Cosmo provides cash injection

Acacia Pharma 21 January 2020 Update
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Acacia Pharma

Cosmo provides cash injection

In-licensing deal

Pharma & biotech

21 January 2020

Price

€2.81

Market cap

€180m

$1.30/£, $1.11/€, €1.17/£

Net cash ($m) at 31 December 2019

7

Shares in issue

63.9m

Free float

28%

Code

ACPH

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

58.8

87.0

71.1

Rel (local)

58.1

75.1

48.5

52-week high/low

€3.97

€1.31

Business description

Acacia Pharma is a hospital pharmaceutical company focused on the development and commercialisation of new nausea and vomiting treatments for surgical and cancer patients. Its main product, BARHEMSYS, is for the treatment of PONV and could be approved by the FDA in 2020.

Next events

BARHEMSYS US FDA PDUFA date

26 February 2020

ByFavo US FDA PDUFA date

5 April 2020

Analyst

Dr Susie Jana

+44 (0)20 3077 5700

Acacia Pharma is a research client of Edison Investment Research Limited

Acacia Pharma has announced a deal with Cosmo Pharmaceuticals to acquire the US rights to sedative ByFavo (remimazolam). This is a multi-faceted deal – the addition of ByFavo broadens Acacia’s US commercial pipeline beyond key asset BARHEMSYS (post-operative nausea and vomiting (PONV)). Both assets are under FDA review, with imminent PDUFA dates (BARHEMSYS 26 February, ByFavo 5 April) and potential US launch during H220. Critically, Cosmo’s equity investment of €10m plus access to loan facilities (up to $35m) for Acacia bridges its short-term funding gap, enabling it to expand its much-needed US commercial infrastructure to support both product launches. Management changes continue; as CFO Christine Soden is set to retire, the board has appointed Gary Gemignani as successor. We value Acacia at €882m or €13.8/share.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/17

0.0

(6.5)

(2.32)

0.00

N/A

N/A

12/18

0.0

(16.2)

(0.35)

0.00

N/A

N/A

12/19e

0.0

(23.1)

(0.44)

0.00

N/A

N/A

12/20e

1.8

(27.3)

(0.40)

0.00

N/A

N/A

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

PDUFA dates on the horizon

During the last 18 months, the FDA has issued two CRLs (related to problems at Acacia’s CMO and not the clinical data package) on BARHEMSYS, which has weighed heavily on Acacia’s share price. As such, timely approval, launch and sales execution for BARHEMSYS and ByFavo are imperative for Acacia to progress its business strategy rapidly, and for a restoration in market confidence.

Complex deal terms cast lifeline

Cosmo has made a €10m strategic equity investment in Acacia plus €35m available in loan facilities (€10m contingent on US approval of BARHEMSYS and €25m on US approval of ByFavo). Cosmo now holds 14.08% of Acacia’s enlarged share capital and this equity stake could increase up to ~21%. Acacia will pay €10m upfront, 20–25% royalties on sales plus milestones, €30m plus €5m on approval/first sales (met through cash/equity) and up to €105m in sales milestones.

Near-term funding secured

Acacia now has the funding in place to expand its commercial team by ~30 new hires, in addition to the 30 personnel currently focusing on six regions (medical science liaisons, national account directors and regional business directors) and the back-office support staff in the US. Further expansion will depend on the sales opportunity and funding requirements.

Valuation: €881.6m or €13.8/share

Our revised valuation of €881.6m or €13.8/share (vs €631m or €11.8/share previously) is based on a risk-adjusted NPV model. We have updated our model to include US ByFavo sales (we forecast peak sales of $126m). Acacia has changed its reporting currency from the UK pound to US dollars. We retain our sterling-denominated forecasts for now and will change to US dollars post the FY19 results.

ByFavo deal reinvigorates Acacia

Acacia has in-licensed ByFavo (remimazolam), an ultra-short-acting and reversible iv benzodiazepine sedative/anaesthetic for use during procedural sedation (PS). Cosmo Pharmaceuticals originally in-licensed ByFavo from Paion in 2016, with a view to commercialising the product through its US subsidiary Aries Pharmaceuticals. Since the closure of this subsidiary in 2019, Cosmo has looked to out-license the US rights to some of its assets. In terms of strategic fit for Acacia, ByFavo joins lead product BARHEMSYS as a product where detailing is directed to anaesthesiologists and surgical teams. Given the cost to build out its US commercial operations for lead product BARHEMSYS, utilising the speciality field force for multiple drugs makes sense and should enable operational leverage in the mid-term. However, this deal is more than a transfer of the asset’s commercial licence, as the cash injection from Cosmo (€10m equity stake and up to €35m in loan facilities) is vital to enable expansion of the US commercial team to support the launch and early detailing for BARHEMSYS (and ByFavo).

The deal is complex (see Exhibit 1) and involves two-way cash transfers, which is fairly unusual for biotech deals of this size. Access to loan facilities enables Acacia to conserve its current cash position (minus cash burn), as it uses part of the loan to meet its milestone obligations to Cosmo (eg €25m accessed on ByFavo approval and €15m out of the €35 returned in cash, with the remainder in equity), and has the net benefit of a €30m cash injection (€10m equity investment, €20m loan facility). We had previously forecast that Acacia would need to raise c £40m in H120 (following potential approval) to fund operations. The Cosmo deal reduces Acacia’s need for a public equity funding round in the near term, but additional future funding is dependent on sales execution and expansion requirements. As Julian Gilbert (former CEO) and Christine Soden (CFO) have stepped down during the last 12 months, new management is more US-centric with the appointment of Mike Bolinder (CEO) and Gary Gemignani (CFO). A US listing could make sense in time, depending on market conditions and, importantly, Acacia’s status quo (post approval of BARHEMSYS and ByFavo with sales underway).

Exhibit 1: Acacia-Cosmo deal structure for ByFavo

Deal terms

Details

Notes

Commercial terms

Cosmo to receive €10m upfront payment from Acacia

€10m raised in ACHP shares (4,646,841 issued @ €2.152)

Cosmo eligible for €30m ByFavo US approval milestone

PDUFA date 5 April 2020.

Acacia to fund €15m in cash (note: loan facility from Cosmo becomes accessible), and the remaining €15m either by cash or issuing new ordinary shares

Cosmo eligible for €5m ByFavo US launch milestone

Acacia to fund through cash or issue of new ordinary shares

Cosmo eligible for up to €105m in sales-related milestones

Cosmo to receive tiered double-digit royalties on sales that are payable to Paion

20–25%

Financial terms

Cosmo makes a strategic equity investment of €10m in Acacia Pharma

4,347,826 shares issued at €2.30

€10m loan facility available to Acacia on BARHEMSYS US approval

€25m loan facility available to Acacia on ByFavo US approval (€15m to be paid back to Cosmo as above)

Source: Acacia Pharma, Edison Investment Research

We forecast ByFavo peak sales of $126m and believe this deal to be highly accretive to Acacia. We have maintained our SG&A forecasts, given that ByFavo should be a complementary product to BARHEMSYS and therefore little incremental investment should be required. Our model already assumes 60 personnel in the US in 2020. Acacia believes ByFavo is a highly complementary fit to BARHEMSYS, as both are targeted towards the same key physicians, have a similar value proposition (mobilising patients more quickly after procedures, are up and discharged more quickly), and use the same distribution channels and networks. Acacia has already begun the process of educating key opinion leaders on the benefits of BARHEMSYS in PONV, and will extend this to education on procedural sedation and ByFavo ahead of approval.

BARHEMSYS – third time lucky?

Acacia’s lead asset BARHEMSYS (intravenous amisulpride) is being developed for the management of PONV. Following two complete response letters (CRLs) from the US FDA during the past 18 months, deficiencies with Acacia’s previous chosen contract manufacturing organisation (CMO) had been highlighted. Acacia has nominated an alternative CMO with a track record of both manufacturing amisulpride and undergoing regular, successful FDA inspections (c 60% of its current production is already US bound). With no concerns raised in the CRLs about the clinical and safety data package, we forecast regulatory approval by the revised PDUFA date of 26 February 2020. Any slippage would further weigh on the share price and confidence in the company. Acacia plans to launch BARHEMSYS in Q320. Acacia has been slowly building its US commercial operations during the last 12 months and has 30 personnel in the US spanning six regional teams (each team has medical science liaisons, national account directors and sales leadership) and back office support staff. With near-term funding in place, Acacia plans to recruit five hospital territory managers for each of those six regions and train them during June and July. Beyond educating anaesthetic staff and surgical teams, key negotiations include formulary access for hospitals and large integrated delivery networks (IDNs). Post launch, we will monitor formulary access wins and initial sales uptake.

ByFavo: Versatile, effective and safe sedation

ByFavo (remimazolam) is an ultra-short-acting and reversible iv benzodiazepine sedative/anaesthetic designed for use during procedural sedation (PS) such as endoscopy, bronchoscopy and colonoscopy. It offers both rapid onset and offset of action, and this differentiating profile (the opportunity to substitute both midazolam and propofol) should drive US market uptake for short, painful procedures such as colonoscopy. ByFavo has been shown to be a safer, faster alternative to approved sedatives, and potentially carries a reduced risk of cardiac and respiratory depression, which is particularly significant for older patients with comorbidities. Studies have shown that ByFavo is suited for three indications requiring varying depths of sedation – general anaesthesia, procedural and ICU sedation – while maintaining the vital physiological and neurological functions of the patient (source: American Society of Anesthesiologists’ guidelines on the continuum of sedation). A comparison of the characteristics of remimazolam with standard sedatives is shown in Exhibit 2. Acacia’s deal with Cosmo relates to the use of ByFavo in procedural sedation.

Exhibit 2: Summary of key features of remimazolam vs approved anaesthetics

Key feature

Remimazolam

Propofol

Midazolam

Dexmedetomidine

Rapid onset

Yes

Yes

No

Yes

Rapid offset

Yes

Yes

No

No

Low respiratory depression

Yes

No

No

Yes

Cardiovascular stability

Yes

No

No

No

Early recovery to full cognition

Yes

No

Yes

Yes

Reversal agent available

Yes

No

Yes

No

Need to adjust dose for body weight

No

Yes

Yes

Yes

Source: Paion, Edison Investment Research

Positive trial results support US approval and uptake

Based on the results of Paion’s clinical development programme for procedural sedation, we believe there is a high likelihood that ByFavo will be granted marketing approval on or before its 5 April 2020 PDUFA date. Paion has completed three US-based Phase III studies of remimazolam compared to placebo with midazolam rescue in procedural sedation. This includes studies in patients undergoing colonoscopy and bronchoscopy procedures, plus a further Phase III study in higher-risk patients undergoing a colonoscopy. Remimazolam was highly successful in inducing sedation in the three US Phase III studies. Exhibit 3 shows that in each of the studies, over 80% of patients achieved the primary efficacy endpoint, versus less than 4% of placebo-treated patients and less than 35% of those treated with midazolam. The primary outcome measure was a composite endpoint of no need for rescue medication, completion of the procedure and no more than five doses within any 15-minute window (no more than three doses in 12 minutes for midazolam). Failure of a patient to achieve the composite endpoint usually meant that one or more additional doses of midazolam as a rescue medicine were required to achieve adequate sedation and complete the procedure.

Exhibit 3: Successful sedation with remimazolam in high proportion of patients in all three US trials

Source: Paion investor presentation. Note: ASA III/IV patients refers to the safety study in high-risk colonoscopy patients with severe systemic disease. 1Open label.

Shorter procedure times, better patient experience

We expect the shorter procedure times with remimazolam compared to midazolam to be important drivers of market uptake. Exhibit 4 summarises sedation and recovery times for remimazolam and midazolam in the three Phase III studies. In each study, total induction and recovery times were between 17 and 20.3 minutes shorter for remimazolam than for midazolam (average 18.4 minutes). In the clinical setting, midazolam is often administered at higher initial doses and with shorter intervals between top-ups than is recommended on the label. However, our review of published studies found that although this led to faster induction of sedation (six minutes), average recovery times were significantly longer (30 minutes), so the total induction and recovery time in the published studies averaged 36 minutes, slightly longer than the 32-minute total for midazolam in Paion’s Phase III colonoscopy study. It is possible that more rapid administration of midazolam results in higher total doses, leading to slower recovery from sedation.

Exhibit 4: Induction and recovery times for the three Phase III studies*

Bronchoscopy Phase III

Colonoscopy Phase III

High-risk colonoscopy

Remimazolam

Midazolam

Remimazolam

Midazolam

Remimazolam

Midazolam

Time to start of procedure (min)

5.0

16.0

4.1

15.9

5.0

19.0

End of procedure to fully alert (min)

6.0

12.0

7.2

15.7

3.0

7.0

Total induction plus recovery time (min)

11.0

28.0

11.3

31.6

8.0

26.0

Time saving with remimazolam (min)

17.0

20.3

18.0

Source: Paion, Edison Investment Research. Note: *Median times shown for bronchoscopy and high-risk colonoscopy trials; mean times shown for Phase III colonoscopy trial.

With the average time savings with remimazolam being almost 20 minutes and the average duration of the colonoscopy examination itself being less than 20 minutes, the results demonstrate that clinical centres could significantly increase throughput by switching from midazolam to remimazolam. We expect this improved throughput to drive significant uptake of ByFavo in the addressable market of ~24.5m procedures per year in the US (source: Cosmo Pharmaceuticals).

We forecast $126m peak sales in the US in 2025 based on a 20% penetration rate of 17.6m available patients (90% of patients undergoing the 24.5m procedures are eligible for moderate sedation, and we assume 80% of these are covered in the US). We assume pricing of $25/dose (based on company guidance) versus $1/dose of midazolam.

Valuation: €882m or €13.8/share

Our valuation of Acacia Pharma, at €881.6m or €13.8/share, vs €631m or €11.8/share previously, is based on a risk-adjusted NPV model. Valuation uplift is derived from the addition of US ByFavo sales in procedural sedation to our forecasts following the recent in-license agreement. We ascribe a 90% probability of success, reflecting its regulatory status. Our sales forecasts for BARHEMSYS for rescue treatment and prophylaxis of PONV, and the chemotherapy-induced nausea and vomiting (CINV) opportunity for the US market remain unchanged (Exhibit 5). We include end December 2019 net cash of $7m in our valuation ($17m cash and $10m Hercules debt) and use a 12.5% discount rate.

Exhibit 5: Valuation

Product

Indication

Launch

Peak sales ($)

Value
(€)

Probability

rNPV
(€m)

rNPV/
share (€)

BARHEMSYS US only

PONV

2020

386.7

746.1

90%

669.6

10.5

APD403 US only

CINV

2024

107.9

95.1

30%

20.4

0.3

ByFavo US only

Procedural sedation

2020

125.6

210.8

90%

185.3

2.9

Net cash at 31 December 2019

 

 

 

6.3

100%

6.3

0.1

Valuation

 

 

 

1,058.3

881.6

13.8

Source: Edison Investment Research

Financials

We have incorporated the Cosmo deal in our forecasts for Acacia Pharma. Given the complex structure of the deal, the impact is as follows:

We have increased 2020 sales forecasts to £1.8m (from £1.1m) and include preliminary sales of ByFavo and BARHEMSYS. Our forecast for COGS has increased in line with the manufacturing of ByFavo. SG&A remains unchanged, as mentioned above. The net interest increase reflects drawdown of the loan facility from Cosmo on BARHEMSYS and ByFavo approval.

We expect cash burn to increase in 2020 as Acacia’s headcount increases throughout the year. Cash outflows reflect milestone payments to Cosmo, inflows from equity issuance and loan facility drawdown.

Cosmo now holds 14.08% of Acacia’s enlarged share capital and this equity stake could increase up to ~21% if Acacia opts to fund its milestone payment obligations (ByFavo approval and first sales, see Exhibit 1) to Cosmo through equity financing.

Acacia has changed its reporting currency from UK pounds to US dollars as of 1 January 2019. We retain our sterling-denominated forecasts for now and will change to US dollars following publication of the FY19 results.

Exhibit 6: Financial summary

Accounts: IFRS; year end 31 December (£m)

 

 

2015

2016

2017

2018

2019e

2020e

PROFIT & LOSS

Revenue

 

 

0.0

0.0

0.0

0.0

0.0

1.8

Operating revenues

 

 

0.0

0.0

0.0

0.0

0.0

1.8

Cost of sales

 

 

0.0

0.0

0.0

0.0

0.0

(0.2)

Gross profit

 

 

0.0

0.0

0.0

0.0

0.0

1.5

Gross margin %

 

 

N/A

N/A

N/A

N/A

n/a

0.9

SG&A (expenses)

 

 

(2.4)

(0.8)

(1.5)

(11.3)

(18.5)

(24.3)

R&D costs

 

 

(10.1)

(13.6)

(1.5)

(3.8)

(4.7)

(2.2)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

EBITDA (reported)

 

 

(12.5)

(14.4)

(3.0)

(15.0)

(23.2)

(24.9)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported Operating Income

 

 

(12.5)

(14.4)

(3.0)

(15.0)

(23.2)

(24.9)

Operating Margin %

 

 

N/A

N/A

N/A

N/A

n/a

n/a

Finance income/(expense)

 

 

(2.6)

(1.8)

(3.5)

(1.1)

0.1

(2.4)

Exceptionals and adjustments

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported PBT

 

 

(15.1)

(16.3)

(6.5)

(16.2)

(23.1)

(27.3)

Income tax expense (includes exceptionals)

 

 

2.2

2.8

0.3

0.7

(0.5)

(0.7)

Reported net income

 

 

(12.9)

(13.5)

(6.2)

(15.5)

(23.6)

(28.0)

Basic average number of shares, m

 

 

2.7

2.7

2.7

44.1

53.3

69.7

Year-end number of shares, m

 

 

2.7

2.7

2.7

53.3

53.3

69.7

Basic EPS (p)

 

 

(4.83)

(5.06)

(2.32)

(0.35)

(0.44)

(0.40)

Adjusted EPS (p)

 

 

(4.83)

(5.06)

(2.32)

(0.35)

(0.44)

(0.40)

Dividend per share (p)

 

 

0.00

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

0.0

0.0

0.0

0.0

0.0

1.8

Goodwill

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Intangible assets

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other non-current assets

 

 

0.0

0.0

0.0

0.0

0.0

38.5

Total non-current assets

 

 

0.0

0.0

0.0

0.0

0.0

40.3

Cash and equivalents

 

 

5.5

6.9

3.1

29.4

12.2

23.8

Inventories

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Trade and other receivables

 

 

0.3

0.5

0.2

0.3

0.0

0.3

Other current assets

 

 

2.1

2.8

0.3

0.7

0.7

0.7

Total current assets

 

 

7.9

10.2

3.6

30.4

12.8

24.8

Non-current loans and borrowings

 

 

0.0

5.0

0.0

7.0

7.0

59.8

Other non-current liabilities

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Total non-current liabilities

 

 

0.0

5.0

0.0

7.0

7.0

59.8

Trade and other payables

 

 

2.9

5.1

1.0

3.7

10.1

3.3

Current loans and borrowings

 

 

0.0

2.7

5.2

0.3

0.0

0.0

Other current liabilities

 

 

7.8

9.1

15.2

0.0

0.0

0.0

Total current liabilities

 

 

10.8

17.0

21.4

4.1

10.1

3.3

Equity attributable to company

 

 

(2.8)

(11.7)

(17.8)

19.3

(4.3)

2.0

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

Operating Profit

 

 

(15.1)

(16.3)

(6.5)

(16.2)

(23.1)

(27.3)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Share based payments

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other adjustments

 

 

2.7

1.9

3.7

1.6

(0.1)

2.4

Movements in working capital

 

 

1.6

2.0

(3.8)

2.6

6.7

(7.1)

Interest paid/received

 

 

0.0

0.0

0.0

0.2

0.1

(2.4)

Income taxes paid

 

 

1.1

2.2

2.8

0.3

(0.5)

(0.7)

Cash from operations (CFO)

 

 

(9.7)

(10.2)

(3.7)

(11.6)

(18.7)

(35.3)

Capex

 

 

0.0

0.0

0.0

0.0

0.0

(1.8)

Acquisitions & disposals net

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other investing activities

 

 

0.0

0.0

0.0

0.2

1.8

0.2

Cash used in investing activities (CFIA)

 

 

0.0

0.0

0.0

0.2

1.8

(14.4)

Net proceeds from issue of shares

 

 

12.5

4.5

3.4

34.2

0.0

8.5

Movements in debt

 

 

0.0

7.1

(3.4)

1.5

(0.3)

52.8

Other financing activities

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Cash from financing activities (CFF)

 

 

12.5

11.7

0.0

35.7

(0.3)

61.4

Cash and equivalents at beginning of period

 

 

2.6

5.5

6.9

3.1

29.4

12.2

Increase/(decrease) in cash and equivalents

 

 

2.8

1.4

(3.8)

26.3

(17.2)

11.6

Cash and equivalents at end of period

 

 

5.5

6.9

3.1

29.4

12.2

23.8

Net (debt)/cash

 

 

5.5

(0.8)

(2.1)

22.1

5.2

(36.0)

Source: Acacia Pharma, Edison Investment Research


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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.

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

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

General disclaimer and copyright

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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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.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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.

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

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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