Acacia Pharma Group PLC – Acacia Pharma Group plc: Interim Results for the First Half Year 2018

Operating Highlights

In January, announced the NDA for BARHEMSYS(TM) (intravenous amisulpride) was accepted by the FDA with a target PDUFA date of 5 October 2018
Successful fundraising & IPO on Euronext Brussels in March and new credit facility secured in June
In May, FDA confirmed conditional approval of the tradename BARHEMSYS
In June, FDA indicated that no Advisory Committee was planned and reconfirmed the target PDUFA date
Significant steps taken towards launch readiness
21 senior commercial and medical staff recruited in the US, each bringing significant product launch and management skills
Key suppliers assessed and appointed for product distribution, marketing, advertising
Market research studies and advisory boards held with relevant physicians, KOLs and patients to better understand the opportunity to improve the management of PONV and refine plans for product promotion, pricing and positioning
Brand development advanced
Product supply position strengthened
Financial Highlights for the six months to 30 June 2018 (H1 2018)

Financial position strengthened through Euronext IPO and fundraising, raising £33.9 million net of expenses, and new $30 million term loan facility with Hercules Technology Growth Capital.
Cash & cash equivalents at period end of £35.7million (30 June 2017: £3.6 million)
£34.4m held in US dollars to meet expected $ based expenses leading to the launch of BARHEMSYS
Balance sheet strengthened through equity financing and elimination of liabilities on preferred share classes and convertible loan notes through issue of Ordinary Shares
Ordinary shares in issue at period end 53.1 million (30 June 2017: 2.7 million)
Loss after tax for H1 increased to £5.7 million (H1 2017: £2.7 million) reflecting R&D costs in progressing the NDA, increased sales and marketing costs in preparing for the planned launch of BARHEMSYS and increased general & administrative costs relating to the Euronext listing
Loss per share 16.1p (H1 2017: 102.5p)
Dr Julian Gilbert, CEO of Acacia Pharma, commented: “Our interactions with healthcare professionals and patients have strengthened our belief in the opportunity to improve the treatment and prevention of PONV in surgical patients. PONV affects millions of people in the US each year despite the use of current antiemetics.  PONV often results in delayed recovery and increased hospital costs as well as being a major cause of patient distress. Hospitals are now placing increasing emphasis on the benefits of moving patients more quickly through the post-surgical process both in terms of the benefits seen to patients in terms of improved outcomes and in reducing hospital costs. Reducing PONV can offer a real advantage to enhanced recovery after surgery.”
“The Group continues to take great strides in preparing for the launch, if approved, of BARHEMSYS. I am delighted with the calibre of employee we have managed to attract and the speed with which they have grasped the challenges presented to them and moved our operations forward. I have every confidence we will have a world-class commercial organisation ready to launch BARHEMSYS and deliver its full medical and commercial promise.”

Conference Call
A conference call will take place today at 14:00 CEST. Dr Julian Gilbert, CEO and Christine Soden, CFO will present the operational and financial results followed by a Q&A session. The dial-in numbers for the conference call are:
Belgium:0800 746 68
Netherlands:0800 022 9132
UK Toll Free: 0808 109 0700
USA Toll Free: +1 866 966 5335
Standard International Access: +44 (0) 20 3003 2666
The call Password is Acacia.
Contacts

Acacia Pharma Group plc
Julian Gilbert, CEO
Christine Soden, CFO
IR@acaciapharma.com
+44 1223 919760
Citigate Dewe Rogerson
Mark Swallow, Shabnam Bashir, David Dible
acaciapharma@citigatedewerogerson.com
+44 20 7638 9571

Glossary

FDA                                                     The US Food and Drug Administration

NDA                                                     New Drug Application

PDUFA date                                         Date set by the FDA to review an NDA under the Prescription Drug User Fee Act

PONV                                                   Post-operative nausea and vomiting

About Acacia Pharma

Acacia Pharma is a hospital pharmaceutical company focused on the development and commercialisation of new nausea & vomiting treatments for surgical and cancer patients. The Group has identified important and commercially attractive unmet needs in nausea & vomiting and has discovered two product candidates based on the same active ingredient, amisulpride, to meet those needs.
The Group’s lead project, BARHEMSYS(TM) (amisulpride injection) for post-operative nausea & vomiting (PONV) has successfully completed Phase 3 clinical studies and an NDA is under review by the US FDA for marketing approval. Its sister project, APD403 for chemotherapy induced nausea & vomiting (CINV) has successfully completed one proof-of-concept and one Phase 2 dose-ranging study in patients receiving highly emetogenic chemotherapy.
Acacia Pharma is based in Cambridge, UK and its US operations are centred in Indianapolis, IN. The Company is listed on the Euronext Brussels exchange under the under ISIN code GB00BYWF9Y76 and ticker symbol ACPH. www.acaciapharma.com
About BARHEMSYS(TM)

BARHEMSYS comprises a low dose intravenous formulation of the marketed dopamine antagonist amisulpride. The NDA submission for BARHEMSYS, including data from four positive Phase 3 studies and more than 3,300 surgical patients and healthy volunteers, is currently under review by the FDA Under the Prescription Drug User Fee Act (PDUFA), the FDA has set a target date of 5 October 2018 to complete its review.

About PONV

PONV is a common complication of surgery, occurring in approximately 30% of surgical patients and up to 80% of high-risk patients. It is associated with the use of anaesthetic gases and opioid pain-killers and is particularly common following gynaecological, abdominal, breast, eye and ear operations, especially those lasting an hour or more.

The Group estimates that approximately 65 million surgical procedures are conducted in the US each year that require injectable analgesia and are eligible for antiemetic use to prevent PONV. Based on market research, Acacia Pharma estimates that the total market in the US for prophylactic and rescue treatment comprises an estimated 34 million treatment events annually.
PONV has been ranked as the most undesirable of all surgical complications by patients and contributes significantly to patient anxiety and distress. PONV can delay hospital discharge; result in re-admission after in-patient procedures; and lead to day-case patients being admitted to hospital, all of which can result in significantly increased healthcare costs.
Forward looking statements

This announcement includes forward-looking statements, which are based on current expectations and projections about future events. These statements may include, without limitation, any statements preceded by, followed by or including words such as “believe”, “expect”, “intend”, “may”, “plan”, “will”, “should”, “could” and other words and terms of similar meaning or the negative thereof. Forward-looking statements may and often do differ materially from actual results. These forward-looking statements are subject to risks, uncertainties and assumptions about the Company and its subsidiaries and investments, including, among other things, the development of its business, trends in its operating industry, and future capital expenditures and acquisitions. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Any forward-looking statements reflect the Company’s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group’s business, results of operations, financial position, prospectus, growth or strategies and the industry in which it operates. Save as required by law or applicable regulation, the Company and its affiliates expressly disclaim any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise. Forward-looking statements speak only as of the date they are made.

OPERATING REVIEW
Acacia Pharma is a hospital pharmaceutical company focused on the development and commercialisation of new nausea & vomiting treatments for surgical and cancer patients targeting the improvement of patient outcomes and reduction of hospital costs. It is estimated that approximately 16 million surgical patients in the US each year suffer PONV despite having received prior prophylaxis with standard anti-emetics and approximately 18 million patients at high risk of developing PONV could benefit from additional options for prophylaxis.

After completing 4 pivotal Phase 3 clinical studies, the Group prepared and submitted the NDA for BARHEMSYS to the FDA in 2017. The FDA accepted the NDA for filing and has given the company a PDUFA date of 5 October 2018, being the date by which the FDA aims to complete its review of the NDA dossier.

In order to finance its intended launch of BARHEMSYS, if and when approved, the Group issued a Global Offer and on 6 March 2018 successfully raised €40 million gross (€38.5 million after expenses) through the issue of 11,111,111 new Ordinary Shares of £0.02p each at a price per share of €3.60. These shares, together with the existing Ordinary Shares were admitted to listing on Euronext Brussels under the ticker ACPH. The proceeds of this IPO are being applied in developing a hospital-specialist sales and marketing infrastructure and undertake marketing, supply chain and other preparatory activities to launch BARHEMSYS into the US hospital market in 2019.

In April, we announced appointments to four key positions as a step towards building our US commercial organisation. In line with our strategy, we are continuing to successfully recruit highly experienced sales, marketing, regulatory and operations people to support the launch of BARHEMSYS, each of whom brings significant and relevant commercial experience in launching and marketing hospital pharmaceutical products in the US. The leadership team collectively has more than 155 years of industry experience and over 60 pharmaceutical launches. Our US headcount has risen to 22 and we plan to increase this to approximately 40 by the year end.

Our commercialisation plans assume we will recruit 60 hospital sales representatives immediately prior to launching the product. These representatives will be supported by a strong team of medical sales liaisons and national accounts specialists. We expect to launch BARHEMSYS during H1 2019.

The Group is on track with its launch readiness plan. Contracts have been negotiated with suppliers to deliver the logistics, distribution and order and receivables management processes needed upon approval, negotiations with major wholesalers and national accounts are being planned and processes under way to ensure the Group is licensed to sell BARHEMSYS in each of the key US states. Advisory Board meetings have been held at a number of important medical meetings and market research studies conducted delivering insights into the marketing, positioning and pricing of the product. We plan to be present at the American Society of Anaesthesiologists meeting in October when we will start to bring the importance of good management of PONV further into focus amongst key practitioners.

In May, the FDA conditionally approved the tradename BARHEMSYS. In June, the FDA late-cycle review meeting on BARHEMSYS took place, at which the FDA indicated that it did not plan to convene an Advisory Committee meeting and reconfirmed the target PDUFA date of 5 October 2018.

The Group repaid the remaining £3.7m outstanding on the Silicon Valley Debt facility in June and on 29 June 2018, secured a credit facility of up to $30 million with Hercules Technology Growth Capital, Inc. providing additional funding to support the intended US launch of BARHEMSYS, drawing $10 million under the facility at closing.  A further $10 million can be drawn upon receipt of the NDA approval.

The future of the Group is critically dependent on receipt of approval of the NDA for BARHEMSYS. As made clear during the process of the IPO, in order to fund the product launch and post-launch needs and to advance APD403 in CINV, the Group will need to secure additional financing through the issue of further equity and securing additional debt facilities.

Our intellectual property position has been strengthened the grant of an additional PONV patent in the US. Two additional PONV patent applications have been filed internationally and are now published.
In March, leading journal Anesthesiology published pivotal trial data showing that BARHEMSYS in combination with another antiemetic is superior to a single antiemetic in preventing PONV in high-risk surgical patients, a study featured on the front page of the American Society of Anesthesiologists’ website.
We were pleased to welcome two new directors to our Board in March: Dr John Brown and Edward Borkowski, each of whom brings extensive experience of pharmaceutical companies and public markets. We are also delighted to welcome our new employees and look forward to adding more key personnel as we push towards our planned launch.
FINANCIAL REVIEW
Sales & marketing costs

As we transition from a research and development led business towards the launch and commercialisation of BARHEMSYS, our expenditures will shift more towards selling and marketing costs. Sales and marketing costs for the first half of 2018 were up £737k to £972k (H1 2017: £235k), the addition of our new employees and activities.

General & administrative costs

General and administrative costs increased significantly in H1 to £2,568k (H1 2017: £485k) reflecting approximately £1,220k of expenses incurred in bringing the Group to its Euronext listing and increased costs associated with being a listed company.

Research & development expenses

Our clinical activities came towards a conclusion in early 2017 and research and development activities since then have been focused on preparing the NDA and progressing towards its approval. R&D costs in H1 were £1,050k (H1 2017: £560k).

Operating profit

The operating loss for the period was £4,590k (H1 2017: £1,280k).

Financial expense/income

Net financial expense was £1,296k (H1 2017: 1,666k).  The financial expense relates primarily to the dividends accruing on certain equity instruments, the financial expense on the term loan with Silicon Valley Bank and Hercules Capital and the interest on convertible loan notes. The equity instruments were converted into Ordinary Shares on 6 March 2018 resulting in a lower charge in H1 2018 than in 2017. The term loan with Silicon Valley Bank was repaid in June 2018. The convertible loan notes were not issued until late 2017 and were converted to Ordinary Shares on 6 March 2018.

A new term loan facility of up to $30 million was agreed 29 June 2018 with Hercules Capital and $10 million drawn down.

Taxation

The Group has claimed UK R&D tax credits in respect of prior years. The claim for 2017 was agreed at £329k and paid to the Company in July. Given the uncertainty surrounding the timing of using tax losses, no deferred tax asset has been recognised.
Loss per share

Basic LPS was 16.1p (H1 2017: 102.5p), reflecting higher post-tax losses of £5,670k (H1 2017: £2,731k) and a significant increase of 32.5 million in the weighted average number of Ordinary Shares (H1:2018 35.2 million average, H1 2017: 2.7 million) following the conversion of the various preferred shares, convertible loan notes and the new shares issued at Admission.
Current assets

Current assets increased to £36,371k (31 December 2017: £3,573k, 30 June 2017: £3,573k), driven by the increase in cash and cash equivalents resulting from the proceeds of the Global Offer in March 2018 and the debt transactions.

Non-current liabilities

Non-current liabilities increased to £6,699k (30 June 2017: £Nil) due to drawing down the Hercules Capital debt facility.

Current liabilities

Current liabilities decreased to £1,259k (31 December 2017: £21,256k, 30 June 2017: £18,432k), dominated by the impact of settling the accrued finance charges for dividends on the equity instruments through the issue of Ordinary Shares.

Cash flow

Cash outflow from operating activities increased by £3,046k to £4,590k (H1 2017: £1,544k) reflecting the increased levels of operating costs.  Cash and cash equivalents were £35,714k at 30 June 2018 (31 December 2017: £3,070k, 30 June 2017: £3,600k).
SUMMARY AND OUTLOOK
The performance of Acacia Pharma in the first half of 2018 has been in line with, and in many areas ahead of, the expectations of the Board and those presented to investors during its IPO in March. The outlook is entirely driven by the timing of the NDA approval for BARHEMSYS but plans are well under way to deliver a successful US launch of the product in H1 2019 should the approval occur as anticipated. As set out in the IPO prospectus, additional debt or equity funding will be required in order to finance the initial stages of commercialising BARHEMSYS post-launch.
Change of reporting currency to USD

Starting with the 2019 financial year, Acacia Pharma will change its reporting currency to USD. This change is reflective of the position that from that point the majority of the Group’s expected revenues and a significant proportion of its operating costs will be denominated in USD.  This change to report financial information in USD will take effect from 1 January 2019. Acacia Pharma will continue to report its current financial year ending 31 December 2018 in GBP.