Building feasibility data on way to pivotal study

Pixium Vision 28 October 2019 Update
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Pixium Vision

Building feasibility data on way to pivotal study

Clinical trial update

Healthcare equipment
& services

28 October 2019

Price

€0.66

Market cap

€15m

$1.11/€

Net cash (€m) at 30 June 2019

3.4

Shares in issue

22.6m

Free float

49%

Code

PIX

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(37.6)

(54.2)

(61.3)

Rel (local)

(39.2)

(55.3)

(65.5)

52-week high/low

€2.03

€0.66

Business description

Pixium Vision develops bionic vision systems for patients with severe vision loss. Its lead product, Prima, is a wireless sub-retinal implant system designed for dry-AMD. The firm has completed a human feasibility study in Europe and expects to start implantations in a US feasibility study in Q419.

Next events

Start US feasibility study implantations

Q419

Initial feasibility data on Prima 2 system

H120

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Maxim Jacobs, CFA

+1 646 653 7027

Pixium Vision is a research client of Edison Investment Research Limited

Patients in the ongoing, five-patient European feasibility trial on Prima are starting to use the second-generation Prima 2 glasses, which may further enhance the visual experience of patients implanted with the current 378-electrode Prima chip. Initial implantations for the US feasibility study are anticipated shortly. Data accumulated from these studies should help inform the pivotal study programme, expected to start in mid-2020. We obtain an equity valuation of €78m (vs €76m previously).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

2.5

(13.5)

(1.02)

0.0

N/A

N/A

12/18

1.6

(8.1)

(0.44)

0.0

N/A

N/A

12/19e

1.9

(11.0)

(0.49)

0.0

N/A

N/A

12/20e

1.6

(14.4)

(0.64)

0.0

N/A

N/A

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

Feasibility data on Prima 2 expected in H120

We believe that functional data on the EU patients using the new Prima 2 glasses could be available in H120. Before starting a pivotal study, Pixium prefers to have results on hand from feasibility studies with the upgraded Prima system (ie whether the new analytics and other features from Prima 2 glasses will improve visual functionality and quality of life parameters; the actual 378-electrode Prima implant chip has not changed). The company believes that having such data would raise the likelihood of success in the pivotal programme.

Potential simplification of US regulatory pathway

Pixium has had productive discussions with the FDA in recent months and no longer believes that a separate US pilot study is required as part of the regulatory pathway. That is, following the current US feasibility study, it anticipates its next trial involving US centres to be a registration-enabling pivotal study. Pixium intends to start a pivotal study in European sites by mid-2020, and its preferred objective would be to harmonise study design requirements between the FDA and European regulators such that it can combine trial sites from Europe and the US into a single pivotal study that would satisfy registration requirements in both territories. This could potentially result in initial US implantations for the US portion of a pivotal trial before year-end 2020, which would bring our US launch estimate forward to H223. Our base case assumes launches in 2023 in the EU and 2025 in the US.

Valuation: Slight uplift of equity valuation to €78m

We believe Pixium’s cash on hand should be sufficient for it to maintain its operations into Q220, and we estimate that it will raise €65m (vs €83m previously due to lower expected future costs) through 2021 to fund Prima development. We model this as debt financing. We obtain a €78m rNPV valuation that, after adjusting for €0.1m Q319 estimated net debt, translates to a similar equity valuation, or €3.46 per share (vs €3.39 previously). If US and EU sites can be combined into a common pivotal study, bringing the US launch forward to H223, this could add €0.97 per share to our equity valuation.

Feasibility studies using Prima 2 glasses on track

As stated in our 6 August 2019 update note, Pixium is starting feasibility studies in both the EU and the US on its second-generation Prima system (employing the Prima 2 glasses) in patients with advanced dry-AMD with geographic atrophy (GA). As a reminder, the Prima system consists of the implanted sub-retinal chip as well as a specialised pair of augmented reality (AR) eyeglasses, whereby each photovoltaic pixel (on the implant) is independently controlled and self-powered by near-infrared light projected from glasses worn by the patient (the glasses consist of a camera and digital mirror projector, which emit a near-infrared light pattern through the patient’s eye carrying the Prima implant, designed to be processed by the Prima implant’s pixels/electrodes). The Prima 2 glasses are a second-generation version of the AR glasses and, in combination with a new pocket computer employing improved algorithms, designed to incorporate more advanced image processing and artificial intelligence functionality to enhance the visual experience of patients implanted with the current 378-electrode Prima chip. We believe the Prima 2 glasses should enable implanted dry-AMD patients to better combine both prosthetic and natural residual (ie peripheral) vision.

As a reminder, in late 2017, Pixium started the five-patient, single-site, 36-month European feasibility study for its Prima device in patients with advanced dry-AMD and reported positive 12-month data in July 2019. Pixium applied for an amendment to its ongoing EU feasibility study to enable the patients (already enrolled and implanted with the Prima chip) to now use the second-generation Prima 2 glasses instead of the first-generation glasses (which they had been using up until this point). The company has received the requisite regulatory approvals for the amendment and is in the process of transitioning the five EU patients to start using the Prima 2 glasses and then undergo the necessary rehabilitation/training for using the device. We believe that functional data on the EU patients using the new Prima 2 glasses could be available in H120. Before starting a pivotal study, Pixium prefers to have results on hand from feasibility studies with the upgraded Prima system (ie whether the new analytics and other improvements from Prima 2 will improve visual functionality and quality of life parameters). It believes that having such data would raise the likelihood of success in the pivotal programme.

The five-patient US feasibility study being conducted at the University of Pittsburgh Medical Center and at Bascom Palmer Eye Institute (Miami, Florida) will also employ the Prima 2 glasses. Efforts to recruit eligible patients have accelerated in recent months, in conjunction with the FDA relaxing some of the inclusion criteria, and management expects the first implantations to occur before year-end 2019.

Possibility of streamlined US regulatory pathway

Pixium has had productive discussions with the FDA in recent months regarding the eventual pathway towards US registration for Prima and, according to management, there is a potentially clearer regulatory pathway than previously. Previously, the company had disclosed that to achieve US regulatory approval, it would require three US clinical trials: first, a small (n=5) feasibility trial (like the current one underway), followed by a medium-size (approximately 20–40 patients) US pilot study, and finally, a registration-enabling pivotal study. Given the progress of recent talks with regulators and the potential to use some of the clinical data from the European trials, Pixium no longer believes that a separate US pilot study is required as part of the regulatory pathway. That is, following the current US feasibility study, it anticipates its next study involving US study centres to be a registration-enabling pivotal study.

Pixium intends to start a pivotal study in European sites by mid-2020, and its preferred objective would be to harmonise study design requirements between the FDA and European regulators such that it can combine facilities from Europe and the US into a single pivotal trial that would satisfy registration requirements in both territories. This could potentially result in initial US implantations for the US portion of a pivotal study before year-end 2020. The company plans to discuss steps with regulators in the coming months to work towards this unified regulatory approach, and the best-case scenario would be a single registration-enabling trial (which we estimate would involve between 50 and 70 implantations in total across both regions). If it encounters challenges in obtaining agreement for this unified study approach, Pixium will at minimum start the European portion of the pivotal programme by mid-2020 and finalise the appropriate mechanism(s) for US registration afterwards.

Maintaining current US launch timing forecasts for now

While there is the possibility that a single pivotal study programme involving both US and European sites (and potentially enabling registration in both regions) may begin in 2020, our base case continues to assume that European market registration and launch will occur earlier than US approval. We await further clarity on the US registration process over the coming months before revising our assumptions.

Hence, our base case assumes the EU pivotal study may require 40–50 patients and will require 12 months of follow-up safety and efficacy data for European regulators to provide CE mark approval. We estimate that 12-month data from the EU pivotal study will be available in H122, leading to potential EU commercialisation (CE mark approval) in 2023. Our base case assumes a separate US pivotal study programme starting in 2021, leading to US launch in 2025.

If regulators agree to a single pivotal study design containing sites in Europe and the US and satisfying both agencies’ regulatory requirements, we estimate that this could bring forward the US launch to H223.

Financials

Pixium recently reported its 30 September 2019 gross cash position of €7.0m (down from €10.2m on 30 June 2019) and its 9M19 operating cash burn rate of €7.7m. The burn rate is up from €5.2m in 9M18, due to increased clinical product expenses and a delay in the receipt of a research tax credit compared to the prior year, where a €2.1m payment was received in Q318. Pixium expects to receive a €1.3m research tax credit in Q419.

We calculate €3.4m in H119 net cash after adjusting H119 gross cash with €6.87m of gross debt (€2.49m in refundable advances and a €4.38m venture loan). We excluded €1.48m in short- and long-term lease debt (included on reported balance sheet as per IFRS 16) from our company debt calculations as it does not have an immediate cash impact. A full balance sheet was not provided for Q319, so we estimate Q319 net debt at €0.1m. We believe that Pixium’s current funds on hand should be sufficient for the company to maintain its operations and fund its Prima strategy into Q220.

Following the recent Q319 financials and discussions with management, we have reduced our near-term expense forecasts and have also now included R&D grants and tax credits in our 2020 and 2021 forecasts. We continue to expect R&D costs (related to the EU pivotal study) to increase in 2020 and further in 2021 as recruitment for the study reaches completion, but we have lowered our overall cost estimates. We now assume R&D expenses of €9.1m in 2020 and €12.1m in 2021, respectively, versus our prior estimates of €13.0m and €18.0m, respectively. We have reduced our 2019, 2020, and 2021 operating cash burn rates to €10.2m, €9.9m, and €12.9m, respectively, versus our prior estimates of €10.4m and €15.8m and €20.9m, respectively. These estimates largely depend on the size of the upcoming pivotal study (or studies); we currently model a 40- to 50-patient European study to start in mid-2020 and a separate 50- to 60-patient US pivotal study to start in 2021.

We expect that Pixium will seek to raise funds in Q419 or Q120, in order to expand its financial runway to fund the EU pivotal study. Our model continues to estimate that Pixium will raise €20m in Q419, but we have reduced our 2020 and 2021 funding requirement assumptions to €25m and €20m, respectively, versus our prior estimates of €30m and €33m, respectively. As per Edison’s usual policy, our model assumes these sources will be in debt. We forecast that this funding should enable Pixium to complete the registration-enabling Prima clinical studies in the EU to reach commercialisation in Europe. In addition, positive cash flows resulting from EU sales should enable the completion of the US pivotal study. We continue to assume that Pixium will only start to become cash flow positive on a sustainable basis once Prima is launched (in 2023).

In the event that Pixium would only require a single (assumed n=70) pivotal study to satisfy the requirements of both European and US regulators, our funding requirement assumptions for 2019 and 2020 would be similar, but we estimate that Pixium would then only need to raise €7.5m in 2021 (instead of €20m).

Valuation

We continue to value Pixium using an rNPV approach, employing a 12.5% cost of capital. Our valuation is based solely on the Prima opportunity in dry-AMD. We continue to apply a probability of success estimate for Prima-AMD in our model of 15% and we now assume an FX rate, for US sales, of $1.11/€ (versus $1.12/€ previously). We obtain a pipeline rNPV (enterprise value, excluding net cash) of €78.3m versus €74.1m previously.

After including €0.1m in estimated net debt at 30 September 2019, we obtain an equity valuation of c €78.2m, or €3.46 per share (versus €3.39 previously).

Exhibit 1: Pixium Vision rNPV assumptions

Product contributions (net of R&D and marketing costs)

Indication

Status

rNPV
(€m)

rNPV/
share (€)

Probability of success

Launch year

Peak WW sales (€m)

Prima (net of R&D and marketing costs)

Age-related macular degeneration with geographic atrophy

Human feasibility trials

150.9

6.68

15.00%

2023 (EU) and
2025 (US)

1,102 in 2029

Corporate costs & expenses

G&A expenses

(16.6)

(0.73)

Net capex, NWC & taxes

(56.0)

(2.48)

Total rNPV

78.3

3.46

Net cash (debt) (Q319e)

(0.1)

(0.00)

Total equity value

78.2

3.46

FD shares outstanding (000s) (31 August 2019 data)

22,606

Source: Edison Investment Research

The above valuation reflects our base-case assumption of separate clinical pivotal study programmes for the US and Europe, resulting in respective launches in 2023 and 2025, respectively. In the event that study data from both US and European sites can be combined into a common registration-enabling programme for both territories, thus bringing forward the US launch to H223, this would result in an uplift of our pipeline rNPV valuation by €22.1m to €100.4m. This would result in an equity valuation of €100.3m, or €4.43 per share.

Exhibit 2: Financial summary

€000

2016

2017

2018

2019e

2020e

2021e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,516

2,535

1,598

1,856

1,600

1,600

Cost of Sales

(141)

(1,124)

(41)

0

0

0

General & Administrative

(2,953)

(5,324)

(1,508)

(3,223)

(2,400)

(2,460)

Research & Development

(10,869)

(7,817)

(6,184)

(7,880)

(9,050)

(12,100)

EBITDA

 

 

(11,448)

(11,731)

(6,135)

(9,247)

(9,850)

(12,960)

Depreciation

(1,051)

(936)

(677)

(478)

(515)

(930)

Amortization

0

0

0

0

0

0

Operating Profit (before exceptionals)

 

(12,499)

(12,666)

(6,812)

(9,725)

(10,365)

(13,890)

Exceptionals

0

0

(5,483)

0

0

0

Other

0

0

0

0

0

0

Operating Profit

(12,499)

(12,666)

(12,294)

(9,725)

(10,365)

(13,890)

Net Interest

58

(876)

(1,277)

(1,288)

(4,036)

(6,560)

Profit Before Tax (norm)

 

 

(12,441)

(13,542)

(8,088)

(11,013)

(14,400)

(20,450)

Profit Before Tax (FRS 3)

 

 

(12,441)

(13,542)

(13,571)

(11,013)

(14,400)

(20,450)

Tax

0

0

0

0

0

0

Profit After Tax and minority interests (norm)

(12,441)

(13,542)

(8,088)

(11,013)

(14,400)

(20,450)

Profit After Tax and minority interests (FRS 3)

(12,441)

(13,542)

(13,571)

(11,013)

(14,400)

(20,450)

Average Number of Shares Outstanding (m)

12.7

13.3

18.5

22.5

22.6

22.7

EPS - normalised (€)

 

 

(0.98)

(1.02)

(0.44)

(0.49)

(0.64)

(0.90)

EPS - normalised and fully diluted (€)

 

(0.98)

(1.02)

(0.44)

(0.49)

(0.64)

(0.90)

EPS - (IFRS) (€)

 

 

(0.98)

(1.02)

(0.73)

(0.49)

(0.64)

(0.90)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

10,184

9,649

3,666

5,073

6,959

8,053

Intangible Assets

8,205

7,680

2,623

2,527

2,527

2,527

Tangible Assets

1,979

1,970

1,042

2,546

4,432

5,526

Current Assets

 

 

17,405

14,241

17,756

26,340

35,152

33,707

Short-term investments

0

0

0

0

0

0

Cash

14,244

10,532

15,629

23,376

32,078

30,633

Other

3,161

3,710

2,126

2,964

3,074

3,074

Current Liabilities

 

 

(2,836)

(2,752)

(2,044)

(1,810)

(1,810)

(1,810)

Creditors

(2,836)

(2,752)

(2,044)

(1,810)

(1,810)

(1,810)

Short term borrowings

0

0

0

0

0

0

Long Term Liabilities

 

 

(1,505)

(9,302)

(8,023)

(28,266)

(53,266)

(73,266)

Long term borrowings

(1,333)

(9,130)

(7,870)

(26,870)

(51,870)

(71,870)

Other long term liabilities

(172)

(172)

(153)

(1,396)

(1,396)

(1,396)

Net Assets

 

 

23,248

11,836

11,355

1,337

(12,966)

(33,317)

CASH FLOW

Operating Cash Flow

 

 

(11,188)

(10,605)

(6,174)

(10,227)

(9,862)

(12,861)

Net Interest

58

(876)

(1,277)

(1,288)

(4,036)

(6,560)

Tax

0

0

0

0

0

0

Capex

(148)

(191)

(31)

(415)

(2,400)

(2,024)

Acquisitions/disposals

0

0

0

0

0

0

Financing

(0)

519

14,068

923

0

0

Net Cash Flow

(11,279)

(11,153)

6,587

(11,007)

(16,298)

(21,445)

Opening net debt/(cash)

 

 

(24,190)

(12,911)

(1,401)

(7,760)

3,494

19,792

HP finance leases initiated

0

0

0

0

0

0

Other

(0)

(357)

(228)

(247)

0

(0)

Closing net debt/(cash)

 

 

(12,911)

(1,401)

(7,760)

3,494

19,792

41,237

Source: Pixium Vision accounts, Edison Investment Research

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This report has been commissioned by Pixium Vision and prepared and issued by Edison, in consideration of a fee payable by Pixium Vision. 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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1,185 Avenue of the Americas

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NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Pixium Vision and prepared and issued by Edison, in consideration of a fee payable by Pixium Vision. 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.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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Australia

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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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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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