Nicox — NCX-4251 setback sharpens focus on NCX-470

Nicox (Euronext Growth: ALCOX)

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Research: Healthcare

Nicox — NCX-4251 setback sharpens focus on NCX-470

Nicox reported that the Mississippi Phase IIb study assessing NCX-4251 against placebo in patients with acute exacerbations of blepharitis did not meet its primary or secondary efficacy endpoints. Although we reduce our NCX-4251 probability of success and push out its potential launch timelines, this does not substantially affect our valuation of the company, as we continue to view the primary driver (c 80% of our rNPV valuation) as the NCX-470 programme in glaucoma. Top-line data from Mont Blanc, the first of two Phase III NCX-470 studies in glaucoma and ocular hypertension, are expected in Q222. We believe that NCX-470, if approved, could become the most potent single-agent glaucoma drug on the market in terms of intraocular pressure (IOP) lowering efficacy.

Written by

Pooya Hemami

Analyst - Healthcare

Healthcare

Nicox

NCX-4251 setback sharpens focus on NCX-470

NCX-4251 trial update

Pharma & biotech

24 September 2021

Price

€3.29

Market cap

€122m

$1.17/€

Net cash (€m) at 30 June 2021

18.5

Shares in issue

37.1m

Free float

98%

Code

COX

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.1

(13.1)

(9.5)

Rel to TA-100

0.7

(15.1)

(34.5)

52-week high/low

€5.88

€3.07

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

Q222

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

Nicox reported that the Mississippi Phase IIb study assessing NCX-4251 against placebo in patients with acute exacerbations of blepharitis did not meet its primary or secondary efficacy endpoints. Although we reduce our NCX-4251 probability of success and push out its potential launch timelines, this does not substantially affect our valuation of the company, as we continue to view the primary driver (c 80% of our rNPV valuation) as the NCX-470 programme in glaucoma. Top-line data from Mont Blanc, the first of two Phase III NCX-470 studies in glaucoma and ocular hypertension, are expected in Q222. We believe that NCX-470, if approved, could become the most potent single-agent glaucoma drug on the market in terms of intraocular pressure (IOP) lowering efficacy.

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

8.9

(17.2)

(0.46)

0.0

N/A

N/A

12/22e

12.0

(16.1)

(0.43)

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.

Signals of efficacy still shown in Mississippi trial

While the primary efficacy endpoints were not met, some signals of potential efficacy were still observed. There were statistically significant differences versus placebo in the change from baseline in the composite score of the three primary blepharitis signs and symptoms at days 8, 11 and 15 (p=0.01) after 14 days of therapy. Nicox expects to meet with the FDA in early 2022, then provide an update on the next development steps. We have pushed back the potential commercialisation timeline to 2026 (from 2025, previously) and have reduced the programme’s probability of success in our valuation to 30% (from 40%, previously).

NCX-470 promises best-in-class IOP lowering efficacy

NCX-470 (0.065%) has already shown statistical superiority in IOP lowering to prostaglandin F2α (PGA) drug latanoprost in Phase II, delivering up to 1.4mmHg further IOP reduction at day 28. If efficacy is met in the two Phase III trials (Mont Blanc and Denali), NCX-470 could potentially become the first non-combination glaucoma drug product in pivotal studies with statistical superiority to a standalone PGA drug, which we believe should support its market adoption and competitiveness.

Valuation: rNPV of €318m

Nicox reported H121 gross cash and equivalents of €36.5m, which we believe should fund its operations into H222. The NCX-4251 setback, slightly offset by minor FX changes, reduces our rNPV pipeline valuation to €317.7m, from €325.0m previously. Altogether, we now obtain an rNPV of €317.7m, down from €325m previously. After adding €18.5m in H121 net cash, we obtain an equity value of €336.3m, or €9.06 per share.

NCX-4251 did not meet Phase IIb primary endpoints

Nicox reported on 23 September that NCX-4251 did not meet its primary and secondary endpoints in its Mississippi Phase IIb study assessing once-daily dosed NCX-4251 (a proprietary ophthalmic formulation of fluticasone propionate nanocrystals) against placebo in patients with acute exacerbations of blepharitis. The study enrolled 224 patients at multiple US clinical centres, and its primary outcome measure was the proportion of patients achieving complete cure in all three of the selected eyelid-specific signs and symptoms of blepharitis (margin redness, debris and discomfort) at day 15. The two secondary endpoints were measures of the signs and symptoms of dry eye.

While the above endpoints were not met, the company reported a signal of potential efficacy as there was a numerical improvement over placebo in the primary outcome measure of complete cure (score of 0 on a 0–3 scale) in eyelid redness, debris and discomfort at day 15. NCX 4251 also showed a statistically significant difference versus placebo in the exploratory endpoint of change from baseline in the composite score of the same key signs and symptoms at day 8 (p=0.03), day 11 (p=0.01) and day 15 (p=0.01). The company indicates that it will analyse the data and determine what key signs and symptoms of focus for future development. NCX 4251 was also found to be safe and well-tolerated over the 14 days of treatment, with no serious adverse events (AEs). All of the AEs in the treatment arm were mild and there were no discontinuations due to an AE. The company plans to have a meeting with the FDA in early 2022 to discuss a future development plan for NCX-4251, after which it plans to provide an update on the next steps.

The company previously anticipated that the Mississippi study would count as one of the two pivotal trials required by the FDA for New Drug Application (NDA) submission if the primary endpoint had been met. Given that the primary and secondary Mississippi endpoints were not met and the reduced visibility on next NCX-4251 development steps, we have pushed back the potential commercialisation timeline to 2026 (from 2025, previously) to allow for an additional clinical trial if needed. We have also reduced the programme’s probability of success in our valuation to 30% (from 40%, previously) given that there is increased uncertainty about the treatment’s effectiveness in acute blepharitis (considering that the primary endpoints were not met).

Financials and valuation

Nicox reported that at 30 June 2021 it had €36.5m in cash and equivalents versus €42.0m at 31 March 2021. It also reported €18.0m in gross H121 debt consisting of €16.0m in the form of a bond financing agreement with Kreos Capital and a €2m credit agreement with Société Générale and LCL, guaranteed by the French State and granted in August 2020. We have maintained our local currency financial forecasts (for instance, in US dollars for the US market) for the projected period (through to 2024) but, as stated above, have pushed back our NCX-4251 launch timeline to 2026. We have also maintained our existing assumptions for all of Nicox’s remaining programmes (with NCX-470 being the lead driver of our valuation), and have slightly adjusted our FX assumptions (from $1.18/€ to $1.17/€).

We continue to estimate that Nicox has sufficient funds on hand to operate into H222. We continue to model a €10m fund-raising in 2022, followed by an additional €10m in 2023 and €20m in 2024 (all fund-raisings modelled as illustrative debt). Following the anticipated NCX-470 launch in H224, we do not expect Nicox to require additional capital as its royalty streams plus NCX-470 sales should enable it to start achieving consistent positive operating income starting in FY25.

Exhibit 1: Nicox rNPV assumptions

Product contribution

Indication

Stage

NPV
(€m)

Probability of success

rNPV
(€m)

rNPV/
share (€)

Launch year

Peak sales (€m) in 2030

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

Glaucoma

Phase III ongoing

397.8

50%

191.8

5.17

2024

312

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

Glaucoma

Phase III

192.8

35%

62.7

1.69

2026

159

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

Glaucoma

Phase III ongoing

9.3

50%

4.5

0.12

2024

2.8*

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

Acute blepharitis

Phase IIb ongoing

45.1

30%

9.7

0.26

2025

44.2

Vyzulta royalties from Bausch & Lomb

Glaucoma

Commercial

94.3

100%

94.3

2.54

2017

18.4*

Zerviate royalties from Eyevance and others

Allergic conjunctivitis

Commercial

20.5

100%

20.5

0.55

2020

5*

Corporate costs

(65.7)

100%

(65.7)

(1.77)

Total

694.2

317.7

8.56

Net cash (H121) excluding lease liabilities

18.5

18.5

0.50

Total equity value

712.7

336.3

9.06

FD shares outstanding (000) (31 August 2021)

37,125

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

While our rNPV valuation for NCX-4251 has decreased (also due to the reduced probability of success to 30%), the overall effect on our total Nicox valuation is relatively limited given that NCX-470 accounts for c 80% of our total rNPV.

Altogether, we now obtain an rNPV of €317.7m, down from €325.0m previously. After adding €18.5m in H121 net cash, we obtain an equity value of €336.3m, or €9.06 per 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

8,852

11,959

17,493

23,244

Cost of Sales

(690)

(1,405)

(1,516)

(1,586)

(2,407)

(4,859)

(5,930)

Gross Profit

4,027

6,855

12,907

7,266

9,552

12,635

17,314

General & Administrative

(9,506)

(7,666)

(6,677)

(6,837)

(7,097)

(10,432)

(23,063)

Net Research & Development

(15,491)

(16,883)

(11,991)

(16,700)

(17,350)

(12,350)

(7,350)

Amortisation of intangible assets

0

(659)

(1,252)

(1,162)

(1,141)

(1,121)

(1,101)

Operating profit before exceptionals

(20,970)

(18,353)

(7,013)

(17,432)

(16,036)

(11,267)

(14,200)

EBITDA

 

 

(20,718)

(17,230)

(5,270)

(15,917)

(14,544)

(9,808)

(12,727)

Depreciation & other

(252)

(464)

(491)

(354)

(351)

(339)

(372)

Operating Profit (before amort. and except.)

(20,970)

(17,694)

(5,761)

(16,270)

(14,895)

(10,147)

(13,099)

Exceptionals including asset impairment

302

(6,115)

(6,621)

0

0

0

0

Other

0

0

0

0

0

0

0

Operating Profit

(20,668)

(23,809)

(12,382)

(16,270)

(14,895)

(10,147)

(13,099)

Net Interest

2,390

1,690

(4,436)

(901)

(1,170)

(2,151)

(3,070)

Profit Before Tax (norm)

 

 

(18,580)

(16,004)

(10,197)

(17,171)

(16,065)

(12,298)

(16,169)

Profit Before Tax (FRS 3)

 

 

(18,278)

(22,778)

(18,070)

(18,333)

(17,206)

(13,418)

(17,269)

Tax

(113)

3,856

(28)

0

0

0

0

Profit After Tax and minority interests (norm)

(18,693)

(12,148)

(10,225)

(17,171)

(16,065)

(12,298)

(16,169)

Profit After Tax and minority interests (FRS 3)

(18,391)

(18,922)

(18,098)

(18,333)

(17,206)

(13,418)

(17,269)

Average Number of Shares Outstanding (m)

29.6

30.3

33.7

37.2

37.4

37.5

37.7

EPS - normalised (€)

 

 

(0.63)

(0.40)

(0.30)

(0.46)

(0.43)

(0.33)

(0.43)

EPS - normalised and fully diluted (€)

 

(0.63)

(0.40)

(0.30)

(0.46)

(0.43)

(0.33)

(0.43)

EPS - (IFRS) (€)

 

 

(0.62)

(0.62)

(0.54)

(0.49)

(0.46)

(0.36)

(0.46)

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

88,587

87,423

86,401

85,509

Intangible Assets

71,397

72,120

64,848

63,686

62,545

61,424

60,323

Tangible Assets

25,628

27,517

24,829

24,833

24,810

24,909

25,118

Investments in long-term financial assets

15,473

11,023

68

68

68

68

68

Current Assets

 

 

26,092

32,146

52,521

36,106

26,118

26,978

28,446

Short-term investments

0

0

0

0

0

0

0

Cash

22,059

28,102

47,195

29,030

18,593

16,325

17,171

Other

4,033

4,044

5,326

7,075

7,525

10,653

11,275

Current Liabilities

 

 

(8,069)

(9,828)

(15,405)

(15,505)

(12,586)

(15,156)

(12,301)

Creditors

(8,069)

(7,751)

(10,116)

(10,216)

(7,297)

(9,867)

(7,012)

Short term borrowings

0

(2,077)

(5,289)

(5,289)

(5,289)

(5,289)

(5,289)

Long Term Liabilities

 

 

(16,868)

(23,681)

(26,051)

(26,051)

(34,351)

(44,351)

(64,351)

Long term borrowings

0

(9,045)

(12,687)

(12,687)

(22,687)

(32,687)

(52,687)

Other long-term liabilities

(16,868)

(14,636)

(13,364)

(13,364)

(11,664)

(11,664)

(11,664)

Net Assets

 

 

113,653

109,297

100,810

83,137

66,604

53,872

37,303

CASH FLOW

Operating Cash Flow

 

 

(21,533)

(17,741)

(956)

(16,906)

(18,939)

(9,680)

(15,504)

Net interest and financing income (expense)

2,390

1,690

(4,436)

(901)

(1,170)

(2,151)

(3,070)

Tax

0

0

0

0

0

0

0

Capex

(268)

(95)

(20)

(358)

(328)

(437)

(581)

Acquisitions/disposals

0

0

0

0

0

0

0

Financing

0

11,290

13,321

0

0

0

0

Dividends

0

0

0

0

0

0

0

Net Cash Flow

(19,411)

(4,856)

7,909

(18,165)

(20,437)

(12,268)

(19,154)

Opening net debt/(cash)

 

 

0

(37,532)

(28,003)

(29,287)

(11,122)

9,315

21,583

HP finance leases initiated

0

0

0

0

0

0

0

Other

56,943

(4,673)

(6,625)

0

0

0

0

Closing net debt/(cash)

 

 

(37,532)

(28,003)

(29,287)

(11,122)

9,315

21,583

40,737

Lease debt

N/A

1,527

1,099

1,099

1,099

1,099

1,099

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

(37,532)

(26,476)

(28,188)

(10,023)

10,414

22,682

41,836

Source: Company reports, Edison Investment Research


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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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Egdon Resources — Wressle exceeds expectations

The Wressle-1 well has delivered above management’s expectation, producing at 884bod with a further c 80boed of gas. With a 30% working interest in Wressle, Egdon has achieved a significantly higher 289boed net versus its target of 150bod, with the full potential of the well yet to be tested. Further onshore drilling remains dependent on successful farm-outs, while offshore, the 3D seismic surveys on the Shell operated Resolution and Endeavour discoveries will now be delayed beyond the previously rescheduled February 2022 date. Egdon has also made progress with its geothermal projects, having identified the Dukes Wood-1 oil well for recompletion for geothermal heat production.

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