Orexo |
Vorvida submitted to the FDA |
Regulatory update |
Pharma & biotech |
10 March 2020 |
Share price performance
Business description
Next events
Analyst
Orexo is a research client of Edison Investment Research Limited |
Orexo announced on 6 March 2020 that it has submitted an application to the FDA for its vorvida digital therapy for the treatment of heavy drinking. It expects a hearing from the FDA on the approval status of the program in Q220 and to commercialize the product in H220 if it is cleared. The product uses cognitive behavioral therapy coupled with machine learning and has been vetted in a randomized, controlled study to reduce problematic drinking episodes.
Year end |
Revenue (SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
783.1 |
92.2 |
3.99 |
0.0 |
12.7 |
N/A |
12/19 |
844.8 |
227.9 |
6.33 |
0.0 |
8.0 |
N/A |
12/20e |
775.4 |
200.3 |
5.62 |
0.0 |
9.0 |
N/A |
12/21e |
918.6 |
245.5 |
6.82 |
0.0 |
7.4 |
N/A |
Note: *PBT and EPS are reported.
Clinically proven to reduce drinking
The company licensed US rights to vorvida from GAIA in Q419. The product is already launched in Germany and Switzerland by GAIA (although no details have been released). Vorvida was studied in 2015 in a randomized, controlled trial in Germany (n=608), which showed a significant reduction in alcohol consumed per day and binge drinking days per month at both three and six months (p≤0.001 for all measurements).
FDA to determine how vorvida is to be classified
The realm of digital health products is relatively new and the regulatory process is still in a state of flux. There is no well-defined pathway for devices like vorvida, but instead the FDA decides whether it should be subject to review on a case-by-case basis depending on the risk to human health. The current application submitted by the company is through a 513(g) request in which it is seeking feedback on how it will be classified, and a response is expected in the statutory 60 days.
Value highly dependent on marketing, partnering
Digital therapies face significant hurdles in the marketplace and as yet there are no clear success stories for behavioral health products like vorvida. The value of the program will be highly depending on how and to which stakeholders the product is marketed. Given that drinking is a significant drain on health resources, we can envision a scenario in which it is marketed to payors to reduce costs. The company has not provided any details regarding its strategy yet, but we expect more information at the company’s capital markets day on 17 March.
Valuation: Unchanged at SEK3.65bn
Our valuation remains unchanged at SEK3.65bn or SEK105.27 per share. We are holding off adding vorvida to our forecasts until the company achieves its initial sales, which we expect to follow its roll-out in H220, assuming the FDA review goes according to plan.
Exhibit 1: Financial summary
|
|
|
SEKm |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020e |
2021e |
Year end 31 December |
|
|
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
INCOME STATEMENT |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
570.3 |
643.3 |
705.9 |
643.7 |
783.1 |
844.8 |
775.4 |
918.6 |
Cost of Sales |
|
|
|
(107.4) |
(136.1) |
(149.6) |
(164.4) |
(171.8) |
(105.6) |
(74.8) |
(82.5) |
Gross Profit |
|
|
|
462.9 |
507.3 |
556.3 |
479.3 |
611.3 |
739.2 |
700.6 |
836.1 |
Reported operating profit |
|
|
(25.0) |
(169.0) |
51.7 |
57.4 |
95.8 |
231.2 |
164.1 |
199.3 |
|
Joint ventures & associates (post tax) |
|
|
|
||||||||
Profit before tax (reported) |
|
|
(52.6) |
(191.1) |
35.6 |
29.7 |
92.2 |
227.9 |
200.3 |
245.5 |
|
Reported tax |
|
|
|
(4.0) |
(6.9) |
(6.5) |
(6.5) |
45.7 |
(8.8) |
(6.0) |
(7.4) |
Profit after tax (reported) |
|
|
(56.6) |
(198.0) |
29.0 |
23.2 |
137.9 |
219.1 |
194.3 |
238.1 |
|
Minority interests |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
7.0 |
(3.4) |
0.0 |
0.0 |
|
|
|
|
|
|
|||||||
Basic average number of shares outstanding (m) |
|
33.0 |
34.0 |
35.0 |
35.0 |
34.6 |
34.9 |
34.6 |
34.9 |
||
EPS - basic reported (SEK) |
|
|
(1.73) |
(5.74) |
0.84 |
0.67 |
3.99 |
6.33 |
5.62 |
6.82 |
|
|
|
|
|
|
|||||||
BALANCE SHEET |
|
|
|
||||||||
Fixed assets |
|
|
|
289.5 |
185.9 |
185.1 |
176.5 |
227.1 |
279.9 |
294.3 |
317.5 |
Intangible assets |
|
|
197.0 |
159.1 |
138.2 |
121.0 |
103.9 |
113.9 |
105.6 |
95.4 |
|
Tangible assets |
|
|
29.1 |
24.7 |
22.1 |
20.1 |
20.0 |
22.0 |
44.9 |
78.2 |
|
Investments & other |
|
|
63.4 |
2.1 |
24.8 |
35.4 |
103.2 |
143.9 |
143.9 |
143.9 |
|
Current assets |
|
|
936.4 |
830.4 |
833.7 |
827.4 |
1,059.5 |
1,221.2 |
1,396.5 |
1,611.4 |
|
Stocks |
|
|
|
478.1 |
398.9 |
344.2 |
250.2 |
173.6 |
131.8 |
156.1 |
161.5 |
Debtors |
|
|
|
173.8 |
233.4 |
178.5 |
249.3 |
296.1 |
272.6 |
231.4 |
271.8 |
Cash & cash equivalents |
|
|
284.5 |
198.1 |
282.4 |
327.9 |
589.8 |
816.8 |
1,009.0 |
1,178.1 |
|
Other |
|
|
|
0.0 |
0.0 |
28.6 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Current liabilities |
|
|
(268.1) |
(251.6) |
(309.5) |
(349.9) |
(483.4) |
(461.1) |
(461.2) |
(461.2) |
|
Creditors |
|
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Short-term borrowings |
|
|
(1.9) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Other |
|
|
|
(266.2) |
(251.6) |
(309.5) |
(349.9) |
(483.4) |
(461.2) |
(461.2) |
(461.2) |
Long-term liabilities |
|
|
(502.8) |
(498.3) |
(399.0) |
(324.9) |
(327.1) |
(333.6) |
(333.6) |
(333.6) |
|
Long-term borrowings |
|
|
(493.8) |
(494.4) |
(397.8) |
(319.1) |
(320.6) |
(289.6) |
(289.6) |
(289.6) |
|
Other long-term liabilities |
|
|
(9.0) |
(3.9) |
(1.3) |
(5.8) |
(6.5) |
(44.0) |
(44.0) |
(44.0) |
|
Minority interests |
|
|
|
||||||||
|
|
|
|
|
|||||||
CASH FLOW |
|
|
|
|
|||||||
Operating cash flow before WC and Tax |
|
(31.1) |
(124.7) |
60.0 |
108.1 |
109.8 |
240.3 |
202.2 |
246.7 |
||
Working capital |
|
|
(451.8) |
17.2 |
88.7 |
38.5 |
114.1 |
38.4 |
16.9 |
(45.9) |
|
Exceptional & other |
|
|
(8.5) |
(1.6) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Tax |
|
|
|
4.0 |
6.9 |
7.5 |
0.0 |
18.1 |
12.2 |
6.0 |
7.4 |
Net operating cash flow |
|
|
(487.3) |
(102.2) |
156.2 |
146.6 |
242.0 |
290.9 |
225.2 |
208.2 |
|
Capex |
|
|
|
(71.7) |
(4.1) |
0.5 |
(1.6) |
(3.6) |
(26.4) |
(33.0) |
(39.1) |
Acquisitions/disposals |
|
|
0.0 |
21.8 |
5.0 |
0.0 |
(2.5) |
0.0 |
0.0 |
0.0 |
|
Equity financing |
|
|
349.3 |
3.8 |
2.2 |
0.1 |
0.0 |
2.0 |
0.0 |
0.0 |
|
Other |
|
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
(55.8) |
0.0 |
0.0 |
Net cash flow |
|
|
|
(209.7) |
(80.7) |
163.9 |
145.1 |
235.8 |
210.8 |
192.2 |
169.1 |
Opening net debt/(cash) |
|
|
(1.5) |
209.3 |
296.3 |
115.4 |
(8.8) |
(269.2) |
(527.2) |
(719.4) |
|
Other |
|
|
|
(1.2) |
(6.3) |
17.0 |
(20.9) |
24.6 |
47.2 |
0.0 |
0.0 |
Closing net debt/(cash) |
|
|
209.3 |
296.3 |
115.4 |
(8.8) |
(269.2) |
(527.2) |
(719.4) |
(888.5) |
Source: Orexo reports, Edison Investment research
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