Orexo — Update 7 October 2016

Orexo — Update 7 October 2016

Orexo

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Orexo

Good things come in threes

Regulatory news

Pharma & biotech

7 October 2016

Price

SEK44.10

Market cap

SEK1,526m

SEK8.57/US$

Net debt (SEKm) end-June 2016

242.6

Shares in issue

34.6m

Free float

49%

Code

ORX

Primary exchange

NASDAQ OMX Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(8.7)

(10.0)

(33.9)

Rel (local)

(9.6)

(20.6)

(37.9)

52-week high/low

SEK73.50

SEK42.00

Business description

Orexo is a Swedish speciality pharma company, with expertise in drug delivery/reformulation technologies (in particular sublingual formulations) and a US commercial infrastructure for opioid dependence therapy Zubsolv.

Next events

Q316 results

20 October

Actavis ANDA 30-month stay expires

November

FY16 results

26 January

Analysts

Lala Gregorek

+44 (0)20 3681 2527

Daniel Wilkinson

+44 (0)20 3077 5734

Maxim Jacobs

+1 646 653 7027

Orexo is a research client of Edison Investment Research Limited

Orexo has delivered on three key newsflow items, which should contribute to driving increased Zubsolv use in the treatment of opioid addiction. Submission of Zubsolv’s MAA with the EMA means that first launch ex-US could come from 2018 onwards. FDA approval of a new low dose provides greater dosing flexibility. Positive data from the RESOLV real world study will be leveraged in educating new and existing prescribers to improve their treatment programmes. Ahead of Q316 results we maintain our SEK5.13bn (SEK149/share) valuation highlighting that uncertainty due to the ongoing Actavis litigation continues to weigh on the share price; resolution is expected in H216.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/14

570

(53)

(1.6)

0.0

N/A

N/A

12/15

643

(191)

(5.7)

0.0

N/A

N/A

12/16e

753

25

0.5

0.0

N/A

N/A

12/17e

989

137

2.2

0.0

N/A

N/A

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

Mundipharma files Zubsolv in Europe

Orexo’s global ex-US partner Mundipharm has filed the Zubsolv MAA with the EMA suggesting that first EU launches are possible in 2018. Precise timelines would be contingent on reimbursement decisions, which differ between EU member states. The MAA covers six dose strengths (including the newly approved US low dose) but does not trigger any milestone; the next milestone is expected on approval.

FDA approves unique low dose

A new 0.7mg buprenorphine /0.18 mg naloxone Zubsolv tablet will be available in early 2017. Approval of this dose gives Zubsolv the broadest available dose range (six doses) increasing physician dosing flexibility and enabling tapering of patients to the lowest effective maintenance dose, without compromising tablet or packaging integrity through ‘dose splitting’ (tablet breakage).

RESOLV: Completed study = valuable database

The 1,080-pt REZOLV study provides a substantial real-world clinical database for Orexo to leverage in its dialogue with key stakeholders (physicians, politicians and payers) to optimise and improve access to opioid dependence therapy. Of 978 evaluable patients, 77.6% were classed as treatment successes. Numerous factors correlated with positive treatment outcomes: older age, partner support, employment, heroin rather than injectable opioid addiction. Prior failed treatment had a negative impact on success, but physician experience had no bearing.

Valuation: SEK5.1bn or SEK149/share on a DCF basis

We maintain our SEK5.13bn or SEK149/share valuation ahead of Q316 results. This already includes potential European Zubsolv sales revenues (assuming launch in late 2018, conservative €100m peak sales and a 10% net royalty) but not potential Mundipharma milestones as their magnitude and timing are undisclosed.

Exhibit 1: Financial summary

SEK m

2014

2015

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

570.3

643.2

752.9

989.4

Cost of Sales

(107.4)

(136.1)

(143.9)

(182.2)

Gross Profit

462.9

507.1

608.9

807.2

EBITDA

 

 

(12.5)

(88.4)

60.7

156.2

Operating Profit (before GW and except.)

 

(25.0)

(169.1)

45.1

150.1

Intangible Amortisation

0.0

0.0

0.0

0.0

Other

16.5

(64.6)

1.8

0.0

Exceptionals

0.0

0.0

0.0

0.0

Operating Profit

(25.0)

(169.1)

45.1

150.1

Net Interest

(27.6)

(22.1)

(20.2)

(12.8)

Other

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(52.6)

(191.2)

24.8

137.3

Profit Before Tax (IFRS)

 

 

(52.6)

(191.2)

24.8

137.3

Tax

(4.0)

(6.9)

(6.0)

(60.7)

Deferred tax

0.0

0.0

0.0

0.0

Profit After Tax (norm)

(56.6)

(198.1)

18.8

76.6

Profit After Tax (IFRS)

(56.6)

(198.1)

18.8

76.6

Average Number of Shares Outstanding (m)

34.3

34.6

34.6

34.6

EPS - normalised (ore)

 

 

(165)

(573)

54

221

EPS - IFRS (SEK)

 

 

(1.6)

(5.7)

0.5

2.2

Dividend per share (SEK)

0.0

0.0

0.0

0.0

Gross Margin (%)

81.2

78.8

80.9

81.6

EBITDA Margin (%)

(2.2)

(13.7)

8.1

15.8

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

(4.4)

(26.3)

6.0

15.2

BALANCE SHEET

Fixed Assets

 

 

289.5

185.9

168.5

163.3

Intangible Assets

259.2

159.1

147.8

147.8

Tangible Assets

29.1

24.7

19.5

14.3

Other

1.2

2.1

1.2

1.2

Current Assets

 

 

936.4

830.4

967.6

1,088.4

Stocks

478.1

398.9

295.7

199.6

Debtors

173.8

233.4

185.6

244.0

Cash

284.5

198.1

486.3

644.8

Other

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(268.1)

(251.6)

(349.3)

(385.8)

Creditors

(265.6)

(251.6)

(349.3)

(385.8)

Short term borrowings

(2.5)

0.0

0.0

0.0

Long Term Liabilities

 

 

(502.8)

(498.3)

(497.8)

(497.8)

Long term borrowings

(493.8)

(494.4)

(495.5)

(495.5)

Other long term liabilities

(9.0)

(3.9)

(2.3)

(2.3)

Net Assets

 

 

455.0

266.4

289.0

368.1

CASH FLOW

Operating Cash Flow

 

 

(455.7)

(73.2)

300.6

196.4

Net Interest

(31.6)

(29.0)

(23.7)

(12.8)

Tax

0.0

0.0

(0.4)

(24.2)

Capex

(71.7)

(4.1)

(0.8)

(0.9)

Acquisitions/disposals

0.0

21.8

11.0

0.0

Financing

341.7

3.8

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

Net Cash Flow

(217.3)

(80.7)

286.6

158.5

Opening net debt/(cash)

 

 

135.4

211.8

296.3

9.2

HP finance leases initiated

0.0

0.0

0.0

0.0

Exchange rate movements

1.5

4.5

(1.6)

0.0

Other

139.4

(8.3)

2.1

0.0

Closing net debt/(cash)

 

 

211.8

296.3

9.2

(149.3)

Source: Orexo, Edison Investment Research

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DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Orexo 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2016. “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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US

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Level 25, Aurora Place

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Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

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New Zealand

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

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Orexo 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2016. “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

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

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

Research: TMT

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