Targeting NASH with NV556 and NVP022
NV556 – a novel cyclophilin inhibitor
NeuroVive is finalising a preclinical data package and has recently reiterated that a potential out-licensing deal could happen around mid-2018. NV556 is a novel cyclophilin inhibitor originating from NeuroVive’s sangamide class compounds, which are derivatives of sanglifehrin that inhibit cyclophilin. According to findings by NeuroVive and other researchers, cyclophilin inhibition in NASH can be beneficial in three ways:
■
Direct antifibrotic effect on collagen synthesis and export due to cyclophilin B inhibition.
■
Preservation of liver cell mitochondrial integrity by inhibiting mitochondrial cyclophilin D.
■
Anti-inflammatory effect in liver fibrosis via CD147 due to cyclophilin A inhibition.
In preclinical models, NV556 appears to target fibrosis specifically and prevent liver tumour development, while metabolic and inflammatory biomarkers were not affected in the STAM model, but liver enzymes improved in the MCD model (both mice models are widely used for NASH studies). We provided a more detailed discussion about NV556 in our initiation report.
NVP022 – protonophore, ‘mild’ mitochondrial uncoupler
Until recently, few details had been disclosed about NVP022, one of the early projects in the portfolio for out-licensing. It had been reported simply that it targeted NASH, but via a completely different mitochondrial metabolic pathway and could be complementary to NV556. The new data were presented at the Liver Meeting organised by the American Association for the Study of Liver Diseases (AASLD), on 20-24 October 2017.
NVP022 is a protonophore, which acts as a ‘mild’ liver-targeted uncoupler. Protonophores can transport protons across mitochondria membranes and disrupt the proton gradient that is needed to produce ATP in mitochondria (we provided more detailed background about mitochondria function in our initiation report). By disrupting the proton balance, the energy is lost as heat, while lack of ATP supply forces the mitochondria respiration to increase in order to compensate the lack of ATP supply (uncoupling effect). This results in the increase in basal metabolic rate. Another known uncoupling agent, dinitrophenol (DNP), has maximum effect on mitochondrial respiration and in the past has been used for weight loss; however, it was easy to overdose it, resulting in significant risk of side effects due to inefficient ATP production and overheating.
Mitochondrial protonophores have been shown in the past to positively affect NASH and diabetes biomarkers. To overcome this undesirable maximum uncoupling effect, NeuroVive modelled NVP022, which is a ‘mild’ uncoupler and delivered primarily to the liver, limiting exposure to other organs. The new preclinical in vitro data show that NVP022 has a mild uncoupling effect specifically in liver cells and in vivo studies show that the drug is efficiently transported to the liver. Next steps are animal efficacy studies.
NeuroVive’s Q317 results were largely in line with our expectations. R&D-related expenses during 9M17 were SEK22.8m, while total operating costs were SEK56.8m. We estimate full 2017 R&D costs at SEK31.4m with total opex landing at SEK75.7m. NeuroVive’s cash was SEK35.4m at end-Q317 (no debt). On 3 November 2017, NeuroVive announced a private placement of SEK5.3m with Floyd Associates Europe Limited. The SEK3/share price implied a 25% discount to the prior day’s close. While the placement was small, in our view, the key benefit was a new strategic investor coming on board, which could provide support to NeuroVive going forward.
We expect a cash positon of SEK27.9m by end-2017. NeuroVive does not provide guidance but, according to our model and based on current R&D plans, the cash reach is into Q118. We estimate that the company’s need for additional funds in 2018 is around SEK64m, which we include as illustrative long-term debt in our financial forecasts. Notably, we do not take into account revenues from any potential licensing-related income in our financial forecasts. NeuroVive indicated that it will seek financing in early 2018, which could come in various forms including new capital, but also non-dilutive funding. In October 2017, NeuroVive, in collaboration with Lund University, was awarded a SEK2.5m grant for the research of NVP024 in liver cancer.
Our updated valuation of NeuroVive is marginally lower at SEK1.38bn or SEK26.3/share compared to SEK1.39bn or SEK27.0/share previously. Positive effects from rolling our model forward and beneficial US$/SEK exchange rate movements were offset by lower net cash position and a small modification of our assumptions for the NVP015 project. The latter relates to the fact that NeuroVive recently guided that the expected launch in the US and European markets is in 2024, while we previously assumed it would be in 2023. We therefore delayed the launch to 2024. We maintain all our other R&D assumptions, as described in our initiation report. As previously, in our valuation we include the clinical-stage NeuroSTAT (traumatic brain injury) and KL1333 (genetic mitochondrial disorders) and the advanced preclinical products. We exclude NVP025 (mitochondrial myopathy) and NVP022 (NASH) for the time being as both are at an early stage.
Exhibit 1: NeuroVive sum-of-the parts valuation
Product |
Launch |
Peak sales*
($m) |
NPV
($m) |
NPV/share
($) |
Probability |
rNPV
($m) |
rNPV/share
($) |
NeuroSTAT |
2024 |
454 |
304.1 |
5.8 |
15% |
36.3 |
0.7 |
KL1333 |
2023 |
574 |
587.0 |
11.2 |
10% |
53.5 |
1.0 |
NVP015 |
2024 |
875 |
737.1 |
14.1 |
5% |
28.7 |
0.5 |
NV556 |
2026 |
1,716 |
179.2 |
3.4 |
8% |
35.1 |
0.7 |
NVP024 |
2029 |
702 |
30.4 |
0.6 |
3% |
5.7 |
0.1 |
Net cash |
|
|
3.3 |
0.1 |
100% |
3.3 |
0.1 |
Valuation |
|
|
1,841.2 |
35.2 |
|
162.5 |
3.1 |
|
|
|
|
|
|
|
|
|
|
|
SEKm |
SEK |
|
SEKm |
SEK |
NeuroSTAT |
|
|
2,576.1 |
49.2 |
15% |
307.6 |
5.9 |
KL1333 |
|
|
4,971.8 |
95.0 |
10% |
452.8 |
8.7 |
NVP015 |
|
|
6,243.5 |
119.3 |
5% |
243.3 |
4.7 |
NV556 |
|
|
1,518.0 |
29.0 |
8% |
296.9 |
5.7 |
NVP024 |
|
|
257.4 |
4.9 |
3% |
48.1 |
0.9 |
Net cash |
|
|
27.9 |
0.5 |
100% |
27.9 |
0.5 |
Valuation |
|
|
15,594.7 |
298.0 |
|
1,376.6 |
26.3 |
Source: Edison Investment Research. Note: WACC = 12.5% for product valuations. Peak sales reached six years after launch. SEK8.47/US$ vs SEK8.09/US$ previously.
Exhibit 2: Financial summary
|
|
SEK000s |
2015 |
2016 |
2017e |
2018e |
December |
|
|
IFRS |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
|
|
|
|
|
|
Revenue |
|
|
2,502 |
14 |
576 |
576 |
Cost of Sales |
|
|
0 |
0 |
0 |
0 |
Gross Profit |
|
|
2,502 |
14 |
576 |
576 |
Research and development |
|
|
(12,200) |
(12,000) |
(31,442) |
(58,585) |
EBITDA |
|
|
(89,066) |
(69,868) |
(75,001) |
(92,027) |
Operating Profit (before amort. and except.) |
|
|
(90,266) |
(70,989) |
Intangible Amortisation |
|
|
0 |
0 |
0 |
0 |
Exceptionals |
|
|
(1,200) |
(1,121) |
0 |
0 |
Other |
|
|
0 |
0 |
0 |
0 |
Operating Profit |
|
|
(91,466) |
(72,110) |
(75,142) |
(92,185) |
Net Interest |
|
|
665 |
265 |
(600) |
0 |
Profit Before Tax (norm) |
|
|
(89,601) |
(70,724) |
(75,742) |
(92,185) |
Profit Before Tax (reported) |
|
|
(90,801) |
(71,845) |
(75,742) |
(92,185) |
Tax |
|
|
0 |
0 |
0 |
0 |
Profit After Tax (norm) |
|
|
(89,601) |
(70,724) |
(75,742) |
(92,185) |
Profit After Tax (reported) |
|
|
(90,801) |
(71,845) |
(75,742) |
(92,185) |
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
|
|
30.1 |
42.0 |
51.4 |
EPS - normalised (ore) |
|
|
(300.43) |
(172.27) |
(160.92) |
(180.19) |
EPS - normalised (SEK) |
|
|
(3.00) |
(1.72) |
(1.61) |
(1.80) |
EPS - normalised (SEK) |
|
|
(3.04) |
(1.75) |
(1.61) |
(1.80) |
Dividend per share (SEK) |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
100.0 |
100.0 |
100.0 |
100.0 |
EBITDA Margin (%) |
|
|
N/A |
N/A |
N/A |
N/A |
Operating Margin (before GW and except.) (%) |
|
|
N/A |
N/A |
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
Fixed Assets |
|
|
75,369 |
84,645 |
86,774 |
86,807 |
Intangible Assets |
|
|
74,904 |
71,151 |
73,233 |
73,233 |
Tangible Assets |
|
|
316 |
274 |
321 |
354 |
Investments |
|
|
149 |
13,220 |
13,220 |
13,220 |
Current Assets |
|
|
99,558 |
94,901 |
28,867 |
1,000 |
Stocks |
|
|
0 |
0 |
0 |
0 |
Debtors |
|
|
528 |
0 |
0 |
0 |
Cash |
|
|
96,662 |
93,251 |
27,867 |
0 |
Other |
|
|
2,368 |
1,650 |
1,000 |
1,000 |
Current Liabilities |
|
|
(20,148) |
(12,413) |
(10,170) |
(10,170) |
Creditors |
|
|
(20,148) |
(12,413) |
(10,170) |
(10,170) |
Short term borrowings |
|
|
0 |
0 |
0 |
0 |
Long Term Liabilities |
|
|
0 |
0 |
0 |
(64,351) |
Long term borrowings |
|
|
0 |
0 |
0 |
(64,351) |
Other long term liabilities |
|
|
0 |
0 |
0 |
0 |
Net Assets |
|
|
154,779 |
167,133 |
105,471 |
13,286 |
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
Operating Cash Flow |
|
|
(67,885) |
(57,614) |
(65,108) |
(92,027) |
Net Interest |
|
|
665 |
237 |
(600) |
0 |
Tax |
|
|
0 |
0 |
0 |
0 |
Capex |
|
|
(245) |
(139) |
(187) |
(190) |
Acquisitions/disposals* |
|
|
0 |
0 |
(11,035) |
0 |
Financing |
|
|
138,406 |
77,332 |
13,575 |
0 |
Other |
|
|
(23,977) |
(23,227) |
(2,028) |
0 |
Dividends |
|
|
0 |
0 |
0 |
0 |
Net Cash Flow |
|
|
46,964 |
(3,411) |
(65,384) |
(92,218) |
Opening net debt/(cash) |
|
|
(49,698) |
(96,662) |
(93,251) |
(27,867) |
HP finance leases initiated |
|
|
0 |
0 |
0 |
0 |
Other |
|
|
0 |
0 |
0 |
0 |
Closing net debt/(cash) |
|
|
(96,662) |
(93,251) |
(27,867) |
64,351 |
Source: NeuroVive’s accounts, Edison Investment Research. Note: *Related to the disposal of a subsidiary in 2017, the net effect of which was neutral on cash flows.
Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by NeuroVive Pharmaceutical and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Limited (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). 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Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by NeuroVive Pharmaceutical and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Limited (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent. |
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Sydney +61 (0)2 8249 8342 Level 12, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 295 Madison Avenue, 18th Floor 10017, New York US |
Sydney +61 (0)2 8249 8342 Level 12, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
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