Crossject recently announced that it has received regulatory approval to launch the bioequivalence study for Zeneo Midazolam (being developed for the acute treatment of epileptic seizures) in healthy volunteers. This puts the company on track for the expected H218 EU filing and the H119 US filing. Due to this milestone, Crossject has received €2.9m from Bpifrance as part of the Programme des Investissements d’Avenir (PIAVE). Also, the company has successfully completed a €5m rights offering.
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Crossject |
A reinforced cash position |
Financial and |
Pharma & biotech |
7 April 2017 |
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Crossject recently announced that it has received regulatory approval to launch the bioequivalence study for Zeneo Midazolam (being developed for the acute treatment of epileptic seizures) in healthy volunteers. This puts the company on track for the expected H218 EU filing and the H119 US filing. Due to this milestone, Crossject has received €2.9m from Bpifrance as part of the Programme des Investissements d’Avenir (PIAVE). Also, the company has successfully completed a €5m rights offering.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
2.4 |
(6.7) |
(0.85) |
0.0 |
N/A |
N/A |
12/16 |
1.4 |
(7.3) |
(0.85) |
0.0 |
N/A |
N/A |
12/17e |
2.9 |
(5.4) |
(0.44) |
0.0 |
N/A |
N/A |
12/18e |
0.0 |
(9.6) |
(0.85) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Zeneo Midazolam targets under-served market
Currently, there is only one at-home treatment approved in the US for the acute treatment of epileptic seizures, a rectal gel version of diazepam, which is part of the benzodiazepine class along with midazolam. Otherwise, patients need to be taken to the hospital if their seizures do not end by themselves.
Pipeline expected to progress in 2017
By the end of 2017, the company expects to complete bioequivalence studies for Zeneo Midazolam, Sumatriptan and Epinephrine/Adrenaline (by its partner) with Naloxone and Hydrocortisone studies to follow soon thereafter. Crossject has already successfully completed bioequivalence studies for Zeneo Methotrexate.
An additional focus on partnerships
Crossject recently announced that it is working with a London-based advisory company with a presence in North America and a history of successful business development deals to license Zeneo Sumatriptan for the treatment of acute migraines in the US and Canada. Additionally, the company has enlisted Bionest Partners, a healthcare-focused consulting firm, to prepare a commercial assessment for Zeneo Midazolam for use in business development activities.
Valuation
We have adjusted our valuation to €87.4m or €9.91 per share, from €68.2m or €9.91 per share. Our total valuation increased mainly due to rolling forward our NPVs to 2017, extending our expected patent protection to 2036 following the announcement of new patents, a higher net cash balance following the successful €5m rights offering and the €2.9m milestone payment related to Midazolam that was received from PIAVE. This was mitigated by a higher share count as the rights offering was dilutive. Between now and projected profitability in 2020, we forecast a total funding need of €20m (previously €35m).
Investment summary
Crossject’s proprietary needle-free injection platform, ZENEO, can be used for up to 200 drugs (both small molecule and biologic) that it has identified, although currently the company is focusing mainly on acute treatments where the speed of treatment is an important factor for patients.
Exhibit 1: Crossject pipeline
Product |
Indication |
Expectation for submission (EU) |
Expectation for submission (US) |
Notes |
Sumatriptan |
Acute migraine |
H118 |
H218 |
Bioequivalence study expected to be completed in 2017 |
Midazolam |
Acute epilepsy seizures |
H218 |
H119 |
Bioequivalence study given regulatory go-ahead and expected to be completed in 2017 |
Epinephrine/Adrenaline |
Anaphylactic shock |
H218 |
H119 |
Bioequivalence study expected to be completed in 2017 |
Methotrexate |
Rheumatoid arthritis |
H218 |
H120 |
Bioequivalence study completed |
Hydrocortisone |
Acute adrenal insufficiency |
H218 |
H119 |
Bioequivalence study expected to be completed in 2017 |
Naloxone |
Opioid overdose |
H218 |
H119 |
Expect to confirm formulation and pre-stability studies and receive regulatory authorization for bioequivalence studies |
Apomorphine |
Parkinson’s disease |
H119 |
H120 |
Expect to confirm formulation and pre-stability studies |
Source: Crossject
Zeneo Midazolam for the acute treatment of epileptic seizures
Crossject recently announced that it has received regulatory approval to launch the bioequivalence study for Zeneo Midazolam (being developed for the acute treatment of epileptic seizures) in healthy volunteers. This puts it on track for the expected H218 EU filing and the H119 US filing.
According to the Centers for Disease Control (CDC), 2.9 million people have active epilepsy in the United States. The prevalence of epilepsy in Europe is 3.4 million with 20-30% having more than one seizure per month.1 The average seizure lasts less than two minutes2 but the longer a seizure does last the harder it is to stop with treatment and the greater the likelihood of complications. For seizures lasting 10-29 minutes, only 43% cease without treatment and once they reach 30 minutes in length (officially known as status epilepticus), only 7% cease without treatment, with 19% of affected patients dying.3
Forsgren L. et al., European Journal of Neurology 2005 Apr;12(4)245-53
Alford E et al., Journal of Pediatric Pharmacology and Therapeutics 2015;20(4):260-289
DeLorenzo R. et al., Epilepsia 1999 Feb;40(2):164-9
Optimally, the patient would be treated at home as the trip to the hospital can waste very valuable time. However, only one at-home treatment is approved in the US, a rectal gel version of diazepam, which is part of the benzodiazepine class along with midazolam. While rectal diazepam does work quickly, it is not patient friendly as it involves injecting a liquid inside the rectum of a patient while they are having a seizure, which may be convulsive. Nevertheless, rectal diazepam achieved over $100m in sales before going generic in 2010.
In Europe, a buccal form of midazolam, known as Buccolam, is marketed by Shire. It is a liquid that needs to be inserted slowly into the space between the gum and cheek, possibly not the most convenient way to administer a drug to someone with a convulsive seizure. According to EvaluatePharma, sales in 2015 were $18m, though Shire does not disclose sales specifically for that product, given its small size.
Crossject’s Zeneo Midazolam should have a similar profile to intramuscular and buccal midazolam, with a 5-10 minute onset but short duration of action, ideal for home use. It may even have an advantage over intramuscular auto-injectors in penetrating the muscle in high BMI patients, which it recently demonstrated in a positive 97-patient MRI study.
We currently assume approval in the US and EU in 2020 for the product, with pricing of €100 and €25 per dose, respectively (approximately the average price of Buccolam in Europe). Peak sales are estimated at €50.8m in the US (8% peak penetration) and €6.8m in the EU (12% peak penetration). Our penetration estimates are conservative due to the competitive and genericised nature of the market. We believe Crossject will require a marketing partner in the different regions. In terms of milestones, we model €2m upfront/approval milestones for EMA and FDA approval and a further €4m in commercial milestones. We estimate royalties of 20% for both the US and EU.
Valuation
We have adjusted our valuation to €87.4m or €9.91 per share, from €68.2m or €9.91 per share. Our total valuation increased mainly due to rolling forward our NPVs to 2017, extending our expected patent protection to 2036 following the announcement of four new patents, a higher net cash balance following the successful €5m rights offering and the €2.9m milestone payment related to Midazolam that was received from PIAVE. This was mitigated by a higher share count as the rights offering was dilutive. We expect to review our valuation upon completion of bioequivalence studies as well as the announcement of partnerships, especially in the US market.
Exhibit 2: Crossject valuation table
Product |
Main indication |
Probability of success |
Launch year |
WW peak sales (€m) |
Patent protection |
Royalty |
rNPV |
||||
Methotrexate |
Rheumatoid arthritis |
30% |
2020 |
€100 |
2036 |
20% |
€8.8 |
||||
Sumatriptan |
Acute migraine |
60% |
2019 |
€82 |
2036 |
20% |
€13.8 |
||||
Adrenaline |
Anaphylactic shock |
60% |
2020 |
€133 |
2036 |
25% US, 20% EU |
€34.8 |
||||
Midazolam |
Acute epileptic seizures |
60% |
2020 |
€58 |
2036 |
20% |
€9.7 |
||||
Hydrocortisone |
Acute adrenal crisis |
60% |
2020 |
€9 |
2036 |
20% |
€0.7 |
||||
Naloxone |
Opioid overdose |
60% |
2020 |
€14 |
2036 |
20% |
€1.1 |
||||
Apomorphine |
Parkinson's disease |
30% |
2020 |
€53 |
2036 |
20% |
€11.9 |
||||
Total |
|
|
|
|
€80.8 |
||||||
Cash and cash equivalents (Q416 + rights offering + PIAVE payment) (€m) |
€6.52 |
||||||||||
Total firm value (€m) |
€87.36 |
||||||||||
Total basic shares (m) |
8.81 |
||||||||||
Value per basic share (€) |
€9.91 |
||||||||||
Stock options (12/2016e, m) |
0.62 |
||||||||||
Weighted average exercise price (€) |
€2.68 |
||||||||||
Cash on exercise (€m) |
€1.67 |
||||||||||
Total firm value (€m) |
€89.03 |
||||||||||
Total number of shares (m) |
9.4 |
||||||||||
Diluted value per share (€) |
€9.44 |
||||||||||
Source: Edison Investment Research, Crossject reports
Financials
As of Q416, the company had €2.6m in cash. Subsequent to the end of the quarter, the company received a €2.9m milestone payment for the advancement of Midazolam and has also announced the completion of a €5m rights offering. We have lowered our expectations for SG&A expenses in 2017 and 2018 by €1.9m and €2.0m per year, respectively, due to continued control on that expense line. Between now and projected profitability in 2020, we forecast a total funding need of €20m (previously €35m). Note that we are not assuming recurring grants and subsides (such as around €3m in additional milestone payments from Bpifrance), other than R&D credits, at this stage for FY18 and beyond.
Exhibit 3: Financial summary
2014 |
2015 |
2016e |
2017e |
2018e |
|||
Year end 31 December |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
1,744 |
2,370 |
1,427 |
2,900 |
0 |
Cost of Sales |
0 |
(0) |
0 |
0 |
0 |
||
Gross Profit |
1,744 |
2,369 |
1,427 |
2,900 |
0 |
||
R&D Expenses |
(2,421) |
(3,077) |
(4,384) |
(4,800) |
(5,520) |
||
SG&A and Other Expenses |
(3,388) |
(4,808) |
(2,630) |
(2,841) |
(3,068) |
||
EBITDA |
|
|
(4,066) |
(5,516) |
(5,587) |
(4,741) |
(8,588) |
Operating Profit (before GW and except.) |
|
(5,108) |
(7,013) |
(7,291) |
(4,741) |
(8,588) |
|
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
||
Other |
(0) |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(5,108) |
(7,013) |
(7,291) |
(4,741) |
(8,588) |
||
Net Interest |
(36) |
(19) |
(38) |
(659) |
(1,058) |
||
Other |
(160) |
299 |
(429) |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(5,334) |
(6,720) |
(7,329) |
(5,399) |
(9,646) |
Profit Before Tax (FRS 3) |
|
|
(5,304) |
(6,732) |
(7,758) |
(5,399) |
(9,646) |
Tax |
968 |
1,045 |
1,095 |
1,440 |
1,656 |
||
Deferred tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(4,366) |
(5,675) |
(6,234) |
(3,959) |
(7,990) |
||
Profit After Tax (FRS 3) |
(4,336) |
(5,687) |
(6,663) |
(3,959) |
(7,990) |
||
Average Number of Shares Outstanding (m) |
6.7 |
6.7 |
7.3 |
9.0 |
9.4 |
||
EPS - normalised (c) |
|
|
(65.64) |
(85.33) |
(85.19) |
(43.99) |
(85.36) |
EPS - FRS 3 (€) |
|
|
(0.65) |
(0.86) |
(0.91) |
(0.44) |
(0.85) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
5,521 |
5,936 |
9,252 |
9,704 |
10,048 |
Intangible Assets |
2,327 |
2,330 |
2,506 |
2,506 |
2,506 |
||
Tangible Assets |
888 |
1,727 |
5,636 |
6,089 |
6,432 |
||
Other |
2,305 |
1,878 |
1,109 |
1,109 |
1,109 |
||
Current Assets |
|
|
12,853 |
7,943 |
4,997 |
9,811 |
6,477 |
Stocks |
0 |
761 |
398 |
398 |
398 |
||
Debtors |
1,926 |
1,991 |
1,966 |
1,966 |
1,966 |
||
Cash |
10,927 |
5,139 |
2,634 |
7,447 |
4,114 |
||
Other |
0 |
52 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(2,907) |
(3,261) |
(3,321) |
(2,566) |
(2,566) |
Creditors |
(2,907) |
(3,261) |
(2,566) |
(2,566) |
(2,566) |
||
Short term borrowings |
0 |
0 |
(755) |
0 |
0 |
||
Long Term Liabilities |
|
|
(982) |
(1,820) |
(4,645) |
(9,645) |
(14,645) |
Long term borrowings |
0 |
0 |
(3,235) |
(8,235) |
(13,235) |
||
Other long term liabilities |
(982) |
(1,820) |
(1,409) |
(1,409) |
(1,409) |
||
Net Assets |
|
|
14,484 |
8,797 |
6,284 |
7,304 |
(685) |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(3,163) |
(4,796) |
(4,403) |
(2,607) |
(6,528) |
Net Interest |
0 |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(4,770) |
(1,805) |
(6,065) |
(1,805) |
(1,805) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Financing |
17,873 |
0 |
3,961 |
4,980 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
483 |
(252) |
(755) |
0 |
||
Net Cash Flow |
9,940 |
(6,118) |
(6,759) |
(187) |
(8,333) |
||
Opening net debt/(cash) |
|
|
(2,468) |
(10,927) |
(5,139) |
1,357 |
788 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
0 |
||
Other |
(1,481) |
330 |
264 |
755 |
0 |
||
Closing net debt/(cash) |
|
|
(10,927) |
(5,139) |
1,357 |
788 |
9,122 |
Source: Edison Investment Research, Crossject reports
|
|
Research: Financials
S&U’s FY17 results showed continued strong growth in motor finance receivables with an increase of 33%. Competition has had some effect on cost of sales and mix change has been reflected in an expected increase in impairments but pre-tax profit growth was still above 20% and the outlook remains encouraging. The Aspen Bridging finance pilot may provide another avenue for growth while it is reassuring that management is taking a prudent approach in this new area.