Next up - R&D day

Newron Pharmaceuticals 11 October 2018 Update
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Newron Pharmaceuticals

Next up - R&D day

Interim results

Pharma & biotech

11 October 2018

Price

CHF8.73

Market cap

CHF155m

€0.85/CHF

Net cash and short-term investments (€m) at 30 June 2018

50.6

Shares in issue

17.8m

Free float

95%

Code

NWRN

Primary exchange

SIX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(14.3)

(34.9)

(38.8)

Rel (local)

(15.5)

(36.3)

(36.8)

52-week high/low

CHF14.2

CHF8.2

Business description

Newron Pharmaceuticals is an Italian CNS-focused biotechnology company. Xadago (safinamide) for Parkinson’s disease has been launched in Europe and the US. Xadago is partnered with Zambon (EU), Meiji Seika (Japan), US WorldMeds (US), Seqirus (Australia/New Zealand) and Medison Pharma (Israel).

Next events

Sarizotan Phase III STARS data

H119

Evenamide Phase II/III start

2019

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Daniel Wilkinson

+44 (0)20 3077 5734

Newron Pharmaceuticals is a research client of Edison Investment Research Limited

Newron continued to made steady progress in H118. A fuller debrief of pipeline assets including sarizotan (Rett syndrome) and Evenamide (schizophrenia) will take place at the R&D day in NYC, scheduled for 31 October. Royalty income from sales of Xadago (Parkinson’s disease, PD) rose by 54% to €2m, driven mainly by increased sales in the EU and Switzerland. However, the US sales contribution remained small (launched by partner US WorldMeds in H217). In H118 Newron reported an operating loss of €7.6m (vs a profit of €2.3m in H117 due to a €10.3m one-time milestone payment in the period), and revised cash and financial investments of €50.6m at July 2018 should enable funding to key value inflection points in 2020. We value Newron at CHF788m.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/16

6.7

(15.2)

(1.04)

0.0

N/A

N/A

12/17

13.4

(5.3)

(0.32)

0.0

N/A

N/A

12/18e

5.6

(24.6)

(1.38)

0.0

N/A

N/A

12/19e

10.7

(28.2)

(1.58)

0.0

N/A

N/A

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

Xadago sales uplift needed

Newron has reported €2.0m in Xadago (safinamide) royalties in H118 (vs €2.8m in FY17 and €1.3m in H117). Xadago is now available in 14 European countries as an add-on therapy to levodopa in mid- to late-stage PD. The drug was also launched in H217 into the US market for PD patients (as add-on therapy), and regional partner US WorldMeds expects an uplift in sales in 2019 once its Medicare negotiations come to fruition. Xadago is making slow and steady progress, but a ramp-up in sales is required if it is to reach our global peak sales of €653m (in PD alone). Partner Meiji Seika plans to file for marketing approval in Japan in H218 (following positive Phase II/III data in Japanese patients).

Pipeline progressing; R&D day 31 October 2018

R&D highlights for the period include: 1) progress with patient enrolment into the Sarizotan Treatment of Apneas in Rett Syndrome (STARS) potentially pivotal Phase II/III clinical trial, study now expected to in report in H119 (previously late 2018); 2) Evenamide for schizophrenia – two Phase II/III pivotal efficacy studies to initiate in H119, one in patients with worsening psychosis despite atypical antipsychotic treatment and the other in clozapine-resistant schizophrenia; and 3) US partner Zambon is in advanced discussions with the FDA on the design of a potentially pivotal efficacy study to support Xadago’s use in levodopa-induced dyskinesia (PD LID).

Valuation: CHF788m or CHF44.3 per share

Our increased valuation of CHF788m (vs CHF758m) reflects end-June 2018 net cash and short-term investments of €50.6m and rolling forward our model. Our forecasts remain unchanged and include Xadago in PD and risk-adjusted contributions for the dyskinesia indication, sarizotan in Rett syndrome and Evenamide in schizophrenia.

Exhibit 1: Financial summary

€000s

2015

2016

2017

2018e

2019e

Year end December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,380

6,726

13,428

5,625

10,671

Cost of Sales

0

0

0

0

0

Gross Profit

2,380

6,726

13,428

5,625

10,671

Research and development (net)

(11,724)

(12,398)

(8,596)

(20,800)

(29,160)

EBITDA

 

 

(17,604)

(15,290)

(4,298)

(24,731)

(28,281)

Operating Profit (before amort. and except.)

 

 

(17,668)

(15,318)

(4,332)

(24,753)

(28,303)

Intangible Amortisation

(7)

(7)

(14)

(24)

(24)

Exceptionals

(6,725)

0

0

0

0

Other

0

0

0

0

0

Operating Profit

(24,400)

(15,325)

(4,346)

(24,777)

(28,327)

Net Interest

(583)

121

(955)

206

131

Profit Before Tax (norm)

 

 

(18,251)

(15,197)

(5,287)

(24,547)

(28,172)

Profit Before Tax (reported)

 

 

(24,983)

(15,204)

(5,301)

(24,571)

(28,196)

Tax

2,167

(33)

19

0

0

Profit After Tax (norm)

(16,084)

(15,230)

(5,268)

(24,547)

(28,172)

Profit After Tax (reported)

(22,816)

(15,237)

(5,282)

(24,571)

(28,196)

Average Number of Shares Outstanding (m)

13.7

14.7

16.3

17.8

17.8

EPS - normalised (c)

 

 

(117.21)

(103.69)

(32.32)

(137.90)

(158.27)

EPS - (reported) (€)

 

 

(1.66)

(1.04)

(0.32)

(1.38)

(1.58)

Dividend per share (€)

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

 

 

406

451

224

240

256

Intangible Assets

265

261

35

49

63

Tangible Assets

79

120

107

109

111

Investments

62

70

82

82

82

Current Assets

 

 

43,974

56,140

72,800

51,900

27,311

Stocks

38

5

5

98

98

Debtors

3,005

9,667

12,714

3,883

3,883

Cash

40,931

46,468

60,081

47,919

23,330

Other

0

0

0

0

0

Current Liabilities

 

 

(6,513)

(6,645)

(4,727)

(6,653)

(8,537)

Creditors

(6,151)

(6,281)

(4,727)

(6,653)

(8,537)

Short term borrowings

(362)

(364)

0

0

0

Long Term Liabilities

 

 

(755)

(199)

(576)

(576)

(576)

Long term borrowings

(364)

0

0

0

0

Other long term liabilities

(391)

(199)

(576)

(576)

(576)

Net Assets

 

 

37,112

49,747

67,721

44,911

18,454

CASH FLOW

Operating Cash Flow

 

 

(10,695)

(19,616)

(8,404)

(12,328)

(24,658)

Net Interest

121

102

388

241

131

Tax

(2,167)

33

0

0

0

Capex

(60)

(69)

(24)

(24)

(24)

Acquisitions/disposals

0

0

0

0

0

Financing

28,392

25,448

22,324

0

0

Other

(4)

(3)

(300)

(51)

(38)

Dividends

0

0

0

0

0

Net Cash Flow

15,587

5,895

13,984

(12,162)

(24,589)

Opening net debt/(cash)

 

 

(24,615)

(40,205)

(46,104)

(60,081)

(47,919)

HP finance leases initiated

0

0

0

0

0

Other

3

4

(7)

0

0

Closing net debt/(cash)

 

 

(40,205)

(46,104)

(60,081)

(47,919)

(23,330)

Source: Company accounts, Edison Investment Research

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 Newron Pharmaceuticals 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 Newron Pharmaceuticals 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

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