One hand on the prize

Paion 21 November 2016 Outlook

Paion

One hand on the prize

Funded to potential US filing

Pharma & biotech

21 November 2016

Price

€2.51

Market cap

€140m

US$1.10/€

Net cash (€m) at end September 2016

35.9

Shares in issue

55.7m

Free float

75%

Code

PA8

Primary exchange

Frankfurt

Secondary exchange

Xetra

Share price performance

%

1m

3m

12m

Abs

(12.6)

16.4

23.4

Rel (local)

(12.8)

15.7

26.8

52-week high/low

€3.0

€1.1

Business description

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

Next events

Fully recruit bronchoscopy Phase III

Q217

Bronchoscopy Phase III results

Q317

Finalise Japan partnering discussions

2016/17

Analysts

Dennis Hulme

+61 (0)2 9258 1161

Lala Gregorek

+44 (0)20 3681 2527

Paion is a research client of Edison Investment Research Limited

Paion has reported positive data from the first pivotal US study of its ultra-short-acting sedative remimazolam in procedural sedation. Induction and recovery from sedation was faster for remimazolam than the widely used drug midazolam, showing remimazolam could speed patient throughput in colonoscopy screening. Paion out-licensed US rights to Cosmo Pharmaceuticals for c €20m cash, €42.5m milestones and a 20-25% royalty. A second pivotal study is expected to complete recruitment in Q217. Our valuation moves to €208m (€3.74/share) vs €203m (€3.65/share) as higher US/Canada uptake is partially offset by uncertainty about EU development.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/14

3.5

(11.6)

(22.9)

0.0

N/A

N/A

12/15

0.1

(34.0)

(55.7)

0.0

N/A

N/A

12/16e

4.2

(26.5)

(41.7)

0.0

N/A

N/A

12/17e

7.8

(7.3)

(10.2)

0.0

N/A

N/A

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

Positive results from US colonoscopy Phase III

Paion reported positive data from the first of two US pivotal studies of remimazolam in procedural sedation; 91% of patients in the remimazolam arm achieved the primary outcome (completion of colonoscopy procedure without rescue medication) vs 1.7% on placebo. Remimazolam compared with midazolam had a shorter time from (i) start of medication to start of procedure (four vs 19 minutes), (ii) end of procedure to fully alert (7.2 vs 15.7 min), (iii) first dose to discharge (58 vs 75 min).

Opportunities in Japan and Europe

Paion is well placed to file for a general anaesthesia indication for remimazolam in Japan following guidance from the Japanese regulator, the PMDA, which regarded the non-clinical and clinical data packages as complete for filing. We estimate that it could file for approval in Japan in H217, subject to partnering or raising funds to self-file. The company also has the option to seek a partner or raise additional funding to recommence development in Europe, which was suspended in February.

Cosmo deal reduces funding and execution risk

The licence deal brings €10m upfront cash, an equity injection of €10m (€0.4m deferred), plus regulatory and sales milestones of €42.5m and a tiered royalty of 20-25%. Cosmo will fund regulatory filing and commercialisation in the US, while Paion will fund the ongoing bronchoscopy Phase III. €35.9m in cash at 30 September plus anticipated milestone payments is sufficient to fund operations to potential US approval in H218/H119.

Valuation: Modest upgrade to €208m

Our €208m (€3.74/share) valuation reflects a modest increase to North American market penetration rates (22% vs20%) partially offset by lower European risk adjustment (50% vs 60%) due to uncertainty about development timelines and conservative removal of GGF2 from the valuation as partner Acorda assesses its options for further development in heart failure or other neurological indications.

Investment summary

Company description: Anaesthesia and critical care

Paion is a Frankfurt-listed emerging specialty pharma company that develops products for anaesthesia and critical care. Its headquarters are in Aachen, Germany. Paion is focusing on lead programme remimazolam (CNS7056), which it acquired in 2008 through its purchase of CeNeS Pharma for €12m. Short-acting sedative remimazolam has potential in three indications: procedural sedation, general anaesthesia and intensive care unit (ICU) sedation. Paion completed a successful US Phase III study mid-year, with a second Phase III expected to complete enrolment in Q217. It has raised over €125m since flotation in 2005, including €46m at the IPO. Paion has licensed US rights to remimazolam to Cosmo Pharmaceuticals and is evaluating its commercialisation options in unpartnered territories including Europe and Japan, which could include appointing a salesforce in some regions and/or commercial partners.

Valuation: US development entering the home straight

Our sum-of-the-parts DCF valuation is €208m or €3.74 per share, a modest upgrade from €203m in our July report. Paion has sufficient funding to complete pivotal studies in the US and support operations to anticipated filing in H118. The current valuation excludes any potential dilution from the additional funding to file for approval in Japan or to initiate a new Phase III trial in general anaesthesia in Europe. This funding could come from a partner, an equity raise or, depending on timing, from proceeds of commercialisation of remimazolam in the US. We assume that Paion achieves average royalty rates of a 20% in Europe and Japan in line with the lowest tier in the Cosmo licence agreement. Paion has other options include negotiating a profit share, which may deliver a 35% margin.

Sensitivities: Clinical studies with remimazolam

The main sensitivity for Paion is the success or failure of clinical studies with lead product remimazolam. There is already a substantial body of advanced clinical evidence for remimazolam showing it has a good safety and efficacy profile in comparison to the standard of care. This broad evidence should support the product and the economic rationale, which will compete with established generic products. Other sensitivities include the usual regulatory, financial and partnering risks associated with a pharmaceutical company in the late stages of development, and preparing for commercialisation.

Financials: Cosmo deal reduces funding risk

Operating expenses for 9M16 decreased to €20.6m vs €25.4m for 9M15, predominantly due to a lower R&D spend of €16.4m vs €20.9m in 9M15. Paion ended Q316 with €35.9m in net cash, which is expected to be sufficient to fund ongoing Phase III development of remimazolam, including preparation for filing for procedural sedation in the US. Thereafter, we expect that milestones from Cosmo for filing and approval would fund operations until Paion starts receiving royalties on US sales, as long as development goes according to plan. Additional funding or a partner would be required to support filing in Japan and renewed development of general anaesthesia in Europe. We rebalance our FY16 estimated costs, shifting €0.6m from R&D (now €25.4m) to SG&A (now €5.5m) based on guidance. We also allocate €6m of the €10m Cosmo upfront payment to deferred revenue in line with guidance, reducing FY16 revenue by €6m to €4.2m. Our end-FY16 cash estimate is €26.1m. We add €4.5m to costs in FY17 due to the slower recruitment in the bronchoscopy Phase III trial pushing more R&D costs into next year, taking end-2017 net cash to €14.4m from €18.5m.

Paion: Specialty pharma in pivotal trials

Paion is at an advanced stage in developing remimazolam, an ultra-short-acting sedative, having recently successfully completed the first of two US pivotal studies, which could lead to it being approved in the US in H218/H119 in the lead indication procedural sedation. Restarting European studies in general anaesthesia is dependent on partnering or additional funding. Paion has licenced US rights to Cosmo Pharmaceuticals and is evaluating commercialisation options for unpartnered regions. The economic rationale for remimazolam focuses on faster induction and recovery from sedation and an improved safety profile compared to generic alternatives.

Exhibit 1: Pipeline

Product

Indications

Notes

Remimazolam/US Cosmo/ EU and Japan Paion/RoW regional licences

General anaesthesia/procedural sedation/ICU sedation

Various stages of development depending on the region.

GGF2/US Acorda

Heart failure

Out-licensed to Acorda at the preclinical stage. Acorda is assessing next steps for development following the FDA clinical hold due to liver toxicity seen in a patient in the Phase Ib trial.

Source: Paion

Cosmo deal provides a solid foundation for the future

Paion granted Cosmo Pharmaceuticals an exclusive licence for the development and commercialisation of remimazolam in the US in June, soon after reporting positive results for the colonoscopy Phase III. The licence deal brings €10m upfront cash (received in July), an equity injection of €10m (€0.4m deferred), plus regulatory and sales milestones of €42.5m and a tiered royalty of 20-25%. The royalty rate can be adjusted downwards under certain conditions (believed to relate to product pricing) but not to below 15%. Cosmo will fund regulatory filing and commercialisation in the US, while Paion will fund the ongoing bronchoscopy Phase III.

End-September 2016 cash of €35.9m plus anticipated milestone payments for filing and approval of remimazolam the US should mean that Paion is fully funded to the point where it begins to earn royalty income in the US, as long as remimazolam development continues to progress as expected. This puts Paion on a strong footing as it assesses its options for further development of remimazolam in Japan and Europe.

Paion is in discussions with potential partners for remimazolam in Japan and Europe, and its strong financial position means it is not under pressure to do a deal in the near term, but can take its time to find the right partner and negotiate suitable financial terms.

Remimazolam: Versatile, effective and safe sedation

Paion is focusing on developing remimazolam, an ultra-fast-acting intravenous (IV) sedative. Remimazolam could be a safer, faster alternative to approved sedatives and potentially carries a reduced risk of cardiac and respiratory depression, which is particularly significant for older and less healthy patients. Studies of remimazolam have shown it is suited for three indications requiring varying depths of sedation – general anaesthesia, procedural and ICU sedation – while maintaining the vital physiological and neurological functions of the patient.1 Paion has a global strategy in place through a combination of independently funded studies and partnered development and the lead indication per region varies depending on the most attractive business rationale. The characteristics of remimazolam compared to standard sedatives are shown in Exhibit 2.

Exhibit 2: Summary of key features of remimazolam vs approved anaesthetics

Key feature

Remimazolam

Propofol

Midazolam

Dexmedetomidine

Rapid onset

Yes

Yes

No

Yes

Rapid offset

Yes

Yes

No

No

Low respiratory depression

Yes

No

No

Yes

Cardiovascular stability

Yes

No

No

No

Early recovery to full cognition

Yes

Yes

Yes

Yes

Reversal agent available

Yes

No

Yes

No

Need to adjust dose for body weight

No*

Yes

Yes

Yes

Source: Edison Investment Research. Note: *Only for procedural sedation.

The business rationale is based on an unmet need for safer and more controllable sedation supported by the potential for cost savings and reduction in the need for patient supervision during and after procedures compared to approved sedatives.

Exhibit 3: Summary of remimazolam’s development status and global partners

Region/partner

Lead indication

Clinical status

Notes

US/Cosmo

Procedural sedation

Phase III

Pivotal programme underway. A 461-patient Phase III study in colonoscopy reported positive results in June 2016. A 420-patient Phase III study in bronchoscopy is expected to complete recruitment in Q217. Both studies are double-blind, placebo and open-label midazolam controlled.

EU

General anaesthesia

Phase III (suspended)

Headline data from Phase II trial in cardiac surgery met the primary endpoint, efficacy as a general anaesthetic in 98% of pts in the two remimazolam groups vs 96% in the propofol group. Initial results indicate that both remimazolam groups experienced less cardiac depression. Randomised, two-arm Phase III study in cardiac surgery patients that commenced in August 2015 was discontinued in February 2016 due to slow recruitment.

Japan

General anaesthesia/ICU sedation

Phase II/III completed

Cardiovascular profile superior to standard-of-care propofol n=375. BP fell in 35.3%/34.7% of remimazolam pts vs 60% of propofol pts. Paion is in active partnering discussions.

South Korea/Hana Pharma

Anaesthesia

Undisclosed

A Japanese filing document could be used as the basis for filing in South Korea.

China/Yichang Humanwell

Anaesthesia

Undisclosed

Subject to the requirements of the SFDA. First Phase I trial fully recruited, second Phase I trial in general anaesthesia is underway. A Phase II study in procedural sedation in China is also in preparation.

CIS, Russia, Turkey, MENA/R-Pharm

Anaesthesia

Undisclosed

Limited bridging study needed. R-Pharm has a licence to develop, manufacture and commercialise remimazolam in these regions.

Canada/Pendopharm

Procedural sedation

Parallel with FDA studies

Minimal additional development, approval conditional on outcome of FDA study in procedural sedation.

Source: Paion, Edison Investment Research

Positive results in colonoscopy Phase III trial

Paion reported positive results from the first of two US pivotal studies of remimazolam in procedural sedation; 91% of patients in the remimazolam arm achieved the primary outcome (completion of the colonoscopy procedure without rescue medication) vs 1.7% on placebo (Exhibit 4). The time from start of medication to start of procedure (induction time) was four minutes for remimazolam vs 19 minutes for midazolam, while time from end of procedure to fully alert was 7.2 minutes vs 15.7 minutes for remimazolam and midazolam, respectively. There were also fewer instances of hypotension in the remimazolam arm.

Exhibit 4: Key results from Phase III colonoscopy procedural sedation trial

Remimazolam

Placebo

Midazolam
(open label)

Initial/top up dose (mg)

5/2.5

1.75/1.0*

Procedural success

91.30%

1.70%

25.20%

Use of rescue sedation

3.40%

95.00%

64.70%

Average fentanyl dose (µg)

88.9

121.3

106.9

Start of medication to start of procedure (median, minutes)

4

19.5

19

End of procedure to fully alert (mean, minutes)

7.2

21.3

15.7

Mean time first dose to discharge (minutes)

58

86

75

Hypotension

44.3%

47.5%

67.3%

Hypoxia

1.0%

3.4%

1.0%

Back to normal (min)

331

572

553

Source: Paion, Edison Investment Research. Note: *1.0/0.5 mg for elderly/debilitated/chronically ill.

Time savings vs midazolam support business case

A key plank of the business case for remimazolam is that faster induction of and recovery from sedation compared with midazolam will allow increased patient throughput for colonoscopies and other procedures where conscious sedation is required.

The colonoscopy Phase III trial results give strong support to the business case with recovery time to full alertness 8.5 minutes faster for remimazolam than midazolam. However, the data on induction times are more difficult to interpret. The induction time in the midazolam arm of the Phase III trial was 19 minutes compared to 4.8 minutes in the midazolam arm of Paion’s previous Phase II trial (induction with remimazolam was 2.2-3.0 minutes faster than midazolam in the Phase II).

One possible explanation for the difference in midazolam induction times between the Phase II and Phase III trials is that the FDA-approved label for use of midazolam for procedural sedation recommends that each dose for the drug be injected slowly over two minutes, followed by a two-minute wait to assess depth of sedation before administering each top-up dose. Under this protocol each top-up dose would add four minutes to the time to sedation. The label says that a total dose greater than 5mg is not usually required to achieve sedation. Under this protocol, administering a starting dose of 1.75mg if midazolam plus three doses of 1mg to reach a total dose of 4.75mg to induce sedation would take 16 minutes. This time interval is similar to the 19 minutes reported in Paion’s Phase III trial.

However, it appears that the real-world use of midazolam does not follow the protocol outlined in the FDA-approved label. In each of the three studies listed below, for healthy adults under the age of 60 each dose of midazolam was administered as bolus injection, including the initial dose of ~2mg, with additional doses of medication administered at one- to three-minute intervals to achieve or maintain the desired level of sedation. In Paion’s Phase II trial, a higher initial dose of midazolam was used (2.5mg), allowing average time to procedure start to be even shorter than the published trials at 4.8 minutes. In addition, a higher dose of fentanyl was given prior to midazolam or remimazolam in the Phase II study (100µg) compared with in the Phase III trial (50-75µg).

DeWitt et al. (2008)2 reported a mean time to start of endoscopy procedure of 2.5 minutes for propofol and 6.4 minutes for midazolam plus meperidine (pethidine). A separate study by Sipe et al. (2002)3 reported mean time to sedation of 2.1 minutes for propofol and 7.1 minutes for midazolam plus meperidine. A third study by Ulmer et al. (2003)4 reported time to sedation of 2.1 minutes for propofol vs 6.1 minutes for midazolam plus fentanyl.

  DeWitt J et al Gastrointest Endosc 2008;68:499-509

  Sipe BW et al Gastrointest Endosc 2002 Aug;56(2):324

  Ulmer et al Clin Gastroenterol Hepatol 2003;1:425–432

Average time to sedation for midazolam in the three studies above and in Paion’s Phase II trial was 6.1 minutes. The average time to sedation for propofol in the three published studies was 2.2 minutes.

We also examined the recovery times reported in published data where midazolam and propofol have been used for sedation in colonoscopies and similar procedures. In a Cochrane review (which did not report time to induce sedation) of the use of propofol for sedation during colonoscopy, the average recovery time in nine studies was 12 minutes for propofol-treated patients vs 31 minutes for traditional sedation (primarily midazolam, diazepam or other benzodiazepines combined with an opioid). For the two studies that used midazolam plus fentanyl, the combination used in the midazolam arm of Paion’s colonoscopy trial, the average recovery time was 30 minutes.

The average duration of the colonoscopy examination procedure reported in the Cochrane review was 18 minutes. Horiuchi et al. (2012)5 reported that the average colonoscopy procedure time was 14 minutes in a series of 2,100 patients in Japan.

  Horiuchi et al World J Gastroenterol 2012 July 14; 18(26): 3420-342

Exhibit 5 compares the time taken from the start of sedation to the start of the colonoscopy procedure (induction) and the time to recover to full alertness for remimazolam, propofol and midazolam. For midazolam we have shown the data from the open-label arm of Paion’s Phase III and the average data from the Cochrane review and the published studies mentioned above. The second to last column combines the best-case outcomes for midazolam, recovery time from Paion’s trial with the induction time from published studies.

While acknowledging that there are limitations to indirect comparisons between clinical trials, Exhibit 5 suggests that combined induction and recovery time for remimazolam is comparable to that for propofol and substantially faster than for midazolam. Induction and recovery for remimazolam was 11 minutes faster than the best-case estimate for midazolam and 24-25 minutes faster than the two separate estimates for midazolam from Paion’s Phase III.

Exhibit 5: Comparison of time taken for induction of and recovery from sedation

Remimazolam

Midazolam (Paion Phase III)

Midazolam (published studies and Paion Phase II)

Midazolam best case

Propofol (published studies)

Time to sedation/start of procedure (min)

4.0

19.0

6.1

6.1

2.2

End of procedure to fully alert (min)

7.2

15.7

30.0

15.7

12.0

Total sedation induction plus recovery time (min)

11.2

34.7

36.1

21.8

14.2

Total duration assuming 18 min for colonoscopy

29

53

54

40

32

Source: Edison Investment Research, Paion announcements, Cochrane review, Scientific Journal articles

Exhibit 6 shows that even if we use the most conservative estimate of an 11-minute time saving with remimazolam, a clinician who performs four colonoscopies per day with midazolam could do one extra colonoscopy in the same or less time with remimazolam, while one who does 10 procedures with midazolam could do 13 in the same time with remimazolam.

Exhibit 6: More colonoscopy procedures can be done in the same time with remimazolam

Number of colonoscopy procedures done with midazolam

Time taken with midazolam* (best case, min)

Number of procedures done with remimazolam in same time*

Extra procedures done

1

45

1

0

2

90

2

0

3

135

3

0

4

180

5

1

5

225

6

1

6

270

7

1

7

315

9

2

8

360

10

2

9

405

11

2

10

450

13

3

Source: Edison Investment Research. Notes *Five-minute changeover time allowed between patients.

Moderate sedation can be administered by practice nurses under supervision

In the US, moderate sedation (also known as conscious sedation) can be administered by an appropriately trained, licenced, registered nurse or physician assistant under the supervision of a non-anaesthesiologist sedation practitioner such as a licenced physician (eg gastroenterologist) who is specifically trained to administer moderate sedation.

However, eight US states (New York, Connecticut, Georgia, Maine, Nebraska, New Hampshire, South Carolina and West Virginia) restrict this use to sedation agents such as midazolam and exclude nurses from administering drugs such as propofol, which also be used to induce general anaesthesia. In these states propofol can only be administered by an anaesthesia professional such as an anaesthesiologist, a certified registered nurse anaesthetist (CRNA), or a physician trained in the administration of deep sedation.

The American society of Anaesthesiologists (ASA) has issued practice guidelines for sedation and analgesia by non-anaesthesiologists, and a statement on granting privileges for administration of moderate sedation to practitioners who are not anaesthesia professionals. The ASA used the following definitions:

Moderate sedation (conscious sedation) – a drug-induced depression of consciousness during which patients respond purposefully to verbal commands, either alone or accompanied by light tactile stimulation. No interventions are required to maintain a patent airway, and spontaneous ventilation is adequate. Cardiovascular function is usually maintained.

Deep sedation – a drug-induced depression of consciousness during which patients cannot be easily aroused but respond purposefully following repeated or painful stimulation. The ability to independently maintain ventilatory function may be impaired. Patients may require assistance in maintaining a patent airway, and spontaneous ventilation may be inadequate. Cardiovascular function is usually maintained.

In a separate position statement, the ASA said that because of the significant risk that patients who receive deep sedation may enter a state of general anaesthesia, non-anaesthesiologist physicians may neither delegate nor supervise the administration or monitoring of deep sedation by individuals who are not themselves qualified and trained to administer deep sedation, and the recognition of and rescue from general anaesthesia (ie practice nurses).

Benzodiazepine sedatives such as midazolam (and remimazolam if approved) are used in combination with an opioid such as fentanyl to induce moderate sedation and analgesia. Propofol can be used for moderate but is often used to induce deep sedation. Benzodiazepines, including remimazolam, have the advantage that the sedation and respiratory depression effects can be reversed with flumazenil, making these agents safer to use.

Majority of anaesthesiologist use in colonoscopy considered discretionary

A study by the RAND Corporation6 estimated that 12.5 million colonoscopies and upper gastrointestinal (GI) endoscopy procedures were performed in the US in 2009. The study, which analysed claims data for 6.6 million patients, found that in 2009 27% of Medicare patients and 29% of commercially insured patients received anaesthesia services from an anaesthesiologist or nurse anaesthetist for their colonoscopy. The majority of anaesthesia services were delivered to low-risk patients with American Society of Anaesthesiologists (ASA) status level 1 or 2 (64% of Medicare patients and 84% of commercially insured patients where the use of anaesthesia services was considered to be potentially discretionary. They estimated that US$1.1bn of the US$1.3bn paid for anaesthesia providers for GI procedures in 2009 was for these low-risk patients, which highlights the potential savings that could be made if remimazolam was used in place of propofol, reducing the use of anaesthesiologists.

  Liu H, Waxman DA, Main R, and Mattke S, JAMA. 2012;307(11):1178-1184

The percentage of procedures using anaesthesia providers varied across the US, with 48% in the Northeast, 38% in the South, 26% in the Midwest and 14% in the West.

The average payment per procedure for anaesthesia services was US$150 for Medicare patients and US$509 for commercially insured patients in 2009, according to the RAND Corporation report.

Average revenue $788 per colonoscopy at ASCs in 2012 VMG Health's 2012 Intellimarker report on the financial and operating results of ambulatory surgical centres (ASCs) in the US reported that in 2012 the gross charges billed per colonoscopy case were $3,610 and the net revenue per case was $788. The average discount of revenue received to the amount charged was 75%.

Looking just at Medicare fee-for-service patients our analysis of Medicare Provider and Utilisation data showed that in 2014 there were 3.9m claims for colonoscopies. The average physician charge submitted for the colonoscopy procedures was US$1,168 and the average Medicare payment was $208 per procedure.

There were also 0.56m claims for anaesthesiology services for lower intestine endoscopy, with an average submitted charge of US$907 and average Medicare payment of $101.

Bundling of colonoscopy charges would favour remimazolam

The American Gastroenterological Association (AGA) has developed models for bundling the entire cost of colonoscopy procedures, including the cost of sedation. The practice of bundling does not appear to be widespread at present, but with pressure growing to contain healthcare costs we expect the practice to become more common which would support uptake of remimazolam.

Remimazolam offers potential for considerable savings for practices that receive a bundled payment for provision of colonoscopy services, offering equivalent speed of sedation to propofol and a high level of safety without the cost of employing the services of anaesthesiologist.

Measures in place to boost bronchoscopy recruitment

Paion initiated a second US Phase III study of remimazolam in procedural sedation in June 2015, not long after the colonoscopy trial began, to fulfil the FDA’s requirement for two pivotal trials.

The bronchoscopy study was initially expected to be completed in 2016; however, recruitment has been moderate to date and full recruitment is now expected in Q217. Paion has introduced a number of measures to increase patient recruitment, and is in regular close contact with each trial site. The protocol has been amended to allow inclusion of patients taking benzodiazepines or opioids, which are often used to relieve anxiety and breathlessness in respiratory disease. The trial has been reduced from 460 to 420 patients by reducing the size of the midazolam arm, which does not affect the primary endpoint. The trial aims to treat 300 patients with remimazolam, 60 with placebo and 60 with midazolam (original design included 100 with midazolam). The comparison with midazolam is intended for pharmacoeconomic analysis and marketing purposes and is not required for approval of remimazolam.

The prospective double-blind, randomised study in bronchoscopy is recruiting patients across multiple US sites. Patients in the treatment arm will receive 5mg of IV remimazolam for sedation induction, and 2.5mg top-ups for sedation maintenance. The study specifically targets patients with pulmonary disease to demonstrate efficacy and safety in those that are high risk. In the study, patients will be randomised to receive remimazolam plus fentanyl, midazolam or placebo. The study endpoint is to conduct the bronchoscopy without requirement for any alternative sedation. As in the colonoscopy study, the secondary endpoints include speed of onset, time to alertness, full recovery and discharge.

Paion is positioned to take Japanese development forward

Paion regained Japanese rights to remimazolam in November 2014 when partner Ono terminated the agreement that was struck in 2007. It has held a positive pre-NDA meeting with the Japanese regulator (PMDA) and received guidance that the drug manufactured in Europe is considered equivalent to the compound used in Japanese trials. The PMDA stated that the non-clinical and clinical data package was regarded as complete for filing for general anaesthesia.

Paion is in discussions with potential partners for remimazolam in Japan who would take the responsibility of submitting the marketing application. Alternatively, the company has the option to raise additional funding and file for approval in Japan itself, with the assistance of a contract research organisation (CRO) with appropriate expertise. This strategy has the advantage that a Japan filing dossier could also be used for additional filings in countries such as South Korea, which would attract a milestone payment from partner Hana Pharm. Depending on the timing of filing, we estimate that remimazolam could be approved in Japan during 2018.

The outcome of Ono’s Phase II/III trial of remimazolam in general anaesthesia reported in November 2013 was promising. The trial met its primary endpoint and showed remimazolam was 100% effective as a sedative in the 375-patient trial. The incidence rate of a drop in blood pressure was 35.3% and 34.7% of patients in the high- and low-dose remimazolam groups, vs 60% of patients in the propofol arm, and the difference between the remimazolam and midazolam groups was statistically significant. The data are consistent with earlier studies that indicated remimazolam’s good safety profile.

However, in August 2013 Ono discontinued a separate Phase II trial of remimazolam for sedation in ICUs. While all patients were sedated successfully and there were no significant unexpected adverse events, higher than expected plasma concentrations of remimazolam were observed in isolated cases after long-term treatment. The phenomenon of elevated remimazolam plasma concentrations could not be reproduced in preclinical studies or pharmacokinetic models. Further analysis by Paion has shown that such pharmacokinetic deviations are common for sedatives like midazolam and propofol in the ICU and are probably related to the underlying conditions of the patients in the ICU. Paion concluded that the maximum dose level has been identified for ICU sedation. Further development in ICU sedation is planned after the approval of the lead indications and when the required funds are available.

Development in Europe dependent on partner or funding

Paion is also assessing its options for the commercialisation of remimazolam in Europe after the European Phase III trial in general anaesthesia in cardiac surgery patients was discontinued in February 2016 due to slow recruitment. The company believes that an alternative trial design in general surgery patients could be completed successfully, but the initiation would require additional funding or a partner. If development in Europe is restarted, we would also expect the company to seek approval for use in procedural sedation in Europe, on the back of US Phase III trial data. The discontinuation of the European Phase III trial has allowed additional resources to be allocated to the development of remimazolam in the US.

Extra four years US patent life

Paion announced in February that the term of its US patent covering the crystalline form of remimazolam besylate had been extended by 4.3 years due to delays at the US patent office. This will extend US market exclusivity to late 2031 compared to 2027 in other major markets.

The US patent covers crystalline forms of the besylate salt of remimazolam, which Paion selected for use in the drug formulation due to its excellent stability profile. US market exclusivity may be further extended under the Hatch-Waxman Act following FDA approval, representing potential upside to our forecasts. The longer patent life dovetails with the company’s increased focus on the US development of remimazolam for procedural sedation following the discontinuation of the European general anaesthesia Phase III.

Regional partnered studies run in tandem with Paion’s pivotal programmes

Paion has adopted a regional partnering strategy to accelerate remimazolam’s global development and provide marketing partners in each region. The results from pivotal studies in the US and Japan will be bridged to data from each region and could abbreviate clinical studies of remimazolam in these individual geographies. This strategy advances remimazolam’s global clinical status and market potential in a cost-effective way. Paion received upfront payments for each of its four regional partners and is eligible to receive milestone payments plus royalties. These partners will commercialise remimazolam in the respective regions.

In September Paion announced that its partner Yichang Humanwell has completed recruitment in its first Phase I study in China and is planning a Phase II trial in procedural sedation. In addition, a second Phase I study with continuous infusion is underway to prepare for a Phase II study in general anaesthesia.

Exhibit 7: Summary of upfront/milestone/royalties from remimazolam regional partners

Partner

Region

Total received or upfront payment

Total outstanding

Yichang

China

€3m

Up to €4m

Hana Pharma

Korea

€1m

€2m

R-Pharm

CIS

€1m

€3m

R-Pharm

Turkey

€1m

€3m

R-Pharm

MENA

€1.5m

€5.5m

Pendopharm

Canada

-

€4.1

Total

€21.6m

Source: Paion

Partner Acorda appears to have ended development of GGF2

Paion’s other clinical product, GGF2 (cimaglermin alfa) was being developed by Acorda to restore cardiac muscle function in heart failure patients. Paion out-licensed GGF2 at the preclinical stage to Acorda, which started a Phase Ib FDA trial in October 2013 to assess the safety, pharmacokinetics and tolerability of three dose levels of GGF2 in up to 30 patients. However, in June 2015 the company announced that it had stopped enrolment in the Phase Ib clinical trial of GGF2 as blood tests revealed a case of liver injury. Trials were subsequently placed on clinical hold by the FDA pending full analysis of liver interactions. The 22 patients who were dosed in the trial have completed 12-month follow up. In July 2016 the status of trial NCT01944683 on clinicaltrials.gov was change to completed without resuming patient recruitment. Acorda does not list GGF2 in its current development pipeline and in its 2015 annual report stated that it is “working with outside experts to better understand this liver effect and assess next steps for this programme”. In light of this, we have removed GGF2 from our valuation model for Paion pending further clarity on development plans.

A previous Phase Ia trial showed GGF2 was well tolerated and improved ventricular function in study participants.

Paion has two other products in its pipeline: M6G (perioperative pain) and human thrombomodulin, Solulin. Paion has halted development of both owing to the focus on remimazolam, although development of M6G may be resumed. Paion granted China development, manufacture and commercialisation rights for M6G to Yichang Pharma in September 2014 for an upfront payment plus milestones totalling €1.6m.

Sensitivities

The key sensitivity is the outcome of clinical trials with remimazolam, notably the outcome of the Phase III bronchoscopy study in US. The Cosmo licence deal means that Paion should be fully funded until it begins to receive royalty income from US sales, but this is dependent on successful completion of the Phase III bronchoscopy trial and timely regulatory review and subsequent approval by the FDA. Any delay or clinical trial failure may mean that Paion needs to raise additional funds to support operations until a US market launch.

Paion has the option to file for approval in Japan in its own behalf with the assistance of a CRO, but this would likely mean the company would need to raise additional funds at some stage – appointing a partner in Japan who would fund the regulatory filing would be a lower risk approach. Similarly, resumption of development of remimazolam for general anaesthesia in Europe would require a partner or additional funding.

Valuation

Our sum-of-the-parts DCF valuation is €208m, or €3.74 per share, a slight increase from €203m or €3.65 per share. This is based on the assumption that Paion forms post-approval commercialisation deals for remimazolam, which would yield a royalty rate of 20% in unpartnered regions. The summary of changes to our valuation includes:

reducing the likelihood of success in Europe from 60% to 50% and pushing back the timeline for launch from 2020 to 2021 due to uncertainty around when funding will be available to recommence development;

increasing the penetration rate of remimazolam to 22% from 20% in the US and Canada.

extending sales forecasts for markets outside the US out to 2031 (previously ended at patent expiry in 2027), assuming that sales decline by 40% per year following patent expiry;

pushing back the timeline for launch in the RoW markets (excluding US, Japan and Europe) from 2019 to 2020 to allow time for approvals in regional markets;

removing GGF2 from the model (was €3.9m) given the uncertainty regarding the future development path by partner Acorda.

In the US, our cost per procedure assumption for remimazolam is $40 and our peak sales estimate is $308m for the lead indication procedural sedation, assuming an addressable market of 35 million procedures a year.7 In Canada, our peak sales assumption is $42m, for seven million procedures at a revenue per procedure of $30, and we use a market penetration estimate of 22% in the US and Canada. The time savings over midazolam seen in the colonoscopy Phase III trial increase the likelihood that penetration could be higher and remimazolam could be adopted for additional conscious sedation indications; at this stage we have made only a modest revision to our market uptake assumptions.

  CDC procedural stats.

Our peak sales assumption in Europe for the lead general anaesthesia indication is $175m, assuming a price of $25 per procedure and 35 million high-risk or class III/IV discharges in the OECD region per year. In Japan, our peak sales assumption is $75m at an average price of $25 and 20 million procedures a year (in general anaesthesia). We assume that the Japanese data package will be sufficient for filing in 2017. We assume a 15% market penetration in Europe and Japan given the apparent advantages over propofol for the high-risk patients.

Exhibit 8: Valuation assumptions for pipeline

Launch date

Peak sales US$m

Risk adjustment (%)

Market penetration (%)

Royalty (%)

Remimazolam EU in General Anaesthesia

2021

175

50

15

20

Remimazolam US in procedural sedation

2019

308

75

22

20

Remimazolam Japan

2019

75

60

15

20

Remimazolam RoW

2020

165

50

12

12

Remimazolam Canada

2020

46

60

22

15

Source: Edison Investment Research

The key catalysts in H216 include an update on recruitment progress in the bronchoscopy and confirming the filing timeline for Japan. Paion is evaluating its commercialisation options in unpartnered regions, which could lead us to adjust our royalty rate assumptions.

Exhibit 9: Summary valuation

Value (€m)

Value per share (€)

Remimazolam EU

32.9

0.59

Remimazolam US

149.0

2.67

Remimazolam Japan

43.0

0.77

Remimazolam RoW

17.7

0.32

Remimazolam Canada

9.7

0.17

Risk adjusted milestones

53.4

0.96

Expenses

-58.7

-1.05

Tax

-64.7

-1.16

net cash FY16e

26.1

0.47

Total

208.4

3.74

Source: Edison Investment Research

Financials, Q316 update

Operating expenses for 9M16 decreased to €20.6m vs €25.4m for 9M15, predominantly due to a lower R&D spend of €16.4m vs €20.9m in 9M15. Paion ended Q316 with €35.9m in net cash, which is expected to be sufficient to fund ongoing Phase III development of remimazolam, including preparation for filing for procedural sedation in the US. Thereafter, we expect milestones from Cosmo for filing and approval would fund operations until Paion starts receiving royalties on US sales, as long as development goes according to plan. Additional funding or a partner would be required to support filing in Japan and renewed development general anaesthesia in Europe. We rebalance our FY16 estimated costs, shifting €0.6m from R&D (now €25.4m) to SG&A (now €5.5m) based on guidance. We also allocate €6m of the €10m Cosmo upfront payment to deferred revenue in line with guidance, reducing FY16 revenue by €6m to €4.2m. Our end-FY16 cash estimate is €26.1m. We add €4.5m to costs in FY17 due to the slower recruitment in the bronchoscopy Phase III trial pushing more R&D costs into next year, taking end-of-year 2017 cash to €14.4m from €18.5m.

Exhibit 10: Financial summary

€000s

2014

2015

2016e

2017e

Year end 31 December

PROFIT & LOSS

Revenue

 

 

3,456

61

4,200

7,800

Cost of sales

(4)

0

0

0

Gross profit

3,452

61

4,200

7,800

R&D expenditure

(11,799)

(29,385)

(25,400)

(10,000)

General, administrative & selling

(3,702)

(5,729)

(5,500)

(5,300)

Other

411

965

51

51

Operating profit

(11,639)

(34,088)

(26,649)

(7,449)

Depreciation and amortisation

(93)

0

(100)

(100)

Share-based payments

0

0

0

0

Exceptionals

0

0

0

0

EBITDA

 

 

(11,546)

(34,088)

(26,549)

(7,349)

Operating profit (before GW and except)

 

(11,546)

(34,088)

(26,549)

(7,349)

Net interest

(66)

42

50

20

Profit before tax (norm)

 

 

(11,612)

(34,046)

(26,499)

(7,329)

Profit before tax (reported)

 

 

(11,704)

(34,046)

(26,599)

(7,429)

Tax

2,468

5,834

4,290

1,650

Profit after tax (norm)

(9,143)

(28,212)

(22,209)

(5,679)

Profit after tax (reported)

(9,236)

(28,212)

(22,309)

(5,779)

Average number of shares outstanding (m)

39.9

50.7

53.2

55.7

EPS - normalised (c)

 

 

(22.9)

(55.7)

(41.7)

(10.2)

EPS - reported (c)

 

 

(23.2)

(55.7)

(41.9)

(10.4)

Dividend per share (c)

 

 

0.0

0.0

0.0

0.0

Gross margin (%)

NA

NA

NA

NA

BALANCE SHEET

Fixed assets

 

 

3,516

3,417

3,317

3,217

Intangible assets

3,440

3,362

3,287

3,212

Tangible assets

76

56

31

6

Refund from assumption of dev costs

0

0

0

0

Other

0

0

0

0

Current assets

 

 

63,032

40,051

33,442

26,763

Stocks

0

0

0

0

Debtors

467

0

0

25

Cash

58,912

32,680

26,071

19,367

Other

3,653

7,371

7,371

7,371

Current liabilities

 

 

(3,924)

(7,901)

(13,901)

(7,901)

Trade payables

(3,338)

(7,332)

(7,332)

(7,332)

Short-term borrowings

0

0

0

0

Provisions

(306)

(224)

(224)

(224)

Finance lease liabilities

0

0

0

0

Other current liabilities

(254)

(305)

(305)

(305)

Current deferred income

(26)

(39)

(6,039)

(39)

Long-term liabilities

 

 

(17)

(6)

(6)

(5,006)

Long-term borrowings

0

0

0

(5,000)

Provisions

0

0

0

0

Long-term deferred income

(17)

(6)

(6)

(6)

Deferred taxes

0

0

0

0

Other long-term liabilities

0

0

0

0

Net assets

 

 

62,607

35,562

22,853

17,074

CASH FLOW

Operating cash flow

 

 

(12,044)

(28,212)

(20,549)

(13,374)

Net interest

(66)

43

50

20

Tax

0

2,575

4,290

1,650

Capex

0

0

0

0

Purchase of intangibles

(26)

(33)

0

0

Acquisitions/disposals

0

0

0

0

Equity Financing

57,618

22

9,600

0

Dividends

0

0

0

0

Other

0

0

0

0

Net cash flow

45,482

(25,605)

(6,609)

(11,704)

Opening net debt/(cash)

 

 

(13,292)

(58,912)

(32,680)

(26,071)

Effect of exchange rate changes

(72)

(66)

0

0

Other

210

(560)

0

0

Closing net debt/(cash)

 

 

(58,912)

(32,680)

(26,071)

(14,367)

Source: Edison Investment Research, Paion accounts

Contact details

Revenue by geography

Martinstraße 10-12

52062 Aachen

Germany
+49 241 4453 152
www.paion.com

N/A

Contact details

Martinstraße 10-12

52062 Aachen

Germany
+49 241 4453 152
www.paion.com

Revenue by geography

N/A

Management team

CEO: Dr Wolfgang Soehngen

COO: Dr Jürgen Raths

Dr Soehngen co-founded Paion in 2000 and became CEO in 2004. Previously, he founded Virtuality, a consulting firm in 1997 and from 1987 worked in clinical development, project management, corporate development and strategic planning at Grünenthal. Before this, he was a pharmaceutical representative at Pfizer.

Dr Raths joined Paion in September 2015. He has over 25 years of pharma experience, having previously been president and CEO of Correvio International, CEO of Arpida, and various senior leadership roles at Eli Lilly. He holds an MD from the University of Bonn.

Chairman of the supervisory board: Dr Jörg Spiekerkötter

CFO: Abdelghani Omari

Dr Spiekerkötter has been a board member since 2008. He worked as CFO of Schering AG and Organon Biosciences NV, and until December 2010 was CFO of Conergy.

Prior to joining Paion, Mr Omari held various positions at KPMG, Cologne in auditing and advisory. He studied at the University of Aachen and has a diploma in business administration.

Management team

CEO: Dr Wolfgang Soehngen

Dr Soehngen co-founded Paion in 2000 and became CEO in 2004. Previously, he founded Virtuality, a consulting firm in 1997 and from 1987 worked in clinical development, project management, corporate development and strategic planning at Grünenthal. Before this, he was a pharmaceutical representative at Pfizer.

COO: Dr Jürgen Raths

Dr Raths joined Paion in September 2015. He has over 25 years of pharma experience, having previously been president and CEO of Correvio International, CEO of Arpida, and various senior leadership roles at Eli Lilly. He holds an MD from the University of Bonn.

Chairman of the supervisory board: Dr Jörg Spiekerkötter

Dr Spiekerkötter has been a board member since 2008. He worked as CFO of Schering AG and Organon Biosciences NV, and until December 2010 was CFO of Conergy.

CFO: Abdelghani Omari

Prior to joining Paion, Mr Omari held various positions at KPMG, Cologne in auditing and advisory. He studied at the University of Aachen and has a diploma in business administration.

Principal shareholders

(%)

Cosmo Pharmaceuticals

9.1

TIAA Cref

3.0

Companies named in this report

Cosmo Pharmaceuticals, Ono, Pendopharm

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Paion 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2016. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Contact details

Revenue by geography

Martinstraße 10-12

52062 Aachen

Germany
+49 241 4453 152
www.paion.com

N/A

Contact details

Martinstraße 10-12

52062 Aachen

Germany
+49 241 4453 152
www.paion.com

Revenue by geography

N/A

Management team

CEO: Dr Wolfgang Soehngen

COO: Dr Jürgen Raths

Dr Soehngen co-founded Paion in 2000 and became CEO in 2004. Previously, he founded Virtuality, a consulting firm in 1997 and from 1987 worked in clinical development, project management, corporate development and strategic planning at Grünenthal. Before this, he was a pharmaceutical representative at Pfizer.

Dr Raths joined Paion in September 2015. He has over 25 years of pharma experience, having previously been president and CEO of Correvio International, CEO of Arpida, and various senior leadership roles at Eli Lilly. He holds an MD from the University of Bonn.

Chairman of the supervisory board: Dr Jörg Spiekerkötter

CFO: Abdelghani Omari

Dr Spiekerkötter has been a board member since 2008. He worked as CFO of Schering AG and Organon Biosciences NV, and until December 2010 was CFO of Conergy.

Prior to joining Paion, Mr Omari held various positions at KPMG, Cologne in auditing and advisory. He studied at the University of Aachen and has a diploma in business administration.

Management team

CEO: Dr Wolfgang Soehngen

Dr Soehngen co-founded Paion in 2000 and became CEO in 2004. Previously, he founded Virtuality, a consulting firm in 1997 and from 1987 worked in clinical development, project management, corporate development and strategic planning at Grünenthal. Before this, he was a pharmaceutical representative at Pfizer.

COO: Dr Jürgen Raths

Dr Raths joined Paion in September 2015. He has over 25 years of pharma experience, having previously been president and CEO of Correvio International, CEO of Arpida, and various senior leadership roles at Eli Lilly. He holds an MD from the University of Bonn.

Chairman of the supervisory board: Dr Jörg Spiekerkötter

Dr Spiekerkötter has been a board member since 2008. He worked as CFO of Schering AG and Organon Biosciences NV, and until December 2010 was CFO of Conergy.

CFO: Abdelghani Omari

Prior to joining Paion, Mr Omari held various positions at KPMG, Cologne in auditing and advisory. He studied at the University of Aachen and has a diploma in business administration.

Principal shareholders

(%)

Cosmo Pharmaceuticals

9.1

TIAA Cref

3.0

Companies named in this report

Cosmo Pharmaceuticals, Ono, Pendopharm

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Paion 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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.
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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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