New funds allow progress of key trials

NeuroVive Pharmaceutical 4 April 2019 Update
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NeuroVive Pharmaceutical

New funds allow progress of key trials

Rights issue

Pharma & biotech

4 April 2019

Price

SEK1.42

Market cap

SEK264m

SEK8.83/US$

Net cash (SEKm) at end-2018 + newly raised funds

134.0

Shares in issue

186.0m

Free float

95%

Code

NVP

Primary exchange

NASDAQ Stockholm

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

(0.6)

2.1

(33.7)

Rel (local)

(3.9)

(13.0)

(39.9)

52-week high/low

SEK5.1

SEK1.2

Business description

NeuroVive Pharmaceutical is a Swedish biopharmaceutical company with deep expertise in mitochondrial medicine. It has a diversified portfolio in terms of indications and 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 (genetic mitochondrial diseases) are the most advanced assets.

Next events

Top line data from the Phase Ia/b with KL1333

H219

Initiation of NeuroSTAT Phase II

2019

Analysts

Jonas Peciulis

+44 (0)20 3077 5728

Alice Nettleton

+44 (0)20 3077 5700

In February 2019, NeuroVive completed a rights issue, which was followed by a private placement. These brought in a total of SEK108.1m (net estimated), which should be sufficient to 2020. In its recent 2018 annual report, NeuroVive provided a detailed update on its R&D activities and outlined the goals for 2019 achievable with the new funding. Potential near-term share price catalysts include KL1333 Phase Ib initial results, non-dilutive financing and the start of the NeuroSTAT Phase II clinical trial, and an out-licensing of NV556. Our updated valuation is SEK1.51bn or SEK8.1/share.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/17

0.6

(70.1)

(1.49)

0.0

N/A

N/A

12/18

2.5

(68.8)

(0.94)

0.0

N/A

N/A

12/19e

1.5

(90.9)

(0.63)

0.0

N/A

N/A

12/20e

1.5

(113.5)

(0.64)

0.0

N/A

N/A

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

KL1333 Phase Ia/b trial top-line data in 2019

The newly raised funds will be used to advance NeuroVive’s clinical and preclinical programmes, with one of the key trials being the Phase Ia/b study testing KL1333 in development for mitochondrial diseases, such as MELAS, PEO, KSS and Pearson’s syndrome. KL1333, a small molecule NAD+ modulator, was tested in healthy volunteers in a Phase I trial (single ascending dose) by the licensor Yungjin Pharm in South Korea, which found the compound safe, with a favourable PK profile. NeuroVive’s own Phase I trial will include multiple ascending doses in healthy volunteers and patients. We therefore believe the likelihood of confirming the safety profile is high, but additional interesting early efficacy insights could be obtained from patient data. The trial has already enrolled the first healthy volunteer. Initial data from healthy volunteers are expected in H219.

NeuroSTAT, NV556 and NV354 also in focus in FY19

NeuroVive also plans to initiate the proof-of-concept Phase II trial with NeuroSTAT in traumatic brain injury, where there is no specific, approved therapeutic treatment. Additional funding will be required to complete the trial, which management indicated could be carried out via non-dilutive funding or a partnership. Out-licensing preclinical assets in the non-core portfolio, especially NV556 (NASH), is another potential catalyst and a source of cash. NV354 (selected compound from the NVP015 programme) is one of the preclinical projects also gaining pace and could enter the clinic in 2020. Our last outlook report describes the ongoing R&D programmes in detail.

Valuation: SEK1.51bn or SEK8.1/share

Our updated, risk-adjusted NPV valuation of NeuroVive is SEK1.51bn or SEK8.1/share compared to SEK1.51bn or SEK9.2/share previously due to an increased cash position, revision of the operating and rNPV models, and rolling the model forward. The slight decrease in valuation per share is mostly technical adjustment after the increased number of shares.

NeuroVive Pharmaceutical is a research client of Edison Investment Research Limited

Financials and valuation

The rights issue raised a total of SEK99m gross or an estimated net SEK81m (guarantee commitment fee was SEK9.1m). A few weeks after the share issue, NeuroVive announced a private placement, which brought in an additional SEK28.2m gross. The total number of shares outstanding increased from 91.7m to 186.0m after the rights issue and the private placement. Previously we have already included the guaranteed amount of SEK93m in our model, while the total newly raised funds amount to SEK108.1m (net of fees estimate), which we include in our model now. This and the last reported end-Q418 cash of SEK26.0m should be sufficient to fund operations into 2020, according to the company, which is also in line with our model. This includes several R&D events as discussed, most notably expected top-line data from the Phase Ia/b trial with KL1333 and the initiation of the Phase II study with NeuroSTAT.

Exhibit 1: Remaining 2019 milestones and near-term value inflection points

KL1333

Top-line data from the Phase Ia/b study expected (first patient in March 2019)

Prepare for Phase II study

NeuroSTAT

Secure non-dilutive financing for Phase II study

IND application

Initiate Phase II study

NVP015/NV354

Further preclinical studies including in vivo dose-response, toxicology, production scale-up

NV556

Out-licensing activities for NASH

NVP024

Candidate selection

NVP025

Candidate selection

NVP022/NV422

Preclinical dose-response studies in NASH disease model

Source: NeuroVive annual report, Edison Investment Research.

In 2018, total R&D-related expenses were SEK37.9m versus SEK27.9m, mainly due to a combination of more intensive R&D, but also the change in accounting approach from capitalising R&D costs to expensing in April 2017. Although NeuroVive’s FY18 results were largely in line with our expectations, we reviewed our R&D spend projections after the company published its 2018 annual report, in which the 2019 goals were listed. We have made no changes to the lead projects NeuroSTAT and KL1333, as these trials are progressing with the new funding. The main revisions to our R&D model include moving the expected licensing deal for NV556 from 2018 to 2019 and the initiation of the Phase I trial with compounds from the NVP015 programme from 2018 to 2020 (we note that a subset of NVP015 compounds was out-licensed to BridgeBio Pharma in June 2018, as discussed in our outlook report). These were the main reasons for the downward revision of R&D costs in FY19.

Exhibit 2: Key changes to our financial forecasts

SEKm

FY18

FY19e

FY20e

Estimate

Actual

Change (%)

Old

New

Change (%)

New

Revenue

1.500

2.466

+64%

1.500

1.500

+0%

1.500

R&D expenses

(40.560)

(37.922)

-7%

(103.243)

(58.457)

-43%

(79.378)

Personnel expenses

(14.738)

(14.454)

-2%

(15.475)

(15.177)

-2%

(15.936)

Operating profit/(loss) (reported)

(71.394)

(73.360)

+3%

(132.968)

(90.918)

-32%

(113.537)

Profit/(loss) before tax (reported)

(71.594)

(73.494)

+3%

(132.968)

(90.918)

-32%

(113.537)

Profit/(loss) after tax (reported)

(67.594)

(68.373)

+1%

(128.968)

(85.797)

-33%

(108.416)

EPS (reported), SEK

(0.94)

(0.94)

+0%

(1.00)

(0.62)

-38%

(0.58)

Source: NeuroVive accounts, Edison Investment Research

Our updated, risk-adjusted NPV valuation of NeuroVive is SEK1.51bn or SEK8.1/share compared to SEK1.51bn or SEK9.2/share previously due to the increased cash position, revision of the operating and rNPV models, and rolling the model forward. We maintain all other R&D assumptions as described in our initiation report and last outlook note. As previously, in our valuation we include clinical-stage NeuroSTAT (TBI) 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 3: NeuroVive sum-of-the parts valuation

Product

Launch

Peak sales*
($m)

NPV
($m)

NPV/share
($)

Probability

rNPV
($m)

rNPV/share
($)

NeuroSTAT

2025

454

289.7

1.6

15%

35.0

0.2

KL1333

2024

574

593.4

3.2

10%

55.7

0.3

NVP015

2027

875

455.0

2.4

5%

20.3

0.1

NV556

2027

1,743

140.0

0.8

8%

30.5

0.2

NVP024

2029

730

31.2

0.2

3%

7.5

0.0

Net cash end-Q418 + proceeds from rights issue and private placement

14.5

0.1

100%

14.5

0.1

Valuation

 

 

1,523.9

8.2

163.5

0.9

SEKm

SEK

SEKm

SEK

NeuroSTAT

2,674.3

14.4

15%

323.5

1.7

KL1333

5,477.1

29.5

10%

514.2

2.8

NVP015

4,200.1

22.6

5%

187.1

1.0

NV556

1,292.0

6.9

8%

281.3

1.5

NVP024

288.1

1.5

3%

69.1

0.4

Net cash end-Q418 + proceeds from rights issue and private placement

134.0

0.7

100%

134.0

0.7

Valuation

14,065.6

75.6

1,509.3

8.1

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

Exhibit 4: Financial summary

SEK'000s

 

2016

2017

2018

2019e

2020e

December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

14

585

2,466

1,500

1,500

Cost of Sales

0

0

0

0

0

Gross Profit

14

585

2,466

1,500

1,500

Research and development

(12,000)

(27,926)

(37,922)

(58,457)

(79,378)

EBITDA

 

 

(69,868)

(67,897)

(66,675)

(90,771)

(113,405)

Operating Profit (before amort. and except.)

 

 

(70,989)

(69,492)

(68,589)

(90,918)

(113,537)

Intangible Amortisation

0

0

0

0

0

Exceptionals

(1,121)

(1,595)

(4,771)

0

0

Other

0

56

66

0

0

Operating Profit

(72,110)

(71,031)

(73,294)

(90,918)

(113,537)

Net Interest

265

(571)

(200)

0

0

Profit Before Tax (norm)

 

 

(70,724)

(70,063)

(68,789)

(90,918)

(113,537)

Profit Before Tax (reported)

 

 

(71,845)

(71,602)

(73,494)

(90,918)

(113,537)

Tax

0

0

0

0

0

Profit After Tax (norm)

(70,724)

(70,007)

(68,723)

(90,918)

(113,537)

Profit After Tax (reported)

(70,240)

(66,727)

(68,373)

(85,797)

(108,416)

Average Number of Shares Outstanding (m)

42.0

50.2

78.5

152.8

186.0

EPS - normalised (SEK)

 

 

(1.72)

(1.49)

(0.94)

(0.63)

(0.64)

EPS - normalised fully diluted (SEK)

 

 

(1.72)

(1.49)

(0.94)

(0.63)

(0.64)

EPS - reported (SEK)

 

 

(1.67)

(1.33)

(0.87)

(0.56)

(0.58)

Dividend per share (SEK)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

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

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

84,645

87,579

86,681

86,681

86,681

Intangible Assets

71,151

74,315

73,440

73,440

73,440

Tangible Assets

274

162

140

140

140

Investments

13,220

13,102

13,101

13,101

13,101

Current Assets

 

 

94,901

30,560

27,383

44,615

1,432

Stocks

0

0

0

0

0

Debtors

0

0

0

0

0

Cash

93,251

28,992

25,951

43,183

0

Other

1,650

1,568

1,432

1,432

1,432

Current Liabilities

 

 

(12,413)

(14,259)

(18,296)

(18,296)

(18,296)

Creditors

(12,413)

(14,259)

(18,296)

(18,296)

(18,296)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

0

0

0

0

(70,292)

Long term borrowings

0

0

0

0

(70,292)

Other long term liabilities

0

0

0

0

0

Net Assets

 

 

167,133

103,880

95,768

113,000

(475)

CASH FLOW

Operating Cash Flow

 

 

(57,614)

(58,039)

(63,630)

(90,771)

(113,405)

Net Interest

237

(84)

(199)

0

0

Tax

0

0

0

0

0

Capex

(139)

(40)

(82)

(87)

(70)

Acquisitions/disposals*

0

(11,035)

0

0

0

Financing

77,332

9,031

64,656

108,090

0

Other

(23,227)

(4,092)

(3,786)

0

0

Dividends

0

0

0

0

0

Net Cash Flow

(3,411)

(64,259)

(3,041)

17,232

(113,475)

Opening net debt/(cash)

 

 

(96,662)

(93,251)

(28,992)

(25,951)

(43,183)

HP finance leases initiated

0

0

0

0

0

Other

0

0

(0)

0

0

Closing net debt/(cash)

 

 

(93,251)

(28,992)

(25,951)

(43,183)

70,292

Source: NeuroVive accounts, Edison Investment Research

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This report has been commissioned by NeuroVive Pharmaceutical and prepared and issued by Edison, in consideration of a fee payable by NeuroVive Pharmaceutical. 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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General disclaimer and copyright

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

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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

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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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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