Paion — Near-term filings in the US and Japan on track

Paion (DE: PA8)

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2.46

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Research: Healthcare

Paion — Near-term filings in the US and Japan on track

Paion is approaching several important milestones, with partners on track to file for approval of remimazolam in the US, Japan and Russia in the next few months. Its Phase III study of remimazolam in general anaesthesia (GA) in Europe is progressing well and is on track to complete recruitment in 2019, while partner R-Pharm recently completed a successful Phase III in GA in Russia. The filings will be an important step towards establishing Paion as a leader in acute and critical care. We have made minor revisions to the timing of R&D expenditure in line with revised guidance and rolled forward our DCF model, which lifts our valuation to €291m or €4.56/share.

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Healthcare

Paion

Near-term filings in the US and Japan on track

Q318 update

Pharma & biotech

12 November 2018

Price

€2.27

Market cap

€145m

US$1.10/€

Net cash (€m) at end September 2018

19.8

Shares in issue

63.9m

Free float

75%

Code

PA8

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(8.2)

(13.6)

(14.6)

Rel (local)

(4.7)

(5.0)

(2.3)

52-week high/low

€2.7

€2.0

Business description

Paion is an emerging specialty pharma company developing anaesthesia products. Lead product remimazolam has completed US Phase III trials and is partnered with Cosmo (US), Mundipharma (Japan), Yichang (China), Hana Pharma (South Korea), Pendopharm (Canada) and R-Pharm (CIS, Turkey, MENA).

Next events

Japan filing for GA by Mundipharma

Q418

US filing for procedural sedation by Cosmo

Q418/ Q119

Russia filing for GA by R-Pharm

Q119

Analysts

Dr Dennis Hulme

+61 (0)2 8249 8345

Dr Susie Jana

+44 (0)20 3681 2527

Paion is a research client of Edison Investment Research Limited

Paion is approaching several important milestones, with partners on track to file for approval of remimazolam in the US, Japan and Russia in the next few months. Its Phase III study of remimazolam in general anaesthesia (GA) in Europe is progressing well and is on track to complete recruitment in 2019, while partner R-Pharm recently completed a successful Phase III in GA in Russia. The filings will be an important step towards establishing Paion as a leader in acute and critical care. We have made minor revisions to the timing of R&D expenditure in line with revised guidance and rolled forward our DCF model, which lifts our valuation to €291m or €4.56/share.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/16

4.3

(25.1)

(37.8)

0.0

N/A

N/A

12/17

5.8

(15.9)

(20.5)

0.0

N/A

N/A

12/18e

3.1

(13.6)

(17.9)

0.0

N/A

N/A

12/19e

10.5

(9.4)

(10.2)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding, exceptionals and share-based payments.

Filings on track in the US and Japan

Remimazolam is Paion’s ultra-short-acting intravenous (IV) sedative/anaesthetic which combines the best features of the approved IV agents Midazolam and Propofol. Partner Cosmo is on track to file for US approval in procedural sedation, as planned, in Q418 or Q119. Mundipharma is on track to file for approval in Japan towards year-end. Paion expects to receive ~€2m in milestones following a filing in Japan and €7.5m for the US filing.

Progressing GA phase III in Europe

The European Phase III study of remimazolam in 500 elderly or unwell patients undergoing GA for elective surgery is on track to complete recruitment in 2019. The primary endpoint is non-inferiority compared to propofol in successfully completing the procedure. A key secondary endpoint is to show fewer episodes of low blood pressure, which can lead to negative outcomes in these patients.

Partners progressing development in other territories

The company’s partner R-Pharm intends to file for approval of Remimazolam in Russia in Q119, having successfully completed its Phase III in GA. Hana Pharm has completed recruitment in a GA Phase III in South Korea and expects to file for approval in 2020 after production has been established in that country. Partners in several other territories plan to file based on the US or Japanese dossier.

Valuation: Lifted to €291m

We roll forward our DCF model and lift our valuation to €291m, or €4.56/share, from €283m, or €4.44/share. Paion has lowered its guidance for R&D spend in 2018 by €3m to €12-14m to reflect some items of expenditure that have been deferred until 2019. As a consequence, we have revised our forecast R&D spend down by €3m in 2018 and up by €3m in 2019. Paion is funded until H120 assuming the filings in the US and Japan proceed as planned. A further €10m would be required until filing in Europe (we model these funds coming from approval milestones).

Exhibit 1: Financial summary

€'000s

2015

2016

2017

2018e

2019e

Year end 31 December

PROFIT & LOSS

Revenue

 

 

61

4,262

5,811

3,100

10,475

Cost of sales

0

0

0

0

0

Gross profit

61

4,262

5,811

3,100

10,475

R&D expenditure

(29,385)

(23,408)

(17,854)

(13,000)

(16,000)

General, administrative & selling

(5,729)

(5,129)

(3,828)

(3,820)

(3,935)

Other

965

(807)

(2)

51

51

Operating profit

(34,088)

(25,841)

(16,219)

(14,069)

(9,709)

Depreciation and amortisation

0

(759)

(347)

(400)

(300)

Share-based payments

0

0

0

0

0

Exceptionals

0

0

0

0

0

EBITDA

 

 

(34,088)

(25,082)

(15,872)

(13,669)

(9,409)

Operating profit (before GW and except)

(34,088)

(25,082)

(15,872)

(13,669)

(9,409)

Net interest

42

21

20

20

20

Profit before tax (norm)

 

 

(34,046)

(25,061)

(15,852)

(13,649)

(9,389)

Profit before tax (reported)

 

 

(34,046)

(25,061)

(15,852)

(13,649)

(9,389)

Tax

5,834

4,944

3,759

2,470

2,880

Profit after tax (norm)

(28,212)

(20,118)

(12,093)

(11,179)

(6,509)

Profit after tax (reported)

(28,212)

(20,118)

(12,093)

(11,179)

(6,509)

Average number of shares outstanding (m)

50.7

53.2

59.1

62.5

63.9

EPS - normalised (c)

 

 

(55.7)

(37.8)

(20.5)

(17.9)

(10.2)

EPS - reported (c)

 

 

(55.7)

(37.8)

(20.5)

(17.9)

(10.2)

Dividend per share (c)

 

 

0.0

0.0

0.0

0.0

0.0

Gross margin (%)

NA

NA

NA

NA

NA

EBITDA margin (%)

NA

NA

NA

NA

NA

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

NA

NA

NA

NA

NA

BALANCE SHEET

Fixed assets

 

 

3,417

2,855

2,529

2,529

2,529

Intangible assets

3,362

2,688

2,415

2,415

2,415

Tangible assets

56

167

114

114

114

Refund from assumption of dev costs

0

0

0

0

0

Other

0

0

0

0

0

Current assets

 

 

40,051

35,128

29,357

23,245

16,736

Stocks

0

0

0

0

0

Debtors

0

0

37

25

25

Cash

32,680

30,111

24,839

18,739

12,230

Other

7,371

5,017

4,481

4,481

4,481

Current liabilities

 

 

(7,901)

(13,040)

(6,656)

(6,656)

(6,656)

Trade payables

(7,332)

(6,353)

(5,921)

(5,921)

(5,921)

Short-term borrowings

0

0

0

0

0

Provisions

(224)

(555)

(391)

(391)

(391)

Finance lease liabilities

0

0

0

0

0

Other current liabilities

(305)

(359)

(325)

(325)

(325)

Current deferred income

(39)

(5,774)

(19)

(19)

(19)

Long-term liabilities

 

 

(6)

0

0

0

0

Long-term borrowings

0

0

0

0

0

Provisions

0

0

0

0

0

Long-term deferred income

(6)

0

0

0

0

Deferred taxes

0

0

0

0

0

Other long-term liabilities

0

0

0

0

0

Net assets

 

 

35,562

24,943

25,229

19,117

12,608

CASH FLOW

Operating cash flow

 

 

(28,212)

(17,135)

(22,318)

(13,657)

(9,409)

Net interest

43

19

20

20

20

Tax

2,575

5,529

4,577

2,470

2,880

Capex

0

7

0

0

0

Purchase of intangibles

(33)

0

0

0

0

Acquisitions/disposals

0

(199)

(25)

0

0

Equity Financing

22

9,212

12,494

5,067

0

Dividends

0

0

0

0

0

Other

0

0

0

0

0

Net cash flow

(25,605)

(2,567)

(5,251)

(6,100)

(6,509)

Opening net debt/(cash)

 

 

(58,912)

(32,680)

(30,111)

(24,839)

(18,739)

Effect of exchange rate changes

(66)

(2)

(22)

0

0

Other

-560

0

0

0

0

Closing net debt/(cash)

 

 

(32,680)

(30,111)

(24,839)

(18,739)

(12,230)

Source: Edison Investment Research, Paion accounts

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 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Paion 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 Ltd (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.
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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

New York, NY10017

US

Sydney +61 (0)2 8249 8342

Level 4

95 Pitt Street, Sydney

NSW 2000, Australia

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 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Paion 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 Ltd (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 2018. “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.

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

New York, NY10017

US

Sydney +61 (0)2 8249 8342

Level 4

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

New York, NY10017

US

Sydney +61 (0)2 8249 8342

Level 4

95 Pitt Street, Sydney

NSW 2000, Australia

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