FDA issues CRL for BARHEMSYS

Acacia Pharma 10 October 2018 Update
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Acacia Pharma

FDA issues CRL for BARHEMSYS

Corporate update

Pharma & biotech

10 October 2018

Price

€3.20

Market cap

€170m

$1.29/£, $1.16/€, €1.11/£

Net cash (£m) at 30 June 2018

29.0

Shares in issue

53.1m

Free float

100%

Code

ACPH

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.7

(0.9)

N/A

Rel (local)

6.3

3.0

NA

52-week high/low

€4.0

€2.9

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 is forecast to launch in 2019.

Next events

BARHEMSYS US launch as PONV ‘rescue treatment’

H119

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Acacia Pharma is a research client of Edison Investment Research Limited

Acacia Pharma has received a Complete Response Letter (CRL) from the FDA for lead asset BARHEMSYS (repurposed amisulpride) for the management of post-operative nausea and vomiting (PONV). The CRL comes as a surprise as it relates to deficiencies at the contract manufacturers responsible for producing the API. Importantly, we note that the FDA has not requested additional clinical data or trials for BARHEMSYS’s potential approval. We expect Acacia to work with its contract manufacturer and the FDA to discuss the exact requirements to resolve the agency’s concerns. At this point, Acacia expects a quick resolution and maintains a potential launch of BARHEMSYS for PONV rescue in H119. Our valuation is unchanged at €10.9/share.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/16

0.0

(16.3)

(5.06)

0.0

N/A

N/A

12/17

0.0

(6.5)

(2.32)

0.0

N/A

N/A

12/18e

0.0

(20.3)

(0.36)

0.0

N/A

N/A

12/19e

2.7

(45.6)

(0.82)

0.0

N/A

N/A

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

CRL issued on 5 October PDUFA date

While the CRL issued by the FDA for BARHEMSYS was unexpected, the issues raised do not relate to the safety and efficacy of BARHEMSYS in PONV, but rather to deficiencies that the FDA had identified during a recent pre-approval inspection of the amisulpride API contract manufacturer. This means no further clinical trials or clinical data are required, which is positive. Furthermore, Acacia notes that no inadequacies were noted regarding the purity or stability of the API or the quality of the finished product. While the exact issues are unknown, we expect a resolution and potential approval post-resubmission of the application once the concerns of the agencies have been addressed. If it is deemed a Class 1 resubmission, it implies up to a two-month review period.

BARHEMSYS US launch in H119 still possible

While the delay to BARHEMSYS approval on its original 5 October PDUFA date is unexpected, we believe the CRL manufacturing issues should be resolvable, with the timing to an approval the main unknown. Acacia needs to build up its commercial operations including the sizeable salesforce of 60-100 reps required for the PONV indication in the US. Acacia had been targeting a H119 launch, which is still a possibility if the issues are solved quickly with the FDA. Funding in the near term will be required to build the required US organisation (see initiation report).

Valuation: €579m or €10.9per share

Our valuation of Acacia Pharma remains unchanged at €579m or €10.9/share. While we anticipate that the manufacturing deficiencies will be resolved and an H119 launch is still possible, we note the risk that the timelines for BARHEMSYS approval and subsequent launch could slip from our H119 assumption. Our valuation is predominantly based on a risk-adjusted NPV model of BARHEMSYS for PONV, in addition to the CINV opportunity for the US market only.

Exhibit 1: Financial summary

Accounts: IFRS, Year-end: December, £m

 

 

2015

2016

2017

2018e

2019e

2020e

PROFIT & LOSS

Revenue

 

 

0.0

0.0

0.0

0.0

2.7

13.7

Operating revenues

 

 

0.0

0.0

0.0

0.0

2.7

13.7

Cost of sales

 

 

0.0

0.0

0.0

0.0

(0.2)

(0.9)

Gross profit

 

 

0.0

0.0

0.0

0.0

2.5

12.9

Gross margin %

 

 

N/A

N/A

N/A

N/A

0.9

0.9

SG&A (expenses)

 

 

(2.4)

(0.8)

(1.5)

(16.7)

(37.8)

(42.7)

R&D costs

 

 

(10.1)

(13.6)

(1.5)

(2.9)

(7.7)

(10.1)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

EBITDA (reported)

 

 

(12.5)

(14.4)

(3.0)

(19.6)

(43.0)

(39.9)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported Operating Income

 

 

(12.5)

(14.4)

(3.0)

(19.6)

(43.0)

(39.9)

Operating Margin %

 

 

N/A

N/A

N/A

N/A

N/A

N/A

Finance income/(expense)

 

 

(2.6)

(1.8)

(3.5)

(0.7)

(2.5)

(2.6)

Exceptionals and adjustments

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported PBT

 

 

(15.1)

(16.3)

(6.5)

(20.3)

(45.6)

(42.4)

Income tax expense (includes exceptionals)

 

 

2.2

2.8

0.3

1.0

2.0

1.6

Reported net income

 

 

(12.9)

(13.5)

(6.2)

(19.3)

(43.6)

(40.8)

Basic average number of shares, m

 

 

2.7

2.7

2.7

53.1

53.1

53.1

Basic EPS (£)

 

 

(4.83)

(5.06)

(2.32)

(0.36)

(0.82)

(0.77)

Adjusted EPS (£)

 

 

(4.83)

(5.06)

(2.32)

(0.36)

(0.82)

(0.77)

Dividend per share (£)

 

 

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

0.1

0.8

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

0.0

Total non-current assets

 

 

0.0

0.0

0.0

0.0

0.1

0.8

Cash and equivalents

 

 

5.5

6.9

3.1

12.7

14.0

11.1

Inventories

 

 

0.0

0.0

0.0

0.0

0.1

0.5

Trade and other receivables

 

 

0.3

0.5

0.2

0.0

0.5

2.3

Other current assets

 

 

2.1

2.8

0.3

0.3

0.3

0.3

Total current assets

 

 

7.9

10.2

3.6

13.0

15.0

14.2

Non-current loans and borrowings

 

 

0.0

5.0

0.0

6.7

56.7

96.7

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

6.7

56.7

96.7

Trade and other payables

 

 

2.9

5.1

1.0

9.1

5.2

5.8

Current loans and borrowings

 

 

0.0

2.7

5.2

0.4

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

9.5

5.2

5.8

Equity attributable to company

 

 

(2.8)

(11.7)

(17.8)

(3.2)

(46.8)

(87.6)

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

Operating Profit

 

 

(15.1)

(16.3)

(6.5)

(20.3)

(45.6)

(42.4)

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

0.7

2.5

2.6

Movements in working capital

 

 

1.6

2.0

(3.8)

(6.9)

(4.5)

(1.5)

Interest paid / received

 

 

0.0

0.0

0.0

(0.7)

(2.5)

(2.6)

Income taxes paid

 

 

1.1

2.2

2.8

1.0

2.0

1.6

Cash from operations (CFO)

 

 

(9.7)

(10.2)

(3.7)

(26.3)

(48.2)

(42.4)

Capex

 

 

0.0

0.0

0.0

0.0

(0.1)

(0.7)

Acquisitions & disposals net

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other investing activities

 

 

0.0

0.0

0.0

0.1

0.1

0.1

Cash used in investing activities (CFIA)

 

 

0.0

0.0

0.0

0.1

0.0

(0.6)

Net proceeds from issue of shares

 

 

12.5

4.5

3.4

33.9

0.0

0.0

Movements in debt

 

 

0.0

7.1

(3.4)

1.9

49.6

40.0

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

35.8

49.6

40.0

Cash and equivalents at beginning of period

 

 

2.6

5.5

6.9

3.1

12.7

14.0

Increase/(decrease) in cash and equivalents

 

 

2.8

1.4

(3.8)

9.6

1.4

(3.0)

Cash and equivalents at end of period

 

 

5.5

6.9

3.1

12.7

14.0

11.1

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Acacia Pharma and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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London +44 (0)20 3077 5700

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United Kingdom

New York +1 646 653 7026

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US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Acacia Pharma and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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