PAION AG REPORTS ON FISCAL YEAR 2021
DGAP-News: PAION AG / Key word(s): Annual Results
PAION AG REPORTS ON FISCAL YEAR 2021
- Transformation into commercial specialty pharma company following expansion of European product portfolio; own commercialisation of remimazolam, angiotensin II and eravacycline started in second half of 2021
- Remimazolam launched by partners in U.S. and South Korea
- Financial position strengthened to support commercial activities in Europe: EUR 7.8 million gross proceeds raised in rights issue and EUR 20 million loan fully drawn from EIB; sale of Chinese remimazolam patents and future royalties to Humanwell for EUR 20.5 million in early 2022
- Revenues of EUR 7.1 million in 2021 increasingly from product sales and royalties instead of from milestone payments
- Conference call today at 2:00 p.m. CEST (8:00 a.m. EDT)
Aachen (Germany), 30 March 2022 - The specialty pharmaceutical company PAION AG (ISIN DE000A0B65S3; Frankfurt Stock Exchange, Prime Standard: PA8) today reports its consolidated financial results according to International Financial Reporting Standards (IFRS) for fiscal year 2021.
"With the expansion of our product portfolio in Europe and our launch of remimazolam, angiotensin II and eravacycline in select European countries, we have transformed PAION into a commercial specialty pharma company now offering novel products in anesthesia and critical care," commented Dr Jim Phillips, CEO of PAION AG. "The recent agreement with Humanwell for the sale of the patents in China allows us to further invest in the expansion of our European commercial teams and our own sales growth with the goal of becoming a sustainably profitable specialty pharmaceutical company in the next three years."
Update and outlook
Commercial activities in Europe
In the UK, remimazolam was launched and PAION announced an exclusive cooperation agreement with Clinigen for the supply and distribution of PAION's three products in the UK. Furthermore, PAION launched remimazolam in the Netherlands and in Denmark. Launches are planned to have been conducted in most key European markets by the end of 2022/beginning of 2023. In Germany, remimazolam will not be available until the first quarter of 2023 at the earliest. In connection with the German benefit assessment process, PAION has decided to wait for a marketing authorisation extension for general anaesthesia before making the product commercially available in Germany.
Angiotensin II was launched in Germany in 2021 and expanded to the Netherlands and Austria in early 2022. Eravacycline was first launched in the Netherlands in September 2021.
Initial product use indicates good market acceptance of the products, and PAION has received positive feedback from customers on initial experiences with its products, particularly remimazolam.
General anesthesia: Based on the positive results from the EU Phase III trial in general anesthesia, PAION submitted an extension application to the marketing authorization for remimazolam for general anesthesia to the European Medicines Agency (EMA) in December 2021. A decision by the EMA is expected at the end of 2022 or beginning of 2023. This application will be also submitted to the MHRA via the ECDRP (European Commission Decision Reliance Procedure) to obtain approval in the UK as well.
Intensive Care Unit (ICU) sedation: In October 2021, the last patient was treated in the investigator-initiated REHSCU trial. This trial, performed at the University of Nantes, is evaluating remimazolam for the sedation of patients in ICUs. Thirty patients were enrolled in the study. The results should provide further evidence for the use of remimazolam in this patient group. Further development in this indication is currently not being conducted by PAION.
Pediatric development: In September 2021, PAION and U.S. licensee Acacia Pharma (Acacia) announced the initiation of a pivotal study investigating remimazolam for the sedation of pediatric patients. The study will enrol approximately 100 children and adolescents 17 years old or younger at leading institutions across the United States and Denmark. Upon successful completion of the pediatric development plans, it is expected that the EU and U.S. labels for remimazolam will be expanded to include mild to moderate sedation for procedures in pediatric patients.
Remimazolam activities in licensed territories
Licensees generated remimazolam revenues totalling EUR 7.5 million in 2021 (previous year: EUR 2.6 million), amounting to royalties for PAION of EUR 0.6 million.
In the U.S., remimazolam (brand name BYFAVOTM) was launched by Acacia for procedural sedation in January 2021. While Acacia has indicated that initial market response was positive, access to clinics and prescribing doctors has been severely limited due to the COVID-19 pandemic. At the end of September 2021, Acacia reported remimazolam to be on track to meet its full year 2021 formulary acceptance goal. By the end of September, remimazolam had been put on formulary at 95 accounts with a >90% win rate; Acacia expected a total of 150 accounts to put remimazolam on formulary by the end of 2021.
For the indication general anesthesia, the license agreement with Cosmo/Acacia originally provided for an option for the U.S. rights to develop and commercialize remimazolam. As this option was not exercised by the licensee, it has lapsed. An advisory meeting was held in November 2021 with the FDA (U.S. Food and Drug Administration) on suitability of the European clinical program for filing of a New Drug Application (NDA) in the U.S. As a positive outcome of the Type B meeting, the FDA stated that a submission would be possible with the current data package consisting of European and Asian general anesthesia data. Submission would require a re-analysis of the current data. Alternatively, an additional clinical trial was recommended. PAION will use the outcome of the meeting to intensify the discussion with interested parties for the general anesthesia license in the U.S.
In Japan, PAION and licensee Mundipharma agreed on an adjustment of the royalty calculation. Following a batch recall in 2021, sales are expected to be back on track in 2022.
In China, good sales growth has been seen during 2021 for remimazolam (brand name Ruima(R)). At the beginning of 2022, PAION entered into a patent assignment agreement with Humanwell. Under the agreement, PAION assigned all its Chinese remimazolam patents and related future royalties sales in China under the license agreement with Yichang Humanwell to Humanwell for EUR 20.5 million. Yichang Humanwell was released from any future royalty payments to PAION and the licence has been terminated.
In South Korea, licensee Hana Pharm received market approval for remimazolam (brand name ByfavoTM) for general anesthesia in January 2021 and launched the product at the end of March. Market approval for procedural sedation was granted in August 2021. Hana Pharm has reported that its remimazolam local launch and market positioning strategy was successful. Hana Pharm has initiated various academic activities and clinical trial promotion strategies to increase the accessibility of remimazolam. Interest in the Korean anaesthesiologist community is significant: Hana Pharm is currently supporting several investigator-initiated trials at Korean hospitals, including renowned institutions such as Seoul National University and the Samsung Seoul Hospital.
In March 2021, PAION granted TTY Biopharm an exclusive license for the development and commercialisation of remimazolam in Taiwan.
Following Russia's invasion of Ukraine in violation of international law, PAION seeks termination of the licence agreement with the Russian company R-Pharm regarding the licence areas in Russia, Turkey and the MENA region. In order to ensure that the termination of the agreement is legally sound, PAION has engaged the services of a specialised law firm. Until this process is completed, the cooperation with R-Pharm is suspended. PAION is currently evaluating the supply of Remimazolam and Eravacycline to Ukraine, also to address barriers to supply - including the fact that Remimazolam is not approved in Ukraine.
In Canada, PAION and Pharmascience Inc. mutually agreed at the beginning of 2022 to terminate the license agreement from July 2014, which granted Pharmascience Inc. exclusive rights to develop and commercialize remimazolam in Canada. PAION retains full access to all market data generated by Pharmascience and plans to explore strategic options for the commercialisation of remimazolam in Canada. The Canadian pharmaceutical market is approximately one-tenth the size of the U.S. market.
In February 2022, PAION entered into an exclusive cooperation agreement with Medis, d.o.o. for the supply, distribution, marketing and sales of remimazolam, angiotensin II and eravacycline in Eastern Europe (Estonia, Latvia, Lithuania, Czech Republic, Slovakia, Hungary, Croatia, Slovenia and Bulgaria).
In April 2021, a rights issue was completed, raising gross proceeds of EUR 7.8 million. The subscription rate was over 92%. Thereby, the share capital of PAION AG was increased to EUR 71,336,992.00 using the Authorized Capital 2020 through the issuance of 5,095,499 new shares.
Results of operations, financial position and net assets
Revenues recognised in the reporting year amounted to EUR 7.1 million and included EUR 4.5 million from the sale of remimazolam active ingredient to licensees and sales-related royalties; EUR 2.6 million from milestone payments in connection with market approvals and the remimazolam licence for Taiwan to TTY; and KEUR 44 from commercial product sales to wholesalers and hospitals in selected European markets. Revenues in the previous year were primarily attributable to milestone payments in connection with the market approvals of remimazolam in the U.S. and Japan as well as the expansion of licensed territories by six additional countries in Southeast Asia with licensee Hana Pharm in January 2020. Actual revenues were below the Company's forecast of ~EUR 8 million to ~EUR 9.5 million. This is particularly due to the fact that the conclusion of licensing agreements originally planned for the end of 2021 was postponed to 2022 due to the negotiations on the transfer of the Chinese remimazolam patents to Humanwell at the end of the year.
Cost of sales amounted to EUR 3.0 million and was primarily attributable to revenue from the sale of remimazolam active ingredient to licensees.
Research and development expenses amounted to EUR 5.3 million compared to EUR 10.3 million in the previous year. The decrease was as planned and was mainly due to the successful completion of the EU Phase III study in general anaesthesia in 2020.
General administrative and selling expenses amounted to EUR 19.8 million, an increase of EUR 12.3 million compared to the previous year. Administrative expenses rose by EUR 2.4 million to EUR 5.6 million; this increase was mainly related to financing activities and the expansion of IT systems and infrastructure. Selling expenses rose by EUR 9.9 million to EUR 14.3 millionand increased as planned, in particular due to commercialisation and supply chain activities for remimazolam, angiotensin II and eravacycline in Europe.
The financial result amounted to EUR -0.5 million (2020: EUR -0.2 million) and mainly included EUR 2.0 million in financial expenses in connection with the EIB loan and EUR 1.6 million in financial income from the reporting date valuation of the performance-related bullet component in connection with the EIB loan.
Tax income amounted to EUR 0.8 million and relates primarily to tax incentives by the UK tax authorities through tax credits on parts of research and development expenses.
PAION closed fiscal year 2021 with earnings before interest and taxes (EBIT) of EUR -22.1 million (previous year: EUR 1.6 million) and with a net loss of EUR 21.8 million (2020: net profit of EUR 2.2 million). The result is in line with the 2021 forecast. In the previous year, the result was positively influenced by milestone payments in connection with the marketing authorisations for remimazolam in the U.S. and Japan as well as the expansion of the licence territory for remimazolam by six additional countries in Southeast Asia, which was concluded with the licensee Hana Pharm in January 2020.
Cash and cash equivalents decreased by EUR 13.3 million to EUR 6.4 million as of 31 December 2021, compared to EUR 19.7 million at 31 December 2020. Both cash flow from operating activities and cash flow from investing activities were negative. However, liquidity was strengthened by the positive cash flow from financing activities.
Equity at 31 December 2021 amounted to EUR 7.0 million (31 December 2020: EUR 21.3 million). The decrease was mainly related to the net loss for the year and the issue of 5,095,499 new shares as part of the rights issue completed in April 2021. The equity ratio at 31 December 2021 was 19.0% (31 December 2020: 75.6%).
Furthermore, during 2022, PAION plans to grant commercialisation rights for remimazolam, angiotensin II and eravacycline to licensees in select territories in Europe where the Company is not building its own distribution capabilities and to out-license remimazolam for additional markets outside of Europe.
Planned research and development activities mainly relate to paediatric development and carrying out post-approval commitments and life-cycle management for remimazolam. In addition, limited activities related to product development are ongoing. Following the launch of remimazolam by marketing partners in the U.S., Japan and South Korea, PAION expects product sales and revenues from licensees to increase, resulting in an increase in royalties for PAION.
Financial outlook 2022
Cost of sales is expected to be approximately EUR 5 million to approximately EUR 6 million.
The focus of activities in 2022 will continue to be on marketing and sales, with administrative and selling expenses expected to be approximately EUR 26 million to approximately EUR 29 million, depending on the progress of commercial activities. Research and development expenses are budgeted between approximately EUR 7 million and approximately EUR 9 million. Depreciation will amount to between approximately EUR 1.5 million and EUR 2 million. Earnings before interest, taxes, depreciation and amortisation (EBITDA) is forecasted to be between approximately EUR -9 million and approximately EUR -2.5 million for 2022.
As part of the further development of the commercial infrastructure, the number of employees is expected to increase to approximately 70 to 80.
Overall, PAION expects a significant increase in revenues compared to 2021, as well as an increase in operating expenses. Overall, however, EBITDA in 2022 is expected to improve compared to 2021.
The key assumption for the outlook is that the activities of PAION and its licensees will progress as planned. Furthermore, the planning is based on the assumption that the further funding requirements can be at least partially covered by financing measures in the course of the fiscal year 2022. Delays would lead to a deferral of significant cost blocks and/or revenue into 2023 or beyond. Possible effects of the COVID-19 pandemic on PAION's business activities and those of its partners could also lead to delays and deferral of revenues and/or costs.
PAION expects increasing revenues in the coming years, both from licensing agreements and from its own commercialisation activities in parts of Europe, and, based on current planning, expects to achieve break-even in 2024. Until break even, according to current planning, the Company will need additional financing of approximately EUR 30 million, particularly for the further development of the sales infrastructure and the planned staggered country-by-country product launches in Europe, as well as post-approval commitments such as possible Phase IV studies. These funds could be raised through various financing measures and further partnerships. Based on cash at hand, cash from the sale of the Chinese remimazolam patents and future royalties in China to Humanwell in January 2022, expected sales and royalty revenues as well as revenue from potential financing and/or out-licensing activities, PAION expects to have sufficient cash for the next 12 months, based on current planning. If planned cash inflows are delayed or lower than projected, PAION could reduce costs during fiscal year 2022 to ensure sufficient cash for the next 12 months.
Key consolidated financial figures, IFRS
The full annual financial report will be available on 30 March 2022 on PAION's corporate website: https://www.paion.com/medien-investoren/investorcenter/finanzberichte/.
Conference call and webcast
To access the call, participants may dial:
* Germany +49 (0) 30 3001 90612
* UK +44 (0) 33 0551 0200
* U.S. +1 212 999 6659
* Other countries: please use the UK number
When prompted, please give the password "PAION." The conference call will include a webcast presentation, which can be accessed during the call using the following link: PAION AG Conference Call
In addition, PAION markets two intensive care products in selected European countries: Angiotensin II (GIAPREZA(R)), a vasoconstrictor indicated for the treatment of refractory hypotension in adults with septic or other distributive shock, and eravacycline (XERAVA(R)), a novel fluorocycline type of antibiotic indicated for the treatment of complicated intra-abdominal infections in adults.
PAION's mission is to be a leading specialty pharmaceutical company in the fields of anesthesia and critical care by bringing novel products to market to benefit patients, doctors and other stakeholders in healthcare.
PAION is headquartered in Aachen (Germany).
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