Since the beginning of the year, Pharma Equity Group’s share price has fallen approximately 40 percent which is markedly lower than Biotech and Life Science stocks in general when using the S&P Biotech index as a proxy which is down just over 5 percent. The huge underperformance comes at a time even when the company is moving forward from a medical advancement perspective as they have recently received patent for its wound healing product candidate RNX-022 and published strong data for its cancer product candidate RNX-051. As the medical advancement of the pipeline is moving forward as expected, investors are properly considering two other things at this point. Firstly, investors are likely anxiously awaiting news regarding the company entering partnership where the partner will take the company’s product candidates to the next phases. This has been a key part of the strategy continuously described by management. Secondly, and perhaps more important, investors are likely increasingly concerned about the continuous delay regarding the repayment of the receivable from Porthino. Both issues are valid points and can be used as explanations for a waiting attitude towards the share, but a 40 percent drop in share price - more than seven times the general development for Biotech and Life Science stocks - seem highly exaggerated. As far as potential partnership, investors are hoping for soon-to-be announced deals, but as most investors in Biotech and Life Science stocks are also aware, entering partnership deals can be length y process so that shouldn’t come as a big surprise. The postponed repayment of the Porthino receivable is principally concerning, but as long as it is just a postponement, the company expect to be able to bridge finance itself using the receivable as ‘collateral’. Combined, the two issue that are currently on investors minds, do not seem to warrant a dramatic drop in share price like we have seen. In a worst-case scenario where the receivables are never repaid to Pharma Equity Group, it can have some negative consequences for the company to remain financially flexible as the interest rate burden is potentially very high, but as most of the obtained bridge financing is convertibles, this burden should be contained. Admittedly, for existing non-participating investors, the diluting effect could be substantial, but the company should have enough flexibility to stay operational and continue to develop its pipeline and enter partnerships. Following the sliding and underperforming share price we have updated our One-Pager which illustrates that the market currently implicitly discounts little value of the company’s pipeline in absolute terms. Also, when compared to historical industry average likelihoods for BioTech and Life Science companies to successfully develop and launch their pipeline, the market also discounts very little on a relatively basis. Disclaimer: HC Andersen Capital receives payment from Pharma Equity Group for a Digital IR/Corporate Visibility subscription agreement. /Claus Thestrup 8:00 AM 26-04-2024.

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