Financials in line as Prima advances

Pixium Vision 19 February 2019 Update
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Pixium Vision

Financials in line as Prima advances

FY18 results

Healthcare equipment & services

19 February 2019

Price

€1.63

Market cap

€35m

Net cash (€m) at 31 December 2018

7.8

Shares in issue

22.0m

Free float

49%

Code

PIX

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.2)

(14.4)

(43.2)

Rel (local)

(13.8)

(16.2)

(41.4)

52-week high/low

€2.9

€1.5

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-ARMD. The company has completed a human feasibility study for Prima in Europe and expects to start implantations in a US feasibility study in H119.

Next events

Initial implantations for US feasibility study

H119

Start EU pivotal study

H219

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

Pixium reported FY18 financials and reiterated that it is on track to start a pivotal study in the EU for its Prima bionic vision system (BVS) in H219 for the treatment of advanced dry age-related macular degeneration (Dry-ARMD). This follows the release of positive six-month data in January 2019 for its five-patient EU Prima feasibility study. Using a risk-adjusted NPV model, we obtain a pipeline rNPV of €91.2m, vs €88.7m 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

1.6

(10.6)

(0.48)

0.0

N/A

N/A

12/20e

0.0

(21.7)

(0.99)

0.0

N/A

N/A

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

FY18 financials reveal no negative surprises

Pixium reported Q418 gross cash and equivalents of €15.6m, and a yearly operating cash burn rate of €6.17m excluding net interest/finance costs of €1.28m. The sharp reduction in the operating loss from €12.67m in 2017 to €6.81m was, as expected, due to the cessation of the Iris II programme, which resulted in significantly lower COGS and marketing expenses, as well as slightly lower R&D costs.

EU pivotal study expected to start in H219

Pixium plans to work with study investigators and statisticians in coming weeks to analyse full study data and formulate a pivotal study design. It will then begin discussions with regulators to conduct a pan-European pivotal trial across several countries and multiple centres. Pixium’s goal is to start recruitment for the pivotal study in H219, potentially resulting in initial implantations before YE19. We estimate it will require 12 months of follow-up data within the EU pivotal trial for European regulators to provide CE Mark approval. We believe that the EU pivotal study may require 40–50 patients and that EU commercialisation (CE Mark approval) may occur in H222.

Valuation: €99.0m in equity, or €4.50 per share

We believe Pixium’s cash on hand should be sufficient for it to maintain its operations into Q220. Our model continues to estimate that Pixium will raise €20m in 2019, €30m in 2020 and €25m in 2021. As per Edison policy, we model these as debt financing. We continue to value Pixium using an rNPV approach, employing a 12.5% cost of capital and applying a 15% probability of success estimate for Prima. After rolling forward our estimates and reducing near-term R&D costs, we now obtain a pipeline rNPV (enterprise value) of €91.2m, up from €88.7m, previously. After including €7.8m in Q418 net cash (inclusive of €7.9m gross debt) at 31 December 2018, we obtain an equity valuation of c €99.0m, or €4.50 per share (compared to €4.42 previously).

Prima strategy on track with expectations

Pixium Vision provided a general business and financial update on 8 February 2019. The company is focused on advancing its Prima bionic vision system for the treatment of Dry-ARMD. The Prima implant is a miniaturised photovoltaic wireless sub-retinal microchip consisting of 378 electrodes (pixels) that is placed underneath the retina. Each photovoltaic pixel is independently controlled and self-powered by near-infrared light projected from the specialised glasses worn by the patient.

On 8 January 2019, Pixium announced that Prima successfully met the endpoints of the five-patient EU feasibility study1 at interim six months follow-up after implantation, in patients with Dry-ARMD. Pixium indicated that these results exceeded its initial expectations, as all five implantations resulted in successful activations and light perception in areas where no central vision remained prior to implantation. Most patients were able to identify different visual patterns, symbols or letter sequences, and recognition speed improved throughout the post-implantation rehabilitation phase. Some patients reported visual acuity (VA) measures of up to 20/460, which to our knowledge is among the highest level recorded with a prosthetic retinal implant device. Safety measures to date suggest the implant is stable and well-tolerated, as there were no device-related serious adverse events and the device does not impair residual natural peripheral vision.

All surgical implantations at the EU feasibility study took place at the Fondation Ophtalmologique A de Rothschild/Hopital des Quinze Vingts, based in Paris, France.

In parallel, the company continues to advance with the single-centre, five-patient US feasibility trial (PRIMA FS-US). Conducted at the University of Pittsburgh Medical Center, it is actively recruiting and screening potentially eligible patients. Management expects the first implantations to occur in H119. The public release of interim data from the European feasibility study could encourage patient recruitment for this US study. Pixium believes that 12-month safety and performance data on all five patients will likely be sufficient for US regulators to allow a larger US (pilot) study to be started. We continue to anticipate that study data from the US feasibility study should be available in H120 and that recruitment for the US pilot study can begin in H220.

Pixium now focused on gaining approval for EU pivotal study

As reiterated in our 17 December 2018 note, the regulatory pathway for a European approval is shorter than in the US and Pixium is confident the interim safety data from the European feasibility study can be used to enable the design of the protocol for a larger, multi-centre, CE Mark-enabling European pivotal study. The company plans to work with study investigators and statisticians in coming weeks to analyse full study data and formulate a pivotal study design. It will then begin discussions with regulators to conduct a pan-European pivotal trial across several countries and multiple centres. Pixium’s goal is to start recruitment for the pivotal study in H219, potentially resulting in initial implantations before YE19. The firm expects the EU pivotal study to involve sites in several countries, including France, Germany, Italy and Spain.

We continue to estimate it will require 12 months of follow-up safety and efficacy data within the EU pivotal trial for European regulators to provide CE Mark approval. We estimate that the EU pivotal study may require 40–50 patients. We reiterate that to obtain CE Mark approval product safety is generally the primary consideration for regulators (it does not usually require demonstration of long-term clinical efficacy). We continue to estimate that 12-month data from the EU pivotal study (which we estimate is the minimum required for approval) will be available in H221, leading to potential EU commercialisation (CE Mark approval) in H222. We expect that CE Mark clearance (and EU launch) would still occur 18–24 months earlier than US pre-market approval (PMA) and launch.

Exhibit 1: Projected clinical development pathways for the EU and US

EU clinical pathway

US clinical pathway

Clinical studies needed

1. Small-size (c 5-patient) feasibility study

1. Medium-size (c 30-patient) pilot study

2. Medium-size (c 40–50 patient) Pivotal trial

2. Larger (c 60–80 patient) pivotal trial

Projected characteristics and requirements for pivotal trial

12 months of follow-up data

18-24 months of follow-up data

Study must show product safety

Study must show safety and efficacy

Projected commercial launch timeline

H222

2024

Source: Edison Investment Research estimates

Review of FY18 financial results

Pixium reported Q418 gross cash and equivalents of €15.6m and a 2018 operating cash burn rate of €6.17m excluding net interest/finance costs of €1.28m. The firm reported €1.60m in revenue in FY18 (primarily from subsidies and research tax credits), down from €2.54m in FY17. It realised a €6.81m operating loss2 (vs a €12.67m loss in FY17), and a €13.57m net loss (€0.73 per share), vs a €13.54m net loss in FY17.

Please note our calculation of operating loss differs from that reported by the company, largely because we do not exclude the positive revaluation of stock-based compensation from our operating expense calculations; excluding this €1.09m revaluation, the 2018 operating loss would have been €7.9m.

Included within the FY18 net loss was a one-time €5.48m impairment charge related to tangible and non-tangible assets relating to the now-discontinued earlier-generation Iris II epi-retinal implant programme. Excluding this impairment charge, the company’s adjusted net loss was €8.09m, or €0.44 per share.

Overall, Pixium’s sharply lower operating and adjusted net losses compared to FY17 were, as expected, due to the cessation of the Iris II programme, which resulted in significantly lower COGS and marketing expenses, as well as slightly lower R&D costs.

Pixium’s results compare to our FY18 expectations of operating and normalised net losses of €6.7m and €6.49m respectively. The normalised net loss was higher than we expected primarily due to higher than expected net finance costs (€1.28m). Reported FY18 R&D costs (€6.18m) were only slightly ($0.14m) higher than we projected.

Financial outlook

We expect Pixium’s R&D costs and rate of cash burn to increase in 2019 as:

it prepares for the EU pivotal study

the US feasibility study progresses

it finalises processing and design enhancements to the Prima system’s external glasses, and

it produces Prima microchip and glasses inventory for the EU pivotal study.

We believe that Pixium’s funds on hand (€15.6m) should be sufficient for the company to maintain its operations and fund its Prima strategy into Q220. Given that the firm reported €7.9m in total gross debt on 31 December 2018 (€2.4m in conditional advances and €5.5m in long-term debt), we calculate €7.8m in net cash.

Following discussions with management, we have slightly reduced our R&D cost assumptions for the EU pivotal study, particularly in 2019 where we estimate that implantation numbers will be very limited. We anticipate EU pivotal study patient recruitment and implantations to increase significantly in 2020, and that implantations will then also begin for the US pilot study, resulting in a yearly increase in R&D costs.

Compared to our prior estimates, we have lowered our R&D expense assumptions in 2019 and 2020, to €7.5m and €14.0m, respectively (from €10.5m and €16.0m, respectively). We now forecast 2019 and 2020 operating cash burn rates (excluding net interest) of €9.7m and €16.9m respectively, vs our prior estimates of €12.5m and €21.0m, respectively.

We anticipate Pixium will seek to raise funds, likely in mid-2019 or H219, in order to expand its financial runway to fund the EU pivotal study. Our model continues to estimate that Pixium will raise €20m in 2019, €30m in 2020 and €25m in 2021. As per usual Edison policy, our model assumes these sources will be in debt. We forecast that all 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 H222).

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-ARMD. We continue to apply a probability of success estimate for Prima-ARMD in our model of 15% and we assume a forex rate, for US sales, of $1.13/€.

We have not revised our Prima market share, revenue or peak sales assumptions, although we have rolled forward our forecasts in our valuation model and reduced our 2019 and 2020 R&D expense forecasts as stated previously. Hence, we now obtain a pipeline rNPV (enterprise value) of €91.2m, up from €88.7m previously. After including €7.8m in net cash at 31 December 2018, we obtain an equity valuation of c €99.0m, or €4.50 per share (compared to €4.42 previously).

Exhibit 2: Pixium Vision rNPV assumptions

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

Indication

Status

rNPV
(€m)

rNPV/share (€)

Probability of success

Launch
date

Peak WW sales (€m)

Prima (net of R&D and marketing costs)

Age-related macular degeneration

Human feasibility trials

176.7

8.03

15.00%

H222 (EU) and 2024 (US)

1,064 in 2028

Corporate costs and expenses

G&A expenses

(20.1)

(0.92)

Net capex, NWC and taxes

(65.4)

(2.97)

Total rNPV

91.2

4.14

Net cash/(debt) (Q418)

7.8

0.35

Total equity value

99.0

4.50

FD shares outstanding (000) (Q119e)

22,006

Source: Edison Investment Research

Exhibit 3: 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

1,600

0

0

Cost of Sales

(141)

(1,124)

(41)

0

0

0

General & Administrative

(2,953)

(5,324)

(1,508)

(2,800)

(2,900)

(2,973)

Research & Development

(10,869)

(7,817)

(6,184)

(7,500)

(14,000)

(17,000)

EBITDA

 

 

(11,448)

(11,731)

(6,135)

(8,700)

(16,900)

(19,973)

Depreciation

(1,051)

(936)

(677)

(600)

(397)

(803)

Amortisation

0

0

0

0

0

0

Operating Profit (before exceptionals)

 

(12,499)

(12,666)

(6,812)

(9,300)

(17,297)

(20,776)

Exceptionals

0

0

(5,483)

0

0

0

Other

0

0

0

0

0

0

Operating Profit

(12,499)

(12,666)

(12,294)

(9,300)

(17,297)

(20,776)

Net Interest

58

(876)

(1,277)

(1,287)

(4,424)

(7,562)

Profit Before Tax (norm)

 

 

(12,441)

(13,542)

(8,088)

(10,587)

(21,721)

(28,338)

Profit Before Tax (FRS 3)

 

 

(12,441)

(13,542)

(13,571)

(10,587)

(21,721)

(28,338)

Tax

0

0

0

0

0

0

Profit After Tax and minority interests (norm)

(12,441)

(13,542)

(8,088)

(10,587)

(21,721)

(28,338)

Profit After Tax and minority interests (FRS 3)

(12,441)

(13,542)

(13,571)

(10,587)

(21,721)

(28,338)

Average Number of Shares Outstanding (m)

12.7

13.3

18.5

22.0

22.0

22.0

EPS - normalised (€)

 

 

(0.98)

(1.02)

(0.44)

(0.48)

(0.99)

(1.29)

EPS - normalised and fully diluted (€)

 

 

(0.98)

(1.02)

(0.44)

(0.48)

(0.99)

(1.29)

EPS - (IFRS) (€)

 

 

(0.98)

(1.02)

(0.73)

(0.48)

(0.99)

(1.29)

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

3,866

5,869

7,066

Intangible Assets

8,205

7,680

2,623

2,623

2,623

2,623

Tangible Assets

1,979

1,970

1,042

1,242

3,246

4,442

Current Assets

 

 

17,405

14,241

17,756

25,984

32,260

27,725

Short-term investments

0

0

0

0

0

0

Cash

14,244

10,532

15,629

23,858

30,134

25,599

Other

3,161

3,710

2,126

2,126

2,126

2,126

Current Liabilities

 

 

(2,836)

(2,752)

(2,044)

(1,060)

(1,060)

(1,060)

Creditors

(2,836)

(2,752)

(2,044)

(1,060)

(1,060)

(1,060)

Short term borrowings

0

0

0

0

0

0

Long Term Liabilities

 

 

(1,505)

(9,302)

(8,023)

(28,023)

(58,023)

(83,023)

Long term borrowings

(1,333)

(9,130)

(7,870)

(27,870)

(57,870)

(82,870)

Other long term liabilities

(172)

(172)

(153)

(153)

(153)

(153)

Net Assets

 

 

23,248

11,836

11,355

767

(20,954)

(49,292)

CASH FLOW

Operating Cash Flow

 

 

(11,188)

(10,605)

(6,174)

(9,684)

(16,900)

(19,973)

Net Interest

58

(876)

(1,277)

(1,287)

(4,424)

(7,562)

Tax

0

0

0

0

0

0

Capex

(148)

(191)

(31)

(800)

(2,400)

(2,000)

Acquisitions/disposals

0

0

0

0

0

0

Financing

(0)

519

14,068

0

0

0

Net Cash Flow

(11,279)

(11,153)

6,587

(11,771)

(23,724)

(29,535)

Opening net debt/(cash)

 

 

(24,190)

(12,911)

(1,401)

(7,760)

4,011

27,736

HP finance leases initiated

0

0

0

0

0

0

Other

(0)

(357)

(228)

0

0

(0)

Closing net debt/(cash)

 

 

(12,911)

(1,401)

(7,760)

4,011

27,736

57,271

Source: Pixium 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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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 Edison analyst 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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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.

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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

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United States

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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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