Newron Pharmaceuticals — Evenamide safety trial underway

Newron Pharmaceuticals (SIX: NWRN)

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Research: Healthcare

Newron Pharmaceuticals — Evenamide safety trial underway

Newron is focusing on its novel schizophrenia drug, Evenamide, and on a further Xadago study. The Evenamide preclinical studies required by the FDA have been successfully completed. A four-week, 120-patient Phase II safety study is now underway to report in Q121; Newron notes that Phase III could start in Q221. Discussions with Zambon on a Xadago dyskinesia study are progressing. Newron drew down a €7.5m EIB loan in April (a €15m loan facility remains) and had €39m cash at end December 2019. Newron has cash well into 2022. Our indicative value remains at CHF121m.

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Healthcare

Newron Pharmaceuticals

Evenamide safety trial underway

Evenamide update

Pharma & biotech

26 August 2020

Price

CHF2.13

Market cap

CHF38m

€1.05/CHF; $1.03/CHF; $1.08/€

Cash and investments (€m) at 31 Dec 2019

39.2

Shares in issue

17.85m

Free float

99.6%

Code

NWRN

Primary exchange

SIX

Secondary exchange

XETRA

Share price performance

%

1m

3m

12m

Abs

41.1

15.5

(64.4)

Rel (local)

40.8

10.9

(66.1)

52-week high/low

CHF7.69

CHF1.34

Business description

Newron Pharmaceuticals is CNS-focused. Xadago for Parkinson’s disease is sold in Europe, Japan and the US. Evenamide, a novel schizophrenia therapy, may start Phase III trials from Q221.

Next events

H1 report

15 September 2020

Evenamide Phase II outcome

Q121

Analysts

Dr John Savin MBA

+44 (0)20 3077 5700

Dr Susie Jana

+44 (0)20 3077 5700

Newron Pharmaceuticals is a research client of Edison Investment Research Limited

Newron is focusing on its novel schizophrenia drug, Evenamide, and on a further Xadago study. The Evenamide preclinical studies required by the FDA have been successfully completed. A four-week, 120-patient Phase II safety study is now underway to report in Q121; Newron notes that Phase III could start in Q221. Discussions with Zambon on a Xadago dyskinesia study are progressing. Newron drew down a €7.5m EIB loan in April (a €15m loan facility remains) and had €39m cash at end December 2019. Newron has cash well into 2022. Our indicative value remains at CHF121m.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

4.03

(15.01)

(0.84)

0.0

N/A

N/A

12/19

7.04

(20.16)

(1.13)

0.0

N/A

N/A

12/20e

5.59

(14.47)

(0.81)

0.0

N/A

N/A

12/21e

6.67

(20.19)

(1.13)

0.0

N/A

N/A

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

Evenamide in new safety study, pivotal move in Q221

Newron is focusing development work onto Evenamide for schizophrenia. A four-week exploratory safety trial (Study 008) in patients with chronic schizophrenia, as requested by the FDA, is underway (NCT04461119). This plans to use three US sites, 11 hospitals in India and one UK site. It aims to be completed by late January 2021. As a 120-patient outpatient study, it should not be severely affected by COVID-19; 40 patients have been enrolled to date. The randomised trial has three arms: a 7.5mg dose twice per day (bid), a 15mg bid dose and placebo (bid). The endpoint is safety with secondary efficacy endpoints. All patients have psychotic symptoms despite taking an established therapy. Newron then hopes to start two pivotal studies in Q221. These comprise Study 003 to alleviate partial symptoms alongside current anti-psychotic agents plus Study 004 in patients who are treatment refractory to clozapine. Clozapine is currently the most effective anti-psychotic agent, but about 30–50% of patients become resistant to the therapy giving no further treatment options.

Xadago’s further trial plus potential novel therapies

Xadago is a marketed product that faces competition from established generic products like rasagiline. Extending its indications into relief of levodopa-induced dyskinesia in Parkinson’s disease would add value. Newron wishes to run the study and will provide 50% of the funding (up to €10m) with the licensee, Zambon, funding the remainder. Agreement is said to be close and a trial could start in 2021 with possible approval from 2023. In April, the US sublicensee changed to Supernus; this may boost growth due to a larger salesforce. Newron is seeking to in-license novel products targeting the central and peripheral nervous systems.

Valuation: Evenamide partnering or funding needed

Newron had €39m cash in December and drew a further €7.5m EIB loan in April. There is sufficient cash and available funding, according to Newron, well into 2022. Our model indicates an unchanged value of about CHF121m (CHF6.8/share).

Exhibit 1: Financial summary

€000s

2018

2019

2020e

2021e

Year-end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

4,025

7,038

5,590

6,669

Cost of Sales

0

0

0

0

Gross Profit

4,025

7,038

5,590

6,669

EBITDA

 

 

(14,931)

(20,707)

(13,757)

(19,593)

Operating Profit (before amort. and except.)

 

 

(14,967)

(20,899)

(13,963)

(19,616)

Intangible Amortisation

(11)

0

0

0

Exceptionals

0

0

0

0

Other

0

0

0

0

Operating Profit

(14,978)

(20,899)

(13,963)

(19,616)

Net Interest

(41)

737

(507)

(572)

Profit Before Tax (norm)

 

 

(15,008)

(20,162)

(14,470)

(20,189)

Profit Before Tax (reported)

 

 

(15,019)

(20,162)

(14,470)

(20,189)

Tax

(16)

(45)

0

0

Profit After Tax (norm)

(15,024)

(20,207)

(14,470)

(20,188)

Profit After Tax (reported)

(15,035)

(20,207)

(14,470)

(20,189)

Average Number of Shares Outstanding (m)

17.8

17.8

17.8

17.8

EPS - normalised (c)

 

 

(84.20)

(113.24)

(81.09)

(113.13)

EPS - (reported) (€)

 

 

(0.84)

(1.13)

(0.81)

(1.13)

Dividend per share

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

487

342

342

332

Intangible Assets

30

20

20

10

Tangible Assets

106

116

116

116

Investments

351

206

206

206

Current Assets

 

 

59,512

59,946

49,912

40,674

Stocks

0

0

0

0

Debtors

15,659

20,783

19,783

19,783

Cash

43,853

39,163

30,129

20,891

Other

0

0

0

0

Current Liabilities

 

 

(4,432)

(5,595)

(7,081)

(8,081)

Creditors

(4,432)

(5,595)

(7,081)

(8,081)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(731)

(17,895)

(25,395)

(40,395)

Long term borrowings

0

(16,749)

(24,249)

(39,249)

Other long-term liabilities

(731)

(1,146)

(1,146)

(1,146)

Net Assets

 

 

54,836

36,798

17,778

(7,470)

CASH FLOW

Operating Cash Flow

 

 

(15,954)

(22,210)

(16,484)

(24,189)

Net Interest

(78)

71

0

0

Tax

0

0

0

0

Capex

(40)

(51)

(50)

(50)

Acquisitions/disposals

0

0

0

0

Financing

51

0

7,500

15,000

Other

3,002

16,619

0

0

Dividends

0

0

0

0

Net Cash Flow

(13,019)

(5,571)

(9,034)

(9,239)

Opening net debt/(cash)

 

 

(60,081)

(43,853)

(22,414)

(5,880)

HP finance leases initiated

0

0

0

0

Other

(3,209)

(15,868)

(7,500)

(15,000)

Closing net debt/(cash)

 

 

(43,853)

(22,414)

(5,880)

18,358

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Newron Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Newron Pharmaceuticals. 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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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).

Australia

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.

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

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

General disclaimer and copyright

This report has been commissioned by Newron Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by Newron Pharmaceuticals. 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).

Australia

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.

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

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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