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Research: Healthcare
Nicox reported that the Mississippi Phase IIb study assessing NCX-4251 against placebo in patients with acute exacerbations of blepharitis did not meet its primary or secondary efficacy endpoints. Although we reduce our NCX-4251 probability of success and push out its potential launch timelines, this does not substantially affect our valuation of the company, as we continue to view the primary driver (c 80% of our rNPV valuation) as the NCX-470 programme in glaucoma. Top-line data from Mont Blanc, the first of two Phase III NCX-470 studies in glaucoma and ocular hypertension, are expected in Q222. We believe that NCX-470, if approved, could become the most potent single-agent glaucoma drug on the market in terms of intraocular pressure (IOP) lowering efficacy.
Nicox |
NCX-4251 setback sharpens focus on NCX-470 |
NCX-4251 trial update |
Pharma & biotech |
24 September 2021 |
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Nicox reported that the Mississippi Phase IIb study assessing NCX-4251 against placebo in patients with acute exacerbations of blepharitis did not meet its primary or secondary efficacy endpoints. Although we reduce our NCX-4251 probability of success and push out its potential launch timelines, this does not substantially affect our valuation of the company, as we continue to view the primary driver (c 80% of our rNPV valuation) as the NCX-470 programme in glaucoma. Top-line data from Mont Blanc, the first of two Phase III NCX-470 studies in glaucoma and ocular hypertension, are expected in Q222. We believe that NCX-470, if approved, could become the most potent single-agent glaucoma drug on the market in terms of intraocular pressure (IOP) lowering efficacy.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
8.3 |
(16.0) |
(0.40) |
0.0 |
N/A |
N/A |
12/20 |
14.4 |
(10.2) |
(0.30) |
0.0 |
N/A |
N/A |
12/21e |
8.9 |
(17.2) |
(0.46) |
0.0 |
N/A |
N/A |
12/22e |
12.0 |
(16.1) |
(0.43) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Normalised 2020 figures differ from reported amounts primarily due to the €6.9m loss reported following the divestment of Nicox’s holdings in VISUfarma.
Signals of efficacy still shown in Mississippi trial
While the primary efficacy endpoints were not met, some signals of potential efficacy were still observed. There were statistically significant differences versus placebo in the change from baseline in the composite score of the three primary blepharitis signs and symptoms at days 8, 11 and 15 (p=0.01) after 14 days of therapy. Nicox expects to meet with the FDA in early 2022, then provide an update on the next development steps. We have pushed back the potential commercialisation timeline to 2026 (from 2025, previously) and have reduced the programme’s probability of success in our valuation to 30% (from 40%, previously).
NCX-470 promises best-in-class IOP lowering efficacy
NCX-470 (0.065%) has already shown statistical superiority in IOP lowering to prostaglandin F2α (PGA) drug latanoprost in Phase II, delivering up to 1.4mmHg further IOP reduction at day 28. If efficacy is met in the two Phase III trials (Mont Blanc and Denali), NCX-470 could potentially become the first non-combination glaucoma drug product in pivotal studies with statistical superiority to a standalone PGA drug, which we believe should support its market adoption and competitiveness.
Valuation: rNPV of €318m
Nicox reported H121 gross cash and equivalents of €36.5m, which we believe should fund its operations into H222. The NCX-4251 setback, slightly offset by minor FX changes, reduces our rNPV pipeline valuation to €317.7m, from €325.0m previously. Altogether, we now obtain an rNPV of €317.7m, down from €325m previously. After adding €18.5m in H121 net cash, we obtain an equity value of €336.3m, or €9.06 per share.
NCX-4251 did not meet Phase IIb primary endpoints
Nicox reported on 23 September that NCX-4251 did not meet its primary and secondary endpoints in its Mississippi Phase IIb study assessing once-daily dosed NCX-4251 (a proprietary ophthalmic formulation of fluticasone propionate nanocrystals) against placebo in patients with acute exacerbations of blepharitis. The study enrolled 224 patients at multiple US clinical centres, and its primary outcome measure was the proportion of patients achieving complete cure in all three of the selected eyelid-specific signs and symptoms of blepharitis (margin redness, debris and discomfort) at day 15. The two secondary endpoints were measures of the signs and symptoms of dry eye.
While the above endpoints were not met, the company reported a signal of potential efficacy as there was a numerical improvement over placebo in the primary outcome measure of complete cure (score of 0 on a 0–3 scale) in eyelid redness, debris and discomfort at day 15. NCX 4251 also showed a statistically significant difference versus placebo in the exploratory endpoint of change from baseline in the composite score of the same key signs and symptoms at day 8 (p=0.03), day 11 (p=0.01) and day 15 (p=0.01). The company indicates that it will analyse the data and determine what key signs and symptoms of focus for future development. NCX 4251 was also found to be safe and well-tolerated over the 14 days of treatment, with no serious adverse events (AEs). All of the AEs in the treatment arm were mild and there were no discontinuations due to an AE. The company plans to have a meeting with the FDA in early 2022 to discuss a future development plan for NCX-4251, after which it plans to provide an update on the next steps.
The company previously anticipated that the Mississippi study would count as one of the two pivotal trials required by the FDA for New Drug Application (NDA) submission if the primary endpoint had been met. Given that the primary and secondary Mississippi endpoints were not met and the reduced visibility on next NCX-4251 development steps, we have pushed back the potential commercialisation timeline to 2026 (from 2025, previously) to allow for an additional clinical trial if needed. We have also reduced the programme’s probability of success in our valuation to 30% (from 40%, previously) given that there is increased uncertainty about the treatment’s effectiveness in acute blepharitis (considering that the primary endpoints were not met).
Financials and valuation
Nicox reported that at 30 June 2021 it had €36.5m in cash and equivalents versus €42.0m at 31 March 2021. It also reported €18.0m in gross H121 debt consisting of €16.0m in the form of a bond financing agreement with Kreos Capital and a €2m credit agreement with Société Générale and LCL, guaranteed by the French State and granted in August 2020. We have maintained our local currency financial forecasts (for instance, in US dollars for the US market) for the projected period (through to 2024) but, as stated above, have pushed back our NCX-4251 launch timeline to 2026. We have also maintained our existing assumptions for all of Nicox’s remaining programmes (with NCX-470 being the lead driver of our valuation), and have slightly adjusted our FX assumptions (from $1.18/€ to $1.17/€).
We continue to estimate that Nicox has sufficient funds on hand to operate into H222. We continue to model a €10m fund-raising in 2022, followed by an additional €10m in 2023 and €20m in 2024 (all fund-raisings modelled as illustrative debt). Following the anticipated NCX-470 launch in H224, we do not expect Nicox to require additional capital as its royalty streams plus NCX-470 sales should enable it to start achieving consistent positive operating income starting in FY25.
Exhibit 1: Nicox rNPV assumptions
Product contribution |
Indication |
Stage |
NPV |
Probability of success |
rNPV |
rNPV/ |
Launch year |
Peak sales (€m) in 2030 |
NCX-470 (net of R&D and SG&A costs) in US market |
Glaucoma |
Phase III ongoing |
397.8 |
50% |
191.8 |
5.17 |
2024 |
312 |
NCX-470 (net of R&D and SG&A costs) in Europe and unpartnered regions |
Glaucoma |
Phase III |
192.8 |
35% |
62.7 |
1.69 |
2026 |
159 |
NCX-470 licence fees from Ocumension (China and other) |
Glaucoma |
Phase III ongoing |
9.3 |
50% |
4.5 |
0.12 |
2024 |
2.8* |
NCX-4251 (net of R&D and SG&A costs) sales and licence fees/royalties |
Acute blepharitis |
Phase IIb ongoing |
45.1 |
30% |
9.7 |
0.26 |
2025 |
44.2 |
Vyzulta royalties from Bausch & Lomb |
Glaucoma |
Commercial |
94.3 |
100% |
94.3 |
2.54 |
2017 |
18.4* |
Zerviate royalties from Eyevance and others |
Allergic conjunctivitis |
Commercial |
20.5 |
100% |
20.5 |
0.55 |
2020 |
5* |
Corporate costs |
(65.7) |
100% |
(65.7) |
(1.77) |
||||
Total |
694.2 |
317.7 |
8.56 |
|||||
Net cash (H121) excluding lease liabilities |
18.5 |
18.5 |
0.50 |
|||||
Total equity value |
712.7 |
336.3 |
9.06 |
|||||
FD shares outstanding (000) (31 August 2021) |
37,125 |
Source: Edison Investment Research. Note: *Reflects net licence and royalties received by Nicox but not commercial sales by licensee.
While our rNPV valuation for NCX-4251 has decreased (also due to the reduced probability of success to 30%), the overall effect on our total Nicox valuation is relatively limited given that NCX-470 accounts for c 80% of our total rNPV.
Altogether, we now obtain an rNPV of €317.7m, down from €325.0m previously. After adding €18.5m in H121 net cash, we obtain an equity value of €336.3m, or €9.06 per share.
Exhibit 2: Financial summary
€’000s |
2018 |
2019 |
2020 |
2021e |
2022e |
2023e |
2024e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
4,717 |
8,260 |
14,423 |
8,852 |
11,959 |
17,493 |
23,244 |
Cost of Sales |
(690) |
(1,405) |
(1,516) |
(1,586) |
(2,407) |
(4,859) |
(5,930) |
||
Gross Profit |
4,027 |
6,855 |
12,907 |
7,266 |
9,552 |
12,635 |
17,314 |
||
General & Administrative |
(9,506) |
(7,666) |
(6,677) |
(6,837) |
(7,097) |
(10,432) |
(23,063) |
||
Net Research & Development |
(15,491) |
(16,883) |
(11,991) |
(16,700) |
(17,350) |
(12,350) |
(7,350) |
||
Amortisation of intangible assets |
0 |
(659) |
(1,252) |
(1,162) |
(1,141) |
(1,121) |
(1,101) |
||
Operating profit before exceptionals |
(20,970) |
(18,353) |
(7,013) |
(17,432) |
(16,036) |
(11,267) |
(14,200) |
||
EBITDA |
|
|
(20,718) |
(17,230) |
(5,270) |
(15,917) |
(14,544) |
(9,808) |
(12,727) |
Depreciation & other |
(252) |
(464) |
(491) |
(354) |
(351) |
(339) |
(372) |
||
Operating Profit (before amort. and except.) |
(20,970) |
(17,694) |
(5,761) |
(16,270) |
(14,895) |
(10,147) |
(13,099) |
||
Exceptionals including asset impairment |
302 |
(6,115) |
(6,621) |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(20,668) |
(23,809) |
(12,382) |
(16,270) |
(14,895) |
(10,147) |
(13,099) |
||
Net Interest |
2,390 |
1,690 |
(4,436) |
(901) |
(1,170) |
(2,151) |
(3,070) |
||
Profit Before Tax (norm) |
|
|
(18,580) |
(16,004) |
(10,197) |
(17,171) |
(16,065) |
(12,298) |
(16,169) |
Profit Before Tax (FRS 3) |
|
|
(18,278) |
(22,778) |
(18,070) |
(18,333) |
(17,206) |
(13,418) |
(17,269) |
Tax |
(113) |
3,856 |
(28) |
0 |
0 |
0 |
0 |
||
Profit After Tax and minority interests (norm) |
(18,693) |
(12,148) |
(10,225) |
(17,171) |
(16,065) |
(12,298) |
(16,169) |
||
Profit After Tax and minority interests (FRS 3) |
(18,391) |
(18,922) |
(18,098) |
(18,333) |
(17,206) |
(13,418) |
(17,269) |
||
Average Number of Shares Outstanding (m) |
29.6 |
30.3 |
33.7 |
37.2 |
37.4 |
37.5 |
37.7 |
||
EPS - normalised (€) |
|
|
(0.63) |
(0.40) |
(0.30) |
(0.46) |
(0.43) |
(0.33) |
(0.43) |
EPS - normalised and fully diluted (€) |
|
(0.63) |
(0.40) |
(0.30) |
(0.46) |
(0.43) |
(0.33) |
(0.43) |
|
EPS - (IFRS) (€) |
|
|
(0.62) |
(0.62) |
(0.54) |
(0.49) |
(0.46) |
(0.36) |
(0.46) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
112,498 |
110,660 |
89,745 |
88,587 |
87,423 |
86,401 |
85,509 |
Intangible Assets |
71,397 |
72,120 |
64,848 |
63,686 |
62,545 |
61,424 |
60,323 |
||
Tangible Assets |
25,628 |
27,517 |
24,829 |
24,833 |
24,810 |
24,909 |
25,118 |
||
Investments in long-term financial assets |
15,473 |
11,023 |
68 |
68 |
68 |
68 |
68 |
||
Current Assets |
|
|
26,092 |
32,146 |
52,521 |
36,106 |
26,118 |
26,978 |
28,446 |
Short-term investments |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Cash |
22,059 |
28,102 |
47,195 |
29,030 |
18,593 |
16,325 |
17,171 |
||
Other |
4,033 |
4,044 |
5,326 |
7,075 |
7,525 |
10,653 |
11,275 |
||
Current Liabilities |
|
|
(8,069) |
(9,828) |
(15,405) |
(15,505) |
(12,586) |
(15,156) |
(12,301) |
Creditors |
(8,069) |
(7,751) |
(10,116) |
(10,216) |
(7,297) |
(9,867) |
(7,012) |
||
Short term borrowings |
0 |
(2,077) |
(5,289) |
(5,289) |
(5,289) |
(5,289) |
(5,289) |
||
Long Term Liabilities |
|
|
(16,868) |
(23,681) |
(26,051) |
(26,051) |
(34,351) |
(44,351) |
(64,351) |
Long term borrowings |
0 |
(9,045) |
(12,687) |
(12,687) |
(22,687) |
(32,687) |
(52,687) |
||
Other long-term liabilities |
(16,868) |
(14,636) |
(13,364) |
(13,364) |
(11,664) |
(11,664) |
(11,664) |
||
Net Assets |
|
|
113,653 |
109,297 |
100,810 |
83,137 |
66,604 |
53,872 |
37,303 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
(21,533) |
(17,741) |
(956) |
(16,906) |
(18,939) |
(9,680) |
(15,504) |
Net interest and financing income (expense) |
2,390 |
1,690 |
(4,436) |
(901) |
(1,170) |
(2,151) |
(3,070) |
||
Tax |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(268) |
(95) |
(20) |
(358) |
(328) |
(437) |
(581) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
0 |
11,290 |
13,321 |
0 |
0 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(19,411) |
(4,856) |
7,909 |
(18,165) |
(20,437) |
(12,268) |
(19,154) |
||
Opening net debt/(cash) |
|
|
0 |
(37,532) |
(28,003) |
(29,287) |
(11,122) |
9,315 |
21,583 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
56,943 |
(4,673) |
(6,625) |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(37,532) |
(28,003) |
(29,287) |
(11,122) |
9,315 |
21,583 |
40,737 |
Lease debt |
N/A |
1,527 |
1,099 |
1,099 |
1,099 |
1,099 |
1,099 |
||
Closing net debt/(cash) inclusive of IFRS 16 lease debt |
(37,532) |
(26,476) |
(28,188) |
(10,023) |
10,414 |
22,682 |
41,836 |
Source: Company reports, Edison Investment Research
|
|
Research: Oil & Gas
The Wressle-1 well has delivered above management’s expectation, producing at 884bod with a further c 80boed of gas. With a 30% working interest in Wressle, Egdon has achieved a significantly higher 289boed net versus its target of 150bod, with the full potential of the well yet to be tested. Further onshore drilling remains dependent on successful farm-outs, while offshore, the 3D seismic surveys on the Shell operated Resolution and Endeavour discoveries will now be delayed beyond the previously rescheduled February 2022 date. Egdon has also made progress with its geothermal projects, having identified the Dukes Wood-1 oil well for recompletion for geothermal heat production.
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