Auris Medical recently reported its Q318 results and provided a brief business update on its active programs. R&D expenditure for the period was down roughly 60% over Q317, which reflects management’s swift pivot to focus on Phase I development. Auris plans to initiate two intranasal betahistine trials in Q119: the AM-125 Phase II trial in acute vertigo and AM-201 Phase I trial for olanzapine-induced weight gain.
Written by
Auris Medical Holding |
Q318 results and business updates |
Financial update |
Pharma & biotech |
19 November 2018 |
Share price performance
Business description
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Analysts
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Auris Medical recently reported its Q318 results and provided a brief business update on its active programs. R&D expenditure for the period was down roughly 60% over Q317, which reflects management’s swift pivot to focus on Phase I development. Auris plans to initiate two intranasal betahistine trials in Q119: the AM-125 Phase II trial in acute vertigo and AM-201 Phase I trial for olanzapine-induced weight gain.
Year end |
Revenue (CHFm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
0.0 |
(31.0) |
(0.90) |
0.0 |
N/A |
N/A |
12/17 |
0.0 |
(25.9) |
(0.54) |
0.0 |
N/A |
N/A |
12/18e |
0.0 |
(12.7) |
(0.42) |
0.0 |
N/A |
N/A |
12/19e |
0.0 |
(11.8) |
(0.31) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Upcoming Phase II AM-125 trial
Auris is developing AM-125, an intranasal formulation of betahistine for the treatment of acute vertigo. As AM-125 bypasses the digestive tract where the oral compound is readily metabolised, the intranasal formulation has demonstrated superior bioavailability over oral betahistine. Auris expects to initiate the Phase II trial in Q119 in 138 patients with surgically induced acute vertigo following vestibular schwannoma excision.
Phase I trial to demonstrate PK/PD of AM-201
Auris is also developing AM-201, an intranasal betahistine formulation, for co-administration with olanzapine to counteract adverse effects such as weight gain and somnolence. Auris plans to initiate the pharmacokinetics/pharmacodynamics (PK/PD) trial in Q119 in 50 healthy volunteers at one site in Europe.
Actively seeking a partner for Sonsuvi (AM-111)
The company recently announced that it has initiated the search to identify a partner for further development of AM-111 for the treatment of acute inner ear hearing loss. Auris has enlisted JSB Partners, a transaction advisory firm, to assist in identifying a partner and to support partnering discussions. AM-111 was also recently commercially branded as Sonsuvi.
Valuation: $119.8m or $3.92 per basic share
We have slightly adjusted our valuation to $119.8m or $3.92 per basic share ($3.19 per diluted share) from $117.6m or $4.89 per basic share ($3.20 per diluted share). The increase in overall valuation was primarily driven by rolling forward our NPVs and an increase in net cash attributed to ~CHF2.7m in proceeds from financial instruments, which concurrently increased the share count and consequently decreased the price per share.
Plans to initiate two trials in Q119
Auris previously demonstrated the superior bioavailability of AM-125, intranasal betahistine, compared to oral betahistine (48mg) in both single and multiple doses (Exhibits 1 and 2). Adverse events (AE) were mild to moderate, described as transient, and included sneezing and nasal congestion, which corresponded to dose. One patient withdrew from the trial due to an AE, but no serious AEs were reported. According to Auris, the maximum tolerated repeated dose based on local tolerability in the nose was identified and set at 40mg; the maximum tolerated single dose was not reached at 60mg.
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Exhibit 1: Single-dose AM-125 bioavailability vs oral betahistine |
Exhibit 2: Multi-dose AM-125 bioavailability vs oral betahistine |
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|
|
Source: Auris Medical |
Source: Auris Medical |
|
Exhibit 1: Single-dose AM-125 bioavailability vs oral betahistine |
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Source: Auris Medical |
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Exhibit 2: Multi-dose AM-125 bioavailability vs oral betahistine |
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Source: Auris Medical |
Auris plans to initiate its Phase II clinical trial in 138 patients with surgically induced acute vertigo following the removal of vestibular schwannoma (ie a noncancerous tumor located on the main nerve leading from the inner ear to the brain, also known as acoustic neuroma). Vestibular schwannoma surgery triggers acute vertigo, which can leave patients with the loss of peripheral vestibular input on one side.
Auris Medical’s randomized, controlled, double-blind Phase II trial, TRAVERS, will be divided into two parts (Exhibit 3). Part A of the trial, which the company plans to initiate in Q119, will include 50 patients who will be administered five steps with AM-125 three times daily and 16 patients who will receive 48mg three times daily. The company anticipates top-line data readout in Q319, and expects to determine a dose-response curve and select a low dose and a high dose of AM-125 for the second part of the trial, which will be measured against placebo. Then, in Part B of the trial, the company plans to enrol 72 patients. Furthermore, Auris received EMA feedback on the TRAVERS trial and expects to initiate the study in Q119. The trial will be conducted in about 12-15 sites in Europe and possibly in Canada. If successful, this could be an important catalyst.
Exhibit 3: TRAVERS Phase II trial outline
No. patients |
Dose (3x daily) |
Time frame |
Primary endpoints |
Secondary endpoints |
|
Part A |
50 (experimental) |
5 doses up to 40 mg with AM-125 |
4 weeks |
Standing on foam, tandem Romberg test |
Tandem gait, subjective visual deviation and subjective questionnaires |
16 (placebo) |
48mg oral betahistine |
||||
Part B |
72 |
High dose and low dose (determined by interim analysis) vs placebo (48mg oral betahistine) |
4 weeks |
Standing on foam, tandem Romberg test |
Tandem gait, subjective visual deviation and subjective questionnaires |
Source: Auris Medical
Concurrently, Auris plans to initiate the PK/PD trial in AM-210, intranasal betahistine for olanzapine-induced weight gain, as the company expects to receive pre-IND feedback from the FDA in Q418 and subsequently plans to enrol 50 healthy volunteers at one site in Europe in Q119 (Exhibit 4).
Exhibit 4: AM-201 Phase I PK/PD trial design
Screening |
Olanzapine titration |
Maintenance |
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■ Male and female healthy volunteers ■ 18-50 years of age ■ BMI 18-25kg/m2 |
■ Titrate up to 10mg (7.5mg) once daily within first week ■ Replace subjects who do not tolerate olanzapine or gain a clinically relevant amount of weight/high glucose level |
■ Maintain olanzapine dose for three weeks |
Source: Auris Medical
The primary and secondary endpoints are weight gain and daytime sleepiness, respectively, while PK analysis should demonstrate potential drug-drug interaction. The company expects to read out top-line data in summer 2019.
Financials
Auris recently reported its Q318 results. R&D expenditure was CHF1.7m, which is down roughly 60% from Q317 (CHF4.2m), and reflects the company’s strategic shift to focus on Phase I development programs. As of 30 September 2018, Auris had CHF5.3m in cash and equivalents and CHF2.1m in debt. Subsequent to the end of the quarter, net proceeds from the exercise of warrants from the July 2018 offering (~CHF2.2m), in addition to a partial drawdown from its equity line established with LPC ($0.5m), increased shareholders’ equity by CHF2.7m.
In our forecasts, we model a total of CHF65m in financing needs through 2023, which we record as illustrative debt, to bring the two intranasal betahistine programs from Phase I to commercialization (Exhibit 6). However, these financing needs may be offset by potential strategic partnering. Auris may also draw down from its LPC equity line (~$9.5m remaining). We forecast slight increases in R&D expenditure to about CHF7m in 2019 and CHF11m in 2020, primarily associated with the advancement of AM-125 into Phase II and the initiation of the AM-201 Phase I program, which is expected in Q119.
Exhibit 6: Financial summary
CHF'000s |
2016 |
2017 |
2018e |
2019e |
||
Year end 30 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
0 |
0 |
0 |
0 |
Cost of Sales |
0 |
0 |
0 |
0 |
||
Gross Profit |
0 |
0 |
0 |
0 |
||
Research and development |
(24,777) |
(19,211) |
(7,128) |
(6,732) |
||
Selling, general & administrative |
(5,447) |
(5,150) |
(4,512) |
(4,557) |
||
EBITDA |
|
|
(30,321) |
(24,484) |
(11,717) |
(11,443) |
Operating Profit (before amort. and except.) |
(30,223) |
(24,361) |
(11,640) |
(11,366) |
||
Intangible Amortisation |
0 |
0 |
0 |
0 |
||
Exceptionals/Other |
0 |
0 |
0 |
0 |
||
Operating Profit |
(30,223) |
(24,361) |
(11,640) |
(11,366) |
||
Net Interest |
(761) |
(1,586) |
(1,102) |
(400) |
||
Other (change in fair value of warrants) |
191 |
1,520 |
3,432 |
0 |
||
Profit Before Tax (norm) |
|
|
(30,984) |
(25,947) |
(12,742) |
(11,766) |
Profit Before Tax (IFRS) |
|
|
(30,793) |
(24,427) |
(9,310) |
(11,766) |
Tax |
131 |
18 |
26 |
0 |
||
Deferred tax |
(414) |
322 |
1,282 |
0 |
||
Profit After Tax (norm) |
(30,853) |
(25,929) |
(12,716) |
(11,766) |
||
Profit After Tax (IFRS) |
(31,076) |
(24,087) |
(8,002) |
(11,766) |
||
Average Number of Shares Outstanding (m) |
34.3 |
48.4 |
30.6 |
38.2 |
||
EPS - normalised (CHF) |
|
|
(0.90) |
(0.54) |
(0.42) |
(0.31) |
EPS - IFRS (CHF) |
|
|
(0.91) |
(0.50) |
(0.26) |
(0.31) |
Dividend per share (CHF) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
1,967 |
1,959 |
1,962 |
1,885 |
Intangible Assets |
1,483 |
1,629 |
1,664 |
1,664 |
||
Tangible Assets |
369 |
253 |
30 |
(47) |
||
Other |
115 |
77 |
268 |
268 |
||
Current Assets |
|
|
33,691 |
15,868 |
7,716 |
4,470 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
297 |
241 |
92 |
116 |
||
Cash |
32,442 |
14,973 |
7,117 |
3,846 |
||
Other |
953 |
653 |
507 |
507 |
||
Current Liabilities |
|
|
(8,957) |
(10,426) |
(6,858) |
(5,300) |
Creditors |
(6,745) |
(5,884) |
(5,358) |
(5,300) |
||
Short term borrowings |
(2,213) |
(4,542) |
(1,500) |
0 |
||
Long Term Liabilities |
|
|
(12,558) |
(9,563) |
(2,088) |
(12,088) |
Long term borrowings |
(10,151) |
(5,584) |
0 |
(10,000) |
||
Other long term liabilities |
(2,406) |
(3,979) |
(2,088) |
(2,088) |
||
Net Assets |
|
|
14,143 |
(2,162) |
732 |
(11,034) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(30,071) |
(25,827) |
(12,482) |
(11,771) |
Net Interest |
749 |
1,569 |
965 |
0 |
||
Tax |
(131) |
(18) |
(26) |
0 |
||
Capex |
(244) |
(153) |
(20) |
0 |
||
Acquisitions/disposals |
0 |
0 |
68 |
0 |
||
Financing |
11,439 |
10,308 |
12,769 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
68 |
(2,034) |
0 |
0 |
||
Net Cash Flow |
(18,192) |
(16,154) |
1,275 |
(11,771) |
||
Opening net debt/(cash) |
|
|
(38,251) |
(20,078) |
(4,847) |
(5,576) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
(397) |
1,316 |
283 |
0 |
||
Other |
416 |
(393) |
(829) |
0 |
||
Closing net debt/(cash) |
|
|
(20,078) |
(4,847) |
(5,576) |
6,195 |
Source: Company reports, Edison Investment Research
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