Paion — Commercialisation of remimazolam underway

Paion (DE: PA8)

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2.46

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Research: Healthcare

Paion — Commercialisation of remimazolam underway

Paion has gained approvals in the US, China and Japan for its fast-onset, short-recovery anaesthesia product remimazolam. In the US, partner Acacia is expected to launch it in Q420 for procedural sedation (PS). In Japan, Mundipharma launched it in Q320 for general anaesthesia (GA). In China, Yichang Humanwell launched it for PS in August with GA trials ongoing. Initial European PS approval is expected by H121. European marketing will be either direct or by using regional partners. Paion indicates that it has cash until H221. Our valuation is €283m.

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Healthcare

Paion

Commercialisation of remimazolam underway

Pharma & biotech

Deutsches Eigenkapitalforum 2020

15 October 2020

Price

€2.37

Market cap

€157m

Share price graph

Share details

Code

PA8

Shares in issue

66.2m

Net cash at end June 2020

€12.4m

Business description

Paion owns the fast-onset and short-recovery anaesthesia product remimazolam. This is approved in Japan for GA and in the US and China for PS. ByFavo is licensed in the US to Acacia. It is filed in the EU and South Korea. A European GA filing is expected in H121. The European marketing strategy needs to be confirmed.

Bull

An approved product in the US, Japan and China with marketing partners.

EMA PS submission due to complete by H21 with European GA Phase III in final stages

Cash until H221 including EIB €20m loan facilities.

Bear

No clear European marketing strategy against entrenched, cheaper generic alternatives.

Acacia is building a salesforce, its own product, and has no marketing track record.

US label requires supervision, unlike the main generic competitor in PS, midazolam.

Analyst

Dr John Savin MBA

+44 (0)20 3077 5700

Paion is a research client of Edison Investment Research Limited

Paion has gained approvals in the US, China and Japan for its fast-onset, short-recovery anaesthesia product remimazolam. In the US, partner Acacia is expected to launch it in Q420 for procedural sedation (PS). In Japan, Mundipharma launched it in Q320 for general anaesthesia (GA). In China, Yichang Humanwell launched it for PS in August with GA trials ongoing. Initial European PS approval is expected by H121. European marketing will be either direct or by using regional partners. Paion indicates that it has cash until H221. Our valuation is €283m.

Three approvals so far

The FDA approved remimazolam for PS in Q320. In the US, it is branded as ByFavo and licensed to Acacia. Acacia states that the US procedural colonoscopy market is 25m procedures with marketing targeted to hospitals where ByFavo use can be supervised. However. most colonoscopies are carried out in private clinics. Launch is expected in Q420 as Drug Enforcement Agency classification has completed. We expect a price of about $25 per 20mg vial with royalties of 20–25% from H221. In Japan it is approved for GA; Mundipharma instigated launch in July (branded as Anerem) with Paion receiving royalties of 16–18%. In China, branded as Ruima, it is approved for PS and was launched in August by Yichang Humanwell; a GA trial is ongoing.

Europe – a staged approval and market uncertainty

Remimazolam is undergoing a European Medicines Agency review for PS with the outcome likely by H121. The European GA Phase III closed with 424 patients enrolled (of 500 planned), potentially allowing a follow-on, faster, abbreviated EMA GA application. Currently, the European sales strategy is unclear. Paion might sell direct, but the market is too small to support a salesforce unless additional marketed products can be sourced. The major European market is seen as GA. A more likely strategy will be using one or more regional marketing partners to generate royalties; this remains our current valuation assumption.

Valuation: Potential profitability within five years

Paion aims to become profitable within five years. Our indicative value remains at €283m. Paion expects strong 2020 revenues from approval milestones but royalties will be under €1m. COVID-19 might limit the number of procedures carried out in 2021. Paion had €12.4m in cash on 30 June, gained a H220 US approval milestone of €15m and has an EIB loan facility of €20m.

Edison estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

2.77

(12.45)

(15.9)

0.0

N/A

N/A

12/19

8.00

(9.35)

(10.8)

0.0

N/A

N/A

12/20e

20.30

2.42

5.9

0.0

40.2

N/A

12/21e

4.21

(20.88)

(31.2)

0.0

N/A

N/A

Source: Paion reports, Edison forecasts

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This report has been prepared and issued by Edison as part of a road show package for companies attending the Eigenkapital Forum. 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.

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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.

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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.

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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

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United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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NSW 2000, Australia

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