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Research: Healthcare
Paion
Written by
Paion |
Pivotal colonoscopy results mid-year |
Q116 results |
Pharma & biotech |
17 May 2016 |
Share price performance
Business description
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Analysts
Paion is a research client of Edison Investment Research Limited |
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Paion is approaching an important catalyst, with results from the US colonoscopy Phase III trial of remimazolam due to report mid-year. Filing for US approval is expected to be end 2017 at the earliest, as recruitment in the confirmatory bronchoscopy trial continues to be moderate. Partnering discussions for Japan are not expected to conclude until H216 at the earliest; we assume Japan filing in H217. We trim our valuation to €193m or €3.81/share (vs €203m or €4.01/share), with a launch date 12 months later in the US and Japan partly offset by lower forecast expenditure.
Year end |
Revenue (€m) |
PBT* (€m) |
EPS* (c) |
DPS (c) |
P/E (x) |
Yield (%) |
12/14 |
3.5 |
(11.6) |
(22.9) |
0.0 |
N/A |
N/A |
12/15 |
0.1 |
(34.0) |
(55.7) |
0.0 |
N/A |
N/A |
12/16e |
0.1 |
(30.6) |
(51.9) |
0.0 |
N/A |
N/A |
12/17e |
0.1 |
(10.5) |
(18.8) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
US colonoscopy Phase III results mid-year
Recruitment in the US colonoscopy Phase III completed in April, with headline data expected mid-year. Procedural sedation for colonoscopies is a key market opportunity for remimazolam, with ~20 million outpatient procedures/year in the US.
Changes to boost bronchoscopy recruitment
Paion has introduced a number of measures to increase recruitment in the US bronchoscopy Phase III, which has been moderate to date. Most importantly, the protocol has been amended to allow inclusion of patients taking benzodiazepines or opioids, which are often used to relieve anxiety and breathlessness in respiratory disease. The trial has been reduced from 460 to 420 patients by reducing the size of the midazolam arm, which does not affect the primary endpoint. Completion of recruitment could be delayed into 2017, with US filing at end 2017 at the earliest.
Japan filing on track, subject to partnering/funding
Paion is well placed to file for a general anaesthesia indication for remimazolam in Japan, following a positive pre-NDA meeting with the PMDA (Japanese regulator), which regarded the non-clinical and clinical data packages as complete for filing. Paion is in discussions with potential partners in Japan, but these discussions are not expected to conclude before H216. We estimate that Paion could potentially file for approval in Japan in H217, subject to partnering or raising funds to self-file.
Valuation: €193m, funds or partner needed in 2017
We trim our valuation to €193m or €3.81/share (vs €203m or €4.01/share), with the launch in the US and Japan 12 months later (2019) partly offset by lower spending (including €26m on R&D in FY16). Cash at 31 March of €25.6m is sufficient to fund operations to end Q117 and complete the Phase III bronchoscopy study. Paion advised a further €10m would be required up to US filing (~end 2017) and €10m more to US approval (~end 2018). Paion may self-commercialise remimazolam in the US, which could lead to 45% profit margins, but would require further funding of €30m. Partnering deals could provide some or all of this funding.
Exhibit 1: Financial summary
€000s |
2014 |
2015 |
2016e |
2017e |
||
Year end 31 December |
||||||
PROFIT & LOSS |
||||||
Revenue |
|
|
3,456 |
61 |
100 |
100 |
Cost of sales |
(4) |
0 |
0 |
0 |
||
Gross profit |
3,452 |
61 |
100 |
100 |
||
R&D expenditure |
(11,799) |
(29,385) |
(26,000) |
(6,000) |
||
General, administrative & selling |
(3,702) |
(5,729) |
(4,900) |
(4,800) |
||
Other |
411 |
965 |
51 |
51 |
||
Operating profit |
(11,639) |
(34,088) |
(30,749) |
(10,649) |
||
Depreciation and amortisation |
(93) |
0 |
(100) |
(100) |
||
Share-based payments |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
EBITDA |
|
|
(11,546) |
(34,088) |
(30,649) |
(10,549) |
Operating profit (before GW and except) |
|
(11,546) |
(34,088) |
(30,649) |
(10,549) |
|
Net interest |
(66) |
42 |
50 |
20 |
||
Profit before tax (norm) |
|
|
(11,612) |
(34,046) |
(30,599) |
(10,529) |
Profit before tax (reported) |
|
|
(11,704) |
(34,046) |
(30,699) |
(10,629) |
Tax |
2,468 |
5,834 |
4,290 |
990 |
||
Profit after tax (norm) |
(9,143) |
(28,212) |
(26,309) |
(9,539) |
||
Profit after tax (reported) |
(9,236) |
(28,212) |
(26,409) |
(9,639) |
||
Average number of shares outstanding (m) |
39.9 |
50.7 |
50.7 |
50.7 |
||
EPS - normalised (c) |
|
|
(22.9) |
(55.7) |
(51.9) |
(18.8) |
EPS - reported (c) |
|
|
(23.2) |
(55.7) |
(52.1) |
(19.0) |
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 |
|
|
3,516 |
3,417 |
3,317 |
3,217 |
Intangible assets |
3,440 |
3,362 |
3,287 |
3,212 |
||
Tangible assets |
76 |
56 |
31 |
6 |
||
Refund from assumption of dev costs |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Current assets |
|
|
63,032 |
40,051 |
13,742 |
9,203 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
467 |
0 |
0 |
25 |
||
Cash |
58,912 |
32,680 |
6,371 |
1,807 |
||
Other |
3,653 |
7,371 |
7,371 |
7,371 |
||
Current liabilities |
|
|
(3,924) |
(7,901) |
(7,901) |
(7,901) |
Trade payables |
(3,338) |
(7,332) |
(7,332) |
(7,332) |
||
Short-term borrowings |
0 |
0 |
0 |
0 |
||
Provisions |
(306) |
(224) |
(224) |
(224) |
||
Finance lease liabilities |
0 |
0 |
0 |
0 |
||
Other current liabilities |
(254) |
(305) |
(305) |
(305) |
||
Current deferred income |
(26) |
(39) |
(39) |
(39) |
||
Long-term liabilities |
|
|
(17) |
(6) |
(6) |
(5,006) |
Long-term borrowings |
0 |
0 |
0 |
(5,000) |
||
Provisions |
0 |
0 |
0 |
0 |
||
Long-term deferred income |
(17) |
(6) |
(6) |
(6) |
||
Deferred taxes |
0 |
0 |
0 |
0 |
||
Other long-term liabilities |
0 |
0 |
0 |
0 |
||
Net assets |
|
|
62,607 |
35,562 |
9,153 |
(486) |
CASH FLOW |
||||||
Operating cash flow |
|
|
(12,044) |
(28,212) |
(30,649) |
(10,574) |
Net interest |
(66) |
43 |
50 |
20 |
||
Tax |
0 |
2,575 |
4,290 |
990 |
||
Capex |
0 |
0 |
0 |
0 |
||
Purchase of intangibles |
(26) |
(33) |
0 |
0 |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Equity Financing |
57,618 |
22 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Net cash flow |
45,482 |
(25,605) |
(26,309) |
(9,564) |
||
Opening net debt/(cash) |
|
|
(13,292) |
(58,912) |
(32,680) |
(6,371) |
Effect of exchange rate changes |
(72) |
(66) |
0 |
0 |
||
Other |
210 |
(560) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(58,912) |
(32,680) |
(6,371) |
3,193 |
Source: Edison Investment Research, Paion accounts
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