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Published to the market and investors on 5^th September 2018 @ 1.20pm (London time).

Vicore Pharma Holding AB (VICO-SE): Post INIM, focus remains on severe lung disease
Recommendation: OUTPERFORM
Target Price: SEK43.00
Current Price: SEK18.50 (COB on 4^th September 2018)

KEY TAKEAWAY

We have updated our Vicore model for the acquisition of INIM Pharma and Q2 results. We maintain and reiterate both our target price of SEK43 and OUTPERFORM recommendation, based on our view that Vicore's lead asset VP01 (C21) in Phase IIa for idiopathic pulmonary fibrosis ("IPF") has the potential to reach peak sales of c.$1.4bn by 2030E following regulatory approval in 2023E. INIM adds a promising preclinical asset, the IMiD ("immunomodulatory imide drugs") technology to develop local treatments for severe interstitial lung disease. The initial focus will be on IPF-related cough, with a Phase I trial expected to start in 2019. Although promising, we believe it is premature to include the asset in our valuation, which currently consists of C21 revenues in IPF and net cash at YE2018E only.

INIM broadens pipeline, brings on board HealthCap and adds new CEO

On 3 July, Vicore announced the acquisition of privately-held Swedish biotech company INIM Pharma for SEK71m through an issue in kind. The enlarged Vicore, which focuses on severe and rare interstitial lung diseases, now has three major R&D programmes ongoing, of which the lead asset is Vicore's legacy product candidate VP01. Following the completion of the transaction on 20 August, leading healthcare investor HealthCap, who had been INIM's largest shareholder, owns 30.4% of Vicore. As part of the transaction, Carl-Johan Dalsgaard, CEO of INIM Pharma and a former HealthCap venture partner, was appointed CEO of Vicore Pharma, effective 1 September.

IMiD technology: reformulation of existing drugs for safer local delivery

There are three approved IMiDs, marketed by US biotech company Celgene: Revlimid (lenalidomde), Pomalyst (pomalidomide) and Thalomid (thalidomide), used mostly for multiple myeloma. INIM's technology is being used to reformulate one of these molecules for direct local lung delivery via the bronchi through inhalation. The aim is to avoid the toxicity associated with systemic therapy. Available data shows that the compound has anti-fibrotic and anti-inflammatory properties, partially mediated through the inhibition of the inflammatory cytokine TNF-alpha, making it well-suited for interstitial lung diseases, most of which involve fibrosis (scarring).

Updated model post Q2 results reflects integration of INIM

We have updated our Vicore model following Q2 results and have added our preliminary assumptions for the integration of INIM. Key elements include: (1) Addition of 8.851m shares (35.8% dilution) issued to INIM shareholders; (2) preliminary purchase price allocation ("PPA"), including SEK20m in cash and the remaining SEK50.8m in intangible assets; (3) SEK15m loan taken in May; (4) distribution of 1.983m I-Tech shares to legacy Vicore shareholders.

Kind regards,

Brigitte de Lima | Analyst

goetzpartners Healthcare Research Team | Research Team

goetzpartners securities Limited

The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.

T +44 (0) 203 859 7725 | brigitte.delima@goetzpartners.com / healthcareresearch@goetzpartners.com

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