Acacia Pharma

Investment summary

Acacia Pharma has announced an amendment to its original deal terms with Cosmo Pharmaceuticals, whereby €10m of the agreed loan facility (up to €35m, of which €25m is contingent on ByFavo approval) will be swapped for a €10m equity stake (through the issue of 3,213,769 shares at €3.112, a 4.1% premium to the previous day’s closing price). This will take Cosmos’s holding of Acacia’s enlarged share capital to ~18.5%. This is a positive signal and, importantly, lowers the interest payments on debt. 2020 is an inflection year – the FDA approved BARHEMSYS (reformulated amisulpride) for the management of PONV on 26 February and the ByFavo PDUFA data for procedural sedation is imminent (5 July). Our forecasts remain unchanged as we anticipate an increase in elective surgical procedures in the second half of the year and drug shortages to affect uptake of these short-acting products designed to reduce hospitalisation times. Timely approval and launch are thus critical. We value Acacia at €992.1m or €14.6/share.