Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: Healthcare
Photocure
Written by
Photocure |
A slower quarter |
Q315 results |
Pharma & biotech |
12 November 2015 |
Share price performance
Business description
Next event
Analysts
Photocure is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
Following a robust Q215, in which global in-market sales of Hexvix/Cysview grew 26% year-on-year, growth slowed in Q315 to 22%. Growth in the US also slowed, although Hexvix/Cysview revenues grew 42% compared to last year and is now available in 62 centres compared to 51 at the end of 2014. Importantly, the company has commenced patient enrolment in their label expansion trial, which could triple the size of the addressable market. We have lowered our near-term sales estimates as we take a more conservative view of Photocure’s organic growth rate.
Year end |
Revenue (NOKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
129.0 |
1.5 |
0.07 |
0.0 |
N/A |
N/A |
12/15e |
124.8 |
(16.9) |
(0.79) |
0.0 |
N/A |
N/A |
12/16e |
138.8 |
(10.1) |
(0.47) |
0.0 |
N/A |
N/A |
12/17e |
156.2 |
0.5 |
0.02 |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.
Hexvix/Cysview takes a little hit, but still growing
Q315 results for Hexvix/Cysview showed a sequential decline in sales, which is partly due to inventory fluctuations as well as seasonal weakness. Q3 is generally a seasonally weak quarter for healthcare procedures, which this year was likely exacerbated by an inventory drawdown. Global in-market sales of Hexvix/Cysview are up 22% compared to Q314, down from 26% year-on-year growth in Q215.
US market continues to be a key growth driver
US Hexvix/Cysview sales increased 42% compared to the year-ago period, although actual unit sales fell 5% due to a large order in Q314 from the National Cancer Institute (NCI). Importantly, the number of centres with permanent blue light cystoscopes installed increased to 62 from 51 at the end of 2014.
Hexvix/Cysview label expansion trial commences
In October, the company commenced enrolment in a 360 patient study in order to expand Hexvix Cysview use from initial diagnosis to surveillance. This has the potential to increase the addressable market from 250,000 to 1.2 million procedures in the US and from 300,000 to 750,000 procedures in the EU.
Valuation: NOK66 per basic share
We have lowered our valuation of Photocure to NOK1,420m or NOK66 per basic share (NOK62 per diluted share) from NOK1,523m or NOK71 per basic share (NOK67 per diluted share) as we take a more conservative view of Hexvix/Cysview’s near-term growth prospects, (which feed into lower peak sales forecasts and a lower valuation) following slower Q315 results. Key potential catalysts for the company will be partnerships for both Visonac and Cevira.
Continuing to build on a profitable foundation
Photocure currently markets the imaging agent known as Hexvix in the EU and Cysview in the US, which is approved globally for detecting and managing bladder cancer. It improves detection rates and helps prolong recurrence-free survival. The company recently announced the approval of its special protocol assessment (SPA) by the FDA for the Phase III registration programme for Cevira, which is an integrated drug/device combination for the treatment of patients with HPV-related diseases of the cervix. It has demonstrated statistically significant efficacy in patients with high-grade squamous intraepithelial lesions (HSIL), which has over 1m cases diagnosed annually in the US and EU and indicates a higher risk of cancer. Visonac is its Phase III-ready treatment for inflammatory acne, which could be used in those who fail or are unsuitable for isotretinoin and oral antibiotics, a two million-person market in the US and EU.
Exhibit 1: Photocure pipeline
Product |
Active Ingredient |
Indication |
Stage |
Upcoming catalyst |
Advantages over currently approved products |
Hexvix/Cysview |
Hexaminolevulinate hydrochloride (HAL) |
Detection and management of bladder cancer |
Market |
Continued revenue growth |
Improves ability to see cancerous lesions on the bladder. Improves recurrence-free survival |
Cevira |
Hexaminolevulinate hydrochloride (HAL) |
HPV-related diseases of the cervix |
Phase III |
Partnership potentially in 2016 |
Lower pre-term labour risk than surgical procedures |
Visonac |
Methyl aminolevulinate (MAL) |
Moderate-to-severe inflammatory acne |
Phase III |
Partnership potentially in 2016 |
Potential efficacy in refractory patients |
Source: Photocure
Q315 earnings
Following a robust Q215 earnings announcement, Hexvix/Cysview growth slowed in Q315, although part is likely due to inventory fluctuations rather than end-user sales. For example, within the Nordic region, year-over-year revenue growth for Hexvix/Cysview slowed from 19% in Q2 to 11% in Q3 although actual unit sales growth increased from 6% in Q2 to 14% in Q3 (see Exhibit 2). Photocure’s Nordic market share is 39% and Sweden continues to be a growth market with 21% unit sales growth over the first nine months of the year.
Exhibit 2: Hexvix/Cysview growth rates year-on-year
(%) |
Revenues |
Unit sales |
||
Region |
Q2 |
Q3 |
Q2 |
Q3 |
Nordic |
19 |
11 |
6 |
14 |
EU |
3 |
4 |
15 |
8 |
US |
118 |
42 |
55 |
(5) |
Global in-market |
26 |
22 |
15 |
8 |
Source: Photocure
US Hexvix/Cysview sales increased 42% compared to the year ago period, although actual unit sales fell 5% due to a large NCI order in Q314. Given that hospital penetration has increased 27% since Q314, one would expect growth through existing and new centres to provide enough of a tailwind so that there would not be a year-over-year decrease in units. However, the US continues to be a challenge due to the unattractive reimbursement profile for Hexvix/Cysview, despite data unequivocally supporting its use.
Partner revenue (EU) increased by only 4% due to inventory drawdowns following excessive stocking earlier in the year. On an underlying, unit sales growth basis, this line item increased 8% compared to the year-ago period.
Importantly, the company also announced that it has begun enrolment in a 360 patient study to obtain a label expansion into the surveillance market, with data expected in 2017. Currently, Hexvix/Cysview is used in the initial diagnosis and treatment of patients as part of the transurethral resection of the bladder (TURB) procedure. However, following TURB, patients will undergo surveillance in the form of cystoscopy examinations every three to nine months. So, while there are an estimated 250,000 TURB procedures in the US and another 300,000 in the EU, there are 1.2m surveillance procedures in the US and another 750,000 in the EU.
We currently model peak Hexvix/Cysview revenues to Photocure of NOK344m (~$40m) in 2020, which takes into account a label expansion in 2018 to include the surveillance market. This is down from our previous estimate of peak sales of NOK373m (~$43m). We have lowered our sales estimates for Hexvix/Cysview across the US, EU and Nordic markets to take into account the slower growth exhibited in Q315 and to take a more conservative stance on the future. We believe this estimate is reasonable given that the TURB market alone has a $400-500m market potential and the surveillance market is around triple the size.
Valuation
We have lowered our valuation of Photocure to NOK1,420m or NOK66 per basic share (NOK62 per diluted share) from NOK1,523m or NOK71 per basic share (NOK67 per diluted share) as we take a more conservative view of Hexvix/Cysview’s growth prospects following Q315 results. Key potential catalysts for the company will be partnerships for both Visonac and Cevira, which we currently expect to occur sometime in 2016, as discussions with potential partners are ongoing.
Exhibit 3: Photocure valuation
Product |
Main Indication |
Status |
Probability of commercialisation |
Launch year |
Peak sales (NOKm) |
Patent protection |
Economics |
rNPV (NOKm) |
Hexvix/Cysview |
Bladder cancer detection |
Market |
100% |
Launched |
344 |
2019-20 |
Fully owned – US and Nordics. Partner with Ipsen in EU (35% royalty). |
569 |
Cevira |
HPV-related diseases |
Phase III |
50% |
2020 |
2,399 |
2030 |
17.5% |
333 |
Visonac |
Acne |
Phase III |
60% |
2020 |
2,175 |
2028 |
17.5% |
379 |
Total |
|
|
|
|
|
|
|
1,281 |
Cash and cash equivalents (Q315) |
139 |
|||||||
Total firm value |
1,420 |
|||||||
Total basic shares (m) |
21.4 |
|||||||
Value per basic share (NOK) |
66 |
|||||||
Options (Q315, m) |
1.3 |
|||||||
Total number of shares (m) |
22.8 |
|||||||
Diluted value per share (NOK) |
62 |
|||||||
Source: Edison Investment Research, company reports
Financials
The Hexvix/Cysview franchise is profitable, with NOK23.1m in operating profits through 9M15, compared to NOK14.4m in the previous year. US revenue is the main growth driver, up 84% so far this year compared to last year. We have lowered our revenue forecasts due to this quarter’s results and now forecast low-teens annual revenue growth over the next two years, with group operating profit achieved in 2018 (we had been expecting break-even in 2017). With NOK139m in cash and the possibility for upfront and regulatory milestone payments, Photocure should have enough capital to meet its needs. However, this will partially depend on the level of upfront and milestone payments, as well as royalties from potential partners.
Exhibit 4: Financial summary
NOK000s |
2012 |
2013 |
2014 |
2015e |
2016e |
2017e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
133,823 |
83,616 |
128,952 |
124,754 |
138,762 |
156,159 |
Cost of Sales |
(9,405) |
0 |
(6,996) |
(7,904) |
(9,713) |
(10,931) |
||
Gross Profit |
124,418 |
83,616 |
121,956 |
116,850 |
129,049 |
145,227 |
||
Sales, General and Administrative Expenses |
(113,583) |
(114,657) |
(95,032) |
(111,538) |
(116,000) |
(120,640) |
||
Research and Development Expense |
(50,083) |
(33,976) |
(32,554) |
(28,644) |
(29,790) |
(30,982) |
||
EBITDA |
|
|
(39,248) |
(71,846) |
(5,630) |
(23,332) |
(16,741) |
(6,394) |
Operating Profit (before GW and except.) |
(39,248) |
(71,846) |
(5,630) |
(23,332) |
(16,741) |
(6,394) |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
(3,694) |
0 |
0 |
0 |
0 |
||
Operating Profit |
(39,248) |
(75,540) |
(5,630) |
(23,332) |
(16,741) |
(6,394) |
||
Net Interest |
8,236 |
8,688 |
7,157 |
6,388 |
6,643 |
6,909 |
||
Other |
(11,356) |
(14,015) |
(15,573) |
(10,950) |
(11,388) |
(11,844) |
||
Profit Before Tax (norm) |
|
|
(31,012) |
(63,158) |
1,527 |
(16,945) |
(10,098) |
515 |
Profit Before Tax (FRS 3) |
|
|
(42,368) |
(80,867) |
(14,046) |
(27,895) |
(21,486) |
(11,329) |
Tax |
890 |
8,204 |
(0) |
0 |
0 |
0 |
||
Deferred tax |
0 |
0 |
(0) |
(0) |
(0) |
(0) |
||
Profit After Tax (norm) |
(30,122) |
(54,954) |
1,527 |
(16,945) |
(10,098) |
515 |
||
Profit After Tax (FRS 3) |
(41,478) |
(72,663) |
(14,046) |
(27,895) |
(21,486) |
(11,329) |
||
Average Number of Shares Outstanding (m) |
21.3 |
21.2 |
21.3 |
21.5 |
21.7 |
21.9 |
||
EPS - normalised (NOK) |
|
|
(1.42) |
(2.59) |
0.07 |
(0.79) |
(0.47) |
0.02 |
EPS - FRS 3 (NOK) |
|
|
(2.79) |
(3.44) |
(0.66) |
(1.30) |
(0.99) |
(0.52) |
Dividend per share (NOK) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
104,902 |
104,759 |
76,512 |
70,852 |
68,694 |
68,704 |
Intangible Assets |
59,951 |
51,969 |
42,393 |
48,610 |
48,610 |
48,610 |
||
Tangible Assets |
4,111 |
3,681 |
3,056 |
2,431 |
273 |
284 |
||
Other |
40,840 |
49,109 |
31,063 |
19,811 |
19,811 |
19,811 |
||
Current Assets |
|
|
328,076 |
197,020 |
194,067 |
164,485 |
148,575 |
159,882 |
Stocks |
9,826 |
12,624 |
13,237 |
15,501 |
16,121 |
16,766 |
||
Debtors |
15,432 |
17,085 |
15,585 |
22,216 |
23,105 |
24,029 |
||
Cash |
302,818 |
167,258 |
165,245 |
126,767 |
109,348 |
119,087 |
||
Other |
0 |
53 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(51,089) |
(30,307) |
(27,466) |
(28,096) |
(28,096) |
(28,096) |
Creditors |
(51,089) |
(30,307) |
(27,466) |
(28,096) |
(28,096) |
(28,096) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(1,621) |
(2,296) |
(3,055) |
(3,674) |
(3,674) |
(3,674) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(1,621) |
(2,296) |
(3,055) |
(3,674) |
(3,674) |
(3,674) |
||
Net Assets |
|
|
380,268 |
269,176 |
240,058 |
203,566 |
185,498 |
196,817 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(54,927) |
(99,722) |
(6,088) |
(32,384) |
(19,481) |
7,593 |
Net Interest |
0 |
0 |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Capex |
0 |
0 |
(748) |
(10,996) |
(522) |
(543) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
0 |
0 |
0 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
9,073 |
4,518 |
4,138 |
2,485 |
2,584 |
2,688 |
||
Net Cash Flow |
(45,854) |
(95,204) |
(2,698) |
(40,895) |
(17,418) |
9,738 |
||
Opening net debt/(cash) |
|
|
(355,173) |
(302,818) |
(167,258) |
(165,245) |
(126,767) |
(109,348) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
(1) |
0 |
(1) |
2 |
0 |
0 |
||
Other |
(6,500) |
(40,356) |
686 |
2415 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(302,818) |
(167,258) |
(165,245) |
(126,767) |
(109,348) |
(119,087) |
Source: Company accounts, Edison Investment Research
|