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28 September 2020

Comissioned research: Diamyd Medical

As of September 15th, 2020, the company that was founded in 1984 delivered convincing top-line data – in line with medical consensus view of implementing precision medicine – consistently supporting positive effect of the first-in-class disease-modifying diabetes vaccine Diamyd® in a genetically defined group. The patient group constitutes approximately 40% of patients with type 1 diabetes (T1D) and is delineated by patients positive for the human leukocyte antigen DR3-DQ2 haplotype and GAD autoantibodies. The fresh prospective topline-data from the Phase IIb study DIAGNODE-2 has now verified the genetic patient group as responder to Diamyd®, giving the company sufficient cumulative scientific and clinical basis to pursue the genetically defined patient group into a pivotal Phase III study and motivate its associated financing risk.

Going forward with the genetically well-defined patient group reduces the impact of disease heterogeneity considerably, addressing a very significant reason why previous late-stage clinical trials have failed.

The stock has moved 174% YTD and the company is trading at SEK 4.5bn. Insiders have not sold shares. Mark Atkinson, a board member of Diamyd®, a medical researcher best known for his contributions to research seeking to predict, prevent, and cure T1D, the author of over 500 publications and one of the world’s most cited diabetes researchers recently increased his holding in the company.

Clearly money will always follow science, in this instance a disease-modifying therapy for diabetes. On the backdrop of a pioneering treatment for an already huge and growing patient population with significant direct and indirect healthcare costs, the underpinnings are in place which triggers a significant revenue stream and would concurrently translate into hyper-growth for the stock.

We initiate coverage with an Outperform rating. With a 50% LOA for the lead candidate Diamyd® and 18% LOA for Remygen® our risk-adjusted DCF valuation results in a value for Diamyd Medical of SEK 100 per share, corresponding to an equity value of approximately SEK 6.6 bn non diluted. While awaiting further detailed data on the Phase IIb secondary endpoints, the stock should reach our target price in twelve months a head assuminga data consistent trend across these endpoints and pivotal Phase III study set up to start enrolment.

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Marketing material commissioned by Diamyd Medical AB