BARHEMSYS and BYFAVO launched in the US

Acacia Pharma 1 April 2021 Update
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Acacia Pharma

BARHEMSYS and BYFAVO launched in the US

Full-year results

Pharma & biotech

1 April 2021

Price

€2.37

Market cap

€236m

US$1.18:€

Net cash ($m) at 31 December 2020

10.0

Shares in issue

99.7m

Free float

80%

Code

ACPH

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(13.3)

(10.4)

4.4

Rel (local)

(16.4)

(16.8)

(22.3)

52-week high/low

€3.48

€1.85

Business description

Acacia Pharma is a commercial-stage biopharmaceutical company focused on commercialising novel products to improve the care of patients undergoing serious medical treatments such as surgery, invasive procedures or chemotherapy. It has two assets, BARHEMSYS (launched for the treatment of PONV in the US) and in-licensed asset BYFAVO (launched for procedural sedation in the US).

Next events

BARHEMSYS and BYFAVO formulary wins

2021

Initiation of pivotal CINV trial (APD403)

2022

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr John Priestner

+44 (0)20 3077 5700

Acacia Pharma is a research client of Edison Investment Research Limited

The year 2020 was transformational for Acacia Pharma, with the US approval of its two lead assets, BARHEMSYS (amisulpride injection) for the treatment and prevention of post-operative nausea and vomiting (PONV) and BYFAVO (remimazolam), an IV sedative for use during invasive medical procedures. Both assets have now been launched, BARHEMSYS in August 2020 and BYFAVO in January 2021. By marketing two products through a small but experienced salesforce, Acacia should realise significant operational synergies. Launches are in the early phase, with the focus on gaining wide formulary access in FY21; this should translate to significant revenue generation from FY22 onwards and maiden operating profit from FY23. Our updated valuation of Acacia Pharma is €1,278m.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/19

0.0

(21.1)

(0.38)

0.00

N/A

N/A

12/20

0.2

(28.5)

(0.38)

0.00

N/A

N/A

12/21e

8.0

(39.9)

(0.40)

0.00

N/A

N/A

12/22e

39.7

(34.1)

(0.33)

0.00

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

BARHEMSYS early formulary wins are a good start

During 2021, we expect early BARHEMSYS sales to trickle through as Acacia focuses on formulary wins against a tough COVID-19 background; formulary access is key for initial sales in the hospital setting. Since Acacia’s commercial team started customer engagement in mid-October 2020, the company has secured 120 accounts on formulary, representing >85% win rate. A backlog of surgical procedures could additionally aid early sales adoption; BARHEMSYS use results in shorter times in post-anaesthesia care units, which enables increased surgical throughput. Ex US, Acacia is evaluating out-licensing deals for BARHEMSYS in PONV.

BYFAVO launched January 2021

BYFAVO is the first new sedative launched to be in the US in 20 years. Importantly, the broad label granted by FDA covers all adult invasive medical procedures of less than 30-minute duration (extends its utility beyond bronchoscopy and gastroscopy procedures to ophthalmology, interventional radiology and plastic surgery). Acacia estimates the total addressable market in procedural sedation to be >$1.5bn/year. The pandemic has led to the inclusion of competitor procedural anaesthetics (midazolam and propofol) on the FDA drug shortage list, thus a timely launch of BYFAVO is key to benefit from increased pent-up demand of these drug classes.

Valuation: €1,278m or €12.8/share

Our revised valuation is €1,278m or €12.8/share versus €1,170m or €13.4/share previously. Our sales forecasts are unchanged, we have reduced R&D costs, we roll our model forward, update FX and reflect a net cash position of $10.0m at 31 December 2020. Acacia is funded into 2022, additional funding will be needed in H222 for further commercial expansions. Given Acacia’s operational focus on the US and the opportunities for BARHEMSYS and BYFAVO in this key market, we believe a Nasdaq listing would be appropriate to further widen the investor base.

Focus on BARHEMSYS and BYFAVO sales execution

During the last eight months, Acacia Pharma has successfully launched BARHEMSYS, its first internally developed asset to reach the market, and in-licensed BYFAVO in the key US market (Exhibit 1 and 2). The rationale for in-licensing BYFAVO was to enable operational leverage and accompanying sales and marketing synergies as Acacia builds and expands its US commercial operations. Ahead of potential approvals, Acacia’s core US commercial infrastructure was established with c 30 personnel focusing on six regions (medical science liaisons, national account directors and regional business directors) and the back-office support staff in the US. In October Acacia added an additional 30 sales representatives (five in each of the six regions).

Our sales forecasts are unchanged. We forecast peak BARHEMSYS sales of $405.3m and peak BYFAVO sales of $125.6m. To successfully commercialise BARHEMSYS and BYFAVO, Acacia must ensure the products are accepted on each hospital’s formulary (a list of drugs that healthcare providers in the hospital can prescribe). This often requires the hospital’s pharmacy and therapeutics (P&T) committee to be convinced of the clinical and economic benefits of the drug before approving it, which takes nine to 12 months on average. Once the drug is on a hospital formulary, treatment by both assets would be provided under diagnosis-related group codes where the treatment costs would be included in the total cost of surgery. Although inclusion takes time, it leads to a steady annuity-like revenue stream driven by procedure volumes and automated use rather than relying on individual prescriber decisions. Acacia has hired a highly experienced commercial team with direct experience in successfully launching other products such as OFIRMEV (acetaminophen injection) into the same customer base.

Exhibit 1: BARHEMSYS clinical and commercial proposition

Exhibit 2: BYFAVO clinical and commercial proposition

Source: Acacia Pharma corporate presentation

Source: Acacia Pharma corporate presentation

Exhibit 1: BARHEMSYS clinical and commercial proposition

Source: Acacia Pharma corporate presentation

Exhibit 2: BYFAVO clinical and commercial proposition

Source: Acacia Pharma corporate presentation

BARHEMSYS broad label includes ‘rescue’ differentiation

The US label of BARHEMSYS for PONV (approved 26 February 2020) is broad. It is indicated for treatment of patients with PONV to include ‘rescue treatment’ (patients who are uncontrolled following prophylactic treatment with standard-of-care antiemetics) and prophylaxis of PONV as monotherapy and in combination with standard-of-care antiemetics, including a 5-HT3 antagonist (such as ondansetron). Initial detailing will focus on rescue treatment (BARHEMSYS is the only antiemetic with this indication). Acacia estimates the total addressable US population to be c 34 million patients, a sizable opportunity. It also estimates the annual PONV ‘rescue’ market to be $2.7bn. In October 2020, Acacia’s highly experienced commercial team started driving formulary adoption by initially targeting ~900 hospitals. BARHEMSYS has now been added to formulary at 120 hospitals, representing a P&T committee review success rate of 85%.

In addition to BARHEMSYS, Acacia is developing APD403 (repurposed amisulpride, the active ingredient in BARHEMSYS, in both an intravenous form for use alongside chemotherapy and an oral version for use at home in the subsequent days) for managing chemotherapy-induced nausea and vomiting (CINV) as a follow-on indication. Management has indicated that a single Phase III clinical trial would be required for submission for CINV and we expect the company to initiate this trial in 2022, once BARHEMSYS and BYFAVO launches are well underway and there is further visibility on cash runway. In 2017, the global CINV market was valued at $1.7bn (source: MarketInsights reports) and the rising prevalence of cancer has led to increased rates of chemotherapy use. We maintain our forecast peak sales potential of $107.9m in 2031 for CINV.

BYFAVO first new sedative launched in the US in 20 years

Acacia’s product portfolio offering was expanded by the BYFAVO in-licence deal with Cosmo Pharmaceuticals (January 2020), done to enable significant leverage of its US commercial infrastructure. Furthermore, under the deal terms, Acacia has access to the short-term funding required to expand its US footprint. BYFAVO (remimazolam) is an ultra-short-acting and reversible intravenous benzodiazepine sedative/anaesthetic approved (July 2020) for use during procedural sedation. BYFAVO has been designated a Schedule IV (low potential for abuse and low risk of dependence) medicine by the US Drug Enforcement Agency; importantly, this is in line with its benzodiazepine peers. Initial discussions with hospital P&T committees are underway and have netted seven accounts on formulary within eight weeks of launch. Acacia believes BYFAVO’s inclusion on formulary has been more rapid than that of BARHEMSYS as the company is able to leverage its existing relationships established through BARHEMSYS inclusions. Acacia is targeting the 40m annual short-duration surgical procedures a year, this includes 25m gastrointestinal endoscopic procedures, but additional opportunities exist for ophthalmology procedures, plastic surgery and in interventional radiology.

Financials

Acacia reported maiden revenues of $0.2m in FY20, related to initial sales of BARHEMSYS. During the year Acacia continued to build on its US commercial operations in preparation for the launch of BARHEMSYS and BYFAVO. As a result, net loss rose in FY20 to $33.5m (vs FY19: $22.8m). SG&A expenses increased in FY20 to $31.0m versus $18.5m in FY19, reflecting the increased activity leading up to the product launches and the amortisation of intangibles (which represent the amounts paid to Cosmo for the BYFAVO licence) that is included in this figure. R&D expenses declined to $0.1m (vs FY19: $3.9m) reflecting completion of BARHEMSYS clinical programme and a credit of $1.4m related to reversal of inventory provisions on the drugs approval.

We forecast revenues in FY21 of $8.0m, growing to $39.7m in FY22. In the short term, revenues remain dependent on the successful sales execution of BARHEMSYS in PONV and BYFAVO in procedural sedation. Future BARHEMSYS sales could derive from the CINV indication and further product in-licensing. We forecast a net loss of $47.3m in FY21 and $41.4m in FY22 and that Acacia will reach break-even in 2023. We anticipate that SG&A costs will increase to $50.6m in FY21, growing to $68.9m in FY22 – this investment is necessary to support product commercialisation.

In June 2018, Acacia drew down $10m from the loan facility with Hercules Technology Growth Capital. The deal with Cosmo provides an additional €25m loan facility, interest-rate only until January 2023 and repayable over the following 24 months. Until the Hercules debt is fully repaid, the Cosmo loan interest is 11%, after which it decreases to 9%. Acacia reported cash and cash equivalents of $46.7m at 31 December 2020 (vs $17.0m in 2019). In August 2020, Acacia raised €25m gross through the placing of 12.5m shares. Thus, including Cosmo’s equity investments (€20m), Acacia gained access to €70m additional capital in the form of debt and equity in FY20. Post period, Acacia raised €27m gross through a 10m share placing (11.1% of prior share capital). To fund further expansions in US operations, we forecast that an additional c $35m will need to be raised in 2022. We note that, for simplicity, in our model we illustrate this as long-term debt funding. A US listing could make sense in the future depending on market conditions and, importantly, Acacia’s status quo post launch of BARHEMSYS and BYFAVO in terms of sales.

Valuation

Our revised valuation is €1,278m or €12.8/share versus €1,170m or €13.4/share previously. Our sales forecasts are unchanged, we roll our model forward, update FX and reflect a net cash position of $10.0m at 31 December 2020.

Exhibit 3: Valuation

Product

Indication

Launch

Peak sales ($m)

Value ($m)

Probability

rNPV ($m)

rNPV (€m)

rNPV/share (€)

BARHEMSYS US only

PONV

2020

405.3

1,153.0

100%

1,153.0

977.8

9.8

APD403 US only

CINV

2025

107.9

70.3

30%

18.4

15.6

0.2

BYFAVO US only

Procedural sedation

2020

125.6

325.8

100%

325.8

276.2

2.8

Net cash at 31 December 2020

 

 

10.0

100%

10.0

8.5

0.1

Valuation

 

 

 

1,559.1

1,507.2

1,278.1

12.8

Source: Edison Investment Research

Exhibit 4: Financial summary

Year end 31 December (US$m)

 

 

2018

2019

2020

2021e

2022e

PROFIT & LOSS

 

 

 

 

 

 

 

Operating revenues

 

 

0.0

0.0

0.2

8.0

39.7

Cost of sales

 

 

0.0

0.0

(0.0)

(0.5)

(3.1)

Gross profit

 

 

0.0

0.0

0.2

7.5

36.6

Gross margin %

 

 

N/A

N/A

86%

94%

92%

SG&A (expenses)

 

 

(15.0)

(18.5)

(31.0)

(50.6)

(68.9)

R&D costs

 

 

(5.0)

(3.9)

(0.1)

(1.0)

(7.0)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

EBITDA

 

 

(20.0)

(22.3)

(27.8)

(36.0)

(31.2)

Reported operating Income

 

 

(20.0)

(22.4)

(30.9)

(44.1)

(39.3)

Operating Margin %

 

 

N/A

N/A

N/A

N/A

N/A

Finance income/(expense)

 

 

(1.5)

(1.1)

(3.2)

(3.9)

(2.8)

Exceptionals and adjustments

 

 

0.0

0.0

0.0

0.0

0.0

Reported profit before tax

 

 

(21.6)

(23.5)

(34.1)

(48.0)

(42.1)

Normalised profit before tax

 

 

(20.9)

(21.1)

(28.5)

(39.9)

(34.1)

Income tax expense (includes exceptionals)

 

 

0.9

0.7

0.6

0.7

0.7

Reported net income

 

 

(20.7)

(22.8)

(33.5)

(47.3)

(41.4)

Basic average number of shares, m

 

 

44.1

53.7

73.6

98.1

99.7

Year-end number of shares, m

 

 

53.3

54.9

89.6

99.7

99.7

Basic EPS ($)

 

 

(0.47)

(0.43)

(0.45)

(0.48)

(0.42)

Adjusted EPS ($)

 

 

(0.45)

(0.38)

(0.38)

(0.40)

(0.33)

Dividend per share ($)

 

 

0.00

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

Property, plant and equipment

 

 

0.0

0.0

0.0

0.3

2.2

Intangible assets

 

 

0.0

0.0

52.2

44.1

36.1

Other non-current assets

 

 

0.0

0.4

0.3

0.3

0.3

Total non-current assets

 

 

0.0

0.4

52.4

44.8

38.6

Cash and equivalents

 

 

37.4

17.0

46.7

35.0

31.0

Inventories

 

 

0.0

0.0

2.7

1.0

4.3

Trade and other receivables

 

 

0.4

0.6

0.5

1.4

4.3

Other current assets

 

 

0.9

0.7

0.6

0.6

0.6

Total current assets

 

 

38.7

18.3

50.4

38.0

40.2

Non-current loans and borrowings

 

 

8.9

4.7

31.3

31.3

66.3

Other non-current liabilities

 

 

0.0

0.0

0.0

0.0

0.0

Total non-current liabilities

 

 

8.9

4.7

31.3

31.3

66.3

Trade and other payables

 

 

4.7

4.2

5.7

6.9

9.4

Current loans and borrowings

 

 

0.5

5.5

5.4

0.0

0.0

Other current liabilities

 

 

0.0

0.0

0.0

0.0

0.0

Total current liabilities

 

 

5.2

9.6

11.1

6.9

9.4

Equity attributable to company

 

 

24.7

4.3

60.5

44.5

3.1

 

 

 

 

 

 

 

 

CASH FLOW STATEMENT

 

 

 

 

 

 

 

Profit before tax

 

 

(21.6)

(23.5)

(34.0)

(48.0)

(42.1)

Depreciation and amortisation

 

 

0.0

0.1

3.1

8.1

8.1

Share based payments

 

 

0.6

2.4

2.6

0.0

0.0

Other adjustments

 

 

1.5

1.1

3.2

3.9

2.8

Movements in working capital

 

 

(3.9)

(0.8)

(1.0)

2.0

(3.7)

Interest paid

 

 

0.0

0.0

0.0

(3.9)

(2.8)

Income taxes paid

 

 

0.4

0.8

0.7

0.7

0.7

Cash from operations (CFO)

 

 

(15.4)

(19.8)

(25.4)

(37.3)

(37.1)

Capex

 

 

0.0

0.0

0.0

(0.4)

(1.9)

Acquisitions & disposals net

 

 

0.0

0.0

0.0

0.0

0.0

Other investing activities

 

 

0.2

0.4

0.0

0.0

0.0

Cash used in investing activities (CFIA)

 

 

0.2

0.4

0.0

(0.3)

(1.9)

Net proceeds from issue of shares

 

 

47.1

0.2

48.4

31.4

0.0

Movements in debt

 

 

1.8

(1.0)

7.7

(5.4)

35.0

Other financing activities

 

 

0.0

(0.1)

(0.1)

0.0

0.0

Cash from financing activities (CFF)

 

 

48.9

(0.9)

56.0

25.9

35.0

Cash and equivalents at beginning of period

 

 

4.1

37.4

17.0

46.7

35.0

Increase/(decrease) in cash and equivalents

 

 

33.7

(20.3)

30.7

(11.7)

(3.9)

Effect of FX on cash and equivalents

 

 

(0.4)

(0.1)

(1.0)

0.0

0.0

Cash and equivalents at end of period

 

 

37.4

17.0

46.7

35.0

31.0

Net (debt)/cash

 

 

28.1

6.9

10.0

3.7

(35.3)

Source: Acacia Pharma, Edison Investment Research


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This report has been commissioned by Acacia Pharma and prepared and issued by Edison, in consideration of a fee payable by Acacia Pharma. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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This report has been commissioned by Acacia Pharma and prepared and issued by Edison, in consideration of a fee payable by Acacia Pharma. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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