Near-term EU sedation filing added to the list

Paion 1 April 2019 Update
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Paion

Near-term EU sedation filing added to the list

2018 results

Pharma & biotech

1 April 2019

Price

€2.2

Market cap

€141m

US$1.10/€

Net cash (€m) at end December 2018

17.2

Shares in issue

63.9m

Free float

75%

Code

PA8

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.4)

2.3

(2.2)

Rel (local)

(6.4)

(6.3)

2.6

52-week high/low

€2.6

€2.0

Business description

Paion is an emerging specialty pharma company developing anaesthesia products. Lead product remimazolam has completed US Phase III trials and is partnered with Cosmo (US), Mundipharma (Japan), Yichang (China), Hana Pharm (South Korea), Pendopharm (Canada) and R-Pharm (CIS, Turkey, MENA).

Next events

US filing for procedural sedation by Cosmo

Q219

Update on timing for EU filing for PS

June 2019

Russia filing for GA by R-Pharm

2019

Analysts

Dr Dennis Hulme

+61 (0)2 8249 8345

Dr Susie Jana

+44 (0)20 3681 2527

Paion is a research client of Edison Investment Research Limited

Following discussions with the EMA, Paion has added filing for procedural sedation (PS) in Europe to the list of potential near-term filings for remimazolam. Mundipharma filed for approval in general anaesthesia (GA) in Japan in December 2018, while Cosmo is expected to file for PS in the US shortly. Paion’s GA Phase III in Europe is on track to complete recruitment by the end of 2019. The filings will be an important step towards commercialising remimazolam and establishing Paion as a leader in acute and critical care. We have made minor revisions to expenditure in line with guidance, accelerated early ramp-up of sales in Europe and rolled forward our DCF model, which lifts our valuation to €303m or €4.74/share.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

5.8

(15.9)

(20.5)

0.0

N/A

N/A

12/18

2.8

(12.4)

(15.9)

0.0

N/A

N/A

12/19e

10.5

(8.6)

(9.3)

0.0

N/A

N/A

12/20e

20.0

5.8

11.8

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding exceptionals and share-based payments.

Clinical data likely sufficient for PS filing in Europe

After a successful pre-submission meeting with the European Medicines Authority (EMA) in February, Paion assumes that the existing data package will be sufficient for filing in Europe (ie no extra trials needed). It will meet with an EMA rapporteur and anticipates updating the market as to potential timing with the H1 report. We understand that converting a US dossier into a format acceptable to the EMA is complex, and expect that it would take six to 12 months to prepare an EU filing submission if, as we assume, Paion decides to proceed.

Early introduction to EU clinicians and regulators

While initial sales of remimazolam in PS in Europe may be modest, in our view a filing in this indication would be an excellent opportunity to familiarise regulators, anaesthesiologists and other clinicians with the product. It could also bring an early start to the process of getting remimazolam listed on hospital formularies. These factors should lead to a faster uptake of remimazolam in GA (if approved).

US filing expected shortly – other territories to follow

Partner Cosmo has missed its target to file for US approval in PS by the end of Q119, but Paion expects it to complete the submission soon. Paion expects to receive €7.5m in milestones for the US filing. R-Pharm plans to file for GA in Russia by the end of 2019. Partners plan to file in Canada and Turkey based on the US or Japanese dossiers. Hana Pharm plans to file in South Korea in 2020.

Valuation: Lifted to €303m

We roll forward our DCF model and lift our valuation to €303m, or €4.74/share, from €291m, or €4.56/share. We have adjusted our near-term forecasts in line with guidance (R&D down ~€2m, SG&A up ~€0.5m), but have then added €0.5m to R&D spend in each of 2019 and 2020 to cover filing in PS in Europe. Paion is funded until H120 assuming the US filing proceeds as planned. A further €10m would be needed until filing in Europe (we model the funds coming from approval milestones from signed milestone agreements).

Exhibit 1: Financial summary

€'000s

2016

2017

2018

2019e

2020e

Year end 31 December

PROFIT & LOSS

Revenue

 

 

4,262

5,811

2,766

10,475

20,003

Cost of sales

0

0

0

0

0

Gross profit

4,262

5,811

2,766

10,475

20,003

R&D expenditure

(23,408)

(17,854)

(12,167)

(14,500)

(9,500)

General, administrative & selling

(5,129)

(3,828)

(3,408)

(4,601)

(4,739)

Other

(807)

(2)

354

51

51

Operating profit

(25,841)

(16,219)

(12,711)

(8,875)

5,515

Depreciation and amortisation

(759)

(347)

(256)

(300)

(300)

Share-based payments

0

0

0

0

0

Exceptionals

0

0

0

0

0

EBITDA

 

 

(25,082)

(15,872)

(12,455)

(8,575)

5,815

Operating profit (before GW and except)

(25,082)

(15,872)

(12,455)

(8,575)

5,815

Net interest

21

20

6

20

20

Profit before tax (norm)

 

 

(25,061)

(15,852)

(12,449)

(8,555)

5,835

Profit before tax (reported)

 

 

(25,061)

(15,852)

(12,449)

(8,555)

5,835

Tax

4,944

3,759

2,510

2,610

1,710

Profit after tax (norm)

(20,118)

(12,093)

(9,939)

(5,945)

7,545

Profit after tax (reported)

(20,118)

(12,093)

(9,939)

(5,945)

7,545

Average number of shares outstanding (m)

53.2

59.1

62.5

63.9

63.9

EPS - normalised (c)

 

 

(37.8)

(20.5)

(15.9)

(9.3)

11.8

EPS - reported (c)

 

 

(37.8)

(20.5)

(15.9)

(9.3)

11.8

Dividend per share (c)

 

 

0.0

0.0

0.0

0.0

0.0

Gross margin (%)

NA

NA

NA

NA

NA

EBITDA margin (%)

NA

NA

NA

NA

NA

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

NA

NA

NA

NA

NA

BALANCE SHEET

Fixed assets

 

 

2,855

2,529

2,286

2,286

2,286

Intangible assets

2,688

2,415

2,212

2,212

2,212

Tangible assets

167

114

74

74

74

Refund from assumption of dev costs

0

0

0

0

0

Other

0

0

0

0

0

Current assets

 

 

35,128

29,357

22,037

16,093

23,638

Stocks

0

0

0

0

0

Debtors

0

37

1,500

25

25

Cash

30,111

24,839

17,227

12,757

20,302

Other

5,017

4,481

3,311

3,311

3,311

Current liabilities

 

 

(13,040)

(6,656)

(3,501)

(3,501)

(3,501)

Trade payables

(6,353)

(5,921)

(2,218)

(2,218)

(2,218)

Short-term borrowings

0

0

0

0

0

Provisions

(555)

(391)

(630)

(630)

(630)

Finance lease liabilities

0

0

0

0

0

Other current liabilities

(359)

(325)

(654)

(654)

(654)

Current deferred income

(5,774)

(19)

0

0

0

Long-term liabilities

 

 

0

0

0

0

0

Long-term borrowings

0

0

0

0

0

Provisions

0

0

0

0

0

Long-term deferred income

0

0

0

0

0

Deferred taxes

0

0

0

0

0

Other long-term liabilities

0

0

0

0

0

Net assets

 

 

24,943

25,229

20,822

14,878

22,423

CASH FLOW

Operating cash flow

 

 

(17,135)

(22,318)

(16,547)

(7,100)

5,815

Net interest

19

20

5

20

20

Tax

5,529

4,577

3,729

2,610

1,710

Capex

7

0

0

0

0

Purchase of intangibles

0

0

0

0

0

Acquisitions/disposals

(199)

(25)

(13)

0

0

Equity Financing

9,212

12,494

5,214

0

0

Dividends

0

0

0

0

0

Other

0

0

0

0

0

Net cash flow

(2,567)

(5,251)

(7,612)

(4,470)

7,545

Opening net debt/(cash)

 

 

(32,680)

(30,111)

(24,839)

(17,227)

(12,757)

Effect of exchange rate changes

(2)

(22)

(0)

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(30,111)

(24,839)

(17,227)

(12,757)

(20,302)

Source: Edison Investment Research, Paion accounts


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