EUR 848.85 For Business Accounts Only

Asarina Pharma (Buy, TP: SEK37.00) - All or nothing in women’s health We initiate coverage of Asarina Pharma with a BUY and SEK37 target price. The company is focused on the development of drug candidate Sepranolone to treat PMDD (in phase IIb developme

Asarina Pharma (ASAP SS, upgrade to Buy) - All or nothing in women’s health We initiate coverage of Asarina Pharma with a BUY and SEK37 target price. The company is focused on the development of drug candidate Sepranolone to treat PMDD (in phase IIb development, we expect top-line results in Q1 2020) and menstrual migraine (phase IIa study set for mid-2019, we expect top-line data in Q1 2021). Although the majority of the current value is related to PMDD and the company’s early stage in clinical development poses a significant risk to the case, we still find the risk/reward attractive. A significant unmet medical need exists in the treatment of PMDD. Studies estimate that c5% of fertile women (12–51 years old) worldwide suffer from premenstrual dysphoric disorder (PMDD), a disabling mental disorder that correlates with the menstrual cycle. Today’s standard of care is anti-depressant drugs and hormonal therapies, but a significant proportion of patients do not respond to these treatments and many discontinue treatment due to the side effects. Limited market competition for PMDD from other drug candidates under development, and for existing PMDD treatments, there are no approved drugs targeting the underlying mechanism of the disease. For menstrual migraine, a new class of preventive migraine drugs hit the market in 2018. Although these drugs do not specifically target menstrual migraine, we believe Sepranolone could face tough competition in this market. Ongoing PMDD study critical for Asarina Pharma. A significant milestone for the company value-wise would be meeting the primary endpoint in the ongoing phase IIb study. However, clinical development is the main risk to consider. Based on a retrospective study that analysed success probability of drug candidates in phase II development in neurology, there is a 34.4% probability that Sepranolone makes it to phase III and a 19.6% probability of reaching the market. We have applied these risk adjustments in our valuation. We also see further upside potential on its possible new pill formulation. Initiating coverage with a BUY and target price of SEK37. Our long-term risk-adjusted DCF valuation based on PMDD and menstrual migraine shows that the vast majority of the company’s value is in PMDD, the lead indication for Sepranolone. We have not included a terminal value in the model. In our view, the most critical factors affecting the valuation are the likelihood of approval (LOA), patient compliance rate, peak market uptake rate, and pricing of Sepranolone. (67 pages)