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Research: Healthcare
Pixium Vision provided an update on its 9M20 cash flow results, which are broadly in line with H120 trends. The company reported a 9M20 operating cash outflow of €4.2m and a gross cash position of €13.3m at the end of the quarter. We believe Pixium’s funds on hand should be sufficient to support its ongoing operations into Q421, thus including at least several months of initial ramp-up of the upcoming PRIMAvera pivotal study on the Prima bionic vision system (BVS).
Pixium Vision |
Q3 results in line, awaiting pivotal study approval |
Quarterly update |
Healthcare equipment |
29 October 2020 |
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Business description
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Pixium Vision is a research client of Edison Investment Research Limited |
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Pixium Vision provided an update on its 9M20 cash flow results, which are broadly in line with H120 trends. The company reported a 9M20 operating cash outflow of €4.2m and a gross cash position of €13.3m at the end of the quarter. We believe Pixium’s funds on hand should be sufficient to support its ongoing operations into Q421, thus including at least several months of initial ramp-up of the upcoming PRIMAvera pivotal study on the Prima bionic vision system (BVS).
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
1.6 |
(7.7) |
(0.42) |
0.0 |
N/A |
N/A |
12/19 |
1.8 |
(9.8) |
(0.44) |
0.0 |
N/A |
N/A |
12/20e |
1.7 |
(8.6) |
(0.28) |
0.0 |
N/A |
N/A |
12/21e |
1.6 |
(11.0) |
(0.25) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Awaiting Prima pivotal study regulatory approval
Pixium continues to expect European regulatory approval to begin the pivotal study before year-end 2020. We expect implantations for this registration-enabling study will start in H121 and could lead to EU commercialisation in H223. Pixium is in discussions with regulatory authorities to explore the possibility of conducting this study in parallel in Europe and the US, which, if accepted by the FDA, could lead to a US launch earlier than our baseline estimate of H225.
Targeting severe dry-AMD patients
Prima seeks to address a largely unmet market indication, advanced dry age-related macular degeneration involving geographic atrophy. 18-month data from the European feasibility study suggest that the Prima system, enhanced with second-generation augmented reality (AR) glasses and improved analytics, can provide between three and seven lines of improvement on the Landolt visual acuity (VA) scale. We believe this level of amelioration should provide functional benefits (such as recognizing shapes and symbols) and potentially improve patient independence.
Valuation: Raising rNPV to €115.4m
We have updated our valuation by rolling forward our estimates and adjusting our FX assumptions (to use a $1.18/€ rate versus our prior $1.12/€ assumption). Our sales forecasts and post-2021 expense assumptions in local currencies are unchanged. We now obtain a pipeline rNPV (enterprise value excluding net cash) of €115.4m versus €105.9m previously. After including €5.5m in estimated Q320 pro forma net cash (excluding lease liabilities), we obtain an equity valuation of €120.9m, or €2.82 per share (versus €2.73 previously). We continue to assume that Pixium will need to raise €37.5m in funds between Q420 and year-end 2023, modelled as illustrative debt, to bring Prima to commercial launch. We expect that part of this requirement will be fulfilled using the remaining (or unused) €6.25m in tranches from the ESGO funding facility.
Financials review
Pixium’s operating cash flows were generally in line with H120 trends. As stated in our June Outlook report, the COVID-19 pandemic resulted in a pause in R&D, clinical activities and other operating expenses in H120. While many activities have since resumed, including the European Prima feasibility trial (PRIMA-FS), announced on 8 June, with further visual rehabilitation of implanted patients, the end-result was a significant year-on-year decrease in operating cash outflow. The 9M20 operating cash flow loss was €4.21m, a 45% y-o-y decrease. Given that the reported H120 operating cash flow loss was reported as €2.79m, we estimate that the Q320 operating cash outflow was c €1.42m. We expect that Q420 expenses will trend higher than Q320 given the gradual winding up to a more normalised expense run rate for Pixium as of mid-year 2020. After making minor adjustments to our H220 and 2021 forecasts, we estimate that the firm’s 2020 operating cash burn rate (excluding net interest) will be €6.2m and that the 2021 operating cash burn rate will be €9.7m.
As highlighted in our July flash note, Pixium was very active on the financing front in Q320. In addition to completing a €7.3m (gross) capital increase (14.68m shares at €0.50/share) in July, the company took out a €2.5m state-guaranteed loan (from Bpifrance and Pixium’s commercial bank, CIC), along with €2.3m in a repayable advance and a further €0.5m grant (both in connection with the ‘Sight Again’ research funding programme supported by Bpifrance). Pixium also repaid its entire venture loan liability to Kreos Capital, which we estimate at c €2m (the precise payment or liability was not specified). Altogether, the company’s gross cash balance at 30 September 2020 was €13.3m. We believe these funds on hand are sufficient to support Pixium’s ongoing operations into Q421, thus including at least a few months of initial ramp-up of the upcoming PRIMAvera pivotal study. In addition, the company still has €6.25m in unused tranches available from the ESGO funding facility and management states that its cash on hand plus the ESGO financing will allow Pixium to be financed at least until the end of 2021.
The company did not provide an updated account of its formal balance sheet liabilities as of Q320, so our estimate for Q320 net cash is subject to uncertainty. We estimate Q320 pro forma gross debt at c €7.8m, by starting with our assumed H120 gross debt of €5.86m (excluding €1.2m in lease liabilities) and adding the €2.5m state-guaranteed loan and €2.3m repayable advance, and then subtracting the c €2m Kreos liability (due to the repayment) and also reducing the outstanding ESGO convertible debt by €0.88m (given that between 30 June and 12 October, approximately this amount has been converted to equity). After including Q320 gross cash of €13.3m, we estimate Q320 pro forma net cash of c €5.5m.
We continue to assume that Pixium will need to raise €37.5m in funds between Q420 and year-end 2023, modelled as illustrative long-term debt, to complete the PRIMAvera pivotal study, all EU-related regulatory and preparatory commercial activities, and bring Prima to commercial launch. We expect that part of this requirement will be fulfilled using the remaining (or unused) €6.25m in tranches from the ESGO funding facility. All together, we model that Pixium will raise a further €2.5m in the remaining months of 2020, €12.5m in both 2021 and 2022, and €10m in 2023 (all these amounts are shown as long-term debt for illustrative purposes).
Valuation
Our valuation of Pixium Vision is based on an rNPV approach, employing a 12.5% cost of capital, based on the Prima opportunity in dry age-related macular degeneration (AMD). We continue to apply a 20% probability of success estimate for Prima in AMD in our model. We have updated our valuation by rolling forward our estimates and adjusting our FX assumptions (to use a $1.18/€ rate versus our prior $1.12/€ assumption). Our sales forecasts and post-2021 expense assumptions in local currencies are unchanged. We now obtain a pipeline rNPV (enterprise value excluding net cash) of €115.4m versus €105.9m previously.
After including €5.5m in estimated Q320 net cash (excluding lease liabilities), we obtain an equity valuation of €120.9m, or €2.82 per share (versus €2.73 previously).
Exhibit 1: Pixium Vision rNPV assumptions
Product contribution |
Indication |
Status |
NPV (€m) |
Probability of success |
rNPV (€m) |
rNPV/ |
Launch year |
Peak WW sales (€m) |
|||
Prima (net of R&D and SG&A costs) |
Age-related macular degeneration with geographic atrophy |
Human feasibility trials |
1,017.7 |
20% |
196.5 |
4.58 |
H223 (EU) and H225 (US) |
1,046 in 2029 |
|||
Net capex, NWC & taxes |
(377.7) |
(81.1) |
(1.89) |
||||||||
Total |
639.9 |
115.4 |
2.69 |
||||||||
Pro-forma net cash (Q320e) including subsequent debt conversions |
5.5 |
5.5 |
0.13 |
||||||||
Total equity value |
645.4 |
120.9 |
2.82 |
||||||||
FD shares outstanding (000) (30 September 2020) |
42,916 |
||||||||||
Source: Edison Investment Research
Exhibit 2: Financial summary
(€000) |
2017 |
2018 |
2019 |
2020e |
2021e |
2022e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
2,535 |
1,598 |
1,782 |
1,700 |
1,600 |
1,600 |
Cost of Sales |
(1,124) |
(41) |
0 |
0 |
0 |
0 |
||
General & Administrative |
(5,324) |
(2,019) |
(3,815) |
(2,889) |
(2,961) |
(3,835) |
||
Research & Development |
(7,817) |
(5,297) |
(6,320) |
(6,260) |
(8,000) |
(10,400) |
||
EBITDA |
|
|
(11,731) |
(5,758) |
(8,352) |
(7,449) |
(9,361) |
(12,635) |
Depreciation |
(936) |
(677) |
(448) |
(426) |
(480) |
(580) |
||
Amortization |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit (before exceptionals) |
|
(12,666) |
(6,435) |
(8,801) |
(7,875) |
(9,841) |
(13,215) |
|
Exceptionals |
0 |
(5,859) |
(69) |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(12,666) |
(12,294) |
(8,870) |
(7,875) |
(9,841) |
(13,215) |
||
Net Interest |
(876) |
(1,277) |
(1,006) |
(740) |
(1,147) |
(2,210) |
||
Profit Before Tax (norm) |
|
|
(13,542) |
(7,712) |
(9,806) |
(8,616) |
(10,989) |
(15,425) |
Profit Before Tax (FRS 3) |
|
|
(13,542) |
(13,571) |
(9,876) |
(8,616) |
(10,989) |
(15,425) |
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax and minority interests (norm) |
(13,542) |
(7,712) |
(9,806) |
(8,616) |
(10,989) |
(15,425) |
||
Profit After Tax and minority interests (FRS 3) |
(13,542) |
(13,571) |
(9,876) |
(8,616) |
(10,989) |
(15,425) |
||
Average Number of Shares Outstanding (m) |
13.3 |
18.5 |
22.3 |
31.0 |
43.3 |
44.1 |
||
EPS - normalised (€) |
|
|
(1.02) |
(0.42) |
(0.44) |
(0.28) |
(0.25) |
(0.35) |
EPS - normalised and fully diluted (€) |
|
(1.02) |
(0.42) |
(0.44) |
(0.28) |
(0.25) |
(0.35) |
|
EPS - (IFRS) (€) |
|
|
(1.02) |
(0.73) |
(0.44) |
(0.28) |
(0.25) |
(0.35) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
9,649 |
3,666 |
4,507 |
4,021 |
3,765 |
3,228 |
Intangible Assets |
7,680 |
2,623 |
2,361 |
2,268 |
2,268 |
2,268 |
||
Tangible Assets |
1,970 |
1,042 |
2,145 |
1,753 |
1,497 |
961 |
||
Current Assets |
|
|
14,241 |
17,756 |
9,107 |
15,215 |
16,691 |
14,865 |
Short-term investments |
0 |
0 |
0 |
0 |
0 |
0 |
||
Cash |
10,532 |
15,629 |
6,792 |
13,276 |
14,714 |
12,887 |
||
Other |
3,710 |
2,126 |
2,316 |
1,939 |
1,978 |
1,978 |
||
Current Liabilities |
|
|
(2,752) |
(2,044) |
(2,880) |
(2,203) |
(1,360) |
(1,360) |
Creditors |
(2,752) |
(2,044) |
(2,880) |
(2,203) |
(1,360) |
(1,360) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(9,302) |
(8,023) |
(7,033) |
(11,396) |
(23,896) |
(36,396) |
Long term borrowings |
(9,130) |
(7,870) |
(5,787) |
(10,282) |
(22,782) |
(35,282) |
||
Other long term liabilities |
(172) |
(153) |
(1,246) |
(1,114) |
(1,114) |
(1,114) |
||
Net Assets |
|
|
11,836 |
11,355 |
3,700 |
5,636 |
(4,801) |
(19,663) |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(10,605) |
(6,174) |
(7,282) |
(6,218) |
(9,691) |
(12,073) |
Net Interest |
(876) |
(1,277) |
(1,006) |
(740) |
(1,147) |
(2,210) |
||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(191) |
(31) |
(34) |
(222) |
(224) |
(44) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
519 |
14,068 |
2,034 |
10,567 |
0 |
0 |
||
Net Cash Flow |
(11,153) |
6,587 |
(6,288) |
3,387 |
(11,062) |
(14,327) |
||
Opening net debt/(cash) |
|
|
(12,911) |
(1,401) |
(7,760) |
(1,004) |
(2,994) |
8,069 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(357) |
(228) |
(468) |
(1,397) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(1,401) |
(7,760) |
(1,004) |
(2,994) |
8,069 |
22,395 |
Lease debt |
N/A |
N/A |
1,346 |
1,215 |
1,215 |
1,215 |
||
Closing net debt/(cash) inclusive of IFRS16 lease debt |
(1,401) |
(7,760) |
342 |
(1,779) |
9,283 |
23,610 |
||
Source: Company accounts, Edison Investment Research
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Research: TMT
Cyan’s share price has halved year to date. COVID-19 and the Wirecard insolvency affected both H1 sales and its pipeline, leading to a resetting of consensus. Yet H1 sales still more than doubled y-o-y and underlying EBITDA rose to €6.7m (excluding the Wirecard write-down). The prospects for long-term growth remain healthy. At €11, Cyan is valued at 7.0x FY21e consensus EBITDA, a substantial discount to peers. With a new CEO due to arrive in January, it might be time for investors to revisit the story.