Raising the BAR in PONV

Acacia Pharma 7 September 2018 Initiation
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Acacia Pharma

Raising the BAR in PONV

Initiation of coverage

Pharma & biotech

7 September 2018

Price

€3.04

Market cap

€161m

$1.29/£, $1.16/€, €1.11/£

Net cash (£m) at 30 June 2018

29.0

Shares in issue

53.1m

Free float

100%

Code

ACPH

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.5)

(5.2)

N/A

Rel (local)

0.1

(1.6)

N/A

52-week high/low

€3.95

€2.88

Business description

Acacia Pharma is a hospital pharmaceutical company focused on the development and commercialisation of new nausea and vomiting treatments for surgical and cancer patients. Its main product, BARHEMSYS, is for the treatment of PONV and is forecast to launch in 2019.

Next events

BARHEMSYS PDUFA date

5 October 2018

US launch as PONV ‘rescue therapy’

2019

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Acacia Pharma is a research client of Edison Investment Research Limited

Acacia Pharma is focused on bringing antiemetic drugs to the US hospital setting for unmet needs in post-operative nausea and vomiting (PONV) and chemotherapy-induced nausea and vomiting (CINV). We expect FDA approval of Acacia’s lead product, BARHEMSYS (repurposed amisulpride), for the management of PONV by its 5 October 2018 PDUFA date. In the near term, Acacia will concentrate on the US commercial opportunity by expanding its sales and marketing infrastructure. We anticipate US launch of BARHEMSYS in Q219 for PONV ‘rescue treatment’ and expect broadening of use for PONV prophylaxis in subsequent years. We value Acacia Pharma at €579m or €10.9 per share.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(£)

DPS
(£)

P/E
(x)

Yield
(%)

12/16

0.0

(16.3)

(5.06)

0.0

N/A

N/A

12/17

0.0

(6.5)

(2.32)

0.0

N/A

N/A

12/18e

0.0

(20.3)

(0.36)

0.0

N/A

N/A

12/19e

2.7

(45.6)

(0.82)

0.0

N/A

N/A

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

BARHEMSYS; rescue in PONV is an unmet need

BARHEMSYS, intravenously administered, low-dose amisulpride (dopamine antagonist) is in registration phase for the management of PONV. The NDA submission covers ‘rescue treatment’ (patients who are uncontrolled following prophylactic treatment with standard of care antiemetics) and prophylaxis of PONV as monotherapy and in combination with standard of care antiemetics. The total addressable US patient population is c 30 million patients, a sizable opportunity.

US commercialisation to maximise returns

Acacia will commercialise BARHEMSYS through a US salesforce (60-100 reps), which will focus on anaesthetists at ~1,600 US hospitals that account for ~80% of relevant surgical procedures. Inadequately treated PONV leads to prolonged stay in post-anaesthesia care unit (PACU) recovery rooms. BARHEMSYS use could reduce patient hospitalisation time and the associated costs. Despite the near-term increase in SG&A, we estimate that successful commercialisation could enable break-even in 2023 and long-term operating margins of more than 60%. Further funding in the near term will be required to build the required US organisation.

Second indication; CINV repurposed amisulpride

Acacia is developing APD403 (repurposed intravenous and oral amisulpride) for utility in CINV. The acute dose-ranging Phase II study is scheduled to start in 2019 and potential launch in the US in 2022 is feasible. Acacia will leverage its US infrastructure and estimates that it will need to hire ~40 additional reps to target community- and hospital-based oncologists for CINV.

Valuation: €579m or €10.9per share

Our valuation of Acacia Pharma, at €579m or €10.9/share, is predominantly based on a risk-adjusted NPV model of BARHEMSYS for rescue treatment and prophylaxis of PONV, in addition to the CINV opportunity for the US market only.

Investment summary

Company description: Focus on BARHEMSYS

Acacia Pharma, a hospital pharmaceuticals group based in Cambridge, UK and Indianapolis, US, is focused on developing and commercialising treatments for nausea and vomiting. Lead product, BARHEMSYS, is a repurposed formulation of amisulpride (dopamine antagonist approved in high dose for the treatment of schizophrenia in Europe), which it has identified to serve an unmet need for the prophylaxis or rescue treatment of nausea and vomiting in surgical and oncology patients. Acacia will commercialise BARHEMSYS in the US to maximise its economic returns; the ex-US international opportunity will depend on partnering deals. Acacia Pharma’s management team has extensive experience in the discovery, development and commercialisation of hospital pharmaceutical products and in drug repurposing. This experience will be critical to the product’s success. The company was founded in 2007 and listed on Euronext Belgium in March 2018, raising £33.9m (c €37m) net. To date, the group has raised £78.2m in equity; in addition, it has a $30m debit facility with Hercules (drawn down $10m [c £7m]).

Valuation: €579m or €10.9 per share

Our valuation of Acacia Pharma, at €579m or €10.9/share, is exclusively based on a risk-adjusted NPV model of BARHEMSYS for rescue treatment and prophylaxis of PONV, in addition to the CINV opportunity for the US market only. We do not include any contribution from Europe or ROW opportunities as these will be dependent on out-licensing agreements with various future partners, on which we have no visibility. Our NPV calculation incorporates end-June net cash of €32.3m (£29.0m) and we utilise a 12.5% discount rate.

Financials: Further funding required for full commercialisation

Following the £33.9m net raise from the IPO in March and the drawdown of $10m from the $30m credit facility with Hercules Technology Growth Capital (Hercules), Acacia has £35.7m in cash as of 30 June. To fund ongoing operations, we forecast that an additional c £75m (in addition to the remaining $20m from Hercules) will need to be raised in 2019 and 2020. We forecast a significant increase in expenses from historic levels driven by the commercialisation of BARHEMSYS and the clinical trial programme for APD403. FY17 SG&A and R&D were £1.5m each. We forecast R&D costs of £2.9m in FY18, growing to £7.7m in FY19. We anticipate that SG&A costs will increase to £16.7m in FY18, growing to £37.8m in FY19. We forecast a net loss of £19.3m in FY18 and £43.6m in FY19. We forecast that Acacia will reach break-even in 2023.

Sensitivities: Strategic execution crucial to success

Acacia Pharma is subject to various sensitivities common to speciality pharmaceutical companies, including commercialisation (pricing, reimbursement, uptake and competition), manufacturing and financing risks. The key sensitivities for Acacia Pharma relate to execution risk; our sales forecasts and valuation are dependent on the successful US commercialisation of BARHEMSYS (subject to approval by the US FDA later this year). Furthermore, with the focus on one asset in the short term, the valuation is skewed to and dependent on BARHEMSYS. Therefore, if BARHEMSYS fails to obtain approval, it would have a serious and detrimental effect on Acacia’s long-term strategy and our valuation. We note significant commercial risks, including the group’s ability to recruit, train and retain adequate numbers of effective sales and marketing personnel; the ability of sales personnel to obtain access to or persuade adequate numbers of anaesthetists and/or physicians to prescribe any future products; the lack of complementary products offered by sales personnel, unforeseen costs and expenses associated with creating an independent sales and marketing organisation; and costs of marketing and promotion above those anticipated by the group and our forecasts, particularly any need to undertake additional, costly, real-world studies to further confirm BARHEMSYS’s pharmacoeconomic benefit if uptake is slower than anticipated.

Evolving into a commercial entity

Acacia Pharma is at a major inflection point in its history. Its lead drug candidate, BARHEMSYS, has the potential to be the company’s first internally developed asset to reach the market. Approval of BARHEMSYS for PONV (PDUFA date 5 October) would validate the company’s R&D efforts, which are focused on repurposing approved drugs for unmet clinical needs. The rationale is not to identify novel molecules, but rather to identify approved drugs that may be modified (by changes in dosing or administration) for use in other indications than those in which they were originally approved. This approach lowers the typical drug development risks associated with developing new chemical entities (NCEs) as substantial clinical safety and efficacy data exist for approved therapies.

BARHEMSYS has been developed as a novel approach for treating PONV, a significant negative contributor to prolonged hospitalisation stays, and the associated costs and overall patient wellbeing. Current standard of care for medium or high-risk patients involves the prophylactic treatment with standard-of-care antiemetics, including 5-HT3 receptor antagonist (eg ondansetron). If a patient develops PONV despite receiving prophylaxis antiemetic drugs, guidelines indicate that the patient should receive other antiemetics with a different mechanism of action (MOA) as rescue therapy. Currently there are limited options; patients can receive corticosteroids, an NK-1 receptor antagonist or butyrophenones, but all have limitations. BARHEMSYS is a dopamine receptor antagonist, a class of drugs that has historically had safety concerns. Droperidol, a butyrophenone that acts as a dopamine receptor antagonist was a commonly used effective antiemetic until the FDA issued a black box warning in 2001 that cited concerns about QT prolongation and Torsade de Pointes (which could result in sudden cardiac death). BARHEMSYS active ingredient amisulpride is a dopamine antagonist with a lower propensity for cardiac and neurological side effects compared to droperidol (see clinical trial information below). In four registration studies BARHEMSYS has demonstrated a tolerable safety profile. Importantly, no cardiac toxicity or neurological adverse events were reported. Generally, adverse events were lower with BARHEMSYS than placebo.

The regulatory submission of BARHEMSYS is based on four Phase III clinical trials that tested the drug candidate as a rescue treatment following either failed prior prophylaxis or no prior prophylaxis and as a prophylactic treatment in combination or alone. All four studies demonstrated that BARHEMSYS had a statistically significant improvement in treating PONV compared with placebo. If approved across these settings, BARHEMSYS will be the first antiemetic that can be used as a rescue treatment following failed prophylaxis or as a combination treatment when used as a prophylaxis.

With approval likely, Acacia Pharma has started to build its US marketing organisation with 21 senior hires in sales, marketing, managed markets and supply chain management in H118. If BARHEMSYS is approved, Acacia plans to continue hiring, notably sales representatives (60+), before its anticipated launch in Q219.

Our analysis reveals that through an aggregate investment in personnel of $160–180m over the 2018-21 period, Acacia could build up its commercial operations including the sizeable salesforce of 60-100 reps it needs to focus on the ~1,600 hospitals that account for ~80% of US surgical procedures. The modest need for R&D expense (to support the Phase II and Phase III clinical trials of amisulpride in CINV) over the same period, coupled with high gross margins, leads to our forecast that financial break-even in 2023 is feasible on BARHEMYSYS combined sales of c $110m. We note that significant risk remains around commercial execution, particularly as financial investment in the short to medium term will be high ($100m+).

Ramp-up of BARHEMSYS sales in the rescue and broader prophylactic settings has longer-term positive implications for gross margin and EBIT development, mainly through operational leverage. BARHEMSYS is a high gross margin product; gross margins of around 90-95% are not unreasonable assumptions for this small molecule drug. Based on the assumptions discussed in more detail in the valuation section, we forecast peak net sales of BARHEMSYS of $314m in the rescue setting and $90m in the prophylactic setting. Furthermore, after initial infrastructure-related and launch period costs are met, we forecast that SG&A will grow at a much slower rate than sales growth. From 2023, we expect R&D expenses to reduce significantly as the CINV clinical programme will have likely completed. Successful commercial execution will be a critical driver of BARHEMSYS sales; we forecast that sales of $236m would lead to 51% operating margin in 2025.

BARHEMSYS raising the bar in PONV

A new drug application (NDA) for BARHEMSYS (amisulpride/APD421) has been submitted to the FDA for the treatment of established PONV (including after prophylaxis antiemetic failure) with a 10mg single dose (so-called rescue therapy), and prophylaxis of PONV (as monotherapy or in combination) with a 5mg single dose. The NDA submitted to the FDA contains the full range of clinical data to support a broad prescribing label that encompasses rescue and prophylactic use as monotherapy or in combination with available antiemetics respectively.

Post-operative nausea and vomiting (PONV) is a complex and significant issue in anaesthesia practice. It affects 30-80% of surgical patients and is the second most common complaint from patients (pain being the first). While the current mainstay of antiemetic treatments (combinations of different classes of antiemetic drugs are given pre- or intra-operatively) provide relief, these drugs are not 100% effective when used as nausea and vomiting (N+V) prophylaxis, with an estimated 30% of patients still suffering from PONV. The outcome is a prolonged stay in a post-operative recovery room with delayed discharge and recovery, and increased medical costs. Better PONV management improves patient symptoms and can reduce hospitalisation costs, an important factor for drug coverage by payors. According to Acacia Pharma’s market research, there are ~65m applicable invasive surgical procedures undertaken annually in the US, of which ~49 million patients receive prophylactic PONV treatments and ~32% fail on prophylaxis (~16 million patients pa are candidates for rescue therapy). Initially, Acacia Pharma will focus marketing efforts on (assuming approval on the 5 October PDUFA date) on patients who have failed prophylaxis before expanding to prophylaxis treatment for higher-risk surgical patients.

Current standard of care for medium to high-risk patients is use of one or more antiemetic drugs (5-HT3, dopamine, and histamine antagonists and dexamethasone) as prophylactic agents. Prior to 2001, the dopamine antagonist (D2) droperidol was widely used and the agent of first choice in international consensus guidelines. However, significant cardiac toxicity issues (QT interval prolongation) led to withdrawal/disuse of the drug in many countries. This has led to a void of efficacious and low side effect profile D2/3 antagonists. Acacia Pharma has identified amisulpride in low dose as a clinically effective treatment for N+V with an improved side effect profile vs available dopamine antagonists (very low tendency for QT interval prolongation and extrapyramidal signs and symptoms at the proposed nausea and vomiting dose treatment levels).

Exhibit 1: Multiple pathways involved in the pathophysiology of PONV

Source: Company presentations

BARHEMSYS IV: Repurposed amisulpride

Acacia Pharma has developed APD421 (amisulpride injection) branded as BARHEMSYS for its initial indication for PONV as rescue therapy and for prophylactic management. Data from four Phase III clinical trial studies have been submitted as part of the NDA to ascertain a broad prescribing label that encompasses rescue and prophylactic use as monotherapy or in combination with available antiemetics. The company plans initially to target patients whose N+V are uncontrolled on prior prophylaxis therapy, so-called rescue treatment, a high unmet need. In time, once the US commercialisation infrastructure is fully established, Acacia will look to exploit the broader label of prophylaxis for N+V (either used in place of or in addition to ondansetron and dexamethasone).

Amisulpride is a selective dopamine receptor antagonist with high affinity for mesolimbic D2 and D3 receptors (both have been implicated in the emetic response). In Europe it has been approved at doses of 400-800mg for the treatment of acute episodes of schizophrenia and at 50-300mg for maintenance therapy in schizophrenia. At these high treatment doses, amisulpride is associated with clinical side effects relating to the dopamine antagonist class such as sedation, restlessness and extrapyramidal side effects (EPS). Despite its efficacy as an antipsychotic agent, the drug was not developed for use in the US market. This decision appears to be a strategic one made by the drug’s originator (Sanofi-Aventis) rather than a molecule specific efficacy or side effect issue. Acacia Pharma identified amisulpride (Exhibit 2) as a potential candidate for the treatment of N+V in surgical and oncology patients after screening a multitude of dopamine receptor antagonists for a predefined target profile (Exhibit 3), which included potency similar to droperidol, no major EPS effects and low drug interaction potential (enabling combination use).

Exhibit 2: BARHEMSYS designed to provide the solution for PONV

Exhibit 3: Target profile for a D2 antagonist

Source: Company presentations

Source: Company presentations

Exhibit 2: BARHEMSYS designed to provide the solution for PONV

Source: Company presentations

Exhibit 3: Target profile for a D2 antagonist

Source: Company presentations

Four pivotal phase III trials form basis of the NDA

Acacia Pharma is targeting a broad and differentiated label for BAREMSYS for the treatment of established PONV, with or without prior prophylaxis and prophylaxis of PONV alone and in combination. The four Phase III pivotal clinical trials (DP10015, DP10017, DP10018 and DP10019) have completed and, alongside four additional supportive clinical trials, formed the NDA dossier submitted to the US FDA. DP10018 and DP10019 support the use of BARHEMSYS as rescue therapy, either as monotherapy or in combination with standard-of-care antiemetic drugs, respectively. DP10015 and DP10017 support the use of BARHEMSYS for the prophylaxis of PONV as monotherapy or in combination respectively. Importantly, there were no safety signals (extrapyramidal side effects or cardiac events) reported across any of the four trials. This is a critical differentiation factor for BARHEMSYS given the side effect profile, which has limited or led to the withdrawal of previous dopamine antagonists used to treat PONV.

DP10018: BARHEMSYS monotherapy in treatment (no prior antiemetic prophylaxis)

This double-blind study (ClinicalTrials.gov Identifier: NCT02449291) compared 5mg and 10mg of BARHEMSYS with placebo for the treatment of established PONV in patients who had not received any prophylactic antiemetics at the time of anaesthesia induction (n=560). The primary efficacy endpoint of the trial was complete response (CR) defined as no emesis in 30 minutes to 24 hours after treatment or use of rescue medication in 0-24 hours after treatment (Exhibit 4).

Exhibit 4: BARHEMSYS 5mg or 10mg in rescue treatment (no prior prophylaxis)

DP10018

Placebo

BARHEMSYS
5mg

p value

BARHEMSYS 10mg

p value

Number of subjects

181

191

188

Complete Response (24hr) - primary endpoint

39

22%

60

31%

0.016

59

31%

0.016

Complete response (2h)

79

44%

112

59%

0.002

105

56%

0.010

Vomiting

62

34%

64

34%

0.440

57

30%

0.209

Rescue medication use

135

75%

121

63%

0.010

119

63%

0.010

Nausea AUC (0-2h)

5,645

4,513

0.007

4,863

0.022

Source: Company reports

DP10019: BARHEMSYS monotherapy for prophylactic use in PONV

DP10019 (ClinicalTrials.gov Identifier: NCT02646566) evaluated safety and efficacy for the treatment of established PONV, with or without prior prophylaxis. Data from Phase III study DP10019 support BARHEMSYS efficacy as PONV rescue therapy (Exhibit 5). 10mg IV led to an absolute reduction of N+V of 13% at 24 hours and 21% at 2 hours vs placebo (n=702). Furthermore, the average stay in a PACU was 35 minutes less with 10mg BARHEMSYS vs placebo (141 minutes vs 176 minutes) and the average hospital stay was six hours shorter (50hrs vs 56hrs).

Exhibit 5: BARHEMSYS 10mg in rescue treatment (patients receiving prior prophylaxis)

Study DP10019

Placebo

10mg BARHEMSYS

p value

Number of subjects

235

230

Complete response (24hrs), primary endpoint

67

29%

96

42%

0.003

Complete response (2hrs)

116

49%

160

70%

<0.001

Source: Company reports

DP10015: BARHEMSYS monotherapy for prophylactic use in PONV

This placebo-controlled Phase III study (ClinicalTrials.gov Identifier: NCT01991860) evaluated 5mg of BARHEMSYS monotherapy (IV) administered at the time of anaesthesia induction in 342 adult surgical patients with two or more risk factors for PONV. The primary efficacy endpoint of the trial was complete response (CR) defined as no episodes of vomiting or retching or requirement for antiemetic rescue medication in the 24 hours after the end of surgery. Patients who received BARHEMSYS reached CR of 44.3% vs 32.5% on the placebo arm (p=0.013). Secondary efficacy endpoints included incidence of rescue medication use, time to PONV and time to first use of rescue medication (Exhibit 6). Importantly, the incidence of rescue medication use decreased from 66.9% to 54.5% (p=0.010), median time to onset of PONV (failure of prophylaxis) increased from 341 minutes with placebo to 752 minutes with BARHEMSYS (p=0.004) and median time to first rescue medication use increased from 371 to 859 minutes (p=0.003). In terms of safety, BARHEMSYS was broadly comparable to placebo aside form a small and transient increase of serum prolactin levels in the BARHEMSYS group (class effect of dopamine antagonists).

Exhibit 6: mITT* analysis of 342 dosed patients in the DP10015 study

mITT population

Placebo

5mg BARHEMSYS

p value

Number of subjects

166

176

Complete response*

54

32.5%

78

44.3%

0.013

Vomiting

37

22.3%

35

19.5%

0.293

Rescue medication use

111

66.9%

96

54.5%

0.010

Significant nausea

82

49.4%

69

39.2%

0.029

Any nausea

102

61.4%

94

53.4%

0.067

Source: Company reports. Note: *mITT = modified intent to treat.

DP10017 BARHEMSYS combination therapy for prophylactic use in PONV

This Phase III trial (Clinical trials identifier NCT02337062) assessed BARHEMSYS as part of combination prophylaxis in high-risk patients (as defined as three or four PONV risk factors) in 1,147 high-risk patients, of which 51% of surgical patients received ondansetron as combination antiemetic and 48% received a corticosteroid (dexamethasone or betamethasone) as combination (Exhibit 7). The average PACU stay was 17 minutes shorter on 5mg BARHEMSYS combination prophylaxis than placebo (145 minutes vs 162 minutes).

Exhibit 7: BARHEMSYS 5mg as part of combination prophylaxis in high-risk patients

Study DP10017

Placebo plus standard antiemetic

5mg BARHEMSYS plus standard antiemetic

p value

Number of subjects

575

572

Complete response, primary endpoint

268

46.6%

330

57.7%

<0.001

Vomiting

115

20.0%

79

13.8%

0.003

Rescue medication use

284

49.4%

234

40.9%

0.002

Significant nausea

274

47.7%

212

37.1%

<0.001

Any nausea

335

58.3%

286

50.0%

0.002

Source: Company reports

Safety profile differentiation

Across its Phase III trials BARHEMSYS has established an improved safety profile compared to other antiemetic classes (no cardiac toxicity, no EPS, no sedative effects and no anticholinergic effects). There was no increase over placebo in relation to anxiety, depression, blood sugar abnormalities, GI disturbances and headache. Importantly, discontinuation of droperidol for PONV historically was related to QT interval prolongation of 25± 8 millisecond (ms) (QT interval is measured by ECG; prolongation of the interval can lead to a ventricular arrhythmia known as Torsades de Pointes, which can result in sudden cardiac death). Drug-induced QT prolongation of less than 10ms is not considered significant and this is the threshold for regulatory concern; data up to 20ms are inconclusive and above 20ms raise concerns. The maximum impact of BARHEMSYS at a 5mg dose on QT prolongation was 5.0ms, and for 10mg was calculated under standard extrapolation to be 7.9ms. This is a critical differentiating factor.

The commercial opportunity in PONV

The company’s business model centres on enhancing economic returns by commercialising BARHEMSYS in the US market through a targeted hospital-focused salesforce; outside the US the group will seek regional partnership deals.

In the more lucrative US market, Acacia Pharma will market and commercialise BARHEMSYS through its own sales and marketing infrastructure of 60 medical reps initially (rising to 100 reps over three years). These reps will target ~1,600 hospitals that conduct ~80% of surgical procedures in the US focusing on PONV rescue and PONV prophylaxis indications for BARHEMSYS. Acacia Pharma’s management team has extensive experience in the discovery, development and commercialisation of hospital pharmaceutical products and in drug repurposing, which will be critical to product success. To date, Acacia has made 21 hires in its US subsidiary (total staff of 22 in the US, expected to rise to 40 by year-end) as it starts to build the US commercialisation team ahead of potential approval by its 5 October PDUFA date. Key suppliers have been appointed for product distribution, marketing and advertising. If BARHEMSYS is approved, Acacia plans to continue hiring according to the strategy it has presented (Exhibit 8).

Exhibit 8: BARHEMSYS launch plan

Source: Acacia Pharma. Note: Ticks refer to completed activity; stars are ongoing processes.

Complex US commercial market means execution is key

In the US, Acacia plans to focus its BARHEMSYS commercial sales team on hospital-based anaesthetists and surgical teams. Assuming BARHEMSYS is approved with the label Acacia seeks, we anticipate that the company will face three key challenges to the successful commercialisation of BARHEMSYS in the US: 1) salesforce effectiveness including marketing and education; 2) pricing and hospital formulary access; and 3) third-party payor reimbursement and potential contracting.

1.

Using an initial salesforce of 60 reps, Acacia plans to focus on the ~1,600 hospitals that it estimates account for ~80% of applicable surgical procedures across the US. Acacia has based its account targeting on the previous experience of the senior sales teams, particularly CCO Mike Bolinder, who led the commercialisation of OFIRMEV (pain management, API is acetaminophen, commonly referred to as paracetamol outside the US) when he was head of hospital marketing at Mallinckrodt. Acacia is planning to focus on hiring experienced reps, which it believes will enable it to drive the uptake needed, albeit at an increased cost per rep. One of the core challenges will be the education about and marketing of BARHEMSYS; as the last treatment for PONV was approved in 2009 (Emend aprepitant, NK-1 receptor) some physicians may be unfamiliar with the medical need for a new antiemetic for these indications. An initial focus on educating and informing KOLs, particularly anaesthetists, will be important to drive uptake.

2.

To be able to successfully commercialise BARHEMSYS, Acacia must ensure the product is accepted onto each hospital’s formulary (a list of drugs that healthcare providers in the hospital can prescribe). This often requires the hospital’s Pharmacy & Therapeutics (P&T) committee to be convinced of the clinical and economic benefits of the drug before approving it to be on formulary. Once on hospital formulary, treatment with BARHEMSYS would be provided under Diagnosis-Related Group (DRG) codes where the treatment costs would be included in the total cost of a surgery. Under the DRG system, hospitals will charge third-party payors a standard price for a procedure. The cost of the care the hospital provides under this code will be determined by the hospital. As such, the hospitals are incentivised to reduce costs. Acacia will need to demonstrate that BARHEMSYS can provide a pharmacoeconomic benefit at its specified price point (as evidenced by the reduction in PACU and hospitalisation stay overall (clinical trials DP10017 and DP10019). To date, research undertaken by Acacia Pharma has highlighted that a prophylaxis single-dose 5mg IV would likely be priced at approximately $40, with a rescue single-dose 10mg IV priced at approximately $80. Any significant deviation from that price could significantly alter Acacia’s financial returns. We note that commonly utilised drugs like ondansetron and Emend (aprepitant) are typically priced between $10 and $130 per pill, with generically available ondansetron at the lower end of the range vs branded NK-1 antagonist Emend at the top end. Acacia believes that BARHEMSYS used as a rescue treatment results in a 35-minute reduction in PACU time and a 0.25-day reduction in overall hospital stay, which would generate a $670 net cost saving. We note that Acacia may need to undertake additional, costly, real-world studies to further confirm BARHEMSYS’s pharmacoeconomic benefit if uptake is slower than anticipated.

3.

BARHEMSYS use in the hospital setting and utilisation under DRG codes mean third-party reimbursement will not be as important as it is for many other drugs or treatments that are utilised outside the hospital setting. However, for certain treatment settings, like outpatient surgical settings, Acacia will still need to interact with and gain sufficient reimbursement from third-party payors and/or government agencies. Driven by political pressure, drug pricing and reimbursement continues to be subject to downward pressure and third-party payors are increasingly questioning the effectiveness of a therapy, its price and whether it is a necessity. These providers take many different forms, including government healthcare programmes like Medicaid and Medicare, private managed care providers like Blue Cross Blue Shield and private insurers like UnitedHealth. We note that in CINV patients (who are treated in the outpatient setting), reimbursement will be a more important factor and will be key to the product’s success.

Outside of commercial pressures in the US, Acacia faces a variety of operational challenges. Its active pharmaceutical ingredient (API) amisulpride is currently sourced from one manufacturer (Patheon, part of Thermo Fisher Scientific), with which Acacia has a commercial supply agreement. While the API is currently single sourced, it is available from multiple sources and we envision limited supply chain risk at this time, particularly as the finished product has a three-year lifespan and the low cost of the API would enable sufficient stocking. However, any swapping of suppliers or limitations in production capacity at the current supplier could have an effect on the pricing, quality and availability of BARHEMSYS.

In the long term Acacia plans to leverage its salesforce to sell APD421 (dependent on successful FDA approval) to treat CINV. Acacia predicts that this will require an additional 40 sales reps; however, we note the company will be targeting different specialists (oncologists) compared with BARHEMSYS and the ability to target this distinct patient population may require a higher number of reps and associated cost than currently anticipated.

Patent and exclusivity periods

Acacia’s ability to protect its BARHEMSYS franchise will be vital to its long-term sales prospects. Acacia expects its key patents to remain valid until 2031 in the US, EU, Japan and China. The company currently has applications pending that aim to extend exclusivity periods to 2038. To date, Acacia has faced no patent challenges, but any future litigation could prove detrimental to its financial position in terms of both legal costs and lost sales. We would anticipate higher barrier to generic entry given the intravenous formulation of amisulpride and fact that the drug has never been available in the US market.

Exhibit 9: BARHEMSYS and APD403 patents

Patent description

Application number

Valid until

Valid countries

PONV

PCT/GB2011/050472

03/2031

Granted in the US, Australia, Mexico, New Zealand, South Korea, Israel, South Africa, Japan, China, Hong Kong, Canada and by the EPO. Pending in other countries where applications have been made.

PONV

PCT/GB2017/053288

11/2037

Pending

PONV

PCT/GB2018/050374

02/2038

Pending

PONV

GB1720607.9

12/2038

Pending

CINV

PCT/GB2011/050472

03/2031

Granted in the US, Australia, New Zealand, South Korea, Israel, South Africa, Japan, China, Hong Kong and by the EPO. Pending in other countries where applications have been made.

CINV

PCT/GB2016/050998

04/2036

Pending in all countries where applications have been made.

Source: Acacia Pharma, Edison Investment Research

PONV a common surgery-related issue

Post-operative nausea and vomiting (PONV) is the second most common complaint after pain in patients who have undergone surgery. PONV is associated with many different risk factors (Exhibit 10) and risk is assessed using a scoring system such as Apfel simplified scoring system (score 1 for gender, non-smoker, perioperative opioid use, prior history of PONV or motion sickness).

Exhibit 10: Risk factors for PONV

Risk factors

Notes

Patient factors

Gender (female), being a non-smoker, previous history of PONV, obesity increase risk

Perioperative factors

Use of perioperative opioid analgesia

Intraoperative factors

Type of surgery (abdominal surgery, cholecystectomy, gynaecological and laparoscopic surgery are associated with higher risk.
Anaesthetic factors (eg drugs such as ether, ketamine and cyclopropane increase risk,
regional anaesthesia lowers risk by 9x less than general anaesthesia).
Anaesthesia: etomidate (used as an anaesthetic induction agent) increased risk of PONV vs other agents (sodium thiopental).

Post-operative factors

Pain, use of opioid analgesia

Risk factors

Patient factors

Perioperative factors

Intraoperative factors

Post-operative factors

Notes

Gender (female), being a non-smoker, previous history of PONV, obesity increase risk

Use of perioperative opioid analgesia

Type of surgery (abdominal surgery, cholecystectomy, gynaecological and laparoscopic surgery are associated with higher risk.
Anaesthetic factors (eg drugs such as ether, ketamine and cyclopropane increase risk,
regional anaesthesia lowers risk by 9x less than general anaesthesia).
Anaesthesia: etomidate (used as an anaesthetic induction agent) increased risk of PONV vs other agents (sodium thiopental).

Pain, use of opioid analgesia

Source: Edison Investment Research

The pathophysiology of PONV is multiform, involving various pathways and receptors. Stimulation of five different afferent pathways leading to the vomiting centre, an ill-defined region in the brain, can activate N+V via various receptors. Neurotransmitters involved in the pathophysiology of N+V include serotonin (5-HT3 receptor), dopamine, acetylcholine, histamine and substance P (NK-1 receptor). This complexity means that combination therapy for PONV prophylaxis is recommended, particularly in high-risk patients as blockade on one pathway or receptor is unlikely to alleviate symptoms in all patients. The incidence of PONV reduces from 52% when no antiemetics were used, to 37%, 28%, and 22% when one, two and three antiemetics, respectively, are administered. The American Society of Anaesthesiologists suggests that patients who have three or more risk factors (Apfel score) should receive at least two prophylactic antiemetic agents of different classes preoperatively or intraoperatively. Combinations include 5-HT3 antagonist plus dexamethasone or droperidol or all three, or droperidol plus dexamethasone.

Exhibit 11 highlights the main drugs used in the management of PONV classified by the mode of action at the various receptors involved in the multiple pathways implicated in the pathophysiology.

Exhibit 11: Main antiemetic drug classes for PONV

Class

Examples

Notes

Serotonin (5-HT3) antagonists

Ondansetron, dolasetron, granisetron,

Risk of QT prolongation; ondansetron FDA recommendation single dose limit does not exceed 16mg. FDA banned dolasteron for ~CINV due to concerns of QTc prolongation and Torsades de Pointes.

Corticosteroids

Dexamethasone

Relatively slow set of onset so is administered at the time of induction

Anticholinergics/antimuscarinics

Scopolamine

Transdermal scopolamine used in the setting of patient-controlled analgesia

Histamine (H1) antagonists

Cyclizine, Promethazine, diphenhydramine

Side effects limit use

Dopamine (D2) antagonists

Domperidone, metoclopramide, droperidol

Metoclopromide is a weak antiemetic and side effects include dyskinesia and extrapyramidal side effects. Droperidol use has greatly declined in the US from 2001 as a result of the FDA black box restriction due to significant cardiovascular (CV) events.

Neurokinin-1 antagonist

Aprepitant, cospitant, rolapitant

Aprepitant and rolapitant approved for CINV. Aprepitant is more effective than ondansetron in the 24-48 hour post-op period.

Source: Edison Investment Research

However, even prophylactic combination therapy given before or during the operation does not eliminate PONV in all patients, and those that continue to experience symptoms of PONV are candidates for rescue therapy. When rescue therapy is required, it is recommended that a different class of antiemetic is used to what was given prophylactically. Given that 90% of medium to high-risk patients receive a 5-HT3 antagonist and around 50% will receive a corticosteroid as a second, drug options for rescue therapy remain limited.

CINV additional indication potential launch 2022

Acacia Pharma is developing APD403 (repurposed amisulpride, the active ingredient in BARHEMSYS in both an intravenous form for use alongside chemotherapy and an oral version for use at home in the subsequent days) for management of chemotherapy-induced nausea and vomiting (CINV) as a follow-on indication. Oncologists commonly prescribe CINV drugs alongside chemotherapy across a range of cancer types as N+V is a common and intolerable side effect of many of these agents.

According to the NIH National Cancer Institute, an estimated 1.7 million new cases of cancer are expected to be diagnosed in the US in 2018. In 2012 there were 14.1 million new cancer cases worldwide. The incidence of cancer is growing due to demographic factors, and the number of new cancer cases per year is expect to grow to 23.6 million by 2030. CINV is a common side effect of chemotherapy drug regimens in cancer treatment. Rates of developing CINV depend on the class of chemotherapy agency; the National Comprehensive Cancer Network (NCCN) classification is based on the level of emetogenicity. Level 5 – high emetic chemotherapy (HEC) risk is associated with 90% frequency of emesis and Level 3/4 moderate emetic chemotherapy (MEC) risk is associated with 30–90% frequency of emesis. Many standard-of-care chemotherapies (eg cisplatin, cyclophosphamide, oxaliplatin, carboplatin, doxorubicin, irinotecan) fall into Level 3, 4 or 5. Furthermore, combination chemotherapy agents can increase the risk of developing emesis, eg cyclophosphamide and doxorubicin are both classified as MEC but, when given together, the regimen is highly emetic. CINV can be defined as acute CINV (occurs within 24 hours or receiving chemotherapy infusion), delayed CINV (occurs after 24 hrs, 2–5 days) or anticipatory CINV.

Guidelines published by the American Society of Clinical Oncology (ASCO), the Oncology Nursing Society (ONS) and the National Comprehensive Cancer Network (NCCN) are similar. Current guidelines advocate the use of ‘triple therapy’, the combination of three different antiemetic classes consisting of a 5-HT3 antagonist (eg ondansetron), corticosteroid (eg dexamethasone) and NK-1 antagonist (eg aprepitant, or its IV prodrug fosaprepitant) to target the various neuronal pathways implicated. All three drugs are given just prior to chemotherapy for prophylaxis of acute CINV, and oral dexamethasone is given two to four days afterwards to prevent delayed CINV.

Despite available treatment options, 30-50% of patients receiving HEC do not achieve adequate CINV control (despite 97% receiving a 5-HT3 antagonist and 78% receiving a steroid), particularly with respect to delayed nausea (triple drug therapy can control acute CINV in 80-90% of patients on HEC). Guidelines recommend consideration of using a dopamine D2 receptor antagonist in patients, although side effects and cardiac events have limited use and only IV metoclopramide is actually approved for use in CINV. Given amisulpride’s favourable efficacy and safety profile to date and assuming the Phase III programme replicates findings so far, it could be the only dopamine antagonist to receive approval for CINV combination use.

APD403 has completed two Phase II studies, one of which evaluated IV and oral drug versus placebo in HEC patients (cisplatin/anthracycline/cyclophosphamide) in delayed CINV. 46% of patients on the drug met the primary endpoint of delayed-phase complete response (no vomiting and no rescue medication for 24-120 hours after chemotherapy) vs 20% in the placebo arm (p=0.002), representing a relative risk reduction of 32%. Safety was no worse than placebo, showing that APD403 is a safe and efficacious treatment for CINV. Given amisulpride is a dopamine antagonist and therefore works with a different mechanism of action to approved antiemetic drugs for CINV, the rationale is for combination use to improve delayed-phase nausea.

Acacia plans to initiate an acute phase, dose-ranging Phase II/III study in H119. The Phase III programme is expected to start in 2020. The FDA has confirmed the requirement for two Phase III trials (in cisplatin patients, an HEC agent) plus additional safety and efficacy data in breast cancer patients receiving AC chemotherapy (Adriamycin plus cyclophosphamide). Safety will be paramount, particularly in terms of repeated dosing, on the basis that cancer patients are on a multitude of other drug treatments. Contingent on the filing of an NDA efficacy supplement in 2022, we forecast launch of APD403 for CINV in 2022. CINV is an important additional indication given the commercial opportunity in CINV. Successful operational execution in building the US sales and marketing infrastructure in 2019-21 will also lay important foundations for subsequent launch of the new CINV indication, enabling Acacia Pharma to build its speciality franchise. The company will need to increase the number of sales reps moderately to target hospital- and community-based oncologists for this indication.

Commercial opportunity

In 2017, the global CINV market was valued at $1.7bn (source: MarketInsights reports) and rising prevalence of cancer has led to increased rates of chemotherapy use. The most highly prescribed drugs in CINV are the 5-HT3 receptor antagonist and Neurokinin-1 receptor antagonists. While volumes have been increasing, the market has been affected by availability of generic drugs, particularly in the 5-HT3 receptor class. Acacia Pharma estimates that 6.6m cycles of chemotherapy in the US have CINV treatments prescribed alongside; ~3.9m HEC cycles are on triple therapy CINV, and an additional ~one million are on MEC cycles (triple therapy). Based on the encouraging Phase II data presented so far, we forecast peak sales potential of $108m. We assume pricing of $300 per chemotherapy cycle. We forecast peak penetration of 12.5% in 2021 and assume amisulpride use in the 50% of patients receiving HEC or MEC agents who do not achieve adequate CINV control.

Sensitivities

Acacia Pharma is subject to various sensitivities common to speciality pharmaceutical companies, including commercialisation (pricing, reimbursement, uptake and competition), manufacturing and financing risks. The key sensitivities for Acacia Pharma relate to execution risk. Our sales forecasts and valuation are dependent on the successful US commercialisation of BARHEMSYS (subject to approval by the US FDA later this year). Furthermore, with the focus on one asset in the short term, valuation is skewed to and dependent on BARHEMSYS. Therefore, if BARHEMSYS fails to obtain approval, it would have a serious and detrimental effect on Acacia’s long-term strategy and our valuation. We note significant commercial risks including the group’s ability to recruit, train and retain adequate numbers of effective sales and marketing personnel; the ability of sales personnel to obtain access to or persuade adequate numbers of anaesthetists and/or physicians to prescribe any future products; the lack of complementary products offered by sales personnel, which may put the group at a competitive disadvantage relative to companies with more extensive product portfolios; unforeseen costs and expenses associated with creating an independent sales and marketing organisation; and costs of marketing and promotion above those anticipated by the group.

Valuation

Our valuation of Acacia Pharma, at €579m or €10.9/share, is mainly based on a risk-adjusted NPV model of BARHEMSYS for rescue treatment and prophylaxis of PONV, in addition to the CINV opportunity for the US market only. We do not include any contribution from Europe or ROW opportunities as these will be dependent on out-licensing agreements with various future partners, on which we have no visibility. We include end-June net cash of €32.3m (£29.0m) in our valuation and use a 12.5% discount rate.

Exhibit 12: Valuation

Product

Indication

Launch

Peak sales ($)

Value (€)

Probability

rNPV (€m)

rNPV/share (€)

BARHEMSYS US only

PONV

2019

404.7

594.8

90%

533.7

10.1

APD403 US only

CINV

2024

107.9

71.9

30%

12.9

0.2

Net cash at 30 June 2018

32.3

100%

32.3

0.6

Valuation

698.9

578.9

10.9

Source: Edison Investment Research

For the US PONV market, we have valued the opportunity in both high-risk prophylaxis patients and rescue treatment patients. For high-risk prophylaxis, we assume 65 million patients have surgical procedures pa, of which 49 million receive antiemetic treatment and 18 million of those are high risk. We assume a peak penetration of 10% for BARHEMSYS and an initial price of $40 per 5mg dose with a gross to net discount of 20%.

For rescue treatment patients, we assume that 32% of those who receive prophylaxis fail treatment (approximately 16 million) are eligible to receive rescue treatment. Of these patients, we forecast a peak penetration for BARHEMSYS of 10%. We assume an initial price of $80 per 10mg dose with a gross to net discount of 20% and forecast that each patient receives two doses.

We assume no R&D costs for BARHEMSYS, although future pharmacoeconomic studies may have to be undertaken to drive sales. For S&M we assume that 60 sales reps are hired initially (as per company guidance) at a cost of $250k per rep, with the total number of reps growing to 100 in the first four years of launch. We forecast additional costs in the region of $150-200m in the first five years of commercialisation that relate to the wider US commercial team including marketing, managed markets, commercial operations and back office. We assume initial COGS of 5% for the 10mg vial and 6% for the 5mg vial.

For APD403 in CINV we forecast a smaller opportunity then PONV due to a smaller market size. Of the approximately five million moderate to high emetogenic patients, 50% will require rescue treatment. We forecast a peak penetration of 12.5%, the hire of an additional 40 sales reps (as per company guidance), COGS of 5% and the price of a 200mg oral treatment at $300 per cycle.

Below we include sensitivity analyses on how pricing and penetration assumptions for BARHEMSYS for PONV prophylaxis and rescue treatment, and APD403 for CINV could impact on our valuation of Acacia Pharma.

Exhibit 13: BARHEMSYS PONV prophylaxis

 

 

Price, $

30

35

40

45

50

Penetration

5.0%

445

459

472

485

499

7.5%

485

505

525

546

566

 

10.0%

525

552

579

606

632

12.5%

566

599

632

666

699

 

15.0%

606

646

686

726

766

Source: Edison Investment Research

Exhibit 14: BARHEMSYS PONV rescue treatment

 

 

Price, $

70

75

80

85

90

Penetration

5.0%

176

200

223

246

270

7.5%

332

367

402

436

471

 

10.0%

487

533

579

625

671

12.5%

641

699

756

814

871

 

15.0%

795

864

933

1002

1071

Source: Edison Investment Research

Exhibit 15: APD403 CINV

 

 

Price, $

250

275

300

325

350

Penetration

7.5%

560

561

563

565

567

10.0%

566

569

571

574

576

 

12.5%

572

576

579

582

585

15.0%

579

583

587

590

594

 

17.5%

585

590

594

599

603

Source: Edison Investment Research

Financials

Following the £33.9m net raise from the IPO in March and the drawdown of $10m from the $30m credit facility with Hercules, Acacia has £35.7m in cash as of 30 June. £34.4m is held in US dollars to meet expected dollar expenses. In June, Acacia repaid £3.7m of outstanding debt on the Silicon Valley debt facility.

To fund operations we forecast that an additional c £75m (in addition to the remaining $20m from Hercules) will need to be raised in 2019 and 2020. We note that, for simplicity, in our model we currently illustrate this as a debt raise. However, Acacia management has stated that it plans to finance the company by a combination of equity and debt.

In the short term, revenues remain wholly dependent on the success of BARHEMSYS. We forecast no revenue generated in FY18 and FY19 revenues of £2.7m as the company expects to start rolling out the product.

We forecast a significant increase in expenses from historic levels driven by the commercialisation of BARHEMSYS and the clinical trial programme for APD403. FY17 SG&A and R&D were £1.5m each. We forecast R&D costs of £2.9m in FY18, growing to £7.7m in FY19. We anticipate that SG&A costs will increase to £16.7m in FY18, growing to £37.8m in FY19 driven by the investment in personnel.

Acacia reported a net loss of £5.7m in H118 (H117: net loss of £2.7m) driven in core by activities around the NDA filing. We forecast a net loss of £19.3m in FY18 and £43.6m in FY19. Based on the operational and price assumptions outlined above, we forecast that Acacia will reach break-even in 2023 and, in the longer term, operating margins could reach some 55%.

Exhibit 16: Financial summary

Accounts: IFRS, Year-end: December, £m

 

 

2015

2016

2017

2018e

2019e

2020e

PROFIT & LOSS

Revenue

 

 

0.0

0.0

0.0

0.0

2.7

13.7

Operating revenues

 

 

0.0

0.0

0.0

0.0

2.7

13.7

Cost of sales

 

 

0.0

0.0

0.0

0.0

(0.2)

(0.9)

Gross profit

 

 

0.0

0.0

0.0

0.0

2.5

12.9

Gross margin %

 

 

N/A

N/A

N/A

N/A

0.9

0.9

SG&A (expenses)

 

 

(2.4)

(0.8)

(1.5)

(16.7)

(37.8)

(42.7)

R&D costs

 

 

(10.1)

(13.6)

(1.5)

(2.9)

(7.7)

(10.1)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

EBITDA (reported)

 

 

(12.5)

(14.4)

(3.0)

(19.6)

(43.0)

(39.9)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported Operating Income

 

 

(12.5)

(14.4)

(3.0)

(19.6)

(43.0)

(39.9)

Operating Margin %

 

 

N/A

N/A

N/A

N/A

N/A

N/A

Finance income/(expense)

 

 

(2.6)

(1.8)

(3.5)

(0.7)

(2.5)

(2.6)

Exceptionals and adjustments

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported PBT

 

 

(15.1)

(16.3)

(6.5)

(20.3)

(45.6)

(42.4)

Income tax expense (includes exceptionals)

 

 

2.2

2.8

0.3

1.0

2.0

1.6

Reported net income

 

 

(12.9)

(13.5)

(6.2)

(19.3)

(43.6)

(40.8)

Basic average number of shares, m

 

 

2.7

2.7

2.7

53.1

53.1

53.1

Basic EPS (£)

 

 

(4.83)

(5.06)

(2.32)

(0.36)

(0.82)

(0.77)

Adjusted EPS (£)

 

 

(4.83)

(5.06)

(2.32)

(0.36)

(0.82)

(0.77)

Dividend per share (£)

 

 

0.00

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

 

 

Property, plant and equipment

 

 

0.0

0.0

0.0

0.0

0.1

0.8

Goodwill

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Intangible assets

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other non-current assets

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Total non-current assets

 

 

0.0

0.0

0.0

0.0

0.1

0.8

Cash and equivalents

 

 

5.5

6.9

3.1

12.7

14.0

11.1

Inventories

 

 

0.0

0.0

0.0

0.0

0.1

0.5

Trade and other receivables

 

 

0.3

0.5

0.2

0.0

0.5

2.3

Other current assets

 

 

2.1

2.8

0.3

0.3

0.3

0.3

Total current assets

 

 

7.9

10.2

3.6

13.0

15.0

14.2

Non-current loans and borrowings

 

 

0.0

5.0

0.0

6.7

56.7

96.7

Other non-current liabilities

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Total non-current liabilities

 

 

0.0

5.0

0.0

6.7

56.7

96.7

Trade and other payables

 

 

2.9

5.1

1.0

9.1

5.2

5.8

Current loans and borrowings

 

 

0.0

2.7

5.2

0.4

0.0

0.0

Other current liabilities

 

 

7.8

9.1

15.2

0.0

0.0

0.0

Total current liabilities

 

 

10.8

17.0

21.4

9.5

5.2

5.8

Equity attributable to company

 

 

(2.8)

(11.7)

(17.8)

(3.2)

(46.8)

(87.6)

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

Operating Profit

 

 

(15.1)

(16.3)

(6.5)

(20.3)

(45.6)

(42.4)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Share based payments

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other adjustments

 

 

2.7

1.9

3.7

0.7

2.5

2.6

Movements in working capital

 

 

1.6

2.0

(3.8)

(6.9)

(4.5)

(1.5)

Interest paid / received

 

 

0.0

0.0

0.0

(0.7)

(2.5)

(2.6)

Income taxes paid

 

 

1.1

2.2

2.8

1.0

2.0

1.6

Cash from operations (CFO)

 

 

(9.7)

(10.2)

(3.7)

(26.3)

(48.2)

(42.4)

Capex

 

 

0.0

0.0

0.0

0.0

(0.1)

(0.7)

Acquisitions & disposals net

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other investing activities

 

 

0.0

0.0

0.0

0.1

0.1

0.1

Cash used in investing activities (CFIA)

 

 

0.0

0.0

0.0

0.1

0.0

(0.6)

Net proceeds from issue of shares

 

 

12.5

4.5

3.4

33.9

0.0

0.0

Movements in debt

 

 

0.0

7.1

(3.4)

1.9

49.6

40.0

Other financing activities

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Cash from financing activities (CFF)

 

 

12.5

11.7

0.0

35.8

49.6

40.0

Cash and equivalents at beginning of period

 

 

2.6

5.5

6.9

3.1

12.7

14.0

Increase/(decrease) in cash and equivalents

 

 

2.8

1.4

(3.8)

9.6

1.4

(3.0)

Cash and equivalents at end of period

 

 

5.5

6.9

3.1

12.7

14.0

11.1

Source: Company accounts, Edison Investment Research

Contact details

Revenue by geography

The Officers’ Mess,
Royston Road,
Duxford,
Cambridge, CB22 4QH

01223 875130

http://acaciapharma.com

N/A

Contact details

The Officers’ Mess,
Royston Road,
Duxford,
Cambridge, CB22 4QH

01223 875130

http://acaciapharma.com

Revenue by geography

N/A

Management team

CEO: Dr Julian Gilbert

CFO: Christine Soden

Julian is chief executive officer and co-founder of Acacia Pharma. He has more than 30 years of commercial and technical experience in the pharmaceutical industry gained at a number of companies including Chiroscience, Mundipharma, British Technology Group (BTG) and Smith Kline & French (now GlaxoSmithKline). Prior to co-founding Acacia, he was co-founder and commercial director of Arakis. He has a degree in pharmacy and a PhD in pharmaceutics, both from the University of Nottingham.

Christine joined Acacia Pharma in February 2015, and is chief financial officer and company secretary. She is a chartered accountant and has substantial experience in technology and commercialisation-stage companies. Most recently, Christine served as CFO of AIM-listed medical device company, Electrical Geodesics. Previously she was CFO of UK-listed companies Optos, BTG and Celltech-Chiroscience, each of which had significant US operations. She also held senior finance roles with Oxagen and Medeva and is a non-executive director of e-Therapeutics, Fertility Focus and Futurenova.

CMO: Gabriel Fox

CCO: Mike Bolinder

Gabriel joined Acacia Pharma in 2008 from Hoffmann-La Roche, where he was head of global oncology marketing. Previously, he held various roles in development and medical marketing in Roche’s market-leading oncology franchise. Prior to that, Gabriel was medical director for NeXstar Pharmaceuticals and Gilead Sciences, and subsequently acted as a consultant in both clinical development and commercial areas for a number of large and small pharma/biotech companies. Gabriel undertook his medical training at Cambridge University.

Mike joined Acacia Pharma in August 2015 as VP of marketing and was subsequently promoted to chief commercial officer. He has more than 15 years’ experience in the pharmaceutical industry. Prior to Acacia, Mike served as head of marketing and commercial strategy for the Hospital division at Mallinckrodt Pharmaceuticals (via the Cadence Pharmaceuticals. acquisition), which commercialised Ofirmev, a post-operative pain control product promoted to anaesthetists and surgical teams. Prior to joining Cadence, he worked at Eli Lilly for 11 years in various sales and marketing roles of increasing responsibility across multiple therapeutic areas and successful product launches.

Management team

CEO: Dr Julian Gilbert

Julian is chief executive officer and co-founder of Acacia Pharma. He has more than 30 years of commercial and technical experience in the pharmaceutical industry gained at a number of companies including Chiroscience, Mundipharma, British Technology Group (BTG) and Smith Kline & French (now GlaxoSmithKline). Prior to co-founding Acacia, he was co-founder and commercial director of Arakis. He has a degree in pharmacy and a PhD in pharmaceutics, both from the University of Nottingham.

CFO: Christine Soden

Christine joined Acacia Pharma in February 2015, and is chief financial officer and company secretary. She is a chartered accountant and has substantial experience in technology and commercialisation-stage companies. Most recently, Christine served as CFO of AIM-listed medical device company, Electrical Geodesics. Previously she was CFO of UK-listed companies Optos, BTG and Celltech-Chiroscience, each of which had significant US operations. She also held senior finance roles with Oxagen and Medeva and is a non-executive director of e-Therapeutics, Fertility Focus and Futurenova.

CMO: Gabriel Fox

Gabriel joined Acacia Pharma in 2008 from Hoffmann-La Roche, where he was head of global oncology marketing. Previously, he held various roles in development and medical marketing in Roche’s market-leading oncology franchise. Prior to that, Gabriel was medical director for NeXstar Pharmaceuticals and Gilead Sciences, and subsequently acted as a consultant in both clinical development and commercial areas for a number of large and small pharma/biotech companies. Gabriel undertook his medical training at Cambridge University.

CCO: Mike Bolinder

Mike joined Acacia Pharma in August 2015 as VP of marketing and was subsequently promoted to chief commercial officer. He has more than 15 years’ experience in the pharmaceutical industry. Prior to Acacia, Mike served as head of marketing and commercial strategy for the Hospital division at Mallinckrodt Pharmaceuticals (via the Cadence Pharmaceuticals. acquisition), which commercialised Ofirmev, a post-operative pain control product promoted to anaesthetists and surgical teams. Prior to joining Cadence, he worked at Eli Lilly for 11 years in various sales and marketing roles of increasing responsibility across multiple therapeutic areas and successful product launches.

Principal shareholders

(%)

Gilde

32.0%

Lundbeckfond

23.6%

Novo A/S

14.4%

F-Prime

9.3%

AXA Investment Managers

5.1%

Companies named in this report

N/A

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Acacia Pharma and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Acacia Pharma and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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