Pharnext |
Pivotal Phase III initiated |
Clinical update |
Pharma & biotech |
7 April 2021 |
Share price performance
Business description
Next events
Analyst
Pharnext is a research client of Edison Investment Research Limited |
Pharnext announced on 31 March 2021 that it has enrolled its first patient in the pivotal Phase III study of PTX3003 for the treatment of Charcot-Marie-Tooth Disease (CMT) type Ia (the PREMIER study). The study has a target enrolment of 350 and will observe patients over 15 months. We are pleased to see that the study has started, and we expect this to be the major operational focus for the company in 2021 and beyond.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
6.8 |
(21.7) |
(1.83) |
0.00 |
N/A |
N/A |
12/19 |
3.6 |
(23.4) |
(1.61) |
0.00 |
N/A |
N/A |
12/20e |
3.2 |
(17.8) |
(0.96) |
0.00 |
N/A |
N/A |
12/21e |
1.8 |
(26.6) |
(1.27) |
0.00 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Primary endpoint: ONLS improvement
The primary endpoint of the study will be improvement in the Overall Neuropathy Limitations Scale (‘ONLS’). We are pleased to see this because the drug has previously shown improvements in clinical studies as assessed by this metric, including the company’s previous Phase III clinical study. Additionally, the new study will assess patients on a range of other clinical parameters such as the 10-meter walk test, quantified muscular testing and patient assessments.
Based on FDA feedback, moving forward without SPA
The design of this clinical study was made based on feedback from the FDA and EMA. The company previously applied for a special protocol assessment and had received positive feedback from the FDA regarding this study design. The FDA determined that the study may be appropriate for a special protocol assessment (SPA) designation, but the company opted to move forward without the designation to avoid any further delay, because it had not yet reached a consensus on the statistical treatment for COVID-19 delays. The agency and the company agreed on the key aspects of the study design so it was determined that moving forward without an SPA would have no major impact on the study conduct.
Valuation: Increased to €283.2m on PXT3003 upgrade
We have increased our valuation to €283.2m, from €255.6m, although it is lower on a per share basis: €13.08 from €13.31, previously. We have upgraded the probability of success for PXT3003 to 70% from 60% based on the trial initiation and the reported FDA feedback. Additionally we have rolled forward our NPVs and updated for new net cash, including the February offering, which included a €6m equity component (1.75m units at €3.42 per unit, with each unit comprising one share and one half of a share purchase warrant exercisable at €4.45/share) and €5m in convertible debt (convertible at the lower of €4.25, or 93% of the 15-day VWAP).
PXT3003 in a new Phase III study
Pharnext has announced that the first patient has been enrolled in its now ongoing Phase III PREMIER clinical study of PXT3003. This is the company’s pleotropic therapy for the treatment of CMT1A, a rare congenital peripheral neuropathy. The PREMIER study is a randomized, double-blind, two-arm, placebo-controlled, pivotal study that will examine 350 patients for a range of functional assessments. The primary endpoint of the study will be improvement in ONLS, a 12-point functional assessment of the ability to perform tasks with the arms and legs. This primary endpoint was agreed upon after feedback from the EMA and FDA (more on this process below), and we are pleased because we believe that this is the right functional measure for this population, and because the company has previously shown improvement in clinical studies via this parameter. Other secondary endpoints will be the 10-meter walk test, quantified muscular testing of the hand and foot, Patient Global Impression of Severity (‘PGI-S’), Patient Global Impression of Change (‘PGI-C’), and Charcot-Marie-Tooth Neuropathy Score, version 2 (‘CMTNS-v2’).
This study design is largely similar to the company’s previous Phase III clinical study with the notable exception that only one dosing level will be tested, the ‘high dose’ from the previous study: 1.4mg naltrexone, 12mg baclofen, 420mg sorbitol. This previous study was disrupted by a manufacturing and quality control issue, but still managed to achieve statistical significance of improvement in ONLS in that ‘high dose’ arm among study completers (p=0.008) and in the intent-to-treat (ITT) population (0.04) (Exhibit 1).
Exhibit 1: PXT3003 Phase III results (modified SAP) |
Source: Pharnext. Note: Dose 3=0.7mg, 6mg, 210mg; Dose 4=1.4mg, 12mg, 420mg; Dose 4 vs placebo, ANCOVA with multiple imputation (missing data implemented by multiple imputations following the placebo trend). *= p<0.05. **=p<0.01. ***=Average of 12 and 15 month, or 12 month if 15 month is missing. |
In the preparations for this PREMIER study, the company sought feedback from the FDA by applying for an SPA. An SPA, if granted would have outlined the specific parameters by which the study results would be evaluated by the FDA. This can significantly reduce the uncertainty in running a clinical study if there is a consensus beforehand how it will be evaluated. The company however opted not to complete the SPA approval process, because it felt that it was largely in alignment already with the FDA on all major elements of study design based on the feedback to date and that formal approval would delay study initiation. A consensus regarding how disruptions from COVID-19 would be handled statistically had not been reached, but we consider this a relatively minor detail of the overall trial design. Moreover, this process of seeking FDA feedback via SPA discussions without formally completing the process is not an uncommon tactic to get the agency to weigh in on a trial design.
CMT is the most common inherited peripheral neuropathy and one of the most common inherited neurological disorders, affecting approximately 126,000 individuals in the US.1 CMT1A is well established as the most common genetic subtype of the disease, but there has been some variability in the rates reported in different studies, with most reporting rates in the range of 40–50% of all CMT patients. CMT1A is caused by duplication of the PMP22 gene, leading to overexpression of the PMP22 protein. Too much of this protein in the Schwann cells disrupts the formation of the myelin sheath, leading to loss of nerve function. When developing PXT3003, the Pleotherapy platform was used to identify a drug combination that would significantly reduce the overexpression of PMP22.
NIH. Charcot-Marie-Tooth Disease Fact Sheet.
Valuation
We have increased our valuation to €283.2m from €255.6m, although it is lower on a per share basis: €13.08 from €13.31, previously. This increase is driven by an upgrade to our probability of success for the PXT3003 program to 70% from 60%. We have increased this value because we are pleased to see the initiation of the clinical study with what we consider achievable endpoints based on the company’s prior clinical work. Moreover, we are encouraged that the company was able to reach a consensus regarding these parameters with the FDA, despite not seeking an SPA. Additionally, we have rolled forward our NPVs for the program. These factors are offset by our new pro forma net cash estimate (€3.62m at FY20e, from €10.57m previously at H120), which uses an estimated net debt of €1.96m at the end of 2020 and the proceeds from the equity component of the recent offering (€6m gross, estimated €5.58m net).
Exhibit 2: Valuation of Pharnext
Development Program |
Indication |
Clinical stage |
Prob. of success |
Launch year |
Patent/Exclusivity Protection |
Launch Pricing ($/year) |
Peak sales (US$m) |
rNPV (€m) |
PXT3003 |
CMT1A |
Phase III |
70% |
2024 |
2031-2034 |
55,000 |
626 |
283.2 |
Total |
283.2 |
|||||||
Net cash (YE20 est. + offering) (€m) |
3.62 |
|||||||
Total firm value (€m) |
286.8 |
|||||||
Total basic shares (m) |
21.9 |
|||||||
Value per basic share (€) |
13.08 |
|||||||
Dillutive options, warrants, and convertible debt (m) |
7.42 |
|||||||
Total diluted shares |
29.34 |
|||||||
Value per diluted share |
11.05 |
Source: Pharnext reports, Edison Investment Research
Financials
The company completed a financing in February 2021 that included a €6m equity component (1.75m units at €3.42 per unit, with each unit comprising one share and one half of a share purchase warrant exercisable at €4.45/share) and €5m in convertible debt (convertible at the lower of €4.25/share or 93% of 15-day VWAP). We have updated our financials to reflect this offering, which has reduced the expected financing requirement for the company to €80m (€50m in 2022, €30m in 2023) from €95m previously. Otherwise our financials remain unchanged, but we expect to update them for 2020 financial results when these are released.
Exhibit 3: Financial summary
€'k |
2018 |
2019 |
2020e |
2021e |
2022e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
6,829.0 |
3,597.4 |
3,204.9 |
1,759.9 |
3,140.6 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Profit |
6,829.0 |
3,597.4 |
3,204.9 |
1,759.9 |
3,140.6 |
||
R&D |
(17,664.7) |
(15,178.1) |
(9,294.8) |
(16,587.3) |
(17,930.4) |
||
Admin & Marketing |
(7,072.1) |
(8,444.6) |
(8,529.1) |
(8,614.4) |
(8,700.5) |
||
EBITDA |
|
|
(17,754.9) |
(19,501.6) |
(14,499.1) |
(23,334.0) |
(23,412.7) |
Normalised operating profit |
|
|
(18,310.9) |
(20,093.0) |
(14,454.1) |
(23,276.8) |
(23,325.3) |
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Share-based payments |
403.1 |
67.7 |
(165.0) |
(165.0) |
(165.0) |
||
Reported operating profit |
(17,907.8) |
(20,025.3) |
(14,619.1) |
(23,441.8) |
(23,490.3) |
||
Net Interest |
(3,408.8) |
(3,283.9) |
(3,316.7) |
(3,369.1) |
(3,509.3) |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
(21,719.8) |
(23,376.9) |
(17,770.8) |
(26,645.9) |
(26,834.6) |
Profit Before Tax (reported) |
|
|
(21,316.7) |
(23,309.2) |
(17,935.8) |
(26,810.9) |
(26,999.6) |
Reported tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit After Tax (norm) |
(21,719.8) |
(23,376.9) |
(17,770.8) |
(26,645.9) |
(26,834.6) |
||
Profit After Tax (reported) |
(21,316.7) |
(23,309.2) |
(17,935.8) |
(26,810.9) |
(26,999.6) |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
(21,719.8) |
(23,376.9) |
(17,770.8) |
(26,645.9) |
(26,834.6) |
||
Net income (reported) |
(21,316.7) |
(23,309.2) |
(17,935.8) |
(26,810.9) |
(26,999.6) |
||
Basic average number of shares outstanding (m) |
11.8 |
14.5 |
18.5 |
21.1 |
23.0 |
||
EPS - basic normalised (€) |
|
|
(1.83) |
(1.61) |
(0.96) |
(1.27) |
(1.17) |
EPS - diluted normalised (€) |
|
|
(1.83) |
(1.61) |
(0.96) |
(1.27) |
(1.17) |
EPS - basic reported (€) |
|
|
(1.80) |
(1.61) |
(0.97) |
(1.27) |
(1.17) |
Dividend (€) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
1,333.7 |
1,526.5 |
1,247.0 |
1,139.3 |
1,061.6 |
Intangible Assets |
32.3 |
12.1 |
0.0 |
0.0 |
0.0 |
||
Tangible Assets |
401.0 |
293.2 |
185.4 |
77.6 |
0.0 |
||
Investments & other |
900.5 |
1,221.2 |
1,061.6 |
1,061.6 |
1,061.6 |
||
Current Assets |
|
|
29,663.9 |
21,645.1 |
16,979.4 |
2,843.5 |
26,446.4 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
0.0 |
0.0 |
526.8 |
289.3 |
516.3 |
||
Cash & cash equivalents |
22,761.4 |
16,246.6 |
11,054.1 |
(2,844.3) |
20,531.6 |
||
Other |
6,902.5 |
5,398.5 |
5,398.5 |
5,398.5 |
5,398.5 |
||
Current Liabilities |
|
|
(9,361.8) |
(9,959.6) |
(8,144.2) |
(9,966.4) |
(21,532.7) |
Creditors |
(9,173.7) |
(5,792.7) |
(4,324.7) |
(6,146.8) |
(6,506.7) |
||
Tax and social security |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Short term borrowings |
0.0 |
(3,806.3) |
(3,480.6) |
(3,480.6) |
(14,687.0) |
||
Other |
(188.1) |
(360.5) |
(338.9) |
(338.9) |
(338.9) |
||
Long Term Liabilities |
|
|
(47,981.3) |
(20,457.9) |
(19,334.3) |
(24,334.3) |
(63,127.9) |
Long term borrowings |
(38,772.8) |
(11,181.4) |
(9,532.1) |
(14,532.1) |
(53,325.7) |
||
Other long term liabilities |
(9,208.5) |
(9,276.6) |
(9,802.2) |
(9,802.2) |
(9,802.2) |
||
Net Assets |
|
|
(26,345.4) |
(7,245.9) |
(9,252.0) |
(30,317.9) |
(57,152.5) |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
(26,345.4) |
(7,245.9) |
(9,252.0) |
(30,317.9) |
(57,152.5) |
CASH FLOW |
0 |
||||||
Op Cash Flow before WC and tax |
(18,158.0) |
(19,569.3) |
(14,334.1) |
(23,169.0) |
(23,247.7) |
||
Working capital |
2,532.2 |
(1,523.1) |
(1,331.3) |
2,059.7 |
132.9 |
||
Exceptional & other |
(285.2) |
(476.0) |
0.0 |
0.0 |
0.0 |
||
Tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net operating cash flow |
|
|
(15,911.1) |
(21,568.4) |
(15,665.4) |
(21,109.3) |
(23,114.8) |
Capex |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Acquisitions/disposals |
(401.5) |
193.5 |
0.0 |
0.0 |
0.0 |
||
Net interest |
(1,827.2) |
(1,412.9) |
(3,316.7) |
(3,369.1) |
(3,509.3) |
||
Equity financing |
6,110.1 |
16,494.9 |
15,764.7 |
5,580.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(1,267.5) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net Cash Flow |
(13,297.3) |
(6,292.9) |
(3,217.5) |
(18,898.4) |
(26,624.1) |
||
Opening net debt/(cash) |
|
|
2,714.1 |
16,011.4 |
(1,258.8) |
1,958.7 |
20,857.1 |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
23,563.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
16,011.4 |
(1,258.8) |
1,958.7 |
20,857.1 |
47,481.2 |
Source: Pharnext accounts, Edison Investment Research
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