Strategy in place to mitigate COVID-19 effects

Pixium Vision 26 March 2020 Update
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Pixium Vision

Strategy in place to mitigate COVID-19 effects

COVID-19 update

Healthcare equipment & services

26 March 2020

Price

€0.67

Market cap

€17m

$1.08/€

Net cash (€m) at 31 December 2019

1.0

Shares in issue

25.4m

Free float

54%

Code

ALPIX

Primary exchange

Euronext Growth

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(25.9)

(14.7)

(56.7)

Rel (local)

(4.0)

16.4

(48.2)

52-week high/low

€1.8

€0.5

Business description

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

Next events

Prima 2 interim data

Q120

Q120 results

April 2020

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Maxim Jacobs, CFA

+1 646 653 7027

Pixium Vision is a research client of Edison Investment Research Limited

Pixium recently made prudent operational changes to contain expenditures while keeping the long-term investment thesis intact during the COVID-19 pandemic. With the feasibility studies paused and the start of a pivotal study possibly pushed to 2021, we expect these and other cost-cutting initiatives to enable Pixium to maintain its operations into late 2020. These actions should position the firm well to resume normal operations once the COVID-19 situation improves.

Year end

Revenue

(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

1.6

(7.7)

(0.42)

0.0

N/A

N/A

12/19

1.8

(9.8)

(0.44)

0.0

N/A

N/A

12/20e

1.7

(8.1)

(0.32)

0.0

N/A

N/A

12/21e

1.6

(13.1)

(0.51)

0.0

N/A

N/A

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

Studies on pause and possible pivotal trial delay

Pixium is postponing further implantations in its US feasibility study of the Prima System, and upcoming follow-up visits for patients participating in the European feasibility study are also being adjusted. Patient safety monitoring will continue for both studies remotely. These changes are appropriate as the target patient population for Prima, generally patients aged over 65, is particularly susceptible to adverse health effects from COVID-19. We believe significant mitigation or resolution of the pandemic is needed before implantations will resume, and before the pivotal study can start. Pixium previously planned to file its regulatory submission in Q220 and have implantations occur before YE20, but we expect that while they will file with at least the European regulator by Q320, logistical issues outside of Pixium’s control relating to COVID-19 and lingering effects will likely push the start of the pivotal trial into 2021.

Cost controls provide added cushion

We expect that Pixium will be able to weather the COVID-19 storm through at least Q420 and retain a positive cash balance, even in the absence of an equity offering. Many R&D activities involving lab work have been suspended and the company has delayed payments of social charges, rents and temporary unemployment for its employees unable to telecommute. Altogether, we expect that there will be an effective cost saving of slightly above €1m for 2020 from these measures.

Valuation: rNPV of €69.5m

We are pushing back our EU and US Prima launch timelines, to H223 and H225, respectively, from H123 and H125, respectively. After adjusting our cost assumptions and timelines, we obtain a pipeline rNPV (enterprise value, excluding net cash) of €69.5m versus €85.1m previously. After including €1.0m in net cash at 31 December 2019, we obtain an equity valuation of €70.5m, or €2.78 per share (versus €3.46 per share previously, partly due to increased shares outstanding).

Delays but fundamentals intact amid COVID-19 impacts

In light of the COVID-19 pandemic stretching healthcare resources globally as well as the need for organizations to protect workers and patients, Pixium recently made prudent operational changes to contain expenditures while keeping the long-term investment thesis intact during this turbulent time. The company has decided to postpone further implantations in its five-patient US feasibility study of the Prima System in patients with atrophic dry age-related macular degeneration (dry-AMD). To date, two patients have been implanted with the device, and while ongoing safety monitoring will continue, the necessary visual rehabilitation training needed for these patients to adapt to and learn how to optimally use the system is being delayed; such a delay is not expected to adversely affect the eventual visual functioning of the patients once they receive the training in the future. These adjustments are being done in particular because the target patient population for Prima, generally aged over 65 years old, is particularly susceptible to adverse health effects from COVID-19, and we believe significant mitigation or resolution of the pandemic is needed before implantations will resume, and before the pivotal study can start.

In parallel, upcoming follow-up visits for patients participating in the 36-month five-patient European feasibility study (PRIMA-FS) is also being adjusted, with the upcoming visits (mostly corresponding to 24-month follow-up) now being scheduled primarily virtually or through remote testing at this time. Fortunately, Pixium recently completed 18-month follow-up visits for the PRIMA-FS patients, and it expects to release data in Q120, including initial results from these patients transitioning to the second-generation Prima 2 glasses and pocket computer.

The US FDA recently provided guidance to industry and study investigators suggesting that due to the COVID-19 pandemic, refinements to clinical study protocols aimed at protecting patient safety during this pandemic and transitioning to remote or virtual follow-up visits, where appropriate, should not be expected to have detrimental effects to the agency’s review of relevant clinical trial data in the future. European regulators have drafted similar guidance.

Prudent measures in place to ensure funds through late 2020

Most importantly, Pixium has announced measures to control its cash burn rate and we expect that the firm will be able to weather the COVID-19 storm at least into Q420 and retain a positive cash balance, even in the absence of an equity offering (which would be challenging to pursue or heavily dilutive given current market conditions). Many R&D activities involving lab work have been suspended and Pixium employees are currently generally working through virtual means/telecommuting.

In addition to the measures described above to curtail feasibility study costs during the pandemic, the company has taken early measures made possible by prompt French government action in response to the pandemic; namely, it has delayed payments of social charges, rents and temporary unemployment for its employees unable to telecommute.

Altogether, we expect that there will be effective cost savings of slightly above €1m for 2020 from these measures. Further, on a cash inflow basis, the company expects to receive about €1.7m in research tax credits in H120.

While we do not expect the company to pursue an equity offering until the COVID-19 situation improves, the company has an agreement (from November 2019) with US-based investor, European Select Growth Opportunities Fund (ESGO), for the issue of up to €10m in 12-month bonds repayable in cash and/or new shares, over a period of up to 30 months. The first bond tranche (€1.25m) was issued on 6 November and has since been fully converted to common shares, and a second (€1.25m) tranche was issued in February (and partial conversion of about €0.3m to equity has already occurred). Additional tranches may be issued throughout the year.

Altogether, Pixium is controlling costs to be in a position to resume operations to normal once the COVID-19 situation improves. Pixium CEO Lloyd Diamond has commented, ‘we are doing everything we can to keep cash burn to a minimum and to ensure the resources needed are in place to step up clinical development again as soon as the situation improves.’

Pivotal study likely not to start before 2021

As it relates to the planned PRIMAvera pivotal study, the company previously planned to file its regulatory submission in Q220 and have implantations occur before YE20. We now expect it should file at least with the European regulator in mid-2020 or Q320, but it is unclear whether the agency’s administrative resources will be positioned to respond and process the dossier in a timely fashion and whether individual study centres’ institutional review boards would promptly provide clearance (given COVID-19 effects and these organizations’ other prioritisations). Hence, we now believe it is unlikely that the European pivotal study will start implantations until 2021, and this may ultimately depend on the timing for resolution or mitigation of the COVID-19 pandemic.

As a reminder, Pixium’s objective would be to harmonise study design requirements between the FDA and European regulators so it can potentially combine data and facilities from Europe and the US into a single pivotal trial (that would satisfy registration requirements in both territories). In such a scenario where a single pivotal study would be accepted by both regulators, we expect that initial implantations would occur in Europe leading to an earlier market approval in Europe. We reiterate that our base case continues to assume that European and US pivotal studies will be separate and that European market registration and launch will occur earlier than US approval.

Given the delays described above, we are pushing back our Prima launch forecasts by six months, but this may vary further depending on how quickly the COVID-19 situation improves and how quickly clinical studies can resume or launch (generally factors outside of Pixium’s direct control). We now expect the EU pivotal study to start in H121 (vs H220 previously) and the US pivotal study to start in H221 (vs H121 previously). We are pushing back our EU and US launch timelines to H223 and H225, respectively, from H123 and H125.

Financials and valuation

Pixium finished 2019 with a net cash position of €1.0m (€6.8m gross cash offset by €2.6m in refundable advances and €3.2m in long-term debt). We have reduced our 2019 operating expenses due to the measures described above, and also pushed €0.5m of R&D expense projected for 2021, forward to 2022 (given that pivotal study clinical study costs are expected to escalate as recruitment ramps up).

We now assume R&D expenses of €6.0m in 2020 and €8.0m in 2021, respectively, versus our prior estimates of €6.7m and €8.5m. We have reduced our 2020 and 2021 operating cash burn rates to €6.8m and €9.9m versus our prior estimates of €8.0m and €10.6m.

We continue to assume Pixium will need to raise €50m (including the remaining or unused €7.5m in tranches from ESGO funding facility) to bring Prima to launch (now in H223). We believe Pixium’s current funds on hand will be sufficient for the company to maintain its operations at least into Q420. If the company secures an additional tranche from ESGO (two tranches of €1.25m have been issued to date), we expect it will have sufficient funds into 2021.

For now our model assumes that the company will raise €24.7m in net illustrative debt in 2020 (versus €25.0m previously, given that €0.3m debt raised from the February 2020 ESGO tranche has since been converted to equity). We continue to model an additional €25m in illustrative debt in 2021.

Exhibit 1: Pixium Vision rNPV assumptions

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

Indication

Status

rNPV
(€m)

rNPV/share (€)

Probability of success

Launch year

Peak WW sales (€m)

Prima (net of R&D and Marketing costs)

Age-related macular degeneration with geographic atrophy

Human feasibility trials

139.1

5.48

15.00%

H223 (EU);
H225 (US)

1,096 in 2029

Corporate costs & expenses

G&A expenses

(19.8)

(0.78)

Net capex, NWC & taxes

(49.8)

(1.96)

Total rNPV

69.5

2.74

Net cash (debt) (Q419)

1.0

0.04

Total equity value

70.5

2.78

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

25,399

Source: Edison Investment Research

Our valuation for Pixium Vision is based on a rNPV approach, employing a 12.5% cost of capital and is based on the Prima opportunity in dry-AMD. We continue to apply a probability of success estimate for Prima-AMD in our model of 15% and an FX rate, for US sales, of $1.08/€. After adjusting our cost assumptions and launch timelines as described above, we obtain a pipeline rNPV (enterprise value, excluding net cash) of €69.5m versus €85.1m previously.

After including €1.0m in net cash at 31 December 2019, we obtain an equity valuation of €70.5m, or €2.78 per share (versus €3.46 previously, partly due to increased shares outstanding).

Exhibit 2: Financial summary

€000

2017

2018

2019

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,535

1,598

1,782

1,700

1,600

1,600

Cost of Sales

(1,124)

(41)

0

0

0

0

General & Administrative

(5,324)

(2,019)

(3,815)

(2,900)

(2,973)

(3,847)

Research & Development

(7,817)

(5,297)

(6,320)

(6,000)

(8,000)

(10,400)

EBITDA

 

 

(11,731)

(5,758)

(8,352)

(7,200)

(9,373)

(12,647)

Depreciation

(936)

(677)

(448)

(449)

(531)

(639)

Amortization

0

0

0

0

0

0

Operating Profit (before exceptionals)

 

(12,666)

(6,435)

(8,801)

(7,649)

(9,903)

(13,286)

Exceptionals

0

(5,859)

(69)

0

0

0

Other

0

0

0

0

0

0

Operating Profit

(12,666)

(12,294)

(8,870)

(7,649)

(9,903)

(13,286)

Net Interest

(876)

(1,277)

(1,006)

(442)

(3,147)

(4,246)

Profit Before Tax (norm)

 

 

(13,542)

(7,712)

(9,806)

(8,092)

(13,050)

(17,532)

Profit Before Tax (FRS 3)

 

 

(13,542)

(13,571)

(9,876)

(8,092)

(13,050)

(17,532)

Tax

0

0

0

0

0

0

Profit After Tax and minority interests (norm)

(13,542)

(7,712)

(9,806)

(8,092)

(13,050)

(17,532)

Profit After Tax and minority interests (FRS 3)

(13,542)

(13,571)

(9,876)

(8,092)

(13,050)

(17,532)

Average Number of Shares Outstanding (m)

13.3

18.5

22.3

25.4

25.5

25.7

EPS - normalised (€)

 

 

(1.02)

(0.42)

(0.44)

(0.32)

(0.51)

(0.68)

EPS - normalised and fully diluted (€)

 

(1.02)

(0.42)

(0.44)

(0.32)

(0.51)

(0.68)

EPS - (IFRS) (€)

 

 

(1.02)

(0.73)

(0.44)

(0.32)

(0.51)

(0.68)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

9,649

3,666

4,507

4,457

4,151

3,555

Intangible Assets

7,680

2,623

2,361

2,361

2,361

2,361

Tangible Assets

1,970

1,042

2,145

2,096

1,789

1,194

Current Assets

 

 

14,241

17,756

9,107

26,443

38,242

21,699

Short-term investments

0

0

0

0

0

0

Cash

10,532

15,629

6,792

24,133

35,845

19,301

Other

3,710

2,126

2,316

2,310

2,398

2,398

Current Liabilities

 

 

(2,752)

(2,044)

(2,880)

(2,880)

(2,037)

(2,037)

Creditors

(2,752)

(2,044)

(2,880)

(2,880)

(2,037)

(2,037)

Short term borrowings

0

0

0

0

0

0

Long Term Liabilities

 

 

(9,302)

(8,023)

(7,033)

(31,733)

(56,733)

(56,733)

Long term borrowings

(9,130)

(7,870)

(5,787)

(30,487)

(55,487)

(55,487)

Other long term liabilities

(172)

(153)

(1,246)

(1,246)

(1,246)

(1,246)

Net Assets

 

 

11,836

11,355

3,700

(3,713)

(16,378)

(33,516)

CASH FLOW

Operating Cash Flow

 

 

(10,605)

(6,174)

(7,282)

(6,816)

(9,917)

(12,253)

Net Interest

(876)

(1,277)

(1,006)

(442)

(3,147)

(4,246)

Tax

0

0

0

0

0

0

Capex

(191)

(31)

(34)

(400)

(224)

(44)

Acquisitions/disposals

0

0

0

0

0

0

Financing

519

14,068

2,034

300

0

0

Net Cash Flow

(11,153)

6,587

(6,288)

(7,359)

(13,288)

(16,543)

Opening net debt/(cash)

 

 

(12,911)

(1,401)

(7,760)

(1,004)

6,354

19,643

HP finance leases initiated

0

0

0

0

0

0

Other

(357)

(228)

(468)

0

0

0

Closing net debt/(cash)

 

 

(1,401)

(7,760)

(1,004)

6,354

19,643

36,186

Source: Company accounts, Edison Investment Research


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

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

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

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General disclaimer and copyright

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

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

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

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

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

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

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

New Zealand

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

United Kingdom

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

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

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

United States

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

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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