Prima 2 18-month data shows strong promise

Pixium Vision 6 April 2020 Update
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Pixium Vision

Prima 2 18-month data shows strong promise

Clinical update

Healthcare equipment
& services

6 April 2020

Price

€0.74

Market cap

€19m

$1.08/€

Net cash (€m) at 31 December 2019

1.0

Shares in issue

25.4m

Free float

54%

Code

ALPIX

Primary exchange

Euronext Growth

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(19.0)

(4.4)

(54.7)

Rel (local)

6.1

39.3

(39.9)

52-week high/low

€1.83

€0.53

Business description

Pixium Vision develops bionic vision systems for patients with severe vision loss. Its lead product, Prima, is a wireless sub-retinal implant system designed for dry-AMD. The firm completed five implantations in an EU feasibility study and recently started a US feasibility study.

Next events

Q120 results

April 2020

PRIMAvera pivotal study filing

Mid-2020 or Q320

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Maxim Jacobs, CFA

+1 646 653 7027

Pixium Vision is a research client of Edison Investment Research Limited

Pixium on 31 March reported positive 18-month follow-up data from its European feasibility study (PRIMA-FS) on the Prima 2 system in patients with advanced atrophic dry age-related macular degeneration (Dry-AMD). The data showed continued safety and improvements of between three and seven lines on the Landolt C visual acuity (VA) scale versus baseline. The VA improvements show further evidence of clinical activity and reinforce our confidence in the programme as the firm works towards a filing for the PRIMAvera pivotal study in the coming months. We now obtain an equity valuation of €97.9m, or €3.85 per share, versus €2.78 previously, due to increasing our success probability to 20% from 15%.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

1.6

(7.7)

(0.42)

0.0

N/A

N/A

12/19

1.8

(9.8)

(0.44)

0.0

N/A

N/A

12/20e

1.7

(8.1)

(0.32)

0.0

N/A

N/A

12/21e

1.6

(13.1)

(0.51)

0.0

N/A

N/A

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

First set of data reflecting Prima 2 components

These were the first released data using the Prima 2 second-generation transparent augmented reality (AR) glasses and pocket computer employing improved analytics. These hardware improvements aim to provide a better functional visual experience with the 378-pixel Prima chip implant. Effective device-assisted prosthetic VA for the four subjects was between LogMAR 0.5 and LogMAR 0.69, which are markedly superior to the baseline results of LogMAR 1.3 to LogMAR 1.4, even given the assistance of the device’s magnification features.

Data may add flexibility in PRIMAvera design

While dependent on variables and factors such as sample size, in general, we anticipate that to demonstrate statistical significance in the pivotal trial and obtain regulatory approval, the Prima 2 system should show at least three lines of VA improvement versus baseline. Given that up to seven lines were shown in patients with very advanced stages of Dry-AMD disease, there may be the possibility for Pixium to employ more relaxed study inclusion criteria in the upcoming pivotal (PRIMAvera) programme, which could hasten recruitment while still delivering the statistical power to demonstrate efficacy and obtain approval.

Valuation: Increasing rNPV to €98m

The level of VA improvement shown and the continued safety of the Prima implant provide us with increased confidence that the product’s prosthetic visual benefits are meaningful and that it may eventually obtain regulatory approval. We are increasing our probability of success to 20%, from 15% previously. We obtain a pipeline rNPV (enterprise value) of €98.0m versus €69.5m previously. After including €0.1m in Q120 estimated net debt, we obtain an equity valuation of €97.9m, or €3.85 per share (versus €2.78 per share previously). We continue to project that the firm will need to raise €50m to bring Prima to launch (in H223).

18-month data show effective improvements in VA

Pixium previously released positive 12-month data on the five PRIMA-FS subjects implanted with the 378-pixel Prima chip in July 2019. Since then, the company has worked to transition these subjects to the second-generation Prima 2 system consisting of second-generation transparent augmented reality (AR) glasses and a second-generation pocket computer employing improved analytics. These transparent AR glasses allow for the combination of both prosthetic vision and natural residual (peripheral) vision, and the improved pocket computer and its software provides enhanced algorithms, designed to incorporate more advanced image processing and artificial intelligence (AI) functionality. Altogether, these external hardware improvements aim to provide better functional visual experience with the 378-pixel Prima chip implant. As a reminder, the paused US feasibility study and the planned upcoming PRIMAvera pivotal study will use the Prima 2 system including the 378-pixel chip and the second-generation AR glasses and pocket computer.

The 18-month data released on 31 March shows several promising aspects. On the safety side, there were no indications of any ocular health or tolerability issues. More importantly, the use of the new Prima 2 visual system components has led to some measurable improvements in VA, in part due to some of the features on the external device components, which include improved magnification capabilities. The company reported 18-month data on four of the five EU patients implanted in PRIMA-FS (one of the five patients implanted has passed away due to health reasons completely unrelated to Prima implantation or usage).

Pixium reported that of the four remaining subjects, with the Prima 2 system activated, among them they reported between three and seven lines of improvement on the VA scale using the Landolt C optotype (the type of figures or symbols used to measure VA), compared to baseline. Effective device-assisted prosthetic VA for the four subjects was between LogMAR 0.5 (approximately 20/60, or c 33% of normal VA expected in healthy subjects) and LogMAR 0.69 (approximately 20/100, or c 20% of normal VA). Each 0.1 increment on the LogMAR scale represents the next lower VA line of the VA chart (ie the higher the LogMAR value, the lower the effective VA). Altogether, these measures are markedly superior to the baseline results, even given that they were assisted to a degree by the device’s magnification features.

Exhibit 1: Landolt C optotype

Source: Wikimedia commons; attribution to Visuoloog/CC BY-SA

Baseline VA was measured on the implanted eye shortly after surgery but without activation of the Prima system’s glasses or pocket computer (and hence, the Prima system was inactive); baseline VA is expected to be very comparable to pre-implantation VA. We note that the study’s inclusion criteria required entry VA in the implanted eye to be no better than LogMAR 1.3 (20/400 on Snellen scale, or 5% of normal VA). Baseline VA among the four subjects was between LogMAR 1.3 and LogMAR 1.4 (approximately 20/500, or c 4% of normal VA).

In the 12-month data published in a recent American Academy of Ophthalmology journal article,1 it was reported that the three subjects with optimally-positioned Prima implant chips had Prima-activated prosthetic VA between 20/460 (4.3% of normal VA) and 20/550 (3.6% of normal VA). Note these measures were taken with the initial-generation glasses and pocket computer and the magnification and AI capabilities associated with Prima 2 were not available. In addition, the first-generation glasses were opaque, so patients were unable to combine their natural remaining residual vision with the prosthetic vision provided by the Prima chip. Hence, the 12-month post-implantation VA results using the initial Prima glasses and pocket computer are not directly comparable to the 18-month results using the Prima 2 system.

  Palanker D, Le Mer Y, Mohand-Said S, et al. Ophthalmology. February 2020 www.aaojournal.org/article/S0161-6420(20)30189-5/pdf

Even if part of the improvement in VA versus baseline is due to the Prima 2 external devices’ magnification capabilities, these results nonetheless represent significant improvements in the ability of the patients to resolve visual details. Further, we are reassured that there is no degradation in Prima prosthetic visual performance between months 12 and 18 (and management indicates that this remains the case in some early 24-month data), as there had been some speculation that advanced Dry-AMD (which attacks and damages photoreceptor cells in the retina) could eventually provoke atrophic damage to the retinal ganglion cells (that the Prima system relies upon for providing the patient’s prosthetic vision).

We note that assessments of the device’s ability to provide improvements in functional tasks (ie whether the device assists patients in accomplishing day-to-day activities such as locating items, identifying details or maintaining independence) will be very useful for both regulators and potential insurers, and we believe the company hopes to provide some functional use or quality-of-life (QoL) measures in the 24-month data, but this will depend on the evolution of the current COVID-19 pandemic situation (as in-person follow-up visits are generally not feasible during the current pandemic).

Level of VA improvement may provide flexibility for PRIMAvera design

While this is dependent on variables and factors such as sample size, in general, we anticipate that to demonstrate statistical significance in the pivotal trial and obtain regulatory approval the Prima 2 device should show at least three lines of VA improvement versus baseline, in addition to showing safety. We are encouraged that in PRIMA-FS, where patients were required to have a very advanced degree of geographic atrophy to be admissible,2 the 18-month data has shown three to seven lines of improvement vs baseline. We believe that this level of VA amelioration can potentially allow the company to propose somewhat less restrictive inclusion criteria in terms of Dry-AMD disease severity at baseline for the upcoming PRIMAvera pivotal study, while maintaining a sufficient buffer to allow it to demonstrate statistical significance. Relaxing the Dry-AMD baseline severity criteria should facilitate patient recruitment and may lead to earlier study data. We estimate that the PRIMAvera study will involve approximately 50 patients to satisfy European regulators (or up to 70 patients if the design is also accepted by the FDA as a registration-enabling pivotal trial for the US market). At this time, we are not revising our timing assumptions stated in our 26 March 2020 update note (as the COVID-19 pandemic and the timing of improvements or stabilization may affect filing and pivotal study start timelines). We continue to expect that Pixium will file the pivotal study with at least the European regulator in mid-2020 or Q320.

  The inclusion criteria for PRIMA-FS required LogMAR 1.3 or worse VA, along with no foveal visual perception in the study eye

Financials and valuation

We are not revising our financial forecasts and they were discussed in our 26 March 2020 update note. However, the level of VA improvement shown in the 18-month data and the continued safety of the Prima implant provides us with an increased level of confidence that the product’s prosthetic visual benefits are meaningful and that it may eventually obtain regulatory approval. As the sample size is small (four remaining patients in PRIMA-FS, and two subjects have been implanted to date in the US feasibility study), and there is limited objective data on functional or QoL improvements from the Prima 2 system (which may influence approval likelihood and certainly reimbursement prospects), there remains ongoing development risk. Nonetheless, we believe that there is justification in increasing our probability of success to 20%, from 15% previously.

Exhibit 2: Pixium Vision rNPV assumptions

Product contributions (net of R&D and marketing costs)

Indication

Status

rNPV
(€m)

rNPV/share (€)

Probability of success

Launch year

Peak WW sales (€m)

Prima (net of R&D and marketing costs)

Age-related macular degeneration with geographic atrophy

Human feasibility trials

185.5

7.30

20.00%

H223 (EU);
H225 (US)

1,096 in 2029

Corporate costs & expenses

G&A expenses

(19.8)

(0.78)

Net capex, NWC & taxes

(67.7)

(2.66)

Total rNPV

98.0

3.86

Net debt (Q120e)

(0.1)

(0.00)

Total equity value

97.9

3.85

FD shares outstanding (000s) (22 March 2020 data)

25,399

Source: Edison Investment Research

Our valuation for Pixium Vision is based on a rNPV approach, employing a 12.5% cost of capital and is based on the Prima opportunity in dry-AMD. We now apply a probability of success estimate for Prima-AMD in our model of 20% (from 15% previously). We now obtain a pipeline rNPV (enterprise value, excluding net cash) of €98.0m versus €69.5m previously.

Pixium had €1.0m net cash (€6.8m gross cash offset by €2.6m in refundable advances and €3.2m in long-term debt) on 31 December 2019 and, given our projection of a €0.47m monthly cash burn rate in H120 and the estimated conversion of €0.3m of part of its European Select Growth Opportunities Fund (ESGO) debt tranches to equity in Q120, we estimate Q120 net debt of €0.1m. After including €0.1m in estimated Q120 net debt, we obtain an equity valuation of €97.9m, or €3.85 per share (versus €2.78 previously).

As discussed in our 26 March 2020 note, we believe the measures previously announced by Pixium to control its cash burn rate should enable it to weather the COVID-19 storm at least into Q420 and retain a positive gross cash balance, even in the absence of an equity offering (which would be challenging to pursue or heavily dilutive given current market conditions).

We continue to assume that Pixium will need to raise €50m (including the remaining or unused €7.5m in tranches from ESGO funding facility totalling €10m) to bring Prima to launch (now in H223). If the company secures an additional tranche from ESGO (two tranches of €1.25m have been issued to date), we expect it will have sufficient funds into 2021. Our model continues to assume that the company will raise €24.7m in net illustrative debt in 2020 and an additional €25m in illustrative debt in 2021.

Exhibit 3: Financial summary

€000

2017

2018

2019

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,535

1,598

1,782

1,700

1,600

1,600

Cost of Sales

(1,124)

(41)

0

0

0

0

General & Administrative

(5,324)

(2,019)

(3,815)

(2,900)

(2,973)

(3,847)

Research & Development

(7,817)

(5,297)

(6,320)

(6,000)

(8,000)

(10,400)

EBITDA

 

 

(11,731)

(5,758)

(8,352)

(7,200)

(9,373)

(12,647)

Depreciation

(936)

(677)

(448)

(449)

(531)

(639)

Amortization

0

0

0

0

0

0

Operating Profit (before exceptionals)

 

(12,666)

(6,435)

(8,801)

(7,649)

(9,903)

(13,286)

Exceptionals

0

(5,859)

(69)

0

0

0

Other

0

0

0

0

0

0

Operating Profit

(12,666)

(12,294)

(8,870)

(7,649)

(9,903)

(13,286)

Net Interest

(876)

(1,277)

(1,006)

(442)

(3,147)

(4,246)

Profit Before Tax (norm)

 

 

(13,542)

(7,712)

(9,806)

(8,092)

(13,050)

(17,532)

Profit Before Tax (FRS 3)

 

 

(13,542)

(13,571)

(9,876)

(8,092)

(13,050)

(17,532)

Tax

0

0

0

0

0

0

Profit After Tax and minority interests (norm)

(13,542)

(7,712)

(9,806)

(8,092)

(13,050)

(17,532)

Profit After Tax and minority interests (FRS 3)

(13,542)

(13,571)

(9,876)

(8,092)

(13,050)

(17,532)

Average Number of Shares Outstanding (m)

13.3

18.5

22.3

25.4

25.5

25.7

EPS - normalised (€)

 

 

(1.02)

(0.42)

(0.44)

(0.32)

(0.51)

(0.68)

EPS - normalised and fully diluted (€)

 

(1.02)

(0.42)

(0.44)

(0.32)

(0.51)

(0.68)

EPS - (IFRS) (€)

 

 

(1.02)

(0.73)

(0.44)

(0.32)

(0.51)

(0.68)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

9,649

3,666

4,507

4,457

4,151

3,555

Intangible Assets

7,680

2,623

2,361

2,361

2,361

2,361

Tangible Assets

1,970

1,042

2,145

2,096

1,789

1,194

Current Assets

 

 

14,241

17,756

9,107

26,443

38,242

21,699

Short-term investments

0

0

0

0

0

0

Cash

10,532

15,629

6,792

24,133

35,845

19,301

Other

3,710

2,126

2,316

2,310

2,398

2,398

Current Liabilities

 

 

(2,752)

(2,044)

(2,880)

(2,880)

(2,037)

(2,037)

Creditors

(2,752)

(2,044)

(2,880)

(2,880)

(2,037)

(2,037)

Short term borrowings

0

0

0

0

0

0

Long Term Liabilities

 

 

(9,302)

(8,023)

(7,033)

(31,733)

(56,733)

(56,733)

Long term borrowings

(9,130)

(7,870)

(5,787)

(30,487)

(55,487)

(55,487)

Other long term liabilities

(172)

(153)

(1,246)

(1,246)

(1,246)

(1,246)

Net Assets

 

 

11,836

11,355

3,700

(3,713)

(16,378)

(33,516)

CASH FLOW

Operating Cash Flow

 

 

(10,605)

(6,174)

(7,282)

(6,816)

(9,917)

(12,253)

Net Interest

(876)

(1,277)

(1,006)

(442)

(3,147)

(4,246)

Tax

0

0

0

0

0

0

Capex

(191)

(31)

(34)

(400)

(224)

(44)

Acquisitions/disposals

0

0

0

0

0

0

Financing

519

14,068

2,034

300

0

0

Net Cash Flow

(11,153)

6,587

(6,288)

(7,359)

(13,288)

(16,543)

Opening net debt/(cash)

 

 

(12,911)

(1,401)

(7,760)

(1,004)

6,354

19,643

HP finance leases initiated

0

0

0

0

0

0

Other

(357)

(228)

(468)

0

0

0

Closing net debt/(cash)

 

 

(1,401)

(7,760)

(1,004)

6,354

19,643

36,186

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Pixium Vision and prepared and issued by Edison, in consideration of a fee payable by Pixium Vision. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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London, WC1V 7EE

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1,185 Avenue of the Americas

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General disclaimer and copyright

This report has been commissioned by Pixium Vision and prepared and issued by Edison, in consideration of a fee payable by Pixium Vision. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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