Next catalyst ByFavo PDUFA date

Acacia Pharma 5 June 2020 Update
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Acacia Pharma

Next catalyst ByFavo PDUFA date

Corporate update

Pharma & biotech

5 June 2020

Price

€3.07

Market cap

€209m

$1.11/€

Net cash ($m) at 31 December 2019

7

Shares in issue

67.9m

Free float

78%

Code

ACPH

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

25.7

(1.3)

105.3

Rel (local)

7.6

3.0

105.8

52-week high/low

€3.6

€1.3

Business description

Acacia Pharma is a hospital pharmaceutical company focused on the development and commercialisation of new products for surgical and cancer patients. It has two assets: BARHEMSYS (approved for the treatment of PONV in the US) and in-licensed asset ByFavo (sedative/ anaesthetic).

Next events

ByFavo US FDA PDUFA date

5 July 2020

BARHEMSYS US launch as PONV ‘rescue treatment’

H220

ByFavo US launch

H220

Analyst

Dr Susie Jana

+44 (0)20 3077 5700

Dr John Priestner

+44 (0)20 3077 5700

Acacia Pharma has announced an amendment to its original deal terms with Cosmo Pharmaceuticals, whereby €10m of the agreed loan facility (up to €35m, of which €25m is contingent on ByFavo approval) will be swapped for a €10m equity stake (through the issue of 3,213,769 shares at €3.112, a 4.1% premium to the previous day’s closing price). This will take Cosmos’s holding of Acacia’s enlarged share capital to ~18.5%. This is a positive signal and, importantly, lowers the interest payments on debt. 2020 is an inflection year – the FDA approved BARHEMSYS (reformulated amisulpride) for the management of PONV on 26 February and the ByFavo PDUFA data for procedural sedation is imminent (5 July). Our forecasts remain unchanged as we anticipate an increase in elective surgical procedures in the second half of the year and drug shortages to affect uptake of these short-acting products designed to reduce hospitalisation times. Timely approval and launch are thus critical. We value Acacia at €992.1m or €14.6/share.

Year end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

0.0

(21.6)

(0.45)

0.00

N/A

N/A

12/19

0.0

(23.5)

(0.37)

0.00

N/A

N/A

12/20e

2.1

(34.3)

(0.50)

0.00

N/A

N/A

12/21e

28.8

(40.2)

(0.58)

0.00

N/A

N/A

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

BARHEMSYS and potential ByFavo launches ahead

In February, the FDA granted a broad label for BARHEMSYS for ‘rescue treatment’ (in patients who are uncontrolled following prophylactic treatment with standard-of care antiemetics), and prophylaxis of PONV as a monotherapy and in combination with standard-of-care antiemetics. We forecast $386.7m in peak sales for BARHEMSYS in PONV with launch in H220. In January, Acacia in-licensed ByFavo (remimazolam), an ultra-short-acting and reversible intravenous benzodiazepine sedative/anaesthetic for use during procedural sedation, from Cosmo, in a multi-faceted deal. Given the current short supply of procedural sedatives, we believe the FDA will approve ByFavo by or on its 5 July PDUFA date (forecast peak sales of $126m based on H220 launch).

Near-term funding secured

With two potential US product launches in H220, management is closely monitoring timing for the recruitment of key commercial personnel. With the Cosmo deal in place, Acacia has funding secured to key inflection points of product launches.

Valuation: €992.1m or €14.6/share

Our revised valuation is €992.1m (vs €963.2m previously). Our forecasts are unchanged, but we have rolled our model forward and updated for FX.

Acacia Pharma is a research client of Edison Investment Research Limited

Exhibit 1: Financial summary

US$m

 

 

2018

2019

2020e

2021e

PROFIT & LOSS

Revenue

 

 

0.0

0.0

2.1

28.8

Operating revenues

 

 

0.0

0.0

2.1

28.8

Cost of sales

 

 

0.0

0.0

(0.2)

(2.6)

Gross profit

 

 

0.0

0.0

1.9

26.2

Gross margin %

 

 

N/A

N/A

0.9

0.9

SG&A (expenses)

 

 

(15.0)

(18.5)

(31.2)

(54.3)

R&D costs

 

 

(5.0)

(3.9)

(2.8)

(10.0)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

EBITDA (reported)

 

 

(20.0)

(22.4)

(32.1)

(38.0)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

Reported Operating Income

 

 

(20.0)

(22.4)

(32.1)

(38.0)

Operating Margin %

 

 

N/A

N/A

N/A

N/A

Finance income/(expense)

 

 

(1.5)

(1.1)

(2.3)

(2.1)

Exceptionals and adjustments

 

 

0.0

0.0

0.0

0.0

Reported PBT

 

 

(21.6)

(23.5)

(34.3)

(40.2)

Income tax expense (includes exceptionals)

 

 

0.9

0.7

0.7

0.7

Reported net income

 

 

(20.7)

(22.8)

(33.7)

(39.5)

Basic average number of shares, m

 

 

44.1

53.7

67.9

67.9

Year-end number of shares, m

 

 

53.3

54.9

67.9

67.9

Basic EPS ($)

 

 

(0.47)

(0.43)

(0.50)

(0.58)

Adjusted EPS ($)

 

 

(0.45)

(0.37)

(0.50)

(0.58)

Dividend per share ($)

 

 

0.00

0.00

0.00

0.00

BALANCE SHEET

 

 

 

 

 

 

Property, plant and equipment

 

 

0.0

0.0

2.1

3.2

Goodwill

 

 

0.0

0.0

0.0

0.0

Intangible assets

 

 

0.0

0.0

0.0

0.0

Other non-current assets

 

 

0.0

0.4

47.4

47.4

Total non-current assets

 

 

0.0

0.4

49.5

50.5

Cash and equivalents

 

 

37.4

17.0

14.7

12.5

Inventories

 

 

0.0

0.0

0.0

0.5

Trade and other receivables

 

 

0.4

0.6

0.3

4.7

Other current assets

 

 

0.9

0.7

0.7

0.7

Total current assets

 

 

38.7

18.3

15.7

18.3

Non-current loans and borrowings

 

 

8.9

4.7

47.5

87.5

Other non-current liabilities

 

 

0.0

0.0

0.0

0.0

Total non-current liabilities

 

 

8.9

4.7

47.5

87.5

Trade and other payables

 

 

4.7

4.2

4.3

7.4

Current loans and borrowings

 

 

0.5

5.5

0.0

0.0

Other current liabilities

 

 

0.0

0.0

0.0

0.0

Total current liabilities

 

 

5.2

9.6

4.3

7.4

Equity attributable to company

 

 

24.7

4.3

13.4

(26.1)

CASH FLOW STATEMENT

 

 

 

 

 

 

Operating Profit

 

 

(21.6)

(23.5)

(34.3)

(40.2)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

Share based payments

 

 

0.0

0.0

0.0

0.0

Other adjustments

 

 

1.6

1.1

2.3

2.1

Movements in working capital

 

 

(3.9)

(0.8)

0.3

(1.6)

Interest paid/received

 

 

0.2

0.4

(2.3)

(2.1)

Income taxes paid

 

 

0.4

0.8

0.7

0.7

Cash from operations (CFO)

 

 

(15.4)

(19.8)

(33.6)

(41.1)

Capex

 

 

0.0

0.0

(2.2)

(1.4)

Acquisitions & disposals net

 

 

0.0

0.0

0.0

0.0

Other investing activities

 

 

0.2

0.4

0.4

0.3

Cash used in investing activities (CFIA)

 

 

0.2

0.4

(14.6)

(1.1)

Net proceeds from issue of shares

 

 

47.1

0.2

8.5

0.0

Movements in debt

 

 

1.8

(1.0)

37.4

40.0

Other financing activities

 

 

0.0

(0.1)

0.0

0.0

Cash from financing activities (CFF)

 

 

48.9

(0.9)

45.9

40.0

Cash and equivalents at beginning of period

 

 

4.1

37.4

17.0

14.7

Increase/(decrease) in cash and equivalents

 

 

33.3

(20.4)

(2.3)

(2.2)

Cash and equivalents at end of period

 

 

37.4

17.0

14.7

12.5

Net (debt)/cash

 

 

28.1

6.9

(32.9)

(75.1)

Source: Acacia Pharma, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Acacia Pharma and prepared and issued by Edison, in consideration of a fee payable by Acacia Pharma. 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 2020 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

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

General disclaimer and copyright

This report has been commissioned by Acacia Pharma and prepared and issued by Edison, in consideration of a fee payable by Acacia Pharma. 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 2020 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

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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