Acacia Pharma — Ready for BARHEMSYS launch in H119

Acacia Pharma (EU: ACPH)

Last close As at 04/11/2024

1.28

0.04 (3.23%)

Market capitalisation

129m

More on this equity

Research: Healthcare

Acacia Pharma — Ready for BARHEMSYS launch in H119

Acacia Pharma has now established its initial US sales and marketing infrastructure, ahead of the potential launch of lead asset BARHEMSYS. This is the first step in its strategy to bring antiemetic drugs to the hospital setting for unmet needs in PONV and CINV. The FDA has accepted Acacia’s revised New Drug Application (NDA) for BARHEMSYS and has now set a Prescription Drug User Fee Act (PDUFA) date of 5 May. We continue to expect launch of BARHEMSYS in H119. We value Acacia at €635m (or €11.9/share) vs €602m (or €11.3/share) previously.

Analyst avatar placeholder

Written by

Healthcare

Acacia Pharma

Ready for BARHEMSYS launch in H119

FY18 results

Pharma & biotech

27 February 2019

Price

€1.69

Market cap

€90m

$1.32/£, $1.14/€, €1.16/£

Net cash (£m) at 31 December 2018

22.1

Shares in issue

53.3m

Free float

100%

Code

ACPH

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.5

(18.6)

N/A

Rel (local)

5.2

(21.5)

N/A

52-week high/low

€4.0

€1.2

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 is forecast to launch in 2019.

Next events

BARHEMSYS US FDA PDUFA review goal

5 May 2019

BARHEMSYS US launch

H119

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Dr Sean Conroy

+44 (0)20 3681 2534

Acacia Pharma is a research client of Edison Investment Research Limited

Acacia Pharma has now established its initial US sales and marketing infrastructure, ahead of the potential launch of lead asset BARHEMSYS. This is the first step in its strategy to bring antiemetic drugs to the hospital setting for unmet needs in PONV and CINV. The FDA has accepted Acacia’s revised New Drug Application (NDA) for BARHEMSYS and has now set a Prescription Drug User Fee Act (PDUFA) date of 5 May. We continue to expect launch of BARHEMSYS in H119. We value Acacia at €635m (or €11.9/share) vs €602m (or €11.3/share) previously.

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

1.1

(46.0)

(0.83)

0.00

N/A

N/A

12/20e

13.5

(41.7)

(0.76)

0.00

N/A

N/A

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

CRL deficiencies addressed and PDUFA date set

Following the submission of the original NDA for BARHEMSYS, the FDA issued a complete response letter (CRL) that related to issues at the contract manufacturer responsible for producing the active pharmaceutical ingredient (API). Acacia and the API manufacturer prepared a corrective and preventative action plan to address the outstanding deficiencies at the manufacturing facility. This plan was submitted to the FDA by the contract manufacturer alongside a resubmission of the NDA by Acacia. Importantly, the FDA did not request additional clinical data. We do not anticipate any additional problems and expect BARHEMSYS to be approved on or before its PDUFA date. However, sensitivities remain until approval is achieved.

US commercial infrastructure in place

Acacia has hired 35 staff in the US (in sales, regulatory, marketing and operational roles) in preparation for a launch of BARHEMSYS in H119. By mid-2019 Acacia expects this to rise to 40 staff as the drug nears approval and to 100 once direct field staff have been employed. Reps will focus on anaesthetists at ~1,600 US hospitals that account for ~80% of relevant surgical procedures. We estimate that successful commercialisation could enable Acacia to achieve break-even in 2023.

FY18 results: Building US operations

Net loss rose to £15.5m in FY18 vs £6.2m in FY17, predominately as a result of increased SG&A (FY18: £11.3m vs FY17: £1.5m) expenses as Acacia prepares for the US launch of BARHEMSYS. We forecast this trend to continue with a net loss of £44.4m in FY19 driven by significant investment in sales and marketing. Near-term funding will be required to grow the US operations (see our initiation report).

Valuation: €635m or €11.9/share

Our valuation has increased to €635m or €11.9/share vs €602m or €11.3/share previously. This is a result of updating for net cash, FX rates and rolling forward our model. Our valuation is predominantly based on a risk-adjusted NPV model of BARHEMSYS for PONV, in addition to the CINV opportunity for the US market only.

R&D activities strengthen company

Acacia continues to advance its R&D operations, as noted in recent publications and announcements on BARHEMSYS. In November 2018, Acacia published its data from the positive Phase III clinical trial of BARHEMSYS as rescue treatment for established PONV (post-operative nausea and vomiting) in the journal Anesthesiology. In January 2019, the company announced positive cardiac data (DP10022 study) for BARHEMSYS, which demonstrated that there was no significant risk of heart rhythm disturbances (arrhythmias) at the highest proposed dose of BARHEMSYS, given alone or in combination with intravenous ondansetron, a widely used PONV therapy with a known effect on the heart.

As a result of its strong clinical data package to date, the company is seeking the following label from the FDA:

1.

treatment of PONV in patients who have received antiemetic prophylaxis with an agent of a different class or who have not received prophylaxis (at a dose of 10mg); and

2.

prevention of PONV, either alone or in combination with an antiemetic of a different class (at a dose of 5mg).

In addition to BARHEMSYS, Acacia is developing APD403 (repurposed amisulpride, the active ingredient in BARHEMSYS, in both an intravenous form for use alongside chemotherapy and an oral version for use at home in the subsequent days) for management of chemotherapy-induced nausea and vomiting (CINV) as a follow-on indication. In December 2018, the company announced its positive Phase II clinical trial data of APD403 in CINV had been published in the journal Supportive Care in Cancer.

FY18 results: Cost base rises as it readies for launch

Acacia continues to ramp up its US commercial operations in preparation for launch of BARHEMSYS (amisulpride injection). As result, SG&A increased in FY18 to £11.3m vs £1.5m in FY17. The increase was predominately driven by sales and marketing costs of £6.9m (vs FY17: £0.0) from hiring a new commercial team and the subsequent pre-launch marketing, education, training, distribution and regulatory activities. G&A costs rose to £4.3m in FY18 (vs FY17: £1.5m) as a result of the costs of the Euronext IPO and ongoing costs of being a public company. R&D rose to £3.8m (vs FY17: £1.5m) as a result of the NDA submission, product development and the DP10022 study.

Financial income rose to £0.9m (vs FY17: £0.002m) due to the increased cash balance from the IPO, while financial expenses dropped to £2.1m (vs FY17: £3.5m) because of the conversion of both the preferred shares and the convertible loan. Tax credits rose slightly to £0.7m (vs FY17: £0.3m).

Net loss rose in FY18 to £15.5m (vs FY17: £6.2m). The year-end cash balance of £29.4m was aided by the £33.9m net raise from the IPO in March and the drawdown of $10m from the $30m credit facility with Hercules Technology Growth Capital (Hercules). In FY18, the company repaid the existing £5.2m Silicon Valley Bank loan. To fund ongoing operations, we forecast that an additional c £70m (in addition to the remaining $20m from Hercules) will need to be raised in 2019 and 2020. We note that, for simplicity, in our model we currently illustrate this as a debt raise. However, Acacia management has stated that it plans to finance the company by a combination of equity and debt.

We forecast revenue in FY19 of £1.1m, growing to £13.5m in FY20. In the short term, revenues remain wholly dependent on the success of BARHEMSYS. We project R&D costs of £7.6m in FY19, growing to £9.9m in FY20, driven by the clinical trial programme for APD403. We anticipate that SG&A costs will increase to £37.1m in FY19, growing to £42.0m in FY20. We forecast a net loss of £44.4m in FY19 and £40.4m in FY20, and that Acacia will reach break-even in 2023.

Valuation: €635m or €11.9/share

Our valuation of Acacia Pharma, at €635m or €11.9/share vs €602m or €11.3/share previously, is mainly based on a risk-adjusted NPV model of BARHEMSYS for rescue treatment and prophylaxis of PONV, in addition to the CINV opportunity for the US market only. We do not include any contribution from Europe or ROW opportunities as these will be dependent on out-licensing agreements with various future partners, on which we have no visibility. We include end-December 2018 net cash of €25.6m (£22.1m) in our valuation and use a 12.5% discount rate.

Exhibit 1: Valuation

Product

Indication

Launch

Peak sales ($)

Value (€)

Probability

rNPV (€m)

rNPV/share (€)

BARHEMSYS US only

PONV

2019

404.7

661.5

90%

595.4

11.2

APD403 US only

CINV

2024

107.9

77.9

30%

14.0

0.3

Net cash at 31 Dec 2018

25.6

100%

25.6

0.5

Valuation

765.0

634.9

11.9

Source: Edison Investment Research

For a full overview of our valuation please see our previously published initiation report.

Exhibit 2: Financial summary

Accounts: IFRS, year-end: December, £m

 

 

2015

2016

2017

2018

2019e

2020e

PROFIT & LOSS

Revenue

 

 

0.0

0.0

0.0

0.0

1.1

13.5

Operating revenues

 

 

0.0

0.0

0.0

0.0

1.1

13.5

Cost of sales

 

 

0.0

0.0

0.0

0.0

(0.1)

(0.8)

Gross profit

 

 

0.0

0.0

0.0

0.0

1.0

12.6

Gross margin %

 

 

N/A

N/A

N/A

N/A

0.9

0.9

SG&A (expenses)

 

 

(2.4)

(0.8)

(1.5)

(11.3)

(37.1)

(42.0)

R&D costs

 

 

(10.1)

(13.6)

(1.5)

(3.8)

(7.6)

(9.9)

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)

(43.7)

(39.2)

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)

(43.7)

(39.2)

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)

(2.3)

(2.5)

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)

(46.0)

(41.7)

Income tax expense (includes exceptionals)

 

 

2.2

2.8

0.3

0.7

1.6

1.3

Reported net income

 

 

(12.9)

(13.5)

(6.2)

(15.5)

(44.4)

(40.4)

Basic average number of shares, m

 

 

2.7

2.7

2.7

44.1

53.3

53.3

Year-end number of shares, m

 

 

2.7

2.7

2.7

53.3

53.3

53.3

Basic EPS (p)

 

 

(4.83)

(5.06)

(2.32)

(0.35)

(0.83)

(0.76)

Adjusted EPS (p)

 

 

(4.83)

(5.06)

(2.32)

(0.35)

(0.83)

(0.76)

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

1.2

14.1

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

0.0

Total non-current assets

 

 

0.0

0.0

0.0

0.0

1.2

14.1

Cash and equivalents

 

 

5.5

6.9

3.1

29.4

35.0

20.1

Inventories

 

 

0.0

0.0

0.0

0.0

0.0

0.1

Trade and other receivables

 

 

0.3

0.5

0.2

0.3

0.2

2.2

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

35.9

23.1

Non-current loans and borrowings

 

 

0.0

5.0

0.0

7.0

57.0

97.0

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

57.0

97.0

Trade and other payables

 

 

2.9

5.1

1.0

3.7

5.1

5.7

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

5.1

5.7

Equity attributable to company

 

 

(2.8)

(11.7)

(17.8)

19.3

(25.0)

(65.4)

CASH FLOW STATEMENT

 

 

 

 

 

 

Operating Profit

 

 

(15.1)

(16.3)

(6.5)

(16.2)

(46.0)

(41.7)

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

2.3

2.5

Movements in working capital

 

 

1.6

2.0

(3.8)

2.6

1.5

(1.5)

Interest paid / received

 

 

0.0

0.0

0.0

0.2

(2.3)

(2.5)

Income taxes paid

 

 

1.1

2.2

2.8

0.3

1.6

1.3

Cash from operations (CFO)

 

 

(9.7)

(10.2)

(3.7)

(11.6)

(43.3)

(40.9)

Capex

 

 

0.0

0.0

0.0

0.0

(1.2)

(14.1)

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

0.3

0.2

Cash used in investing activities (CFIA)

 

 

0.0

0.0

0.0

0.2

(0.8)

(13.9)

Net proceeds from issue of shares

 

 

12.5

4.5

3.4

34.2

0.0

0.0

Movements in debt

 

 

0.0

7.1

(3.4)

1.5

49.7

40.0

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

49.7

40.0

Cash and equivalents at beginning of period

 

 

2.6

5.5

6.9

3.1

29.4

35.0

Increase/(decrease) in cash and equivalents

 

 

2.8

1.4

(3.8)

26.3

5.6

(14.9)

Cash and equivalents at end of period

 

 

5.5

6.9

3.1

29.4

35.0

20.1

Source: Acacia Pharma accounts, Edison Investment Research

General disclaimer and copyright

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 Edison analyst 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 Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

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

More on Acacia Pharma

View All

Latest from the Healthcare sector

View All Healthcare content

Research: Metals & Mining

Amur Minerals — Gaining traction

On 26 February, Amur announced the long-awaited results of its updated pre-feasibility study (PFS) into its Kun-Manie project in Russia’s Far East. In contrast to previous studies, the PFS considered just two options, namely a toll smelt option and a low-grade matte option, and dispensed with the high-grade matte and refinery options. Detailed financial models are not yet available. However, both considered a 6Mtpa mining operation and results are comparable to those published by Edison in our note, Cobalt-plated nickel, published on 16 April 2018.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free