Nicox — Funded through key milestones

Nicox (Euronext Growth: ALCOX)

Last close As at 18/05/2024

EUR0.37

−0.01 (−1.32%)

Market capitalisation

EUR19m

More on this equity

Research: Healthcare

Nicox — Funded through key milestones

Nicox announced on 9 December that it has raised €15m in gross proceeds (€13.7m net) through a private placement and restructured its bond financing agreement with Kreos Capital. Management expects these initiatives to extend Nicox’s cash runway to Q423, and thus comfortably past the top-line Mont Blanc Phase III study data readout for NCX-470 in glaucoma, expected in Q123. We expect the Mont Blanc data release to be a potential key catalyst for the company. The improved funding visibility through this milestone helps reduce a financial overhang and may draw investors’ attention more strongly towards NCX-470’s opportunity as a potential best-in-class single-agent glaucoma therapy.

Written by

Pooya Hemami

Analyst - Healthcare

Healthcare

Nicox

Funded through key milestones

Financing update

Pharma & biotech

16 December 2021

Price

€2.56

Market cap

€110m

$1.13/€

Pro-forma net cash (€m) at 31 October 2021 (post-financing)

26.9

Shares in issue

43.1m

Free float

98%

Code

COX

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(20.0)

(29.0)

(39.7)

Rel (local)

(17.3)

(31.8)

(50.9)

52-week high/low

€5.04

€2.56

Business description

Based in France, Nicox develops therapeutics for the treatment of ocular conditions. Lead development candidate NCX-470 is in Phase III studies for the treatment of glaucoma. Nicox also receives licence revenue from its partners for its FDA-approved drugs Vyzulta and Zerviate.

Next events

Mont Blanc Phase III NCX-470 top-line results

Q123

Denali Phase III NCX-470 confirmatory study top-line results

2023

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Maxim Jacobs, CFA

+1 646 653 7027

NicoxNicox is a research client of Edison Investment Research Limited

Nicox announced on 9 December that it has raised €15m in gross proceeds (€13.7m net) through a private placement and restructured its bond financing agreement with Kreos Capital. Management expects these initiatives to extend Nicox’s cash runway to Q423, and thus comfortably past the top-line Mont Blanc Phase III study data readout for NCX-470 in glaucoma, expected in Q123. We expect the Mont Blanc data release to be a potential key catalyst for the company. The improved funding visibility through this milestone helps reduce a financial overhang and may draw investors’ attention more strongly towards NCX-470’s opportunity as a potential best-in-class single-agent glaucoma therapy.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/19

8.3

(16.0)

(0.40)

0.0

N/A

N/A

12/20

14.4

(10.2)

(0.30)

0.0

N/A

N/A

12/21e

5.8

(20.6)

(0.51)

0.0

N/A

N/A

12/22e

9.0

(16.2)

(0.37)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Normalised 2020 figures differ from reported amounts primarily due to the €6.9m loss reported following the divestment of Nicox’s holdings in VISUfarma.

Review of key financing terms

The equity financing consisted of a private placement of 6m shares at €2.50 per share, with attached warrants for up to €5.1m additional shares at €3.21 per share. The Kreos amendment allows Nicox to reduce its cash-out over the next two years by €10.4m compared to its previous agreement largely by extending the interest-only portion of 70% of the loan to July 2023 (from January 2022). The overall loan maturity was also extended by c 18 months to early 2026.

Strengthened funding runway

Nicox reported cash and equivalents of €31.6m and debt excluding lease liabilities of c €18.1m at 31 October. Given the €13.7m net equity raise and €0.34m in debt restructuring commissions, we calculate a pro forma net cash position of €26.9m (gross cash of €45.0m). We believe Nicox has sufficient funds to operate into 2024 and it will need to raise an additional €45m (down from €55m previously), modelled as illustrative debt, before potentially launching NCX-470 in H225.

Valuation: Higher rNPV but reduced value per share

After rolling forward our estimates and adjusting forex assumptions, we now obtain a €294.0m rNPV valuation (vs €282.8m previously). After adding pro-forma net cash of €26.9m described above, we obtain an equity value of €320.9m, or €7.44 per basic share. This is lower than our prior per-share valuation of €8.00 due to the increased shares outstanding following the equity offering. After considering the potential dilutive effect of options, warrants and convertible debt and their effects on net cash, our fully diluted valuation becomes €6.68 per fully diluted share.

Capital raise and debt restructuring extend runway

On 9 December Nicox announced it has raised €15m in gross proceeds (€13.7m net) through a private placement of shares (and attached warrants) and it restructured its bond financing agreement with Kreos Capital. Excluding any potential proceeds from the exercise of the warrants, management expects these initiatives to extend Nicox’s cash runway to Q423, and thus comfortably past the top-line Mont Blanc Phase III study data readout for NCX-470 in glaucoma, expected in Q123.

As a reminder, lead candidate NCX-470 is based on the company’s proprietary nitric oxide (NO)-donating platform, which combines an NO-donating molecule with an analogue of established prostaglandin F2α (PGA) drug bimatoprost, thereby providing an additional mechanism for the drug to reduce intraocular pressure (IOP). We continue to forecast potential NCX-470 commercialisation in H225.

Review of terms of equity issue and Kreos debt restructuring

The equity financing consisted of a private placement of 6m shares at €2.50 per share, with attached share purchase warrants included that permit the purchase of €5.1m additional shares for up to five years at an exercise price of €3.21 per share purchase warrant. The full exercise of these attached share purchase warrants would provide €16.4m in additional proceeds.

The company indicates the full proceeds of the private placement will be allocated to NCX 470 development. Approximately 40% will be applied to complete the Mont Blanc trial, c 33% to continue to progress the Denali NCX-470 confirmatory Phase III trial (study completion still guided before YE23), and c 27% to fund certain pharmaceutical activities (stability and manufacturing validation) required in preparation for the New Drug Application (NDA) filing with the US FDA if Phase III study data are positive. If the warrants are exercised, which we believe would be likely in the event of positive Phase III data, the company believes the received proceeds should be sufficient to complete the US NDA and finance pre-commercial activities ahead of potential launch.

As it relates to the company’s debt financing agreement with Kreos Capital, the company had €16.1m in outstanding debt with Kreos as of end-October and was scheduled to only pay interest- on the loan until January 2022, and then start paying principal and interest thereafter in order to fully repay the loan by July 2024. As part of the restructuring, 70% of the company’s Kreos debt1 will be restructured to remain interest-only until July 2023 (vs January 2022 previously) and this portion’s maturity will be extended to January 2026; the interest rate remains unchanged at 9.25%. For the remaining 30% of the Kreos loan (€5.1m), €3.3m will be structured as convertible bonds (at 9.25% interest rate) maturing in January 2026 and convertible to Nicox shares at €3.67/share, and €1.8m will be structured similarly (ie same rate and maturity) but will not be convertible to Nicox shares. Nicox will also pay a restructuring commission of €0.34m to Kreos.

Financials

Nicox reported cash and equivalents of €31.6m (excluding the proceeds of the equity financing) as of 31 October and outstanding debt of €19.4m (consisting of the €16.1m Kreos loan, a €2m French-state guaranteed credit agreement with Société Générale and Le Crédit Lyonnais and €1.3m in lease liabilities). Given the €13.7m net proceeds from the equity offering and after considering the €0.34m restructuring commission, we calculate a pro forma net cash position of €26.9m as of 31 October (gross cash of €45.0m).

Following the equity issue and Kreos bond restructuring, we now estimate the company’s cash on hand should be sufficient to maintain operations into 2024. Our financial model no longer assumes a €10m fundraise in 2022, but we believe it will need to raise an additional €45m (down from €55m previously), before potentially launching NCX-470 for the treatment of elevated IOP in patients with glaucoma. We assume the company will raise €10m in 2023, €20m in 2024 and €15m in 2025 (all these fundraisings are modelled as illustrative debt). Our projections do not include any potential proceeds from the exercise of options or warrants, which if exercised, would lower our funding forecasts accordingly.

Following the anticipated NCX-470 launch in H225, we do not expect Nicox to require additional capital as we expect its royalty streams plus NCX-470 sales should enable it to start achieving consistent positive operating income starting in H226.

Valuation

We have made minor adjustments to our rNPV valuation for Nicox by rolling forward our estimates and adjusting forex assumptions (we now assume $1.13/€ vs $1.16/€ previously). Our local-currency sales and profitability forecasts are unchanged, although we did increase our FY21 net financial expense by €0.34m to consider the restructuring commission paid to Kreos.

Exhibit 1: Nicox SA rNPV assumptions

Product contribution

Indication

Stage

NPV
(€m)

Probability of success

rNPV
(€m)

rNPV/basic share (€)

Launch year

Peak sales (€m) in 2031

NCX-470 (net of R&D and SG&A costs) in US Market

Glaucoma

Phase III ongoing

332.1

50%

158.8

3.68

H225

336

NCX-470 (net of R&D and SG&A costs) in Europe and unpartnered regions

Glaucoma

Phase III

162.2

35%

54.0

1.25

2027

171

NCX-470 license fees from Ocumension (China and other)

Glaucoma

Phase III ongoing

9.3

50%

4.5

0.10

2024

3.1*

NCX-4251 (net of R&D and SG&A costs) sales and license fees/royalties

Acute blepharitis

Phase IIb ongoing

47.4

30%

9.3

0.22

2026

55.4

Vyzulta royalties from Bausch & Lomb

Glaucoma

Commercial

99.2

100%

99.2

2.30

2017

21.2*

Zerviate royalties from Eyevance and others

Allergic conjunctivitis

Commercial

21.8

100%

21.8

0.51

2020

5.5*

Corporate costs

(53.6)

100%

(53.6)

(1.24)

Total

618.5

294.0

6.82

Net cash (Oct 2021 pro forma) excluding lease liabilities

26.9

26.9

0.62

Total equity value

645.3

320.9

7.44

Basic shares outstanding (000)

43,138

Outstanding options and warrants and convertible debt adjustments (000)

8,058

FD shares outstanding (000)

51,197

Source: Edison Investment Research. Note: *Reflects net license and royalties received by Nicox and not commercial sales by licensee.

We now obtain a €294.0m rNPV valuation for Nicox (vs €282.8m previously). After updating for pro-forma October 2021 net cash of €26.9m described above, we obtain an equity value of €320.9m, or €7.44 per basic share. This is lower than our prior per-share valuation of €8.00 due to the added shares outstanding following the equity financing. After considering the potential dilutive effect of options, warrants and convertible debt and their effects on net cash, our fully diluted valuation would be €6.68 per fully diluted share.

Exhibit 2: Financial summary

€’000s

2018

2019

2020

2021e

2022e

2023e

2024e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

4,717

8,260

14,423

5,761

9,010

11,709

21,648

Cost of Sales

(690)

(1,405)

(1,516)

(1,681)

(2,349)

(3,029)

(5,606)

Gross Profit

4,027

6,855

12,907

4,080

6,661

8,680

16,042

General & Administrative

(9,506)

(7,666)

(6,677)

(6,520)

(6,751)

(10,044)

(18,213)

Net Research & Development

(15,491)

(16,883)

(11,991)

(17,731)

(15,150)

(15,550)

(11,350)

Amortisation of intangible assets

0

(659)

(1,252)

(1,184)

(1,178)

(1,157)

(1,136)

Operating profit before exceptionals

(20,970)

(18,353)

(7,013)

(21,355)

(16,418)

(18,072)

(14,657)

EBITDA

 

 

(20,718)

(17,230)

(5,270)

(19,795)

(14,946)

(16,633)

(13,206)

Depreciation & other

(252)

(464)

(491)

(376)

(293)

(282)

(315)

Operating Profit (before amort. and except.)

 

(20,970)

(17,694)

(5,761)

(20,171)

(15,240)

(16,914)

(13,521)

Exceptionals including asset impairment

302

(6,115)

(6,621)

(18)

0

0

0

Other

0

0

0

0

0

0

0

Operating Profit

(20,668)

(23,809)

(12,382)

(20,189)

(15,240)

(16,914)

(13,521)

Net Interest

2,390

1,690

(4,436)

(415)

(937)

(1,169)

(2,150)

Profit Before Tax (norm)

 

 

(18,580)

(16,004)

(10,197)

(20,586)

(16,177)

(18,084)

(15,671)

Profit Before Tax (FRS 3)

 

 

(18,278)

(22,778)

(18,070)

(21,788)

(17,355)

(19,241)

(16,808)

Tax

(113)

3,856

(28)

24

0

0

0

Profit After Tax and minority interests (norm)

(18,693)

(12,148)

(10,225)

(20,562)

(16,177)

(18,084)

(15,671)

Profit After Tax and minority interests (FRS 3)

(18,391)

(18,922)

(18,098)

(21,764)

(17,355)

(19,241)

(16,808)

Average Basic Number of Shares Outstanding (m)

29.6

30.3

33.7

40.1

43.4

43.7

44.1

EPS - normalised (€)

 

 

(0.63)

(0.40)

(0.30)

(0.51)

(0.37)

(0.41)

(0.36)

EPS - normalised and fully diluted (€)

 

 

(0.63)

(0.40)

(0.30)

(0.51)

(0.37)

(0.41)

(0.36)

EPS - (IFRS) (€)

 

 

(0.62)

(0.62)

(0.54)

(0.54)

(0.40)

(0.44)

(0.38)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

112,498

110,660

89,745

91,247

90,022

88,876

87,966

Intangible Assets

71,397

72,120

64,848

65,759

64,580

63,423

62,287

Tangible Assets

25,628

27,517

24,829

25,419

25,373

25,384

25,610

Investments in long-term financial assets

15,473

11,023

68

69

69

69

69

Current Assets

 

 

26,092

32,146

52,521

48,589

33,775

25,399

29,104

Short-term investments

0

0

0

0

0

0

0

Cash

22,059

28,102

47,195

43,075

27,796

18,685

22,205

Other

4,033

4,044

5,326

5,514

5,979

6,714

6,899

Current Liabilities

 

 

(8,069)

(9,828)

(15,405)

(15,106)

(14,939)

(13,144)

(11,202)

Creditors

(8,069)

(7,751)

(10,116)

(12,497)

(12,330)

(10,535)

(8,593)

Short term borrowings

0

(2,077)

(5,289)

(2,609)

(2,609)

(2,609)

(2,609)

Long Term Liabilities

 

 

(16,868)

(23,681)

(26,051)

(29,105)

(29,105)

(39,105)

(59,105)

Long term borrowings

0

(9,045)

(12,687)

(15,368)

(15,368)

(25,368)

(45,368)

Other long-term liabilities

(16,868)

(14,636)

(13,364)

(13,737)

(13,737)

(13,737)

(13,737)

Net Assets

 

 

113,653

109,297

100,810

95,625

79,754

62,027

46,763

CASH FLOW

Operating Cash Flow

 

 

(21,533)

(17,741)

(956)

(16,932)

(14,095)

(17,649)

(13,788)

Net interest and financing income (expense)

2,390

1,690

(4,436)

(415)

(937)

(1,169)

(2,150)

Tax

0

0

0

0

0

0

0

Capex

(268)

(95)

(20)

(118)

(247)

(293)

(541)

Acquisitions/disposals

0

0

0

0

0

0

0

Financing

0

11,290

13,321

13,536

0

0

0

Dividends

0

0

0

0

0

0

0

Net Cash Flow

(19,411)

(4,856)

7,909

(3,929)

(15,279)

(19,111)

(16,480)

Opening net debt/(cash)

 

 

0

(37,532)

(28,003)

(29,287)

(25,167)

(9,888)

9,223

HP finance leases initiated

0

0

0

0

0

0

0

Other

56,943

(4,673)

(6,625)

(191)

0

0

0

Closing net debt/(cash)

 

 

(37,532)

(28,003)

(29,287)

(25,167)

(9,888)

9,223

25,703

Lease debt

N/A

1,527

1,099

971

971

971

971

Closing net debt/(cash) inclusive of IFRS 16 lease debt

(37,532)

(26,476)

(28,188)

(24,196)

(8,917)

10,194

26,674

Source: Company reports, Edison Investment Research

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New Zealand

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United Kingdom

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United States

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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

1185 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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