Alexza Pharmaceuticals — Update 1 November 2015

Alexza Pharmaceuticals — Update 1 November 2015

Alexza Pharmaceuticals

Written by

Pooya Hemami

Analyst - Healthcare

Alexza Pharmaceuticals

Regaining US Adasuve rights, new opportunity?

Reacquiring US rights

Pharma & biotech

2 November 2015

Price

$1.07

Market cap

$21m

Net debt (£m) at end August 2015

48.8

Shares in issue

19.4

Free float

86%

Code

ALXA

Primary exchange

NASDAQ

Secondary exchange

N/A

Share price performance

Business description

Alexza develops products for the acute treatment of CNS disorders using its proprietary Staccato rapid inhalation drug delivery system. Adasuve is approved (US and EU) for the acute treatment of agitation in patients with schizophrenia or bipolar I disorder.

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Christian Glennie

+44 (0)20 3077 5727

Alexza Pharmaceuticals is a research client of Edison Investment Research Limited

Alexza and Teva have reached an agreement whereby Alexza will reacquire the US commercial rights for Adasuve, with a projected target completion date of 1 January 2016. US sales since the March 2014 launch have been tepid (Teva-derived product revenue to Alexza was under $3m) and recent developments at Teva (ie Actavis acquisition) may have deprioritized Adasuve’s position within the firm. While Teva’s Adasuve relinquishment may reflect a reduced long-term sales outlook, the process may actually help facilitate Alexza’s ongoing strategic review. An outright sale or royalty agreement for Alexza’s entire interest in Adasuve may be more straightforward once US rights are regained.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/14

5.6

(45.1)

(2.54)

0.0

N/A

N/A

12/15e**

6.4

(45.4)

(2.24)

0.0

N/A

N/A

12/16e**

9.3

(42.1)

(1.90)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments and exceptional items. Note: **2015 and 2016 estimates are under review.

In September 2015, Alexza retained an investment bank to examine strategic options (including asset sales or a business combination) to enhance shareholder value and lower the cost of capital for advancing pipeline projects including AZ-007 (Staccato zaleplon). Alexza also secured a $5m loan from EU partner Ferrer to maintain sufficient liquidity to complete the review and secure a deal.

Given Q215 gross cash of $15.7m, and our expectation of a slower cash burn following the August 2015 suspension of Adasuve manufacturing (H115 cash burn was $20.9m), we estimate this loan should extend Alexza’s gross cash runway into Q216. Our financial estimates and valuation will be updated following the company’s release of Q315 results on 5 November 2015. In light of Alexza’s reacquisition of US Adasuve rights and the time needed to establish a new US commercial strategy for the drug, we anticipate a lower sales outlook and will review our $365m peak global net Adasuve sales assumption.

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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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