A year of steady market expansion
In 2016, Photocure executed on its multipronged growth strategy to increase the market opportunity for its core product, Hexvix/Cysview. The product, known as Hexvix outside North America and Cysview within, is the photoactive compound hexaminolevulinate hydrochloride (HAL), which is selectively metabolised in bladder cancer cells. When combined with blue light cystoscopy, the product illuminates the cancer cells, improving the ability of doctors to identify and remove the legions during a transurethral resection of the bladder (TURB). The growth strategy for the company includes both the expansion of the product into new territories, as well as expanding the treatable market through approval of the product for the bladder cancer surveillance market. The product is well established in its home Nordic territory, where it is used in approximately 40% of TURB procedures, but the primary growth driver for internal sales has been expansion into the US. The product is currently marketed by Ipsen in the rest of Europe, and licences were signed in 2016 with partners in Canada (BioSyent) and Australia (Juno).
Photocure is also developing two other products based on photoactivatable technology similar to that used in Hexvix/Cysview. Cevira is a drug/device combination for the treatment of HPV-related dysplasias of the cervix using the same light sensitive molecule as Hexvix/Cysview and an intravaginal light device. The treatment successfully demonstrated efficacy controlling high-grade squamous intraepithelial lesions, and is currently Phase III-ready, pending Photocure finding a development partner. Visonac is a treatment for acne. It could potentially be used in patients who are refractory to other treatments. It is similarly Phase III-ready pending a partnership.
Q416 and full year results: Steady end user growth
Photocure reported revenue of NOK144m for 2016, representing 7% growth over 2015. This was driven by 13% year-on-year growth of revenues from Hexvix/Cysview (of NOK131m), offset by lower milestone revenue (NOK7.4m vs NOK12.4m). End user unit sales were either flat (in the Nordic market) or up (5% for partner sales and 21% for US sales) for the year.
Total sales of Hexvix/Cysview for Q416 were flat on a quarter-on-quarter basis, despite 7% end user growth for the period. These fluctuations are largely due to lumpiness in the purchasing patterns of Photocure’s partners and distributers. This is exemplified by the sales in the Nordic region, which were down 22% year-on-year, although this is largely due to strong purchasing in Q415. The product had a slow quarter of unit sales in Q316 (1,984 units), which the company attributed to vacancies in its salesforce. This issue appears to have been resolved and unit sales were up 23% in Q416 over Q316, bringing the product back to previous levels (approximately 2,400 units per quarter).
Exhibit 1: Q416 and full year Hexvix/Cysview sales
Q416 |
Revenue (NOKm) |
Y-o-y |
Q-o-q |
Units |
Y-o-y |
Q-o-q |
Hexvix sales Nordic |
9,593 |
-22% |
10% |
2,450 |
-3% |
23% |
Cysview sales US |
8,033 |
9% |
3% |
1,042 |
5% |
-4% |
Total own sales |
17,626 |
-10% |
7% |
3,492 |
-1% |
14% |
Partner sales |
13,986 |
3% |
-8% |
10,816 |
4% |
5% |
Total Hexvix/Cysview |
31,611 |
-5% |
0% |
14,308 |
3% |
7% |
FY16 |
|
|
|
|
|
|
Hexvix sales Nordic |
39,040 |
1% |
- |
9,224 |
0% |
- |
Cysview sales US |
30,465 |
32% |
- |
4,116 |
21% |
- |
Total own sales |
69,504 |
13% |
- |
13,340 |
5% |
- |
Partner sales |
61,460 |
14% |
- |
43,334 |
5% |
- |
Total Hexvix/Cysview |
130,964 |
13% |
- |
56,674 |
5% |
- |
Exhibit 2: Hexvix/Cysview internal sales (NOK 000s)
|
|
|
|
Unit sales for the US were slightly slower in Q416 compared to the previous quarter (38 fewer units or 4%), and only two additional blue light cystoscopes were placed in US hospitals over the period (bringing the total to 83). Photocure continues to build the case for the utility of the product and present it to US physicians, although we believe the biggest factor to revitalise growth in the US will be expansion into the surveillance market (see below).
SG&A for Q4 was in line with previous quarters at NOK30.3m (compared to NOK30.7m in Q3). Management comments indicate an increase in SG&A in 2017 and 2018 due in large part to increasing the number of salespeople in the United States. This will enable them to penetrate additional metropolitan areas and lay the groundwork in preparation for the surveillance market launch. We have increased our forecast SG&A for 2017 from NOK132.9m to NOK155.8m, increasing to NOK194.8m in 2018.
R&D expenses were up slightly (to NOK5.4m from NOK3.9m), although these remain small compared to other programmes. The company received the final Galderma payment (NOK32.8m), which boosted operational cash flows to NOK49.9m for the quarter and NOK19.2m for the year, leaving it with NOK169m in cash. We believe that this balance should be sufficient to finance the company to profitability from the Hexvix/Cysview product following entry into the surveillance market in 2019 (previously 2018).
We previously reported on the two recent publications on the technology,and the inclusion of blue light cystoscopy in the bladder cancer guidelines published by the American Urological Association (AUA) and the Society of Urologic Oncology (SUO). The case has been further bolstered by Photocure’s presentation at the SUO annual meeting of the latest data from the ongoing prospective study of 338 bladder cancer patients from nine centres using Hexvix/Cysview. The study investigated patients who received white light cystoscopy, blue light cystoscopy, or a combination of the two. The addition of blue light to the standard white light procedure increased the detection frequency to 98% compared to 73%. Perhaps most impressively, the detection of carcinoma in situ (CIS), which is difficult to identify under white light, was almost doubled from 52% to 97%. Unfortunately, the statistics on these measurements were not provided.
Exhibit 3: Detection rates from registry study using different cystoscopy techniques
Detection method |
Any malignancy |
Any papillary |
Low grade papillary |
High grade papillary |
CIS |
White light alone |
73% |
87% |
82% |
87% |
52% |
Blue light alone |
89% |
89% |
97% |
91% |
91% |
Combination |
98% |
99% |
98% |
99% |
97% |
Perhaps the greatest driver of potential future revenue to the company is the expansion of Hexvix/Cysview into the bladder cancer surveillance market. There are 1.2m surveillance procedures performed in the US, compared to only 250,000 TURB procedures. The company reported in February 2017 that its ongoing Phase III clinical study in the US was fully enrolled. At least 300 bladder cancer patients have entered the trial, and over 100 have received multiple cystoscopies with Hexvix/Cysview. The primary endpoint of the trial is the detection of malignancy with blue light cystoscopy that was missed under white light. Top-line data is expected from this 100-patient cohort in mid-2017.
