHARE 2017 2018 2019E 2020E 2021E EPS -6.32 -11.52 -16.75 -19.11 16.69 EPS adj -6.32 -11.52 -16.75 -19.11 16.69 Dividend 0.00 0.00 0.00 0.00 0.00 Net debt -31.70 -19.80 -2.71 -8.72 -23.38 Total shares 19.93 19.93 19.93 27.04 27.04 VALUATION 2017 2018 2019E 2020E 2021E EV 882.8 -394.6 2,407.1 2,225.4 1,829.0

SHARE INFORMATION Reuters code ORPHA.CO List Mid cap Share price 135.0 Total shares, million 27.0 Market Cap, MDKK 3236 MANAGEMENT & BOARD CEO Kim Stratton CFO Anders Vadsholt IR Chairman Georges Gemayel FINANCIAL INFORMATION FY 2019 Results February 28, 2020 H1 report August 28, 2020 ANALYSTS Redeye AB Anders Hedlund Mäster Samuelsgatan 42, 10tr [email protected] 111 57 Stockholm Arvid Necander [email protected]

SHARE PERFORMANCE GROWTH/YEAR 16/18E 1 month 44.9 % Net sales 216.2 % 3 month 164.7 % Operating profit adj 60.0 % 12 month 153.3 % EPS, just 62.8 % Since start of the year 86.5 % Equity -70.3 %

SHAREHOLDER STRUCTURE % CAPITAL VOTES Novo Holdings A/S 15.0 % 15.0 % LSP V Coöperative U.A. 13.6 % 13.6 % Sunstone Life Science Ventures Fund II K/S 9.1 % 9.1 % Coöperatieve Aescap Venture I U.A. 8.9 % 8.9 %

DCF VALUATION WACC (%) 12.0 %


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Redeye Rating and Background Definitions Company Quality

Company Quality is based on a set of quality checks across three categories; PEOPLE, BUSINESS, FINANCE. These

are the building blocks that enable a company to deliver sustained operational outperformance and attractive long-

term earnings growth.

Each category is grouped into multiple sub-categories assessed by five checks. These are based on widely

accepted and tested investment criteria and used by demonstrably successful investors and investment firms. Each

sub-category may also include a complementary check that provides additional information to assist with

investment decision-making.

If a check is successful, it is assigned a score of one point; the total successful checks are added to give a score for

each sub-category. The overall score for a category is the average of all sub-category scores, based on a scale that

ranges from 0 to 5 rounded up to the nearest whole number. The overall score for each category is then used to

generate the size of the bar in the Company Quality graphic.

People

At the end of the day, people drive profits. Not numbers. Understanding the motivations of people behind a business

is a significant part of understanding the long-term drive of the company. It all comes down to doing business with

people you trust, or at least avoiding dealing with people of questionable character.

The People rating is based on quantitative scores in seven categories:

• Passion, Execution, Capital Allocation, Communication, Compensation, Ownership, and Board.

Business

If you don’t understand the competitive environment and don’t have a clear sense of how the business will engage

customers, create value and consistently deliver that value at a profit, you won’t succeed as an investor. Knowing

the business model inside out will provide you some level of certainty and reduce the risk when you buy a stock.

The Business rating is based on quantitative scores grouped into five sub-categories:

• Business Scalability, Market Structure, Value Proposition, Economic Moat, and Operational Risks.

Financials

Investing is part art, part science. Financial ratios make up most of the science. Ratios are used to evaluate the

financial soundness of a business. Also, these ratios are key factors that will impact a company’s financial

performance and valuation. However, you only need a few to determine whether a company is financially strong or

weak.

The Financial rating is based on quantitative scores that are grouped into five separate categories:

• Earnings Power, Profit Margin, Growth Rate, Financial Health, and Earnings Quality.


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Redeye Equity Research team

Management Björn Fahlén

[email protected]

Håkan Östling

[email protected]

Technology Team Jonas Amnesten

[email protected]

Henrik Alveskog

[email protected]

Havan Hanna

[email protected]

Kristoffer Lindström

[email protected]

Erika Madebrink

[email protected]

Fredrik Nilsson

[email protected]

Tomas Otterbeck

[email protected]

Eddie Palmgren

[email protected]

Magnus Skog

[email protected]

Oskar Vilhelmsson

[email protected]

Viktor Westman

[email protected]

Linus Sigurdsson (Trainee)

[email protected]

Editorial Eddie Palmgren

[email protected]

Mark Siöstedt

[email protected]

John Hintze

[email protected]

Johan Kårestedt (Trainee)

[email protected]

Life Science Team Gergana Almquist

[email protected]

Oscar Bergman

[email protected]

Anders Hedlund

[email protected]

Arvid Necander

[email protected]

Erik Nordström

[email protected]

Klas Palin

[email protected]

Jakob Svensson

[email protected]

Ludvig Svensson

[email protected]


19

Disclaimer Important information Redeye AB ("Redeye" or "the Company") is a specialist financial advisory boutique that focuses on small and mid-cap growth companies in the Nordic region. We focus on the technology and life science sectors. We provide services within Corporate Broking, Corporate Finance, equity research and investor relations. Our strengths are our award-winning research department, experienced advisers, a unique investor network, and the powerful distribution channel redeye.se. Redeye was founded in 1999 and since 2007 has been subject to the supervision of the Swedish Financial Supervisory Authority. Redeye is licensed to; receive and transmit orders in financial instruments, provide investment advice to clients regarding financial instruments, prepare and disseminate financial analyses/recommendations for trading in financial instruments, execute orders in financial instruments on behalf of clients, place financial instruments without position taking, provide corporate advice and services within mergers and acquisition, provide services in conjunction with the provision of guarantees regarding financial instruments and to operate as a Certified Advisory business (ancillary authorization). Limitation of liability This document was prepared for information purposes for general distribution and is not intended to be advisory. The information contained in this analysis is based on sources deemed reliable by Redeye. However, Redeye cannot guarantee the accuracy of the information. The forward-looking information in the analysis is based on subjective assessments about the future, which constitutes a factor of uncertainty. Redeye cannot guarantee that forecasts and forward-looking statements will materialize. Investors shall conduct all investment decisions independently. This analysis is intended to be one of a number of tools that can be used in making an investment decision. All investors are therefore encouraged to supplement this information with additional relevant data and to consult a financial advisor prior to an investment decision. Accordingly, Redeye accepts no liability for any loss or damage resulting from the use of this analysis. Potential conflict of interest Redeye’s research department is regulated by operational and administrative rules established to avoid conflicts of interest and to ensure the objectivity and independence of its analysts. The following applies:

• For companies that are the subject of Redeye’s research analysis, the applicable rules include those established by the Swedish Financial Supervisory Authority pertaining to investment recommendations and the handling of conflicts of interest. Furthermore, Redeye employees are not allowed to trade in financial instruments of the company in question, from the date Redeye publishes its analysis plus one trading day after this date.

• An analyst may not engage in corporate finance transactions without the express approval of management and may not receive any remuneration directly linked to such transactions.

• Redeye may carry out an analysis upon commission or in exchange for payment from the company that is the subject of the analysis, or from an underwriting institution in conjunction with a merger and acquisition (M&A) deal, new share issue or a public listing. Readers of these reports should assume that Redeye may have received or will receive remuneration from the company/companies cited in the report for the performance of financial advisory services. Such remuneration is of a predetermined amount and is not dependent on the content of the analysis.

Redeye’s research coverage Redeye’s research analyses consist of case-based analyses, which imply that the frequency of the analytical reports may vary over time. Unless otherwise expressly stated in the report, the analysis is updated when considered necessary by the research department, for example in the event of significant changes in market conditions or events related to the issuer/the financial instrument. Recommendation structure Redeye does not issue any investment recommendations for fundamental analysis. However, Redeye has developed a proprietary analysis and rating model, Redeye Rating, in which each company is analyzed and evaluated. This analysis aims to provide an independent assessment of the company in question, its opportunities, risks, etc. The purpose is to provide an objective and professional set of data for owners and investors to use in their decision-making. Redeye Rating (2020-02-13)

Duplication and distribution This document may not be duplicated, reproduced or copied for purposes other than personal use. The document may not be distributed to physical or legal entities that are citizens of or domiciled in any country in which such distribution is prohibited according to applicable laws or other regulations. Copyright Redeye AB.

Rating People Business Financials

5p 12 12 4 3p - 4p 92 71 27 0p - 2p 9 30 82 Company N 113 113 113

CONFLICT OF INTERESTS

Anders Hedlund owns shares in the company : No Arvid Necander owns shares in the company : No Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.

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