nerve cells

Gate not yet open to Phase III

Newron Pharmaceuticals 7 April 2021 Update
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Newron Pharmaceuticals

Gate not yet open to Phase III

Evenamide update

Pharma & biotech

7 April 2021

Price

CHF2.45

Market cap

CHF44m

€1.05/CHF; $1.03/CHF; $1.08/€

Cash and investments (€m) at 31 Dec 2020

31.25

Shares in issue

17.845m

Free float

99.6%

Code

NWRN

Primary exchange

SIX

Secondary exchange

XETRA

Share price performance

%

1m

3m

12m

Abs

(13.7)

15.8

(52.1)

Rel (local)

(18.2)

11.3

(59.4)

52-week high/low

CHF6.47

CHF1.34

Business description

Newron Pharmaceuticals is focused on the central nervous system. Xadago for Parkinson’s disease is sold in Europe, Japan and the US. Evenamide, a novel schizophrenia therapy, may start Phase III in 2022 if the 30mg bid dose has positive results.

Next events

H121 report

September 2021

Evenamide Phase II outcome

Late 2021

Analysts

Dr John Savin MBA

+44 (0)20 3077 5700

Dr Susie Jana

+44 (0)20 3077 5700

Newron Pharmaceuticals is a research client of Edison Investment Research Limited

Newron is developing evenamide as an add-on to existing anti-psychotic therapies to treat poorly managed and refractory schizophrenia. Two recently completed safety studies, one in patients and the other in healthy volunteers respectively showed no brain or heart safety issues. The patient Phase II study did not show efficacy at the 7.5mg or 15mg bid doses requested by the FDA. Newron will now complete the requested safety work using the intended therapeutic dose of 30mg bid. This continuation study (008A) will take until H221 to complete. Our indicative value of CHF121m has been retained until Study 008A completes.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/19

7.04

(18.04)

(1.01)

0.0

N/A

N/A

12/20

5.26

(18.16)

(1.09)

0.0

N/A

N/A

12/21e

6.67

(18.10)

(1.01)

0.0

N/A

N/A

12/22e

7.68

(27.24)

(1.53)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. 2019 accounts were restated.

Confirmatory expansion study at 30mg dose

Evenamide reduces the firing rate of neurons, preventing rapid bursts of the nerve depolarisation that carries electric signals. As neuronal signalling is how the brain and heart function, the FDA required key safety evidence. Newron reported on 1 April that evenamide was safe. This was based on data from Study 008 with 138 patients studying brain wave activity. A further 58-volunteer heart study (010) showed no effects on heart electrical activity, indicating no risk of arrythmias.

In study 008 in chronic schizophrenia, patients were assessed on the widely used Positive and Negative Syndrome Scale (PANSS) for efficacy. There was no statistical difference compared to placebo at the 15mg twice per day (bid) dose; 7.5mg bid was sub-therapeutic. As a result, an extension, Study 008A, will be run at a 30mg bid dose. If Study 008A is positive, the 30mg bid intended therapeutic dose could progress into Phase III. A 25mg bid dose was evaluated, including PANSS, in a 90-patient, four-week dose escalation study from 15mg to 25mg with efficacy reported; a single 30mg dose has also been tested.

Effect on cash flow and partnering

Study 008A could complete by late 2021 with pivotal studies now possible from Q222, in our view. Phase III data may not be available before H223 with full year marketing possible from 2025. This also implies that an evenamide deal is unlikely before H222. There is funding and anticipated cash flows to support development until at least late 2022; this may be extended as Phase III costs are delayed.

Valuation: Held at CHF121m until more data available

Our current valuation uses an evenamide probability of 30% and indicates a value of about CHF121m (CHF6.8/share). We have retained this until study 008A reports. If evenamide cannot show sufficient indication of efficacy at the 30mg bid dose or if significant safety issues arise, the project might not progress. In that case, the remaining value would rest on Xadago with current annual royalties of €5.3m.

Exhibit 1: Financial summary

€000s

2019

2020

2021e

2022e

Year end December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

7,038

5,258

6,669

7,678

Cost of Sales

0

0

0

0

Gross Profit

7,038

5,258

6,669

7,678

EBITDA

 

 

(18,567)

(16,386)

(16,681)

(25,822)

Depreciation

(206)

(219)

(219)

(219)

Share option adjustments

(2,126)

(1,461)

0

0

Operating Profit

(20,899)

(18,066)

(16,900)

(26,041)

Net Interest

737

(1,552)

(1,200)

(1,200)

Profit Before Tax (norm)

 

 

(18,036)

(18,157)

(18,100)

(27,241)

Profit Before Tax (reported)

 

 

(20,162)

(19,618)

(18,100)

(27,241)

Tax

(45)

(1,380)

0

0

Profit After Tax (norm)

(18,081)

(19,537)

(18,100)

(27,241)

Profit After Tax (reported)

(20,207)

(20,998)

(18,100)

(27,241)

Average Number of Shares Outstanding (m)

17.8

17.8

17.8

17.8

EPS - normalised (€)

 

 

(1.01)

(1.09)

(1.01)

(1.53)

EPS - (reported) (€)

 

 

(1.13)

(1.18)

(1.01)

(1.53)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

14,797

13,324

13,309

13,294

Intangible Assets

20

11

11

11

Tangible Assets

252

734

719

704

Investments

14,525

12,579

12,579

12,579

Current Assets

 

 

45,491

37,874

20,048

8,323

Stocks

0

0

0

0

Debtors

6,328

6,624

6,324

6,324

Cash

39,163

31,250

13,724

1,999

Current Liabilities

 

 

(5,595)

(6,892)

(7,151)

(7,651)

Creditors

(5,595)

(6,892)

(7,151)

(7,651)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(17,895)

(27,060)

(27,060)

(42,060)

Long term borrowings

(16,749)

(25,674)

(25,674)

(40,674)

Other long-term liabilities

(1,146)

(1,386)

(1,386)

(1,386)

Net Assets

 

 

36,798

17,246

(854)

(28,094)

CASH FLOW

Operating Cash Flow

 

 

(22,668)

(12,656)

(16,141)

(25,341)

Net Interest

737

(1,552)

(1,200)

(1,200)

Tax

(45)

(1,380)

0

0

Capex

(51)

(34)

(50)

(50)

Acquisitions/disposals

0

0

0

0

Financing

0

0

0

0

Other

17,337

7,365

(135)

14,865

Dividends

0

0

0

0

Net Cash Flow

(4,690)

(8,257)

(17,526)

(11,726)

Opening net debt/(cash)

 

 

(42,972)

(22,414)

(5,576)

11,950

HP finance leases initiated

0

0

0

0

Other

(15,868)

(8,581)

0

(15,000)

Closing net debt/(cash)

 

 

(22,414)

(5,576)

11,950

38,675

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

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

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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

1185 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

1185 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 Newron Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Newron Pharmaceuticals. 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.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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

1185 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

1185 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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