Ascelia Pharma (One-pager): Shares continue to slide implying low investor confidence the company will successfully launch Orviglance

Following the completion of the SPARKLE study and subsequent release of very strong headline data from the study earlier this year, Ascelia Pharma shares was markedly up in the first half of the year until July 10th where Ascelia Pharma announced its decision to carry out a rights issue. Since the announcement, Ascelia Pharma’s share has dropped almost 80 percent which has made us revisit our company guided DCF-model to update our One-Pager to see how the market currently implicitly assesses the likelihood for Ascelia Pharma to successfully launch Orviglance together with a partner.

Importantly, there is no change in the model from an operational and scientific development perspective. The models’ estimates are unchanged. As the share price has changed markedly, this means that the implicitly calculated likelihood of success is now very low. In fact, the market now believes there is just over a 10 percent chance Orviglance will be successfully launched. This is very low from an absolute perspective, and when measured relative to the historical average likelihood in the industry for new product candidates to be approved and subsequent launched which is typically 50-60 percent. As we will discuss below, investors are clearly concerned of the timing of the rights issue, but if we take a step back, it is important to remember that from a scientific perspective Ascelia Pharma expects to get a product approved based on a completed study with very strong data that will serve an unmet need in a market that will potentially be up to USD 800 annually and currently has no competitors. Also, Orviglance has the chance to get a priority status in the approval process from the regulatory authorities. This will potentially bring forward the launch of Orviglance by 6 months.

But at this point, investors are likely more focused on the timing, the motivation and diluting effect of the rights issue as Ascelia Pharma before the announcement had communicated, they had funding until the middle of 2025. At a recent event CEO Magnus Corfitzen commented on the timing and explained that as a partner agreement is keenly awaited by the investor community, a strong balance sheet could be important when the company negotiate with potential partners. CEO Magnus Corfitzen also explained that the issue is a preemptive rights issue giving all current shareholders the opportunity to participate at the low issue price following the high diluting nature of the issue. And for those investors concerned the right issue will not be fully subscribed leaving Ascelia Pharma with insufficient funding, the issue is guaranteed by almost 70 percent.

Disclaimer: HC Andersen Capital receives payment from Ascelia Pharma for a Digital IR/Corporate Visibility subscription agreement. /Claus Thestrup 1:00 PM 19-08-2024.