Acacia Pharma — FDA approves BARHEMSYS for PONV

Acacia Pharma (EU: ACPH)

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Research: Healthcare

Acacia Pharma — FDA approves BARHEMSYS for PONV

The US FDA has approved Acacia Pharma’s lead asset, BARHEMSYS (reformulated amisulpride), for the management of post-operative nausea and vomiting (PONV). Rescue treatment for PONV is an unmet need. Acacia plans to launch BARHEMSYS in H220 and management has been slowly building up its US commercial operations. It now has 30 personnel in the US spanning six regional teams. With short-term funding secured through the ByFavo in-licence deal with Cosmo Pharmaceuticals, Acacia plans to recruit further key personnel required to support the product’s launch in H220. Importantly, the FDA has granted BARHEMSYS a broad label in PONV. Combined with economic saving data, this should support broad hospital formulary access. Our increased valuation is €15.2/share.

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Written by

Healthcare

Acacia Pharma

FDA approves BARHEMSYS for PONV

Corporate update

Pharma & biotech

27 February 2020

Price

€2.79

Market cap

€178m

$1.30/£, $1.11/€, €1.17/£

Net cash (£m) at 31 December 2019

7

Shares in issue

63.9m

Free float

28%

Code

ACPH

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.3)

55.5

64.7

Rel (local)

(6.2)

58.5

55.0

52-week high/low

€4.0

€1.3

Business description

Acacia Pharma is a hospital pharmaceutical company focused on the development and commercialisation of new nausea and vomiting treatments for surgical and cancer patients. Its main product, BARHEMSYS, is for the treatment of PONV and could be approved by the FDA in 2020.

Next events

FY19 results

2 March 2020

ByFavo US FDA PDUFA date

5 April 2020

BARHEMSYS US launch as PONV ‘rescue treatment’

H220

Analyst

Dr Susie Jana

+44 (0)20 3077 5700

Acacia Pharma is a research client of Edison Investment Research Limited

The US FDA has approved Acacia Pharma’s lead asset, BARHEMSYS (reformulated amisulpride), for the management of post-operative nausea and vomiting (PONV). Rescue treatment for PONV is an unmet need. Acacia plans to launch BARHEMSYS in H220 and management has been slowly building up its US commercial operations. It now has 30 personnel in the US spanning six regional teams. With short-term funding secured through the ByFavo in-licence deal with Cosmo Pharmaceuticals, Acacia plans to recruit further key personnel required to support the product’s launch in H220. Importantly, the FDA has granted BARHEMSYS a broad label in PONV. Combined with economic saving data, this should support broad hospital formulary access. Our increased valuation is €15.2/share.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/17

0.0

(6.5)

(2.32)

0.00

N/A

N/A

12/18

0.0

(16.2)

(0.35)

0.00

N/A

N/A

12/19e

0.0

(23.1)

(0.44)

0.00

N/A

N/A

12/20e

1.8

(27.3)

(0.40)

0.00

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

BARHEMSYS US launch expected in H220

The FDA has granted a broad label for BARHEMSYS (intravenous amisulpride). It is indicated for ‘rescue treatment’ (patients who are uncontrolled following prophylactic treatment with standard-of care-antiemetics) and prophylaxis of PONV as monotherapy and in combination with standard-of-care antiemetics including a 5-HT3 antagonist. Initial detailing will focus on rescue treatment and we note the total addressable US patient population is c 30 million patients, a sizable opportunity. We forecast $386.7m peak sales for BARHEMSYS in PONV.

ByFavo up next; PDUFA date 5 April

In January, Acacia in-licensed ByFavo (remimazolam), an ultra-short-acting and reversible intravenous benzodiazepine sedative/anaesthetic for use during procedural sedation (PS). ByFavo broadens Acacia’s US commercial pipeline and will enable significant leverage of its US commercial infrastructure on launch.

Near-term funding secured

Acacia now has the funding in place, through the Cosmo Pharma deal, to expand its commercial team by ~30 new hires, in addition to the 30 personnel currently focusing on six regions (medical science liaisons, national account directors and regional business directors) and the back office support staff in the US. Further expansion will depend on the sales opportunity and funding requirements.

Valuation: €970.5m or €15.2/share

We increase our valuation to €970.5m or €15.2/share vs (vs €881.6m or €13.8/share previously). We remove risk adjustment for BARHEMSYS but maintain our peak sales forecast. Acacia has changed its reporting currency from GBP to US$. We retain our sterling-denominated forecasts for now, but will change to US dollars in the near future.

Exhibit 1: Financial summary

Accounts: IFRS; year-end 31 December (£m)

 

 

2015

2016

2017

2018

2019e

2020e

PROFIT & LOSS

Revenue

 

 

0.0

0.0

0.0

0.0

0.0

1.8

Operating revenues

 

 

0.0

0.0

0.0

0.0

0.0

1.8

Cost of sales

 

 

0.0

0.0

0.0

0.0

0.0

(0.2)

Gross profit

 

 

0.0

0.0

0.0

0.0

0.0

1.5

Gross margin %

 

 

N/A

N/A

N/A

N/A

n/a

0.9

SG&A (expenses)

 

 

(2.4)

(0.8)

(1.5)

(11.3)

(18.5)

(24.3)

R&D costs

 

 

(10.1)

(13.6)

(1.5)

(3.8)

(4.7)

(2.2)

Other income/(expense)

 

 

0.0

0.0

0.0

0.0

0.0

0.0

EBITDA (reported)

 

 

(12.5)

(14.4)

(3.0)

(15.0)

(23.2)

(24.9)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported Operating Income

 

 

(12.5)

(14.4)

(3.0)

(15.0)

(23.2)

(24.9)

Operating Margin %

 

 

N/A

N/A

N/A

N/A

n/a

n/a

Finance income/(expense)

 

 

(2.6)

(1.8)

(3.5)

(1.1)

0.1

(2.4)

Exceptionals and adjustments

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Reported PBT

 

 

(15.1)

(16.3)

(6.5)

(16.2)

(23.1)

(27.3)

Income tax expense (includes exceptionals)

 

 

2.2

2.8

0.3

0.7

(0.5)

(0.7)

Reported net income

 

 

(12.9)

(13.5)

(6.2)

(15.5)

(23.6)

(28.0)

Basic average number of shares, m

 

 

2.7

2.7

2.7

44.1

53.3

69.7

Year-end number of shares, m

 

 

2.7

2.7

2.7

53.3

53.3

69.7

Basic EPS (p)

 

 

(4.83)

(5.06)

(2.32)

(0.35)

(0.44)

(0.40)

Adjusted EPS (p)

 

 

(4.83)

(5.06)

(2.32)

(0.35)

(0.44)

(0.40)

Dividend per share (p)

 

 

0.00

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

0.0

0.0

0.0

0.0

0.0

1.8

Goodwill

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Intangible assets

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other non-current assets

 

 

0.0

0.0

0.0

0.0

0.0

38.5

Total non-current assets

 

 

0.0

0.0

0.0

0.0

0.0

40.3

Cash and equivalents

 

 

5.5

6.9

3.1

29.4

12.2

23.8

Inventories

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Trade and other receivables

 

 

0.3

0.5

0.2

0.3

0.0

0.3

Other current assets

 

 

2.1

2.8

0.3

0.7

0.7

0.7

Total current assets

 

 

7.9

10.2

3.6

30.4

12.8

24.8

Non-current loans and borrowings

 

 

0.0

5.0

0.0

7.0

7.0

59.8

Other non-current liabilities

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Total non-current liabilities

 

 

0.0

5.0

0.0

7.0

7.0

59.8

Trade and other payables

 

 

2.9

5.1

1.0

3.7

10.1

3.3

Current loans and borrowings

 

 

0.0

2.7

5.2

0.3

0.0

0.0

Other current liabilities

 

 

7.8

9.1

15.2

0.0

0.0

0.0

Total current liabilities

 

 

10.8

17.0

21.4

4.1

10.1

3.3

Equity attributable to company

 

 

(2.8)

(11.7)

(17.8)

19.3

(4.3)

2.0

CASH FLOW STATEMENT

 

 

 

 

 

 

 

 

Operating Profit

 

 

(15.1)

(16.3)

(6.5)

(16.2)

(23.1)

(27.3)

Depreciation and amortisation

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Share based payments

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other adjustments

 

 

2.7

1.9

3.7

1.6

(0.1)

2.4

Movements in working capital

 

 

1.6

2.0

(3.8)

2.6

6.7

(7.1)

Interest paid/received

 

 

0.0

0.0

0.0

0.2

0.1

(2.4)

Income taxes paid

 

 

1.1

2.2

2.8

0.3

(0.5)

(0.7)

Cash from operations (CFO)

 

 

(9.7)

(10.2)

(3.7)

(11.6)

(18.7)

(35.3)

Capex

 

 

0.0

0.0

0.0

0.0

0.0

(1.8)

Acquisitions & disposals net

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Other investing activities

 

 

0.0

0.0

0.0

0.2

1.8

0.2

Cash used in investing activities (CFIA)

 

 

0.0

0.0

0.0

0.2

1.8

(14.4)

Net proceeds from issue of shares

 

 

12.5

4.5

3.4

34.2

0.0

8.5

Movements in debt

 

 

0.0

7.1

(3.4)

1.5

(0.3)

52.8

Other financing activities

 

 

0.0

0.0

0.0

0.0

0.0

0.0

Cash from financing activities (CFF)

 

 

12.5

11.7

0.0

35.7

(0.3)

61.4

Cash and equivalents at beginning of period

 

 

2.6

5.5

6.9

3.1

29.4

12.2

Increase/(decrease) in cash and equivalents

 

 

2.8

1.4

(3.8)

26.3

(17.2)

11.6

Cash and equivalents at end of period

 

 

5.5

6.9

3.1

29.4

12.2

23.8

Net (debt)/cash

 

 

5.5

(0.8)

(2.1)

22.1

5.2

(36.0)

Source: Acacia Pharma, Edison Investment Research

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This report has been commissioned by Acacia Pharma and prepared and issued by Edison, in consideration of a fee payable by Acacia Pharma. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Frankfurt +49 (0)69 78 8076 960

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This report has been commissioned by Acacia Pharma and prepared and issued by Edison, in consideration of a fee payable by Acacia Pharma. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “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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New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

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United Kingdom

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