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Research: Healthcare
Operationally, the year to date, has been exceptional in Acacia Pharma’s history. It achieved significant milestones with two US FDA approvals: BARHEMSYS (amisulpride injection) for the management of post-operative nausea and vomiting (PONV) on 26 February and BYFAVO (remimazolam), an intravenous benzodiazepine sedative for use during invasive medical procedures on 6 July. Acacia has evolved into an integrated hospital pharmaceutical company with strong development and commercialisation capabilities. Management’s focus is now on executing the successful launch of both assets in H220 and Acacia recently raised €25m gross proceeds in a share placing to fund this; timely launches and the effective sales execution of both products is critical. We value Acacia at $989m.
Written by
Acacia Pharma |
Two US drug launches in 2020 |
Interim results |
Pharma & biotech |
21 August 2020 |
Share price performance
Business description
Next events
Analysts
Acacia Pharma is a research client of Edison Investment Research Limited |
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Operationally, the year to date, has been exceptional in Acacia Pharma’s history. It achieved significant milestones with two US FDA approvals: BARHEMSYS (amisulpride injection) for the management of post-operative nausea and vomiting (PONV) on 26 February and BYFAVO (remimazolam), an intravenous benzodiazepine sedative for use during invasive medical procedures on 6 July. Acacia has evolved into an integrated hospital pharmaceutical company with strong development and commercialisation capabilities. Management’s focus is now on executing the successful launch of both assets in H220 and Acacia recently raised €25m gross proceeds in a share placing to fund this; timely launches and the effective sales execution of both products is critical. We value Acacia at $989m.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
0.0 |
(21.6) |
(0.45) |
0.00 |
N/A |
N/A |
12/19 |
0.0 |
(23.5) |
(0.37) |
0.00 |
N/A |
N/A |
12/20e |
2.1 |
(36.2) |
(0.40) |
0.00 |
N/A |
N/A |
12/21e |
28.8 |
(40.0) |
(0.46) |
0.00 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
BARHEMSYS and BYFAVO – US launches ahead
The near-term focus for Acacia’s management is on expanding its marketing capabilities and it is advancing its plans to build an initial hospital sales force and support staff ahead of launch in the H220. In addition, obtaining access to US hospital pharmacy formulary lists will be vital to successful sales execution. In January, Acacia in-licensed BYFAVO from Cosmo, in terms of strategic fit, like lead product BARHEMSYS, BYFAVO is a product where detailing is directed to anaesthesia providers. Our forecast for peak BAREMSYS sales of $386.7m and BYFAVO sales of $125.6m is unchanged. We note that BYFAVO cannot be marketed in the US until the Drug Enforcement Agency has determined its scheduling, which is expected to take place within the next few months.
H120 financials highlight changes in opEx
Acacia reported an H120 operating loss of $12.8m (H119 $12.8m), lower R&D costs ($0.6m in H120 vs $2.5m H119) offset an increase in SG&A ($4.4m in H120 vs $2.2m in H119). This highlights Acacia’s transformation from R&D driven to a speciality commercial-stage company. SG&A costs will continue to accelerate in H220 as Acacia builds out its US marketing infrastructure. Acacia reported cash and cash equivalents of $24.6m at 30 June 2020. Post the period end in August, Acacia raised €25m gross through the placing of 12.5m shares at €2.00 (a 24.8% discount to the prior day’s closing price). The proceeds will in part be used to fund both product launches, recruit c 30 sales reps and 10 support staff and implement post-approval R&D commitments.
Valuation: €989m or €11.6/share
Our revised valuation is €989m vs €1.03bn previously. Our forecasts are unchanged, but we have rolled our model forward and updated for FX.
Exhibit 1: Financial summary
Year end 31 December (US$m) |
|
|
2018 |
2019 |
2020e |
2021e |
PROFIT & LOSS |
||||||
Revenue |
|
|
0.0 |
0.0 |
2.1 |
28.8 |
Operating revenues |
|
|
0.0 |
0.0 |
2.1 |
28.8 |
Cost of sales |
|
|
0.0 |
0.0 |
(0.2) |
(2.4) |
Gross profit |
|
|
0.0 |
0.0 |
1.9 |
26.4 |
Gross margin % |
|
|
N/A |
N/A |
0.9 |
0.9 |
SG&A (expenses) |
|
|
(15.0) |
(18.5) |
(31.6) |
(54.7) |
R&D costs |
|
|
(5.0) |
(3.9) |
(2.8) |
(10.0) |
Other income/(expense) |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
EBITDA (reported) |
|
|
(20.0) |
(22.4) |
(32.5) |
(38.3) |
Depreciation and amortisation |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
Reported Operating Income |
|
|
(20.0) |
(22.4) |
(32.5) |
(38.3) |
Operating Margin % |
|
|
N/A |
N/A |
N/A |
N/A |
Finance income/(expense) |
|
|
(1.5) |
(1.1) |
(3.7) |
(1.7) |
Exceptionals and adjustments |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
Reported PBT |
|
|
(21.6) |
(23.5) |
(36.2) |
(40.0) |
Income tax expense (includes exceptionals) |
|
|
0.9 |
0.7 |
0.7 |
0.7 |
Reported net income |
|
|
(20.7) |
(22.8) |
(35.5) |
(39.4) |
Basic average number of shares, m |
|
|
44.1 |
53.7 |
73.0 |
85.3 |
Year-end number of shares, m |
|
|
53.3 |
54.9 |
85.3 |
85.3 |
Basic EPS ($) |
|
|
(0.47) |
(0.43) |
(0.49) |
(0.46) |
Adjusted EPS ($) |
|
|
(0.45) |
(0.37) |
(0.40) |
(0.46) |
Dividend per share ($) |
|
|
0.00 |
0.00 |
0.00 |
0.00 |
BALANCE SHEET |
|
|
|
|
|
|
Property, plant and equipment |
|
|
0.0 |
0.0 |
2.1 |
3.2 |
Goodwill |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
Intangible assets |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
Other non-current assets |
|
|
0.0 |
0.4 |
60.1 |
60.1 |
Total non-current assets |
|
|
0.0 |
0.4 |
62.2 |
63.2 |
Cash and equivalents |
|
|
37.4 |
17.0 |
30.0 |
28.0 |
Inventories |
|
|
0.0 |
0.0 |
0.0 |
0.4 |
Trade and other receivables |
|
|
0.4 |
0.6 |
0.3 |
4.7 |
Other current assets |
|
|
0.9 |
0.7 |
0.7 |
0.7 |
Total current assets |
|
|
38.7 |
18.3 |
31.1 |
33.8 |
Non-current loans and borrowings |
|
|
8.9 |
4.7 |
43.2 |
83.2 |
Other non-current liabilities |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
Total non-current liabilities |
|
|
8.9 |
4.7 |
43.2 |
83.2 |
Trade and other payables |
|
|
4.7 |
4.2 |
4.3 |
7.5 |
Current loans and borrowings |
|
|
0.5 |
5.5 |
0.0 |
0.0 |
Other current liabilities |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
Total current liabilities |
|
|
5.2 |
9.6 |
4.3 |
7.5 |
Equity attributable to company |
|
|
24.7 |
4.3 |
45.8 |
6.4 |
CASH FLOW STATEMENT |
|
|
|
|
|
|
Operating Profit |
|
|
(21.6) |
(23.5) |
(36.2) |
(40.0) |
Depreciation and amortisation |
|
|
0.0 |
0.1 |
0.1 |
0.3 |
Share based payments |
|
|
0.6 |
2.4 |
1.4 |
0.0 |
Other adjustments |
|
|
1.6 |
1.1 |
3.7 |
1.7 |
Movements in working capital |
|
|
(3.9) |
(0.8) |
0.4 |
(1.6) |
Interest paid/received |
|
|
0.2 |
0.4 |
(1.9) |
(1.7) |
Income taxes paid |
|
|
0.4 |
0.8 |
0.7 |
0.7 |
Cash from operations (CFO) |
|
|
(15.4) |
(19.8) |
(32.6) |
(41.4) |
Capex |
|
|
0.0 |
0.0 |
(2.2) |
(1.4) |
Acquisitions & disposals net |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
Other investing activities |
|
|
0.2 |
0.4 |
0.8 |
0.7 |
Cash used in investing activities (CFIA) |
|
|
0.2 |
0.4 |
(14.3) |
(0.7) |
Net proceeds from issue of shares |
|
|
47.1 |
0.2 |
28.7 |
0.0 |
Movements in debt |
|
|
1.8 |
(1.0) |
33.0 |
40.0 |
Other financing activities |
|
|
0.0 |
(0.1) |
0.0 |
0.0 |
Cash from financing activities (CFF) |
|
|
48.9 |
(0.9) |
61.7 |
40.0 |
Cash and equivalents at beginning of period |
|
|
4.1 |
37.4 |
17.0 |
30.0 |
Increase/(decrease) in cash and equivalents |
|
|
33.3 |
(20.4) |
13.0 |
(2.0) |
Cash and equivalents at end of period |
|
|
37.4 |
17.0 |
30.0 |
28.0 |
Net (debt)/cash |
|
|
28.1 |
6.9 |
(13.2) |
(55.2) |
Source: Acacia Pharma, Edison Investment Research
|
|
Research: Financials
ProCredit Holding (PCB) grew its gross loan book by 4.4% in Q220 by seizing the opportunity that arose from the more subdued activity of its competitors amid the pandemic. As a result, management now expects FY20 growth of 8–10% (we assume 9.3%). However, its net interest margin (NIM) fell to 2.9% in Q220 vs 3.1% in Q219 due to widespread rate cuts by local central banks and higher lending activity in the upper medium segment of the SME market. Cost of risk (67bp in H120) remained in line with earlier guidance, although management now expects the FY20 cost to be at the upper end of the previously guided range at 75bp (vs our unchanged forecast of c 80bp).