Sparebanken 1 Markets, commissioned research report.

Promising antimicrobial technology - further advancement dependent on sufficient
funding

Conclusion
SoftOx Inhalations Solutions aims to replace the use antibiotics with
hypochlorous acid (HOCI) in the treatment of Ventilator-Associated Pneumonia
(VAP). VAP is a respiratory infection that occurs during the intubation of
patients by circumventing natural airway defenses, heightening the risk of
bacterial infection. An estimated 130,000 patients in Europe and the US contract
VAP yearly and there is currently no effective treatment on the market as
resistant bacteria and biofilms limit the effect of antibiotics. SoftOx has
managed to develop medical-grade stabilized HOCI that has showed strong
antibiofilm activity against pathogens found in VAP. With proof-of-concept
studies in animal respiratory infections the clinical success has a favorable
probability. Phase 1 was completed in 2022 and proved the solution to be safe to
inhale for humans. Phase 2 aims to demonstrate proof-of-concept in humans and
could commence early 2025. However, the company requires funding of NOK50m to
take the project through phase 2, and an additional NOK130m for phase 3. In
Europe and the US, the estimated market size is NOK18bn. The company targets
capturing a 10% market share within the initial 3 years of market approval, with
additional growth opportunities stemming from high mortality rates and potential
cost savings.

Our analysis
o	There is currently limited effective treatments for VAP as antimicrobial
resistance and biofilms limits the effects of antibiotics. Antimicrobial
resistance is a global concern, causing 1.2 million deaths in 2019 and listed by
WHO as one of the top 10 global health threats. Patients contract VAP during
ventilator intubation as it circumvents natural airway defenses, heightening the
risk of bacterial infection. VAP raises mortality rates in ICUs and, according
to SoftOx, intubated patients face a 10-30% risk of developing VAP and increases
mortality rates of up to 50%. Studies show that in Europe and the US there is an
estimated 70,000 and 60,000 cases each year, respectively, and leads to extra
hospital costs of USD47k per patient in the US and USD30k per patient in the EU.


o	SoftOx has achieved medical-grade stabilized hypochlorous acid within the
therapeutic window. Due to the inherent instability and high reactivity of
chlorine-based solutions, most solutions today are unable to maintain a
therapeutic level over time. SoftOx Inhalation Solution's HOCI strikes a balance
between unacceptable toxicity and insufficient efficacy, with degradation being
less than 5% over 2 years. SIS has proven to be effective against bacterial
biofilms and respiratory pathogens. With proof-of-concept studies in animal
respiratory infections the clinical success has a favorable probability with
relatively low study costs. Phase 1 showed the solutions to be safe to inhale
for humans, and Phase 2 aims to demonstrate proof-of concepts in humans. SIS is
protected by over 90 patents ensuring patent protection for +15 years on vital
applications, shielding them from competitors seeking approval for similar
products. Should SIS reach market approval, the pathway is well defined. Since
VAP is an infection contracted at hospital, the hospital is liable to cover the
associated treatment costs without any reimbursement process. VAP comprises a
large market with a cost reduction potential of NOK54bn.

o	Valuation thoughts: Assuming the company receives sufficient funding and
reaches market approval, we estimate NOK1.8bn in revenues and NOK722m in net
income by 2030, based a 10% market share and a 40% net income margin. Based on a
Price-to-Earnings ratio of 12.5x discounted back to 2024 and equity issuances
post-phase 2 of NOK230m in the range NOK0.5-1.5/share, this translates to a fair
value of NOK0.53-0.69/share.