Paion — FDA outcome April 2020; EMA filing in Q419

Paion (DE: PA8)

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Research: Healthcare

Paion — FDA outcome April 2020; EMA filing in Q419

Assuming a successful FDA review of remimazolam for procedural sedation (PS), with an outcome due by 5 April 2020, Paion is set for 20–25% royalties from US sales made by Cosmo. Remimazolam is a safe ultra-short-acting sedative/anaesthetic offering both rapid onset and offset of action. This profile should drive US market uptake for short, painful procedures such as colonoscopy. A European regulatory filing for PS will now be made in H219 allowing a possible European launch in 2021, an abbreviated EMA filing for general anaesthesia (GA) could be made by late 2020. We maintain our valuation of €317m (€4.96 per share).

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Healthcare

Paion

FDA outcome April 2020; EMA filing in Q419

H119 results

Pharma & biotech

15 August 2019

Price

€2.33

Market cap

€149m

US$1.10/€

Cash (€m) at 30 June 2019

19.2

Shares in issue

63.9m

Free float

75%

Code

PA8

Primary exchange

Frankfurt

Secondary exchange

Xetra

Share price performance

%

1m

3m

12m

Abs

(6.4)

5.9

(2.3)

Rel (local)

0.3

10.5

5.1

52-week high/low

€2.6

€2.0

Business description

Paion is an emerging specialty pharma company developing anaesthesia products. Lead product remimazolam has been filed for approval in the US, Japan and China and is partnered with Cosmo (US), Mundipharma (Japan), Yichang (China), Hana Pharma (South Korea), Pharmascience (Canada) and R-Pharm (CIS, Turkey, MENA).

Next events

Japan approval decision

Q419/H120

Fully recruit GA Phase III in Europe

Q120

FDA decision on PS

5 April 2020

Analysts

Dr John Savin MBA

+44 (0)20 3077 5700

Dr Susie Jana

+44 (0)20 3077 5700

Paion is a research client of Edison Investment Research Limited

Assuming a successful FDA review of remimazolam for procedural sedation (PS), with an outcome due by 5 April 2020, Paion is set for 20–25% royalties from US sales made by Cosmo. Remimazolam is a safe ultra-short-acting sedative/anaesthetic offering both rapid onset and offset of action. This profile should drive US market uptake for short, painful procedures such as colonoscopy. A European regulatory filing for PS will now be made in H219 allowing a possible European launch in 2021, an abbreviated EMA filing for general anaesthesia (GA) could be made by late 2020. We maintain our valuation of €317m (€4.96 per share).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

5.8

(15.9)

(20.5)

0.0

N/A

N/A

12/18

2.8

(12.4)

(15.9)

0.0

N/A

N/A

12/19e

8.0

(11.1)

(14.2)

0.0

N/A

N/A

12/20e

25.0

10.8

19.6

0.0

11.9

N/A

Note: *PBT and EPS are normalised, excluding exceptional items.

US outcome by 5 April 2020, EU review by end Q420

The FDA review will complete by 5 April 2020 (PDUFA), which could allow an H2 2020 launch of remimazolam. Four Phase III studies in the US and Japan all met their primary endpoints and reported favourable safety data, so we use a 90% likelihood of approval. Paion now plans to file with the EMA for PS (based on the US trials) by late 2019 (and subject to EMA approval of the Paediatric Investigation Plan), potentially allowing EU sales from 2021. Recruitment to the GA Phase III (NCT03661489) is ongoing, with over 200 of 500 planned patients treated since July 2018; completion may now be in Q120 if recruitment accelerates. The Phase III data in GA could then allow a faster abbreviated follow-on filing.

H119 results show improved cash position

Paion received an H1 €7.5m milestone from Cosmo on the FDA regulatory filing, a further €0.5m related to the Japanese filing might be received in H2. In H219, UK R&D tax credits should provide €2m in cash. The company expects a reported PAT loss for FY19 of €7–10m compared to our forecast loss of €9.1m, formerly €9.3m. Our forecast revenues for 2020 (€25m) come from milestones in the US, Japan and Canada. Depending on the US and Japanese launch dates and sales growth, there might be additional royalties, but these really grow from 2021. Given the €19.2m June 19 cash plus expected income, Paion is funded into H220. Management states that a further €10m of funding will be required up to the GA EMA filing (we estimate Q420). Paion now has a European Investment Bank loan facility of €20m available until June 2021; €5m will be drawn in H219. Paion intends to market remimazolam directly in some countries in Europe but this will need investment.

Valuation: Retained at €317m

We expect the higher patient throughput achievable with remimazolam in PS procedures such as colonoscopy to be a key factor driving US market uptake from late 2020. We retain our valuation of €317m or €4.96/share. Use of the European Investment Bank loan of €20m will reduce the potential dilution requirement.

Exhibit 1: Financial summary

€'000s

2017

2018

2019e

2020e

Year end 31 December

PROFIT & LOSS

Revenue

 

 

5,811

2,766

8,000

25,003

Cost of sales

0

0

0

0

Gross profit

5,811

2,766

8,000

25,003

R&D expenditure

(17,854)

(12,167)

(14,500)

(9,500)

General, administrative & selling

(3,828)

(3,408)

(4,601)

(4,739)

Other

(2)

354

0

0

Operating profit

(16,219)

(12,711)

(11,401)

10,464

Depreciation and amortisation

(347)

(256)

(300)

(300)

Share-based payments

0

0

0

0

Exceptionals

0

0

0

0

EBITDA

 

 

(15,872)

(12,455)

(11,101)

10,764

Operating profit (before amort. and except.)

 

 

(15,872)

(12,455)

(11,101)

10,764

Net Interest

20

6

20

20

Profit Before Tax (norm)

 

 

(15,852)

(12,449)

(11,081)

10,784

Profit before tax (reported)

 

 

(15,852)

(12,449)

(11,081)

10,784

Tax

3,759

2,510

2,000

1,710

Profit after tax (norm)

(12,093)

(9,939)

(9,081)

12,494

Profit after tax (reported)

(12,093)

(9,939)

(9,081)

12,494

Average number of shares outstanding (m)

59.1

62.5

63.9

63.9

EPS - normalised (c)

 

 

(20.5)

(15.9)

(14.2)

19.6

EPS - reported (c)

 

 

(20.5)

(15.9)

(14.2)

19.6

Dividend per share (c)

 

 

0.0

0.0

0.0

0.0

Gross margin (%)

NA

NA

NA

NA

EBITDA margin (%)

NA

NA

NA

NA

Operating margin (before GW and except.) (%)

NA

NA

NA

NA

BALANCE SHEET

Fixed assets

 

 

2,529

2,286

2,286

2,286

Intangible assets

2,415

2,212

2,212

2,212

Tangible assets

114

74

74

74

Refund from assumption of dev costs

0

0

0

0

Other

0

0

0

0

Current assets

 

 

29,357

22,037

12,957

25,451

Stocks

0

0

0

0

Debtors

37

1,500

25

25

Cash

24,839

17,227

9,621

22,115

Other

4,481

3,311

3,311

3,311

Current liabilities

 

 

(6,656)

(3,501)

(3,501)

(3,501)

Trade payables

(5,921)

(2,218)

(2,218)

(2,218)

Short-term borrowings

0

0

0

0

Provisions

(391)

(630)

(630)

(630)

Finance lease liabilities

0

0

0

0

Other current liabilities

(325)

(654)

(654)

(654)

Current deferred income

(19)

0

0

0

Long-term liabilities

 

 

0

0

0

0

Long-term borrowings

0

0

0

0

Provisions

0

0

0

0

Long-term deferred income

0

0

0

0

Deferred taxes

0

0

0

0

Other long-term liabilities

0

0

0

0

Net assets

 

 

25,229

20,822

11,742

24,236

CASH FLOW

Operating cash flow

 

 

(22,318)

(16,547)

(9,626)

10,764

Net interest

20

5

20

20

Tax

4,577

3,729

2,000

1,710

Capex

0

0

0

0

Purchase of intangibles

0

0

0

0

Acquisitions/disposals

(25)

(13)

0

0

Equity Financing

12,494

5,214

0

0

Dividends

0

0

0

0

Other

0

0

0

0

Net cash flow

(5,251)

(7,612)

(7,606)

12,494

Opening net debt/(cash)

 

 

(30,111)

(24,839)

(17,227)

(9,621)

Effect of exchange rate changes

(22)

(0)

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

(24,839)

(17,227)

(9,621)

(22,115)

Source: Edison Investment Research, company accounts


General disclaimer and copyright

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New Zealand

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General disclaimer and copyright

This report has been commissioned by Paion and prepared and issued by Edison, in consideration of a fee payable by Paion. 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

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.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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