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Research: Healthcare
As we await the FDA verdict on ByFavo (remimazolam) for procedural sedation (PS) due 5 July 2020, Paion announced in June that it will provide remimazolam for compassionate use, supplied free, to sedate five intensive care COVID-19 patients in Milan. This has no immediate commercial implications but shows how remimazolam might be further developed. This may lead to published ICU case reports and we expect remimazolam to be an alternative to midazolam and propofol. Paion announced Q1 gross cash at €18m, down from €18.8m on 31 December, with a €15m milestone due on anticipated FDA approval. Paion has funds and loan facilities until 2022. Our indicative value remains at €270m.
Written by
Paion |
Compassionate COVID-19 ICU use in Italy |
Q120 results and update |
Pharma & biotech |
9 June 2020 |
Share price performance
Business description
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Paion is a research client of Edison Investment Research Limited |
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As we await the FDA verdict on ByFavo (remimazolam) for procedural sedation (PS) due 5 July 2020, Paion announced in June that it will provide remimazolam for compassionate use, supplied free, to sedate five intensive care COVID-19 patients in Milan. This has no immediate commercial implications but shows how remimazolam might be further developed. This may lead to published ICU case reports and we expect remimazolam to be an alternative to midazolam and propofol. Paion announced Q1 gross cash at €18m, down from €18.8m on 31 December, with a €15m milestone due on anticipated FDA approval. Paion has funds and loan facilities until 2022. Our indicative value remains at €270m.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
2.77 |
(12.45) |
(15.9) |
0.0 |
N/A |
N/A |
12/19 |
8.00 |
(9.35) |
(10.8) |
0.0 |
N/A |
N/A |
12/20e |
20.30 |
2.42 |
3.7 |
0.0 |
69.7 |
N/A |
12/21e |
4.21 |
(20.88) |
(31.2) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding exceptional items.
US approval likely on 5 July with sales via Acacia
The FDA review for PS will now complete by 5 July 2020 (PDUFA). Cosmo (Paion’s US partner) sublicensed US sales to Acacia, a company now selling Barhemsys for post-operative recovery. Cosmo will loan Acacia €25m on ByFavo approval to support marketing; Cosmo announced a €10m equity investment in June. We expect that Paion will receive a €15m milestone on US approval and a 20% royalty on sales. ByFavo launch is expected in Q420, but royalties will only become significant from 2021 onwards. In Japan, remimazolam (Anerem) is approved for general anaesthesia (GA) with Mundipharma planning a mid-2020 launch. Remimazolam is under EMA review for PS; the outcome is now likely in H121. The GA Phase III (NCT03661489) closed enrolment. This will allow analysis in H220, with possible launch after an abbreviated EMA application in Q421.
COVID-19 compassionate use by leading hospital
In an interesting development, a leading Italian hospital, the San Raffaele Hospital in Milan, is using Remimazolam as a sedative for five COVID-19 ICU patients. The usual sedation agents, propofol and midazolam, are in short supply; ICU use is not a current clinical application and compassionate use products are not sold commercially. However, we potentially expect published case reports and other data to emerge. Midazolam accumulates with prolonged use, which can lead to delirium, so remimazolam might have advantages for longer-term patients. As the number of SARS-CoV-2 infections falls, this specific ICU demand will drop, but more general ICU use might be a way to further expand the market in future.
Valuation: Remains at €270m with cash until H221
Paion has stated that it aims to become a profitable company within five years. It has cash (€18m at 31 March), expected milestones in 2020 (€20m) and EIB loan facilities (€20m) to cover planned expenses to H221 plus potential royalties, assuming US ByFavo approval. The company is evaluating the economics of creating a direct salesforce in key European markets. Our value remains at €270m.
Exhibit 1: Financial summary
€'000s |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
||||||
PROFIT & LOSS |
||||||
Revenue |
|
|
2,766 |
8,000 |
20,295 |
4,207 |
Cost of sales |
0 |
0 |
(120) |
(1,284) |
||
Gross profit |
2,766 |
8,000 |
20,175 |
2,924 |
||
Operating profit |
(12,711) |
(9,346) |
2,210 |
(21,096) |
||
Depreciation and amortisation |
(256) |
(120) |
(214) |
(214) |
||
Share-based payments |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
EBITDA |
|
|
(12,455) |
(9,226) |
2,424 |
(20,882) |
Operating profit (before amort. and except.) |
|
|
(12,455) |
(9,226) |
2,424 |
(20,882) |
Net Interest |
6 |
(122) |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(12,449) |
(9,348) |
2,424 |
(20,882) |
Profit before tax (reported) |
|
|
(12,449) |
(9,448) |
2,230 |
(21,076) |
Tax |
2,510 |
2,432 |
0 |
0 |
||
Profit after tax (norm) |
(9,939) |
(6,916) |
2,424 |
(20,882) |
||
Profit after tax (reported) |
(9,939) |
(7,016) |
2,230 |
(21,076) |
||
Average number of shares outstanding (m) |
62.5 |
63.9 |
66.0 |
67.0 |
||
EPS - normalised (c) |
|
|
(15.9) |
(10.8) |
3.7 |
(31.2) |
EPS - reported (c) |
|
|
(15.9) |
(11.0) |
3.4 |
(31.5) |
Dividend per share (c) |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
Gross margin (%) |
NA |
NA |
NA |
NA |
||
EBITDA margin (%) |
NA |
NA |
NA |
NA |
||
Operating margin (before GW and except.) (%) |
NA |
NA |
NA |
NA |
||
BALANCE SHEET |
||||||
Fixed assets |
|
|
2,286 |
2,262 |
2,068 |
1,874 |
Intangible assets |
2,212 |
2,137 |
1,943 |
1,749 |
||
Tangible assets |
74 |
46 |
46 |
46 |
||
Refund from assumption of dev costs |
0 |
0 |
0 |
0 |
||
Other |
0 |
79 |
79 |
79 |
||
Current assets |
|
|
22,037 |
22,650 |
23,048 |
12,165 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
1,500 |
500 |
0 |
464 |
||
Cash |
17,227 |
18,787 |
22,252 |
10,905 |
||
Other |
3,311 |
3,363 |
796 |
796 |
||
Current liabilities |
|
|
(3,501) |
(10,179) |
(3,800) |
(3,800) |
Trade payables |
(2,218) |
(4,843) |
(2,843) |
(2,843) |
||
Short-term borrowings |
0 |
(4,354) |
0 |
0 |
||
Provisions |
(630) |
(956) |
(956) |
(956) |
||
Other current liabilities |
(654) |
(26) |
0 |
0 |
||
Long-term liabilities |
|
|
0 |
0 |
0 |
(10,000) |
Long-term borrowings |
0 |
0 |
0 |
(10,000) |
||
Provisions |
0 |
0 |
0 |
0 |
||
Long-term deferred income |
0 |
0 |
0 |
0 |
||
Deferred taxes |
0 |
0 |
0 |
0 |
||
Other long-term liabilities |
0 |
0 |
0 |
0 |
||
Net assets |
|
|
20,822 |
14,733 |
21,316 |
240 |
CASH FLOW |
||||||
Operating cash flow |
|
|
(16,547) |
(5,274) |
944 |
(21,326) |
Net interest |
5 |
(8) |
0 |
0 |
||
Tax |
3,729 |
2,435 |
2,567 |
0 |
||
Capex |
0 |
(15) |
(20) |
(20) |
||
Purchase of intangibles |
0 |
0 |
0 |
0 |
||
Acquisitions/disposals |
(13) |
1 |
0 |
0 |
||
Equity Financing |
5,214 |
0 |
4,354 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
4,421 |
(4,380) |
10,000 |
||
Net cash flow |
(7,612) |
1,560 |
3,465 |
(11,346) |
||
Opening net debt/(cash) |
|
|
(24,839) |
(17,227) |
(14,433) |
(22,252) |
Effect of exchange rate changes |
(0) |
0 |
0 |
0 |
||
Other |
0 |
(4,354) |
4,354 |
(10,000) |
||
Closing net debt/(cash) |
|
|
(17,227) |
(14,433) |
(22,252) |
(905) |
Source: Edison Investment Research, company accounts
|
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Research: Investment Companies
Finsbury Growth & Income Trust (FGT) has been managed by Nick Train since January 2001. Given the economic uncertainty due to the global COVID-19 pandemic, he stresses the importance of determining which companies will survive and thrive, and which could ultimately fail. The manager also seeks to invest in firms that can take advantage of the upsurge in digital and software services, as technology is advancing at an accelerating pace. While Train rarely initiates new holdings in the fund, in recent months he has added a position in premium mixer producer Fever-Tree, taking advantage of a significant pullback in its share price. FGT has a very strong performance record and has outpaced the broad UK market over the last one, three, five and 10 years.