NeuroVive Pharmaceutical — KL1333 Ph I positive; rights issue oversubscribed

NeuroVive Pharmaceutical — KL1333 Ph I positive; rights issue oversubscribed

On 27 April 2018, NeuroVive announced that the planned rights issue was oversubscribed (104%), delivering SEK78.5m in gross proceeds and funding the operations into 2019. The fundraise allows NeuroVive to focus on the initiation of the NeuroSTAT (traumatic brain injury) Phase IIb trial (H218/H119) and the Phase Ib KL1333 (genetic mitochondrial diseases) trial in Europe (H218). The latter project was bolstered by the recent news from the South Korean partner, Yungjin Pharm, which reported a positive outcome in its own locally run Phase I trial with KL1333. Our updated valuation is SEK1.62bn or SEK17.7/share (SEK18.0/share previously).

Analyst avatar placeholder

Written by

NeuroVive Pharmaceutical

KL1333 Ph I positive; rights issue oversubscribed

Q118 company update

Pharma & biotech

4 June 2018

Price

SEK2.62

Market cap

SEK240m

SEK8.94/US$

Net cash (SEKm) at end-Q118 + the proceeds from the rights issue

94.3

Shares in issue

91.6m

Free float

98.3%

Code

NVP

Primary exchange

Nasdaq Stockholm

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

14.4

13.5

(26.6)

Rel (local)

14.1

10.8

(25.0)

52-week high/low

SEK6.0

SEK2.1

Business description

NeuroVive Pharmaceutical is a Swedish biopharmaceutical company with deep expertise in mitochondrial medicine. It employs a dual strategy: it develops a core portfolio of assets for orphan diseases and seeks to out-license proprietary products for non-orphan indications. NeuroSTAT (neurotrauma, Phase IIb ready) and KL1333 (mitochondrial diseases) are the most advanced assets.

Next events

Start of NeuroVive’s Phase Ib with KL1333

H218

NeuroVive initiation of NeuroSTAT
Phase IIb

H218/H119

Out-licensing deal for NV556

H218

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Alice Nettleton

+44 (0)20 3681 2527

NeuroVive Pharmaceutical is a research client of Edison Investment Research Limited

On 27 April 2018, NeuroVive announced that the planned rights issue was oversubscribed (104%), delivering SEK78.5m in gross proceeds and funding the operations into 2019. The fundraise allows NeuroVive to focus on the initiation of the NeuroSTAT (traumatic brain injury) Phase IIb trial (H218/H119) and the Phase Ib KL1333 (genetic mitochondrial diseases) trial in Europe (H218). The latter project was bolstered by the recent news from the South Korean partner, Yungjin Pharm, which reported a positive outcome in its own locally run Phase I trial with KL1333. Our updated valuation is SEK1.62bn or SEK17.7/share (SEK18.0/share previously).

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(ore)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/16

0.0

(70.7)

(172.3)

0.0

N/A

N/A

12/17

0.6

(70.1)

(149.3)

0.0

N/A

N/A

12/18e

0.6

(83.6)

(132.6)

0.0

N/A

N/A

12/19e

0.6

(132.2)

(170.7)

0.0

N/A

N/A

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

Phase I trial with KL1333 in South Korea positive

Recently, Yungjin reported positive results from the KL1333 Phase I trial in healthy volunteers performed by partner Yungjin Pharm in South Korea (n=60). The researchers found that KL1333 has a favourable PK profile and no serious adverse events were observed. This was a direct positive catalyst for NeuroVive’s share price, as the company is about to start a Phase Ib study with KL1333 in Europe (UK sites; NeuroVive owns the rights to territories outside Japan and South Korea). The study is planned to start in H218, with results expected in H119. As with Yungjin’s study, it will involve a dose escalation in healthy volunteers, but will also include a multiple ascending dosing (MAD) in healthy volunteers as well as patients with genetic mitochondrial disease generating the first-ever such human data. NeuroVive has received orphan drug designation by the FDA for KL1333 in mitochondrial diseases, in addition to the existing EMA designation. These could provide seven and 10 years of market exclusivity in the US and Europe, respectively, if KL1333 receives marketing authorisation before competitors.

Now financed into 2019, ramping up R&D

We maintain all our current forecasts but now include the full amount from the rights issue (SEK78.5m less costs), compared with the previous guaranteed amount (SEK55.0m). Adding this to the end-Q118 net cash results in approximately SEK94m, which according to our model should fund the company’s activities into 2019. Further capital may be required to complete the NeuroSTAT Phase IIb trial, but the results from the Phase I MAD study with KL1333 should be in H119 and the company is working on several potential funding sources (detailed below).

Valuation: Updated to SEK1.62bn or SEK17.7/share

Our updated valuation of NeuroVive is SEK1.62bn or SEK17.7/share, compared to SEK1.44bn or SEK18.0/share previously, mainly due to proceeds from the rights issue and the appreciation of the US$ versus the SEK. The initiation of the next trials with KL1333 and NeuroSTAT, and potential out-licensing of a preclinical asset NV556 (NASH) are near-term R&D events.

Financials and valuation

Q1 financial results

NeuroVive reported income of SEK174k and total operating expenses of SEK13.2m, which is largely in line with our model and lower than a year ago (SEK21.3m). The y-o-y decrease was mainly due to a one-off, non-cash cost item of SEK11.0m booked in Q117 relating to administrative expenses associated with the disposal of a subsidiary. We make no changes to our forecast of total opex of SEK84.2m for 2018 (versus reported SEK71.7m in 2017), with cash burn accelerating later in 2018 as NeuroVive initiates the clinical trials.

We now include the full amount from the rights issue (SEK78.5m less costs). Adding this to the end-Q118 cash (no debt) results in approximately SEK94.3m, which, according to our model, should fund the company’s activities into 2019. Further capital may be required to complete the NeuroSTAT Phase IIb trial, but the results from the Phase I MAD study with KL1333 should be in H119. In addition, the company indicated that it is also working towards securing co-funding for the Phase IIb NeuroSTAT trial, as well as non-dilutive funding from a potential licensing deal for NV556 (NASH) in H218 and potential further research grants. Furthermore, a total exercise of warrants exercisable in November 2018 could bring in another SEK37.3m gross in cash (strike price SEK3.80).

Valuation update

Our updated valuation of NeuroVive is SEK1.62bn or SEK17.7/share compared to SEK1.44bn or SEK18.0/share previously. The increase in absolute value and decrease in valuation per share reflect the higher number of shares outstanding after the rights issue. The main changes were the addition of the full amount of proceeds from the issue and a significant appreciation of the US$ versus the SEK from the start of this year (from SEK/US$8.2 to 8.9). We maintain the R&D assumptions described in our initiation report. As previously, in our valuation we include clinical-stage NeuroSTAT (traumatic brain injury) and KL1333 (genetic mitochondrial disorders) and the advanced preclinical products. We continue to exclude NVP025 (mitochondrial myopathy) and NVP022 (NASH) for the time being, as both are at an early stage.

Exhibit 1: NeuroVive sum-of-the parts valuation

Product

Launch

Peak sales*
($m)

NPV
($m)

NPV/share
($)

Probability

rNPV
($m)

rNPV/share
($)

NeuroSTAT

2024

454

320.4

3.5

15%

38.3

0.4

KL1333

2023

574

619.3

6.8

10%

57.4

0.6

NVP015

2024

875

777.5

8.5

5%

31.3

0.3

NV556

2026

1,716

185.7

2.0

8%

37.2

0.4

NVP024

2029

702

31.8

0.3

3%

6.5

0.1

Net cash at end-Q118 + the proceeds from rights issue

10.5

0.1

100%

10.5

0.1

Valuation

 

 

1,945.2

21.2

181.1

2.0

SEKm

SEK

SEKm

SEK

NeuroSTAT

2,864.1

31.3

15%

342.0

3.7

KL1333

5,536.9

60.5

10%

512.8

5.6

NVP015

6,950.7

75.9

5%

279.9

3.1

NV556

1,660.4

18.1

8%

332.3

3.6

NVP024

283.9

3.1

3%

57.9

0.6

Net cash at end-Q118
+ the proceeds from rights issue

94.3

1.0

100%

94.3

1.0

Valuation

17,390.2

189.9

1,619.2

17.7

Source: Edison Investment Research. Note: *Peak sales reached six years after launch. WACC = 12.5% for product valuations.

Exhibit 2: Financial summary

SEK000s

2016

2017

2018e

2019e

December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

14

585

585

585

Cost of Sales

0

0

0

0

Gross Profit

14

585

585

585

Research and development

(12,000)

(27,926)

(57,170)

(104,380)

EBITDA

 

 

(69,868)

(67,897)

(83,481)

(132,031)

Operating Profit (before amort. and except.)

(70,989)

(69,492)

(83,623)

(132,185)

Intangible Amortisation

0

0

0

0

Exceptionals

(1,121)

(1,595)

0

0

Other

0

56

0

0

Operating Profit

(72,110)

(71,031)

(83,623)

(132,185)

Net Interest

265

(571)

0

0

Profit Before Tax (norm)

 

 

(70,724)

(70,063)

(83,623)

(132,185)

Profit Before Tax (reported)

 

 

(71,845)

(71,602)

(83,623)

(132,185)

Tax

0

0

0

0

Profit After Tax (norm)

(70,724)

(70,007)

(83,623)

(132,185)

Profit After Tax (reported)

(70,240)

(66,727)

(79,623)

(128,185)

Average Number of Shares Outstanding (m)

42.0

50.2

66.1

79.8

EPS - normalised (ore)

 

 

(172.27)

(149.31)

(132.64)

(170.66)

EPS - normalised & fully diluted (ore)

 

(172.27)

(149.31)

(132.64)

(170.66)

EPS - reported (SEK)

 

 

(1.67)

(1.33)

(1.21)

(1.61)

Dividend per share (SEK)

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

 

 

84,645

87,579

87,579

87,579

Intangible Assets

71,151

74,315

74,315

74,315

Tangible Assets

274

162

162

162

Investments

13,220

13,102

13,102

13,102

Current Assets

 

 

94,901

30,560

20,728

1,568

Stocks

0

0

0

0

Debtors

0

0

0

0

Cash

93,251

28,992

19,160

0

Other

1,650

1,568

1,568

1,568

Current Liabilities

 

 

(12,413)

(14,259)

(14,259)

(14,259)

Creditors

(12,413)

(14,259)

(14,259)

(14,259)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

0

0

0

(112,978)

Long term borrowings

0

0

0

(112,978)

Other long term liabilities

0

0

0

0

Net Assets

 

 

167,133

103,880

94,048

(38,090)

CASH FLOW

Operating Cash Flow

 

 

(57,614)

(58,039)

(83,481)

(132,031)

Net Interest

237

(84)

0

0

Tax

0

0

0

0

Capex

(139)

(40)

(141)

(107)

Acquisitions/disposals*

0

(11,035)

0

0

Financing

77,332

9,031

73,790

0

Other

(23,227)

(4,092)

0

0

Dividends

0

0

0

0

Net Cash Flow

(3,411)

(64,259)

(9,832)

(132,138)

Opening net debt/(cash)

 

 

(96,662)

(93,251)

(28,992)

(19,160)

HP finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

(93,251)

(28,992)

(19,160)

112,978

Source: NeuroVive’s accounts, Edison Investment Research. Note: *Related to the disposal of a subsidiary in 2017, the net effect of which was neutral on cash flows.

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 NeuroVive Pharmaceutical 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

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 NeuroVive Pharmaceutical 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

Brady — In-line trading, focused on investing in technology

In a brief AGM update, Brady said that trading has been in line. Following a period of significant change, with new people hired and the business having been streamlined, the primary focus has shifted to re-engineering the software. The initial outcome of this was shown with the launch of the group’s first FAST START implementation offering in May. We will review our forecasts following tomorrow’s capital markets day. If Brady can successfully transition to the cloud, there is a lot to go for as E/CTRM is an attractive growth industry and Brady has a high-quality customer base.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free