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Faron announced FY results on 13th March. Losses increased slightly and the company remains in a precarious funding situation. More importantly than the results Faron has announced that it is to release the next update on the BEXMAB trial on the 19th March, with an associated webcast at 9am. We expect this data to be critical to the ongoing funding of the company, and also future partnering. Faron announced FY results on 13th March. The operating loss increased to EUR31.0m from EUR 28.9m FY 2022. 2023 included a broadly similar level of R&D (EUR19.5m vs EUR20.7m) and an increase in administration spending as Faron invests in a US office and amending terms of the 2015 share option plan. At the end of the period the company had Net Cash of EUR6.9m (Net Debt EUR6.2). Cash had fallen to EUR4.3m by 19th February, resulting in Faron breaching its debt covenants with IPF, described as a ‘hiccup’ by management. The situation has been temporarily resolved through the arrangement of a EUR3.2m convertible loan, though additional funding is required imminently. Management has indicated that further short-term financing is expected to be in place by the AGM on 5th April. However, again this is a temporary fix, a further circa EUR35m additional capital is required for Faron to reach the end of Phase 2 in the clinical trial plan. Authorisation for this share issue is to be sought at the AGM. This could take the company to the point where we believe partnering is possible. Further funding would be required if a larger registrational trial is required, for expansion of indications and for the completion of the regulatory submission and commercialisation. In the results presentation management were more forthcoming on partnering activities, indicating that it has had discussions with multiple companies. However, to complete a quality out-licensing we expect additional data to be required, at least the end of the current Phase II BEXMAB clinical trial, putting completion of a partnering transaction to the end of 2024 at the very earliest. The BEXMAB data to be announced next week will be important to give an indication of trial progression. Faron is able to make these frequent releases as the trial had no control arm, and the patients are monitored on an ongoing basis. We expect the release on Tuesday to update on progression of these patients, and to include data from patients dosed later in the cohort. The trial duration has now been sufficient to begin to generate survival data for the MDS patients. Median overall survival for patients with refractory MDS is currently just 4-6 months, with no viable treatment options. Lengthening survival would be a key indicator of positive benefit. At the last release of data in October three of four HMA-failed MDS patients responders showed above median survival. Across the broader group results showed 11 objective responses across 22 patients (8 across 15 patients at the last data release in July) and 100% response rate in the refractory- MDS patients. We retain our Under Review recommendation whilst Faron resolves its funding situation. We look to the data due next week as a key event in both future funding and partnering activities.
Faron Pharmaceuticals Oy
Faron announced yesterday that it is in default of the covenants associated with its debt agreement with IPF. We believe the company has drawn down EUR10m to date. Whilst negotiations to restructure the loan facility are ongoing we place our recommendation and target price under review. Faron announced yesterday that it is in default of the covenants associated with its debt agreement with IPF Fund II SCA, SICAV-FIAR (IPF). We believe the company has drawn down EUR10m to date. Negotiations related to possible restructuring of the loan facility as well as waiver of covenant obligations are ongoing with IPF. Whilst these are underway we place our recommendation and target price under review. Under the terms of the agreement with IPF signed in February 2022 the Faron could access up to EUR30m (with conditions). The first EUR 10m was available without conditions, though terms require the company to keep a cash balance of EUR6m and a 3 month cash runway. The second EUR5m tranche was available to be drawn by 30th June 2023 if Faron raised at lease EUR15m of new gross equity, has funding until 31st March 2023 AND had approval from the FDA for a protocol for a pivotal clinical trial of bexmarilimab in an oncology indication. The final EUR15m tranche has yet to be committed, and requires approval of the IPF investment committee. As with all biotech debt, the deal was relatively expensive, including an annual cash interest charge of EURIBOR + 9.00%. In addition, IPF gain the right to a board observer and warrants of 10% of each tranche, with the price determined by the strike price the day before debt drawdown. Faron has cash of EUR 4.3m, which is sufficient to cover the company’s financing needs until the beginning of April. However, the cash requirement for completion of its clinical programme for bexmarilimab is significant, we estimate at least EUR50m to reach BLA submission. Management has historically explored a number of different funding routes including setting its sights towards NASDAQ, with a US based CFO and increasing focus on its US activities, however, we believe more data from the BEXMAB trial is required for this to be a realistic prospect. A partnership could also possible, with new data increasing interest. We believe a large partner would be able to accelerate the development of bexmarilimab, likely across a wider range of indications in parallel, rather than the economically prudent route being pursued by Faron. However, negotiating an out-licensing is likely to be challenging under the current circumstances. Faron is expected to report FY results to December on 29th February.
Frustrating, but this card should be turned – We see real promise with bexmarilimab, and believe the trial should be run to conclusion. However, with limited sight of how FARN can achieve this right now, we place our recommendation and target price Under Review.
The most recent clinical data from its BEXMAB study demonstrates continuing indications of efficacy, further data is expected in December. Management has reiterated its strategy, with the initiation of Phase 2 expected in Q4 2023. The company is also gaining traction in its discussions with partners as the data builds. However, Faron continues to operate with limited funding, and we anticipate a further raise very shortly. At least EUR50m is required to reach BLA submission, though we expect this to be raised in tranches.
Faron interims highlighted the ongoing progress of the Bexmab clinical trial, with the next update expected in late October/November. Receipt of orphan drug designation for bexmarilimab brings with it increased guidance from regulators giving confidence in the clinical strategy. Assuming sufficient funding for study completion, Faron is targeting a BLA submission in 2025. We make minor adjustments to our estimates.
Excellent prospects for bexmarilimab – we remain enthused by the clinical data (both the solid and liquid tumour data) but our TP drops today (from 524p) as we strip out legacy Covid indications and allow for an additional period of time for approval in liquid tumours.
Faron published new clinical data on the BEXMAB study and an update on clinical strategy. The trial has shown eight objective responses across fifteen patients to date. The company believes it is close to completing the Phase I, with a plan to move to a Phase II in 2024, transitioning into a pivotal trial mid-2024. Assuming sufficient funding to complete the study, Faron is targeting a BLA submission in H1 2025.
FDA feedback is a useful makeweight – We believe this is a positive development for FARN, as it is now able to demonstrate to all potential strategic partners/Pharma companies that the FDA sees a route forward for bexmarilimab.
Faron’s lead asset, bexmarilimab, is an oncology drug (an antibody therapy) that is yielding some very promising data in Phase 1 and 2. We have some time with management in the diary for 7/8 March if you would like to hear more.
Faron has announced FY results to December, losses rise as expected as bexmarilimab clinical activities accelerate. The company expects a meeting with the FDA this quarter to establish the next steps for development as a monotherapy, whilst the BEXMAB combination study continues, with encouraging data to date. The FDA meeting is essential to establishing next steps (and cost of) development of bexmarilimab. We believe the price over the next 12 months is likely to be capped by cash requirements, with current facilities, even post the recent raise, only providing funding into Q3 2023.
Faron is expected to announce FY results to December 2022 on 3rd March. Faron reported YE 2022 cash at EUR7m, though did not give a Net Cash update; we estimate the company had Net Debt of EUR2.9m at the YE. We expect Faron to use the results to update on the progress with the FDA and its end of Phase I/II meeting, expected this quarter. This is essential to establishing next steps (and cost of) development of bexmarilimab as a monotherapy. We believe the price over the next 12 months is likely to be capped by cash requirements, with current facilities, even post the recent raise, only providing funding into Q3 2023
Value inflection points – The key now will be the focused use of capital for progressing the trials to data/regulator meetings, where existing data is so promising, ahead of 3Q23. We will review forecasts in due course.
Faron has published further early data on its BEXMAB Phase I/II study, which continues to show encouraging progress. The trial is now being expanded into major hematological centres in the US and also into the triplet cohort. We maintain our 290p target price. We believe the price over the next 12 months is likely to be capped by funding requirements, with current facilities only providing funding into Q1 2023.
Faron Pharmaceuticals Oy Faron Pharmaceuticals Oy
Bexmarilimab data continues to be encouraging, with survival and safety data supported biomarkers to identify the target responding population. We believe the early data points to a substantial market opportunity, both as a standalone and in combination, supporting our valuation, but trials require substantial funding.
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