Commissioned research. Oasmia Pharmaceuticals. Healthcare Sweden. In waiting mode for EMA decision. 13 June Key data

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1 Commissioned research Healthcare Sweden 13 June 217 Oasmia Pharmaceuticals In waiting mode for EMA decision Proprietary drug delivery technology Oasmia is an innovative pharmaceutical development company focused on next-generation chemotherapy drugs for both human and animal applications. Its product pipeline is built on an inhouse developed drug delivery technology, XR-17, which enhances formulations by creating micelles that encapsulate the API and improve water solubility without the use of any toxic solvents. Late-stage assets Founded almost 2 years ago, Oasmia has been on a long journey, but after certain important decisions the company could soon be able to capitalise on earlier research efforts. Paclical, its lead asset and a combination of paclitaxel and XR-17, has completed ph III and is awaiting a response from EMA about market approval. Quarterly review Oasmia s Q4 report was broadly in line with our expectations, with an operating loss of SEK 37.4m. In terms of business activities, the company reiterated that it is evaluating external financing options for its veterinary activities. It also provided an update on the approval process for Paclical, as it intends to answer follow-up questions by 15 August and we believe it could receive a CHMP opinion by September. Oasmia commented on the potential structural changes in Russia, including a new partner, and revealed that Doxophos has reached the final registration phase. Estimate changes and events after the report We make no changes to our estimates as the report was largely in line with our expectations. After yesterday s report, the company announced an equity issue of SEK 164m with preferential rights for the current shareholders. The rights issue is intended to cover the company s upcoming capital needs related to registration of Paclical, ramp-up of production facilities, clinical studies and obligations to creditors. Key data Key data Country Sweden Bloomberg OASM SS Reuters OASM.ST Share price 3.5 Free float 57% Market cap (m) SEK 441 Website Next report date 1 September 217 Absolute and relative performance Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 OMX Stockholm PI Oasmia -1M -6M -12M YTD Absolute -45% -59% -68% -62% Relative -45% -69% -93% -73% Source: Thomson Reuters Estimate changes 17/18E 18/19E 19/2E Sales % % % EBIT % % % Source: Nordea Markets Summary table - key figures SEKm 212/13 213/14 214/15 215/16 216/17 217/18E 218/19E 219/2E Total revenue growth -3% -44% 71% -8% 765% 257% 144% EBIT (adj.) margin n.m. n.m. n.m. n.m. n.m. n.m. n.m. 2.9% EPS growth n.m. n.m. n.m. n.m. n.m. n.m. n.m. DPS P/E n.m. n.m. n.m. n.m. n.m. n.m. n.m. 5.4 EV/EBIT n.m. n.m. n.m. n.m. n.m. n.m. n.m. 8. EV/Sales RoE -24.4% -35.% -35.5% -4.6% -51.1% -37.6% -35.3% 44.6% Div. yield.%.%.%.%.%.%.%.% FCF yield -14.5% -7.6% -9.1% -8.5% -15.1% -3.7% -23.5% 2.1% ND/EBITDA n.a. n.a. n.a. n.a. n.a. n.a. n.a. 2.9 Marketing material commissioned by Oasmia Pharmaceuticals 1

2 Oasmia Pharmaceuticals 5 June 217 Table of contents Quarterly overview... 3 Factors to consider when investing in Oasmia Pharmaceuticals... 5 Company overview Estimates Risk factors Glossary Reported numbers and forecasts Disclaimer Conflict of interest Issuer review Marketing material commissioned by Oasmia Pharmaceuticals 2

3 Quarterly overview Oasmia reported an operating loss of SEK 37.4m in its Q4 report, for the period between 1 February and 3 April, compared to SEK 3.6m for the same period last year. The net loss for the full year 216/17 was SEK 16m, compared to SEK 142m in the previous financial year. The company reiterated that it is evaluating strategic options to externally fund its veterinary activities. It also provided an update on the timing of the EMA process for Apealea (Paclical). The company intends to answer the follow-up questions by 15 August and we believe that it could receive a CHMP opinion in September. A strategic overview is ongoing in Russia to improve sales, and product candidate Doxophos has reached final registration phase for market approval in the region. The company reported operating losses of SEK 37.4m for Q4 Follow-up questions from EMA to be answered before 15 August Oasmia s Q4 report (covering the period between 1 February and 3 April) was broadly in line with our expectations, with an operating loss of SEK 37.4m, compared to SEK 3.6m in the same period last year. The net loss for 216/17 was SEK 16m compared to SEK 142m in the previous financial year. The increased losses were partly explained by higher net financials of SEK -2m in 216/17, compared to SEK -9m in 215/16. Business activities In terms of business activities, the company has earlier announced that it would spin off its veterinary assets to a US subsidiary to provide an ideal environment for its two product candidates, Paccal Vet and Doxophos Vet. An investment bank has been appointed and is currently evaluating external financing options to boost development and commercialisation for its products in the US, the largest pet market. An update was also provided for the human health pipeline. The application process for market authorisation in Europe regarding Apealea (Paclical) is advancing and the company intends to answer follow-up questions before 15 August, after requesting an extended clock-stop on 9 May. The situation in Russia was also addressed and the company stands firm on the potential in the region. Sales have been disappointing so far and the tender process has been more time-consuming than expected, resulting in inventory writedowns. Therefore, efforts have been made to educate clinicians about the product and Oasmia is evaluating different structural changes in the region, including changing its distributor. The company also mentioned that it is in the final registration processes with the Russian pharmaceutical authorities for product candidate Doxophos, which could provide some relief in terms of additional near-term cash flows. Financing activities On 3 December 216 Oasmia replaced a SEK 94m loan from Nexttobe AB with a new SEK 12m loan (including SEK 8m in accrued interest) at a 3.5% interest rate. The new loan is due in September 217. It also issued a SEK 26m convertible bond, replacing a SEK 28m bond that fell due on 14 April 217. The new convertible bond is due on 18 April 218 and carries an interest rate of 8.5% and can be converted at a price of SEK 12. per share. As of April 3, the company had liquid assets of SEK 28m and unutilised credit facilities totalling SEK 45m In June 216, the company issued another convertible debt instrument of SEK 42m before issue expenses. The instrument carried an interest rate of 8.5% and payment fell due on 9 June 217. Oasmia announced that it will replace this with new debt, in the form of nonnegotiable promissory notes. The new term is up to one year, but it could be repaid prematurely by Oasmia. The interest rate for the new debt is kept unchanged at 8.5%. On 31 March 217 another SEK 42m convertible bond was issued that carried no interest and exchanged for new shares at a conversion price of SEK 5.95 per share in April 217. As of 3 April 217, the company had SEK 28m in liquid assets, while interest-bearing liabilities amounted to SEK 169m, consisting of the loan to Nexttobe and convertible debt Marketing material commissioned by Oasmia Pharmaceuticals 3

4 instruments. In addition, the company had an unutilised bank credit of SEK 5m and an unutilised credit facility outstanding from principal owner Alceco International S.A. of SEK 4m. Our estimates are unchanged after the report Estimate changes As the report was largely in line with our expectations, we have not made any adjustments to our estimates. In the coming half year we expect to get more clarification on Russia, a new strategy for the veterinary assets, how to improve the financial situation and, most importantly, a decision from EMA about potential market approval for Paclical in Europe. These events could trigger both positive and negative estimate revisions, depending on the outcome. The company will host a capital markets day on 15 June, which could provide some further details of the current situation. Estimate revisions 17/18E 18/19E 19/2E Sales % % % EBIT % % % Source: Nordea Markets Rights issue of SEK 164m announced on 12 June Events after the report Yesterday, the company announced a rights issue of a maximum of 5.4m shares, amounting to SEK 164m, with preferential rights for the current shareholders. Oasmia s shareholders will receive preferential rights to subscribe to two new shares for every five existing share, ie a subscription ratio of 2:5. The price is set at SEK 3.25 per new share and the rights issue is fully covered by subscription and guarantee commitments. The capital raise is intended to cover the costs associated with executing management s strategic plan for the company. Oasmia expects its financial need to be about SEK 125m over the next 12 months and intends to allocate it as follows: Operational costs and investments related to registration of Paclical and rampup of production facilities of SEK 1m Costs related to clinical studies of SEK 1m Costs related to obligations to creditors of SEK 15m The board of directors argues that the capital it hopes to raise creates a foundation for the company to capitalise on its current strategy in the coming year. This should also bolster its negotiation position with potential partners. The last day of trading including preferential rights to participate in the rights issue is 15 June and the announcement of the final outcome of the rights issue is expected on 7 July. Marketing material commissioned by Oasmia Pharmaceuticals 4

5 Oasmia Pharmaceuticals 5 June 217 Factors to consider when investing in Oasmia Pharmaceuticals An investment in Oasmia offers exposure to a pharmaceutical development company focused on developing next-generation formulations of well-established cytostatic drugs within human and veterinary oncology. Its product pipeline is built on patented drug delivery technology XR-17, which utilises nanotechnology to improve water solubility without the use of any toxic solvents. In total, the company has five product candidates within human health and two products within veterinary health. Paclical, its lead asset, based on the well-known cytostatic drug paclitaxel in combination with XR-17, has completed ph III and is awaiting response to its marketing approval application to the European Medicines Agency. We have identified a number of key themes describing the investment case in Oasmia We consider the following factors to be key when evaluating an investment in Oasmia: A proprietary drug delivery technology that utilises nanotechnology to enhance formulations and improve water solubility without the use of any toxic solvents Focus on optimising formulations of already established chemotherapy drugs, with well-known efficacy profiles and extensive patient history, instead of new novel treatments Late-stage assets in human health, with potential to penetrate major product markets across several indications Veterinary products offer additional opportunities outside human oncology. Key risk factors: Oasmia is still in development phase and the current cash flows being generated are not enough to support its current operations in the near term Dependency on regulatory approvals and successful commercialisation of its product candidates The market for pharmaceutical products is highly competitive and we find it likely that the products and product candidates will face multiple competitors, including companies with extensive resources and established sales networks Operations in Oasmia have so far been limited to early-stage development activities, while the lack of commercial experience makes it difficult to accurately predict its future prospects. A full description of the main risk factors we find relevant for Oasmia is provided on page 25. XR-17 enhances APIs by creating micelles Technology platform with broad applications Oasmia s product pipeline is based on a platform called XR-17, which is a nanoparticle drug delivery system that facilitates the creation of optimised formulations. The technology enhances pharmaceutical substances by creating micelles that encapsulate the API and improve its water solubility without the use of any toxic solvents. This approach has broad applications and could potentially be applied across a wide array of different APIs. Another interesting characteristic is that it allows the dual encapsulation of both water-soluble and insoluble active pharmaceutical ingredients (APIs) in one nanoparticle formulation, which is the basic idea behind product candidate OAS-19. No need for toxic solvents As many efficient chemotherapy drugs are poorly soluble in water, solvents are commonly used to deliver the substance to the body. These solvents can be highly toxic and require premedication to prevent severe side effects. In many cases this can limit the Marketing material commissioned by Oasmia Pharmaceuticals 5

6 maximum dosage that can be administered, resulting in a lower efficacy of the drug. As XR-17 is non-toxic, it could allow higher dosage than with establish treatments, shorten infusion time and limit the time spent at the hospital. Technology platform Active Pharmaceutical Ingredient (API) The XR-17 molecule Micelle consisting of XR-17 and Paclitaxel Paclitaxel - A water-insoluble cytostatic - Needs to be water-soluble to be injected Source: Company data Water-soluble Focus on wellestablished compounds Efficacy and sideeffect profile are well-known Next-generation formulations of established drugs Oasmia s main focus is on developing improved formulations of already established chemotherapy substances with well-known efficacy and extensive patient history. One example is the anti-cancer molecule paclitaxel, the substance used in Oasmia s lead asset Paclical, which was discovered more than 5 years ago and remains one of the workhorses in chemotherapy treatment. As such, the company does not need prove the actual mechanism of molecule, which means quicker advancement and potentially lower clinical costs than with new novel treatments. And although chemotherapy often comes with severe side effects, we find it likely that it will still be one of the standard treatment regimens for the foreseeable future, due to its efficacy, especially when the cancer has spread. Another aspect that potentially could be favourable for chemotherapy is the relative price point, as new and more advanced treatments are likely to be more expensive. Human health pipeline Candidate Indication Pre-clinical Phase 1 Phase 2 Phase 3 Reg./ Approval Rights Geography Partner Ovarian cancer Prep. Submission USA Appealea/ Paclical (paclitaxel) Ovarian cancer Ovarian cancer Application submitted* Approved** EU RUS Breast cancer (methastatic) Global Doxophos (doxorubicin) Docecal (docetaxel) OAS-19 (combination) KB952 (new subst.) Breast cancer Hybrid Application subm. RUS Global Breast cancer Ongoing Ongoing Global Various cancer Various cancer Ongoing Ongoing Global Global Source: Company data Marketing material commissioned by Oasmia Pharmaceuticals 6

7 Animal health pipeline Candidate Indication Pre-clinical Phase 1 Phase 2 Phase 3 Paccal Vet (paclitaxel) Mast cell Planned Ongoing Reg./ Approval Geography Global (ex-jap) Global (ex-jap) Rights Partner Doxophos Vet (Doxorubicin) Lymphoma Ongoing Global Source: Company data Pending market approval application in the EU for its product candidate Paclical Late-stage assets with potential to penetrate major product markets Oasmia has five product candidates within human oncology, a market where consensus estimates global product sales of USD 112bn across all indications. Its latest-stage asset is Paclical, a next-generation formulation of established chemotherapy drug paclitaxel. Oasmia has completed a ph III trial for the product candidate and is awaiting a response to the market approval application in Europe in ovarian cancer. Upon potential approval, the company intends to file for market authorisation in the US and later expand into other cancer indications treated with paclitaxel. Global oncology sales USDbn Reported sales Forecasted (consensus estimates) Solid tumours global sales per indication Non-small cell lung cancer Breast cancer Prostate cancer Melanoma Ovarian cancer Colorectal cancer Renal cell carcinoma (RCC) Bladder cancer Cervical cancer prophylaxis Head & neck cancers Pancreatic cancer Sales 222E Sales Source: Evaluate Pharma and Nordea Markets Global oncology sales per region 25 2 USDbn Regional division 1% 8% 6% 4% 2% % US EU ROW US EU ROW Source: Evaluate Pharma and Nordea Markets Celgene reported sales of USD 973m for Abraxane in 216 The two leading paclitaxel products are Taxol (generic) and Abraxane. Taxol reached peak sales of almost USD 1.6bn in 2 before patent expiration, while Abraxane was launched by Abraxis in 25 and later acquired by Celgene for an upfront consideration of USD 2.9bn plus additional milestone payments. Celgene reported total product sales of USD 973m for Abraxane in 216 (excluding Japan). Marketing material commissioned by Oasmia Pharmaceuticals 7

8 Pipeline consists of further late-stage assets Oasmia also has another product candidate called Docecal, which is based on docetaxel in combination with XR-17. The product candidate is currently ongoing a clinical ph I trial and safety and tolerability study. Docetaxel is the active substance in Taxotere, a product marketed by Sanofi, which reached peak sales of EUR 2.1bn before patent expiration in 21. In addition, Oasmia has filed for market approval in Russia for its product candidate Doxophos as a hybrid drug (improved generic). Taxol reported sales Abraxane reported sales (excl. Japan) USDm 1,8 1,6 1,4 1,2 1, USDm 1,2 1, Source: Evaluate Pharma and Nordea Markets Geographical split 1% Abraxane estimated sales (excl. Japan) 16 8% 22% 22% 26% 32% 35% 12 6% 4% 2% 78% 78% 74% 68% 65% USDm 8 4 % US International E 218E 219E 22E 221E 222E Abraxane estimated sales Source: Evaluate Pharma and Nordea Markets Two products specifically designed for animal applications Increased focus on veterinary assets after recent strategic changes Veterinary products offer opportunities beyond human health Oasmia also has two product candidates specifically engineered for veterinary indications, an underlying market experiencing structural growth thanks to increased spending among pet owners. In the US alone, there are about 89.7 million domestic dogs according to the American Pet Products Association (APPA), and canine cancer rates are about the same as for humans. Oasmia s Paccal Vet product covers some of the most common cancers in dogs, including mammary carcinoma, squamous cell carcinoma and mast cell tumours. In addition, the company s second veterinary product candidate, Doxophos Vet, is in the final phase of clinical trials before conditional approval for lymphoma, the most common cancer among dogs. To further increase focus on the veterinary products, the company has initiated a strategic overview of its veterinary assets and will spin off all assets to a US subsidiary, including all rights for Paccal Vet and Doxophos Vet. It has hired a US financial advisor to oversee the strategic and financial options. In conjunction with this decision, Oasmia has decided to withdraw its conditional approval to change the treatment regime with a lower dosage. Its intention is to improve the safety profile by reducing side effects and improving the life quality of the pets. Marketing material commissioned by Oasmia Pharmaceuticals 8

9 Another potential benefit is that the product could be available to more veterinarians. Previously, the product was mainly available across the few hundred specialised veterinary oncologists; with the new profile it could potentially be available to the larger community of general veterinary practitioners. Oasmia intends to conduct a new minor study to change the present dosing. Total number of dogs owned in the US 1 8 In millions Source: American Pet Products Association Total number of pets owned in the US Small Animal Reptile Saltwater Fish Freshwater Fish Horse Dog Cat Bird In millions Source: American Pet Products Association Total US pet industry expenditures 75 Total revenue for veterinary services companies in the US 4 USD bn 5 25 USD bn Source: American Pet Products Association Source: US Bureau of the Census A full description of the risk factors we find most relevant is provided on page 28 Risk factors As Oasmia is still in a development phase, cash flows from current operations are not enough to support its planned activities in the near term. The company has in the past used several different financing sources and believes its prospects of securing additional funds are good. However, if it failed to raise additional funds, it would be impossible for it to continue as a going concern. In terms of near-term debt maturities, the company has a SEK 12m loan from Nexttobe AB maturing on 3 September 217. It also replaced a convertible bond on 9 June 217 with new debt of SEK 42m, in the form of non-negotiable promissory notes. The terms are one-year maturity at an 8.5% interest rate, but Oasmia can choose to exercise it prematurely. In addition, the company has an outstanding convertible bond of SEK 26m maturing in April 218. At the end of Q4 216/17 Oasmia had liquid assets of SEK 28m, an unutilised bank credit of SEK 5m and an unutilised credit facility from principal owner Alceco International of SEK 4m. Another key risk is that Oasmia is dependent on regulatory approvals and clinical trials for its product candidates to reach commercial success. These are all-or-nothing processes in the sense that a negative outcome would imply limited earnings potential. In particular, the upcoming EMA decision for Paclical will be important, as an unfavourable decision would question the validity of the remaining pipeline in human Marketing material commissioned by Oasmia Pharmaceuticals 9

10 health, although it does not necessarily imply a negative outcome for its other product candidates. The pharmaceutical industry is highly competitive and Oasmia is likely to face multiple competitors, some with superior resources. Apart from the established treatments, Oasmia might also face competition from new novel treatments that are currently under development or will be developed in the coming years. Since inception, Oasmia has focused on early-stage research activities and has not generated any significant revenue apart from milestone payments. Therefore, upon potential approval the commercial success, earnings potential and costs associated with a launch are difficult to forecast. We find it likely that the company will need to add new capabilities to penetrate the market, or undertake a strategic collaboration, and failure to do so could affect the future success. A full description of the main risk factors we find relevant for Oasmia is provided on page 25. Marketing material commissioned by Oasmia Pharmaceuticals 1

11 Oasmia Pharmaceuticals 5 June 217 Company overview Oasmia Pharmaceuticals is an innovative pharmaceutical company focused on treatments within human and veterinary oncology. The product pipeline is built on a proprietary technology platform, named XR-17, which improves solubility of active pharmaceutical ingredients (APIs). Its lead asset is Paclical, a patented formulation of the chemotherapy molecule paclitaxel in combination with XR-17, which has completed a ph III trial and is awaiting a response to the market approval application in Europe for epithelial ovarian cancer. Oasmia is a pharmaceutical development company Product candidates in human and veterinary oncology Oasmia Pharmaceutical AB is a Swedish pharmaceutical company focused on innovative treatments in the fields of human and veterinary oncology. Its products and product candidates are based on a proprietary drug delivery technology, XR-17, that utilises nanotechnology to develop novel formulations of established cytostatic drugs with potentially improved properties, reduced side effects and an extended therapeutic area. The company has five product candidates in human health and two in animal health. Its lead product is Paclical/Apealea (depending on region), a patented formulation of paclitaxel and XR-17 that has been designated orphan drug status in the EU and US for the indication epithelial ovarian cancer. The company s share is listed at Nasdaq Stockholm, Nasdaq Capital Market US and Frankfurt Stock Exchange. Company history Oasmia Pharmaceuticals was built up from a private research project in biochemistry in the 199s. Initially, the project was designed to study the ageing of cells but it later evolved into formulating more efficient cancer drugs with improved side-effect profiles compared to established treatments. In 1999, the company was officially formed and registered as Oasmia Pharmaceutical AB. Basic research behind XR-17 was finalised in 23-4 The basic research behind Oasmia s main technology platform with the excipient XR-17 was finalised in 23-4 followed by the first clinical trials for Paclical. In 25, Oasmia was listed on NGM Nordic MTF and moved into new facilities to enable in-house production. Oasmia s production facility meets the requirements of current Good Manufacturing Practice (cgmp). It also has a contract manufacturing deal with Baxter Oncology GmbH, which will be responsible for commercial production once product demand reaches a certain level. In 27 the Animal Health business area was established following promising data for Paccal Vet (Paclical for veterinary indications). Paccal Vet and Paclical later entered into clinical phase III in 27 and 28, respectively. The ph III study for Paccal Vet, the largest study in veterinary oncology at the time, according to the company, was finalised in 21 and formed the basis for registration with the FDA. Paccal Vet has been granted MUMS (Minor Uses/Minor Species, similar to orphan drug designation) status and is the first chemotherapeutic agent authorised for treatment of squamous cell carcinoma and mammary carcinoma in dogs. Overall survival data for Paclical was published in April 216 Oasmia has completed the ph III trial comparing Paclical and carboplatin to Taxol for treatment of epithelial ovarian cancer. The study met its primary end points and is the basis for the market authorisation application (MAA) submitted to EMA in February 216 and is under review. In addition, the product has already been approved for treatment of ovarian cancer in Russia and the CIS since 215. Oasmia has entered into an agreement with Pharmasyntez for commercialisation of Paclical in the region. Marketing material commissioned by Oasmia Pharmaceuticals 11

12 Oasmia key events Key events 1999 Oasmia Pharmaceuticals was founded 24 Initiated clinical trials on Paclical 25 Initiated clinical trials on Paccal Vet 26 Paclical receives orphan drug status (EMA) 27 Initiated phase III trial on Paccal Vet 28 Initiated phase III trial on Paclical 29 FDA grants Paclical orphan drug designation 21 Changes listing from NGM Equity to Nasdaq Stockholm 21 Submitted application for Paccal Vet to EMA and FDA 211 Listing on Frankfurt Stock Exchange 211 Interim results indicating non-inferiority between Paclical and Taxol 211 Contract manufacturing deal with Baxter Oncology GmbH 212 Paccal Vet and Doxophos Vet receives MUMS designation from FDA 213 Initiated development of OAS Distribution deal with Pharmasyntez for Paclical in Russia and CIS 214 Paccal Vet receives conditional approval from FDA 214 Production facility approved by FDA and EMA 215 Paclical receives market approval in Russia 215 Listing on Nasdaq Capital Market 216 Application for market approval of Appealea (Paclical) in Europé 216 Application for market approval of Doxophos in Russia 216 Positive study results for XR Initiated clinical studies with Docecal 216 Overal survival data for Paclical 217 Veterinary assets moved to US subsidary Source: Company data Product candidates based on a nanotechnology platform called XR- 17 Technology platform Oasmia s product pipeline is built upon XR-17, a nanoparticle formulation technology with broad applications. XR-17 is a vitamin A derivative that was discovered through the company s in-house R&D activities. It is designed to overcome the common challenge of water solubility in pharmaceutical development by creating a micellar formation that encapsulates a single or multiple active pharmaceutical ingredients (APIs). This approach has several potential advantages compared to established treatments such as an improved safety profile and higher efficacy. Technology platform Active Pharmaceutical Ingredient (API) The XR-17 molecule Micelle consisting of XR-17 and Paclitaxel Paclitaxel - A water-insoluble cytostatic - Needs to be water-soluble to be injected Water-soluble Source: Company data Focus on both human and veterinary oncology Business areas The nanoparticle formulation technology XR-17 is the foundation of Oasmia s product pipeline in human and veterinary oncology. Unlike many other pharmaceutical development companies, Oasmia s main focus is to find optimised formulations of already established chemotherapy drugs, with well-known efficacy profiles. This allows for quicker advancement at potentially lower costs compared to novel treatments. Its focus on both human and animal oncology drugs is also quite rare in a sector context. Marketing material commissioned by Oasmia Pharmaceuticals 12

13 Improved formulations of established cytostatic drugs Human Health Oasmia has five product candidates within human oncology. Its latest-stage asset is Paclical/Apealea, a next-generation formulation of established chemotherapy drug paclitaxel (sold under the brand name Taxol, among others), which is part of the taxane family. Paclitaxel is seen as a workhorse in chemotherapeutics, first discovered more than 5 years ago, and is used to treat a number of indications such as ovarian cancer, breast cancer, lung cancer, Kaposi sarcoma, cervical cancer and pancreatic cancer. The leading paclitaxel products are Taxol and Abraxane, two of the most widely used cancer drugs. Taxol generated almost USD 1.1bn in peak sales in 2, before patent expiration in 21. Even off patent it was still able to maintain USD 93m in sales as late as 213. Next-generation drug Abraxane, a patented nanoparticle formulation, was launched in 25 by Abraxis and was later acquired by Celgene in 21 for an upfront payment of USD 2.9bn. The product is approved for treating breast, lung and pancreatic cancers and had global sales of USD 973m in 216 (excluding Japan). Paclical, a nanoparticle formulation of paclitaxel, is the lead asset Ph III for Paclical forms the basis for a EMA application Oasmia s product candidate Paclical also uses a nanoparticle delivery method with many compelling properties compared to existing formulations. The main advantage of a nanotechnology-based delivery solution is that it does not use a solvent, such as Cremophor EL in the case of Taxol, to deliver paclitaxel. Cremophor EL has a high toxicity and requires pre-medication with steroids and antihistamines to prevent severe side effects in combination with paclitaxel. This limits the maximum dosage, and potentially the efficiency of the drug. The recommended dosage of paclitaxel for Abraxane is ~5% higher than Taxol with a maintained safety profile. On the basis of a successful ph III trial, which met its primary end-points, the company filed for market approval in the EU in February 216. Doxophos is Oasmia s second product candidate and is a patented formulation of doxorubicin in combination with XR-17. Doxorubicin is the active ingredient in the generic drugs Doxil and Adriamycin, which is used in the treatment of breast cancer, bladder cancer, Kaposi s sarcoma, lymphoma and acute lymphocytic leukaemia, among others. In December 215, Oasmia submitted a request for marketing authorisation of Doxophos as a hybrid (improved generic) in Russia. In addition, Oasmia has developed another taxane-based chemotherapy drug called Docecal for treatment of metastatic breast cancer. It is based on docetaxel, the active ingredient of Sanofi s commercially successful drug Taxotere, in combination with XR- 17. The company has initiated a clinical ph I study and a safety and tolerance study. OAS-19 enabled the combination of two chemotherapeutic drugs in one infusion OAS-19 is a proprietary drug candidate that combines two different chemotherapeutic drugs in one infusion. This is enabled by Oasmia s XR-17 technology that allows for combining two active substances in one micelle. A particularly interesting property is that it allows the combination pharmaceuticals with different degrees of water solubility. Oasmia states that the product has shown promising results in pre-clinical studies. KB952 is a substance acquired from Karo Pharma in November 216. It has shown signs of reduced side effects in combination with cytostatic in pre-clinical trials and efficacy against various sorts of cancer. Oasmia is evaluating how to develop the product further; for example, through a partnership. Marketing material commissioned by Oasmia Pharmaceuticals 13

14 Human health pipeline Candidate Indication Pre-clinical Phase 1 Phase 2 Phase 3 Prep. Submission Rights Geography Partner Ovarian cancer Prep. Submission USA Appealea/ Paclical (paclitaxel) Ovarian cancer Ovarian cancer Application submitted* Approved** EU RUS Breast cancer (methastatic) Global Doxophos (doxorubicin) Docecal (docetaxel) OAS-19 (combination) KB952 (new subst.) Breast cancer Hybrid Application subm. RUS Global Breast cancer Ongoing Ongoing Global Various cancer Various cancer Ongoing Ongoing Global Global Source: Company data Oasmia has two product candidates within Animal Health Animal Health Oasmia s pipeline in Animal Health consists of two different product candidates. Paclical Vet is a patented formulation of paclitaxel in combination with XR-17 for animal indication. It has received conditional approval from the FDA for treatment of mammary carcinoma and squamous cell carcinoma in dogs and has been granted MUMS designation in treatment of mast cell tumours, mammary carcinoma and squamous cell carcinoma. Doxophos Vet is a patented formulation of doxorubicin in combination with XR-17 for animal indication. It is developed for treatment of lymphoma, one of the most common cancer types among dogs. Doxophos Vet was granted MUMS status by FDA for lymphoma. Animal health pipeline Candidate Indication Pre-clinical Phase 1 Phase 2 Phase 3 Paccal Vet (paclitaxel) Doxophos Vet (doxorubicin) Mast cell Source: Company data Planned Ongoing Reg./ Approval Geography Global (ex-jap) Global (ex-jap) Lymphoma Ongoing Global Rights Partner Lean management team headed by CEO Mikael Asp Executive management Oasmia has a lean management team headed by CEO Mikael Asp. Julian Aleksov, one of the founders and also the main owner of the company, is Executive Vice Chairman of the Board. Our overall impression is that management has relevant experience for pharmaceutical development. Marketing material commissioned by Oasmia Pharmaceuticals 14

15 Executive management Julian Aleksov Bo Cederstrand Alexander Kotsinas Lars Bergkvist Julian Aleksov Mikael Asp Anders Blom Fredrik Gynnerstedt Position Position Position Position Executive Vice Chairman of the Board Chief Financial Officer Selected experience Selected experience Selected experience Selected experience Co-founder of Oasmia, served as CEO (until May, 215) and director since 1999, partner and member of board at main shareholder Alceco Chief Executive Officer 25 years experience from the international pharmaceutical industry in various positions at Xellia, Pfizer, Wyeth and Pharmacia Executive Vice President 2 years experience from international business development and finance at Galderma and Pharmacia, previously CEO of Nexttobe 15 years experience from international business as Director of Collaboration at Karnov Group, CFO at Bringwell and as auditor and consultant at E&Y Education Education Education Education Economist MSc Chemical Engineering, Royal Institute of Technology, Stockholm Master of Business Administration, Uppsala University Master of Business Administration, Stockholm University Equity stake Equity stake Equity stake Equity stake Ordinary shares: Ordinary shares: 4 5 Ordinary shares: 3 Ordinary shares: Via Alceco: Source: Company data Marketing material commissioned by Oasmia Pharmaceuticals 15

16 Board of directors Board of directors Julian Aleksov Bo Cederstrand Alexander Kotsinas Lars Bergkvist Position Position Position Position Executive Vice Chairman of the Board Selected experience Selected experience Selected experience Selected experience Co-founder of Oasmia, served as CEO (until May, 215) and director since 1999, partner and member of board at main shareholder Alceco Board Member Board Member Board Member 4 years experience in different leadership postions, mainly within Retail. Currently Deputy Board Member of Frugas AB VP and CFO at Q-Med, previously CFO Life Europé AB and 3 Scandinavia and VP Investor AB, Board Member in several companies Experience from several managerial positions. Prev. CEO of Arken Zoo and Hidden Dinosaur, Board Member in FDT AB, Master Design AB etc. Education Education Education Education Economist - MSc Applied Physics, Royal Institute of Technology and BSc Business Adm., Stockholm School of Economics MSc Accounting and Finance Equity stake Equity stake Equity stake Equity stake Ordinary shares: Ordinary shares: Via Alceco: Via Alceco: Source: Company data Julian Aleksov is one of the founders and also among the largest shareholders Shareholder structure Julian Aleksov and Bo Cederstrand are the main shareholders (via Alceco International) and own 21.6% of the outstanding shares. The second-largest shareholder is the Swedish entrepreneur Per Arwidsson, through holding company Granitplattan AB, and owns 11.7% of the company. Shareholder structure as of April 3, 217 Shareholder Ownership Alceco International S.A. 21.6% Granitplattan AB 11.7% Försäkringsaktiebolaget Avanza Pension 8.8% Danske Bank International S.A. 4.1% Nordnet Pensionsförsäkring AB 3.9% JP Morgan Bank Luxembourg 2.6% Bank of New York 2.1% JP Morgan Securities LLC 1.6% AM Karlsson i Kvicksund AB 1.% Övriga 42.6% Total 1% Source: Company data Further information We provide a more in-depth description of the company s technology platform, business areas, underlying market and historical financials in our initiation report published on 5 June 217. The full report can be accessed via this link. Marketing material commissioned by Oasmia Pharmaceuticals 16

17 Oasmia Pharmaceuticals 5 June 217 Estimates Our research implies that Oasmia could reach risk-adjusted peak sales of SEK 1,863m in 227/28E. We base our forecast model on the company s late-stage assets, including Paclical, Docecal and Doxophos in human health, and Paccal Vet and Doxophos Vet in veterinary health. In 222/23E we calculate that product sales within human oncology will constitute 77% of group sales, while veterinary oncology products make up the remaining 23%. Our estimates include the company s latestage products in human and veterinary health Our estimates include forecasts for the company s late-stage product candidates, including Paclical, Docecal and Doxophos in human health and Paccal Vet and Doxophos Vet in veterinary health in the major regions (the US and EU including Russia). Hence, we have not assigned any value or included potential revenue streams from early-stage projects such as OAS-19 and KB952, as well as potential out-licensing of the XR-17 technology. Oasmia has indicated that it will either commercialise its products through a targeted sales force, or in collaboration with a strategic partner with an established sales network. Our forecasts are based on a direct sales model, similar to the approach of Abraxis when Abraxane was brought to the market in 25. In terms of sales, a strategic partnership involving a specialised oncology sales network would likely yield a higher sales outcome and potentially be value-accretive depending on the terms offered in such a deal. Due to the late stage of the product candidates, a potential deal would likely be back-end loaded with a lower upfront payment and a higher royalty base. We estimate that Paclical will receive EMA approval in 217 Paclical sales model Below we list the main assumptions behind our sales forecasts for Paclical. We expect that Paclical could receive EMA and FDA approval in 217 and 218, respectively, followed by commercial launch in the subsequent year. We assign a 7% probability for market authorisation approval in the EU and 65% in the US. Upon a potential approval, we believe that Oasmia intends to expand into other indications treated with taxanes, primarily breast cancer (metastatic), which is reflected in our model. The addressable market for Paclical is defined as metastatic breast cancer patients and epithelial ovarian cancer patients. We assume that the price point will be in line with Abraxane, which is currently priced at about USD 1,3 per vial (1 mg) in the US. In Europe, the price of Abraxane is about a third of the price in the US. Peak sales are estimated in 228, although the products could be eligible for patent term expansion. Potential for sales to pick up in Russia in the near term Oasmia has announced that a strategic overview is ongoing for its Russian operations, which could imply a new partner or other measures to improve sales in the region. We expect this could already result in a sales improvement in the coming quarters. Paclical has also received approval for its pricing and is eligible for reimbursement through the Russian insurance system. Tenders in the Russian hospital system are carried out on a semi-annual or annual basis, depending on the region. Marketing material commissioned by Oasmia Pharmaceuticals 17

18 Main assumptions US Source: Company data, NCI and Nordea Markets Main assumptions EU Addressable market Adressable market Metast. breast & ovarian cancer (no. patients): 346,887 Metast. breast & ovarian cancer (no. patients): 167,8 Patient growth: 3% Patient growth: 3% Price Price Treatment cycles: 6 Treatment cycles: 6 Price per vial (1mg): USD 1,3 Price per vial (1mg): USD 433 Price inflation: 3% Price inflation: 3% Sales Sales Launch (year): 219 Launch (year): 218 Peak sales (year): 228 Peak sales (year): 228 Prob. of approval: 65% Prob. of approval: 7% Source: Company data, NCI and Nordea Markets We calculate nonrisk adjusted peak sales of USD 165m for Paclical Based on the assumptions that the company can deliver on our forecasts, we see a potential to reach non-risk-adjusted peak sales of USD 165m for Paclical in 228E. On a regional basis, we expect that the US will contribute 83% of the sales value, with the EU constituting the remaining 17% in 223E. Paclical sales (non-risk adj.) 2 16 Geographical sales split 1% 8% USDm % 4% 2% % Paclical sales US EU Marketing material commissioned by Oasmia Pharmaceuticals 18

19 Paclical sales model USDm E 218E 219E 22E 221E 222E 223E 224E 225E 226E 227E 228E US patients on Paclical -Metastatic breast Epilepthial ovarian ,92 1,125 1,594 1,71 1,844 1,9 1,891 1,847 Total (no. patients) ,13 1,567 1,696 2,265 2,22 2,21 2,248 2,213 2,139 Cost per patient (in USD) 37,44 38,563 39,72 4,912 42,139 43,43 44,75 46,46 47,428 48,851 5,316 51,826 53,38 US Paclical sales -Metastatic breast Epilepthial ovarian Total (USDm) EU patients on Paclical -Metastatic breast Epilepthial ovarian ,35 1,66 1,98 1,131 1,165 1,2 1,236 1,273 Total (no. patients) ,35 1,254 1,367 1,48 1,37 1,412 1,454 1,498 1,542 Cost per patient (in USD) 12,74 13,122 13,516 13,921 14,339 14,769 15,212 15,669 16,139 16,623 17,121 17,635 18,164 EU Paclical sales -Metastatic breast Epilepthial ovarian Total (USDm) RUS patients on Paclical -Metastatic breast Epilepthial ovarian Total (no. patients) ,17 1,186 1,222 1,258 1,165 1,2 1,236 Cost per patient (in USD) 12,74 13,122 13,516 13,921 14,339 14,769 15,212 15,669 16,139 16,623 17,121 17,635 18,164 RUS Paclical sales -Metastatic breast Epilepthial ovarian Total (USDm) Paclical sales (USDm) Source: Company data, NCI and Nordea Markets We include Docecal estimates across two different indications Docecal sales model Oasmia s second product candidate, Docecal, is a next-generation formulation based on docetaxel, which is a chemotherapy substance used to treat a number of cancer indications. In our forecasts we have only included sales across two different indications: breast cancer (metastatic) and prostate cancer (castor resistant). As the product is still in clinical phase we assign a probability of success of 5% in EU and assume potential market approval by the EMA in 219 followed by US approval in the subsequent year. Main assumptions US Main assumptions EU Addressable market Addressable market Metast. breast & prost. cancer (no. patients): 39,199 Metast. breast & prost. cancer (no. patients): 138,392 Patient growth: 3% Patient growth: 3% Price Price Full treatment cost: USD 15,6 Full treatment cost: USD 5,2 Price inflation: 3% Price inflation: 3% Sales Launch (year): 22 Launch (year): 219 Peak sales (year): 228 Peak sales (year): 228 Sales Prob. of approval: 45% Prob. of approval: 5% Source: Company data, NCI and Nordea Markets Source: Company data, NCI and Nordea Markets We model non-risk adjusted peak sales of USD 13m We model non-risk-adjusted peak sales of USD 13m in 228E across the EU and US. Our estimates indicate that 76% of the sales value will derive from the US in 223E. Marketing material commissioned by Oasmia Pharmaceuticals 19

20 Docecal sales (non-risk adj.) USDm Geographical sales split 1% 8% 6% 4% 2% % Docecal sales US EU Docecal sales model USDm E 218E 219E 22E 221E 222E 223E 224E 225E 226E 227E 228E US patients on Docecal -Metast. breast ,18 1,63 1,847 2,76 2,138 2,11 2,268 2,336 -Castor-resist prostate ,172 1,28 1,244 1,68 1,188 1,178 1,167 Total (no. patients) ,1 1,867 2,83 3,55 3,319 3,25 3,298 3,446 3,53 Cost per patient (in USD) 15,6 16,68 16,55 17,47 17,558 18,85 18,627 19,186 19,762 2,354 2,965 21,594 22,242 US Docecal sales -Metastatic breast Castor-resistant prostate Total (USDm) EU patients on Docecal -Metastatic breast ,352 1,393 1,514 1,56 1,66 1,655 1,74 -Castor-resistant prostate ,81 1, Total (no. patients) ,3 1,538 2,25 2,271 2,419 2,641 2,663 2,644 2,662 Cost per patient (in USD) 6,5 6,695 6,896 7,13 7,316 7,535 7,761 7,994 8,234 8,481 8,735 8,998 9,267 EU Docecal sales -Metastatic breast Castor-resistant prostate Total (USDm) Docecal sales (USDm) Source: Company data, NCI and Nordea Markets Potential approval of Doxophos in the near term Doxophos sales model Oasmia s product candidate Doxophos, based on doxorubicin, is used to treat breast cancer, among others. The company filed for market authorisation in December 215 for the use of Doxophos as a hybrid drug (improved generics) and is awaiting decision on approval in Russia and the CIS. We believe the product could receive approval in 217 and contribute to earnings in fiscal-year 217/18E. Our estimates only reflect the sales potential in Russia, and we do not assign any value for other regions. Main assumptions RUS Addressable market Metastatic breast cancer (no. patients): 9,778 Patient growth: 3% Price Full treatment cost: USD 1,5 Price inflation: 3% Sales Launch (year): 217 Prob. of approval: 8% Source: Company data, NCI and Nordea Markets Marketing material commissioned by Oasmia Pharmaceuticals 2

21 Doxophos would potentially improve the cash flow We see potential that, upon approval, Doxophos will contribute to near-term earnings and improve the cash flow situation for the company before its lead assets reach commercial phase. However, in terms of long-term value the successes of Paclical and Docecal are far more important for the company. Doxophos sales model USDm E 218E 219E 22E 221E 222E 223E 224E 225E 226E 227E 228E RUS patients on Doxophos -Metastatic breast ,37 1,63 1,651 1,587 1,635 1,563 1,486 1,43 1,314 1,218 Total (no. patients) ,37 1,63 1,651 1,587 1,635 1,563 1,486 1,43 1,314 1,218 RUS Doxophos sales -Metastatic breast Total (USDm) Doxophos sales (USDm) Source: Company data, NCI and Nordea Markets Strategic initiatives to bolster the development of the veterinary pipeline Veterinary health products Oasmia has recently initiated a strategic overview of its veterinary products and decided to move its asset to a US subsidiary. The company has also withdrawn its FDA approval for Paccal Vet and intends to reintroduce the product with lower dosage, which potentially could give fewer side effects and improved wellbeing for the pets. This could also allow the product to be available on a broader scale to general veterinary practitioners instead of only specialised veterinary oncologists. Paccal Vet is used to treat squamous cell carcinoma and mastocytoma, which together represent about a third of all skin tumours in dogs. It is also used to treat to mammary carcinoma, a tumour common in female unsprayed dogs. Doxophos Vet has received MUMS designation from the FDA for treatment of lymphoma, one of the most common cancers among dogs. According to Oasmia, about 2, dogs are affected on an annual basis. In our forecasts, we assume an addressable market for Doxophos Vet of about 2, dogs and 175, dogs for Paccal Vet across all indications, with 3% annual growth. Furthermore, we set an average price of USD 1,75 and assume 3% price inflation. We assigned a probability of approval of 9% for Paccal Vet and 85% for Doxophos Vet. Our estimates do not include any value from potential sales in other regions, such as Europe. Veterinary Health sales model USDm E 218E 219E 22E 221E 222E 223E 224E 225E 226E 227E 228E Patient data (no. patients) Paccal Vet - - 1,857 5,737 6,16 8,115 8,985 9,255 9,532 9,818 1,113 1,416 1,729 Doxophos Vet ,825 5,99 1,144 1,657 1,977 11,36 11,645 11,994 12,354 12,725 Cost per patient (in USD) 1,75 1,83 1,857 1,912 1,97 2,29 2,9 2,152 2,217 2,283 2,352 2,422 2,495 US Vet Sales (USDm) Paccal Vet Doxophos Vet Total sales (USDm) Source: Company data, The National Canine Cancer Foundation and Nordea Markets Our estimates imply risk-adjusted peak sales of SEK 1,863m in 227/28E Group estimates Based on our forecasts, we calculate risk-adjusted peak sales of SEK 1,863m yielding an EBIT of SEK 791m in 227/28E. In our forecasts, human health products constitute 77% of 222/23E sales, with animal health products representing the remaining 23%. Within human health, Paclical represents 7% of risk-adjusted sales in 222/23E followed by Docecal (28%) and Doxophos (2%). Marketing material commissioned by Oasmia Pharmaceuticals 21