Auris Medical Holding — Q318 results and business updates

Auris Medical Holding — Q318 results and business updates

Auris Medical recently reported its Q318 results and provided a brief business update on its active programs. R&D expenditure for the period was down roughly 60% over Q317, which reflects management’s swift pivot to focus on Phase I development. Auris plans to initiate two intranasal betahistine trials in Q119: the AM-125 Phase II trial in acute vertigo and AM-201 Phase I trial for olanzapine-induced weight gain.

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Auris Medical Holding

Q318 results and business updates

Financial update

Pharma & biotech

19 November 2018

Price

US$0.54

Market cap

US$17m

US$1.01/CHF

Net cash ($m) at 30 September 2018 (proceeds from exercise of warrants and LPC equity drawdown)

5.9

Shares in issue

30.6m

Free float

79.3%

Code

EARS

Primary exchange

NASDAQ

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(63.3)

126.3

(93.2)

Rel (local)

(62.3)

134.9

(93.6)

52-week high/low

US$9.3

US$0.2

Business description

Auris Medical is a Swiss biopharmaceutical company developing neurotology therapeutics. The company is developing intranasal betahistine in a Phase I trial for mental disorder supportive care and is entering Phase II for vertigo; both are designed to demonstrate proof-of-concept.

Next events

Initiate AM-201 PK/PD study

Q119

Initiate AM-125 Phase II study

Q119

AM-201 PK/PD top-line readout

Summer 2019

AM-125 Phase II top-line data readout

Q319

Analysts

Maxim Jacobs

+1 646 653 7027

Briana Warschun

+1 646 653 7031

Auris Medical Holding is a research client of Edison Investment Research Limited

Auris Medical recently reported its Q318 results and provided a brief business update on its active programs. R&D expenditure for the period was down roughly 60% over Q317, which reflects management’s swift pivot to focus on Phase I development. Auris plans to initiate two intranasal betahistine trials in Q119: the AM-125 Phase II trial in acute vertigo and AM-201 Phase I trial for olanzapine-induced weight gain.

Year end

Revenue (CHFm)

PBT*
(CHFm)

EPS*
(CHF)

DPS
(CHF)

P/E
(x)

Yield
(%)

12/16

0.0

(31.0)

(0.90)

0.0

N/A

N/A

12/17

0.0

(25.9)

(0.54)

0.0

N/A

N/A

12/18e

0.0

(12.7)

(0.42)

0.0

N/A

N/A

12/19e

0.0

(11.8)

(0.31)

0.0

N/A

N/A

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

Upcoming Phase II AM-125 trial

Auris is developing AM-125, an intranasal formulation of betahistine for the treatment of acute vertigo. As AM-125 bypasses the digestive tract where the oral compound is readily metabolised, the intranasal formulation has demonstrated superior bioavailability over oral betahistine. Auris expects to initiate the Phase II trial in Q119 in 138 patients with surgically induced acute vertigo following vestibular schwannoma excision.

Phase I trial to demonstrate PK/PD of AM-201

Auris is also developing AM-201, an intranasal betahistine formulation, for co-administration with olanzapine to counteract adverse effects such as weight gain and somnolence. Auris plans to initiate the pharmacokinetics/pharmacodynamics (PK/PD) trial in Q119 in 50 healthy volunteers at one site in Europe.

Actively seeking a partner for Sonsuvi (AM-111)

The company recently announced that it has initiated the search to identify a partner for further development of AM-111 for the treatment of acute inner ear hearing loss. Auris has enlisted JSB Partners, a transaction advisory firm, to assist in identifying a partner and to support partnering discussions. AM-111 was also recently commercially branded as Sonsuvi.

Valuation: $119.8m or $3.92 per basic share

We have slightly adjusted our valuation to $119.8m or $3.92 per basic share ($3.19 per diluted share) from $117.6m or $4.89 per basic share ($3.20 per diluted share). The increase in overall valuation was primarily driven by rolling forward our NPVs and an increase in net cash attributed to ~CHF2.7m in proceeds from financial instruments, which concurrently increased the share count and consequently decreased the price per share.

Plans to initiate two trials in Q119

Auris previously demonstrated the superior bioavailability of AM-125, intranasal betahistine, compared to oral betahistine (48mg) in both single and multiple doses (Exhibits 1 and 2). Adverse events (AE) were mild to moderate, described as transient, and included sneezing and nasal congestion, which corresponded to dose. One patient withdrew from the trial due to an AE, but no serious AEs were reported. According to Auris, the maximum tolerated repeated dose based on local tolerability in the nose was identified and set at 40mg; the maximum tolerated single dose was not reached at 60mg.

Exhibit 1: Single-dose AM-125 bioavailability vs oral betahistine

Exhibit 2: Multi-dose AM-125 bioavailability vs oral betahistine

Source: Auris Medical

Source: Auris Medical

Exhibit 1: Single-dose AM-125 bioavailability vs oral betahistine

Source: Auris Medical

Exhibit 2: Multi-dose AM-125 bioavailability vs oral betahistine

Source: Auris Medical

Auris plans to initiate its Phase II clinical trial in 138 patients with surgically induced acute vertigo following the removal of vestibular schwannoma (ie a noncancerous tumor located on the main nerve leading from the inner ear to the brain, also known as acoustic neuroma). Vestibular schwannoma surgery triggers acute vertigo, which can leave patients with the loss of peripheral vestibular input on one side.

Auris Medical’s randomized, controlled, double-blind Phase II trial, TRAVERS, will be divided into two parts (Exhibit 3). Part A of the trial, which the company plans to initiate in Q119, will include 50 patients who will be administered five steps with AM-125 three times daily and 16 patients who will receive 48mg three times daily. The company anticipates top-line data readout in Q319, and expects to determine a dose-response curve and select a low dose and a high dose of AM-125 for the second part of the trial, which will be measured against placebo. Then, in Part B of the trial, the company plans to enrol 72 patients. Furthermore, Auris received EMA feedback on the TRAVERS trial and expects to initiate the study in Q119. The trial will be conducted in about 12-15 sites in Europe and possibly in Canada. If successful, this could be an important catalyst.

Exhibit 3: TRAVERS Phase II trial outline

No. patients

Dose (3x daily)

Time frame

Primary endpoints

Secondary endpoints

Part A

50 (experimental)

5 doses up to 40 mg with AM-125

4 weeks

Standing on foam, tandem Romberg test

Tandem gait, subjective visual deviation and subjective questionnaires

16 (placebo)

48mg oral betahistine

Part B

72

High dose and low dose (determined by interim analysis) vs placebo (48mg oral betahistine)

4 weeks

Standing on foam, tandem Romberg test

Tandem gait, subjective visual deviation and subjective questionnaires

Source: Auris Medical

Concurrently, Auris plans to initiate the PK/PD trial in AM-210, intranasal betahistine for olanzapine-induced weight gain, as the company expects to receive pre-IND feedback from the FDA in Q418 and subsequently plans to enrol 50 healthy volunteers at one site in Europe in Q119 (Exhibit 4).

Exhibit 4: AM-201 Phase I PK/PD trial design

Screening

Olanzapine titration

Maintenance

Male and female healthy volunteers

18-50 years of age

BMI 18-25kg/m2

Titrate up to 10mg (7.5mg) once daily within first week

Replace subjects who do not tolerate olanzapine or gain a clinically relevant amount of weight/high glucose level

Maintain olanzapine dose for three weeks

Source: Auris Medical

The primary and secondary endpoints are weight gain and daytime sleepiness, respectively, while PK analysis should demonstrate potential drug-drug interaction. The company expects to read out top-line data in summer 2019.

Valuation: $119.8m or $3.92 per basic share

We have slightly adjusted our valuation to $119.8m or $3.92 per basic share ($3.19 per diluted share) from $117.6m or $4.89 per basic share ($3.20 per diluted share). The increase in overall valuation was primarily driven by rolling forward our NPVs and an increase in net cash attributed to ~CHF2.7m in proceeds from the exercise of warrants from the July 2018 offering and drawdown from its equity line established with Lincoln Park Capital Fund (LPC). The decrease in price per share is also attributed to the exercise of warrants from the July 2018 offering and a small drawdown from its LPC equity line.

Exhibit 5: Valuation of Auris Medical

Program

Market

Indication

Clinical stage

Probability of success

Launch year

Peak sales ($m)

rNPV ($m)

AM-125

US

Acute vertigo

Phase I

30%

2023

88.73

$22.3

AM-125

Europe

Acute vertigo

Phase I

45%

2022

113.12

$56.3

AM-201

US

Mental health supportive care

Phase I

20%

2024

128.72

$15.0

AM-201

Europe

Mental health supportive care

Phase I

20%

2025

143.85

$20.3

Total

113.93

Net cash and equivalents (as of 30 September 2018 plus proceeds from warrants from July offering and LPC draw down ) ($m)

5.92

Total firm value ($m)

119.84

Total basic shares (as of 30 September 2018 plus exercise of warrants from July offering and LPC draw down, m)

30.6

Value per basic share ($)

3.92

Options and warrants (as of 30 September 2018 plus exercise of warrants from July offering, m)

7.0

Total diluted shares (m)

37.6

Value per diluted share ($)

3.19

Source: Edison Investment Research

Financials

Auris recently reported its Q318 results. R&D expenditure was CHF1.7m, which is down roughly 60% from Q317 (CHF4.2m), and reflects the company’s strategic shift to focus on Phase I development programs. As of 30 September 2018, Auris had CHF5.3m in cash and equivalents and CHF2.1m in debt. Subsequent to the end of the quarter, net proceeds from the exercise of warrants from the July 2018 offering (~CHF2.2m), in addition to a partial drawdown from its equity line established with LPC ($0.5m), increased shareholders’ equity by CHF2.7m.

In our forecasts, we model a total of CHF65m in financing needs through 2023, which we record as illustrative debt, to bring the two intranasal betahistine programs from Phase I to commercialization (Exhibit 6). However, these financing needs may be offset by potential strategic partnering. Auris may also draw down from its LPC equity line (~$9.5m remaining). We forecast slight increases in R&D expenditure to about CHF7m in 2019 and CHF11m in 2020, primarily associated with the advancement of AM-125 into Phase II and the initiation of the AM-201 Phase I program, which is expected in Q119.

Exhibit 6: Financial summary

CHF'000s

2016

2017

2018e

2019e

Year end 30 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

0

0

0

Cost of Sales

0

0

0

0

Gross Profit

0

0

0

0

Research and development

(24,777)

(19,211)

(7,128)

(6,732)

Selling, general & administrative

(5,447)

(5,150)

(4,512)

(4,557)

EBITDA

 

 

(30,321)

(24,484)

(11,717)

(11,443)

Operating Profit (before amort. and except.)

(30,223)

(24,361)

(11,640)

(11,366)

Intangible Amortisation

0

0

0

0

Exceptionals/Other

0

0

0

0

Operating Profit

(30,223)

(24,361)

(11,640)

(11,366)

Net Interest

(761)

(1,586)

(1,102)

(400)

Other (change in fair value of warrants)

191

1,520

3,432

0

Profit Before Tax (norm)

 

 

(30,984)

(25,947)

(12,742)

(11,766)

Profit Before Tax (IFRS)

 

 

(30,793)

(24,427)

(9,310)

(11,766)

Tax

131

18

26

0

Deferred tax

(414)

322

1,282

0

Profit After Tax (norm)

(30,853)

(25,929)

(12,716)

(11,766)

Profit After Tax (IFRS)

(31,076)

(24,087)

(8,002)

(11,766)

Average Number of Shares Outstanding (m)

34.3

48.4

30.6

38.2

EPS - normalised (CHF)

 

 

(0.90)

(0.54)

(0.42)

(0.31)

EPS - IFRS (CHF)

 

 

(0.91)

(0.50)

(0.26)

(0.31)

Dividend per share (CHF)

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

1,967

1,959

1,962

1,885

Intangible Assets

1,483

1,629

1,664

1,664

Tangible Assets

369

253

30

(47)

Other

115

77

268

268

Current Assets

 

 

33,691

15,868

7,716

4,470

Stocks

0

0

0

0

Debtors

297

241

92

116

Cash

32,442

14,973

7,117

3,846

Other

953

653

507

507

Current Liabilities

 

 

(8,957)

(10,426)

(6,858)

(5,300)

Creditors

(6,745)

(5,884)

(5,358)

(5,300)

Short term borrowings

(2,213)

(4,542)

(1,500)

0

Long Term Liabilities

 

 

(12,558)

(9,563)

(2,088)

(12,088)

Long term borrowings

(10,151)

(5,584)

0

(10,000)

Other long term liabilities

(2,406)

(3,979)

(2,088)

(2,088)

Net Assets

 

 

14,143

(2,162)

732

(11,034)

CASH FLOW

Operating Cash Flow

 

 

(30,071)

(25,827)

(12,482)

(11,771)

Net Interest

749

1,569

965

0

Tax

(131)

(18)

(26)

0

Capex

(244)

(153)

(20)

0

Acquisitions/disposals

0

0

68

0

Financing

11,439

10,308

12,769

0

Dividends

0

0

0

0

Other

68

(2,034)

0

0

Net Cash Flow

(18,192)

(16,154)

1,275

(11,771)

Opening net debt/(cash)

 

 

(38,251)

(20,078)

(4,847)

(5,576)

HP finance leases initiated

0

0

0

0

Exchange rate movements

(397)

1,316

283

0

Other

416

(393)

(829)

0

Closing net debt/(cash)

 

 

(20,078)

(4,847)

(5,576)

6,195

Source: Company reports, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Auris Medical Holding and prepared and issued by Edison, in consideration of a fee payable by Auris Medical Holding. 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 Edison analyst 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.

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General disclaimer and copyright

This report has been commissioned by Auris Medical Holding and prepared and issued by Edison, in consideration of a fee payable by Auris Medical Holding. 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 Edison analyst 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 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: Investment Companies

Vietnam Enterprise Investments — Correction presents long-term opportunities

Vietnam Enterprise Investments (VEIL) was launched in 1995 and became a member of the FTSE 250 in July 2017. It is the largest and longest established closed-ended fund focused on investing in Vietnam equities. The fund’s objective is to generate long-term capital growth through applying a rigorous, bottom-up approach to selecting companies that can benefit from the underlying secular drivers of the country’s growth. Unconstrained by benchmark weightings, the portfolio of 35–40 high-conviction stocks often differs meaningfully from the VN Index. VEIL has generated strong absolute gains over the long term, and over 10 years has delivered annualised returns of 14.2%. The VN Index peaked in April 2018, following which it has corrected c 24% to a level that, according to the manager, presents exciting long-term investment opportunities.

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