INDEPENDENT RESEARCH
`UPDATE
`
`8th January 2018
`Healthcare
`
`Bloomberg
`Reuters
`12-month High / Low (EUR)
`Market capitalisation (EURm)
`Enterprise Value (BG estimates EURm)
`Avg. 6m daily volume ('000 shares)
`Free Float
`3y EPS CAGR
`Gearing (12/16)
`Dividend yield (12/17e)
`
`
`
`COX FP
`NCOX.LN
`13.2 / 7.8
`295
`282
`290.8
`98.9%
`-35.3%
`0%
`NM
`
`YE December
`Revenue (EURm)
`EBIT (EURm)
`Basic EPS (EUR)
`Diluted EPS (EUR)
`EV/Sales
`
`EV/EBITDA
`EV/EBIT
`P/E
`ROCE
`
`
`
`12/16 12/17e
`0.01
`0.03
`-10.61
`-19.28
`-0.86
`-0.75
`-0.86
`-0.75
`32797.76
`9975.54x
`x
`NS
`NS
`NS
`-17.0
`
`NS
`NS
`NS
`-13.4
`
`12/18e 12/19e
`5.67
`15.01
`-17.30
`-5.98
`-0.67
`-0.23
`-0.67
`-0.23
`53.05x
`20.51x
`
`NS
`NS
`NS
`-13.7
`
`NS
`NS
`NS
`-5.0
`
`14.8
`
`13.8
`
`12.8
`
`11.8
`
`10.8
`
`9.8
`
`8.8
`
`7.8
`
`6.8
`04/07/16
`
`04/10/16
`NICOX
`
`04/01/17
`
`04/10/17
`04/07/17
`04/04/17
`SXX EUROPE 600 HEALTH CARE
`
`04/01/18
`
`Nicox
`Clearing major milestones
`Fair Value EUR17 vs. 14.3 (price EUR10.03)
`
`BUY
`
`vs.Corporate
` In 2017, Nicox’s centre of gravity shifted towards the US with two FDA
`approvals. We expect visibility to further increase in 2018 with 1/ the
`first sales of recently-launched Vyzulta (glaucoma) by Valeant and 2/
`the upcoming launch of Zerviate (allergic conjunctivitis) by US-based
`partner, Eyevance Pharmaceuticals LLC. In the meantime, ramping-
`up royalties should help to sustain a steady rate of innovation and de-
`risk the pipeline. Two IND for phase II trials on fully-owned assets are
`expected to be filed this year. We increase our Fair Value to EUR17 and
`move our rating to Buy.
`
`n Backed by Valeant, we expect Vyzulta (NO-donating latanoprost
`analog) to exceed USD700m at peak. The recent US launch by Valeant
`should trigger the first royalty payments, albeit small at this stage as
`inclusion in wholesaler and Medicare Part D lists might take time. Strong
`efficacy with demonstrated superiority to current best-sellers in glaucoma
`should drive adoption by physicians during the course of 2018.
`
`n Upcoming launch of Zerviate, approved three months ahead of the
`PDUFA goal date. Nicox’s US-based
`partner, Eyevance
`Pharmaceuticals, is expected to launch the product in H2 2018.
`
`n Two IND for phase II trials to be filed in 2018 should further increase
`Nicox’s focus in Ophthalmology. NCX-470 and NCX-4251 are two
`fully-owned assets developed by Nicox. We don’t rule out the possibility
`of NCX-470, for which we expect a higher efficacy than Vyzulta in
`glaucoma, attracting Valeant’s interest while NCX-4251, developed in
`blepharitis, could be the first treatment to be approved in this indication.
`
`n FV increased from EUR14.3 to EUR17. Buy rating. We have rolled-
`over our model to 2018, slightly increased our peak sales for Vyzulta to
`USD720m (vs. USD670m previously) and added NCX-470 and NCX-
`4251 to our estimates. We see the current share price as only pricing
`in Vyzulta US peak sales of USD405m (BGe c.EUR11/share).
`Despite two FDA approvals, Nicox’s share price has increased by only
`8.5% over the past 12-months.
`
`Analyst:
`Hugo Solvet
`33(0) 1 56 68 75 57
`hsolvet@bryangarnier.com
`
`r
`
`r
`
`Sector Analyst Team:
`Jamila El Bougrini
`Eric Le Berrigaud
`Marion Levi
`Gary Waanders, PhD
`Exhibit 1060
`ARGENTUM
`IPR2017-01053
`
`000001
`
`

`

`Nicox
`
`Simplified Profit & Loss Account
`(EURm)
`Revenues
`Change (%)
`R&D
`Adjusted EBITDA
`EBIT
`Change (%)
`Financial results
`Pre-Tax profits
`Exceptionals
`Tax
`Net profit
`Restated net profit
`Change (%)
`Cash Flow Statement (EURm)
`Operating cash flows
`Change in working capital
`Capex, net
`Financial investments, net
`Dividends
`Other
`Net debt
`Free Cash flow
`Balance Sheet (EURm)
`Tangible fixed assets
`Intangibles assets
`Cash & equivalents
`current assets
`Other assets
`Total assets
`L & ST Debt
`Others liabilities
`Shareholders' funds
`Total Liabilities
`Capital employed
`Ratios
`Tax rate
`ROE (after tax)
`ROCE (after tax)
`Gearing
`Pay out ratio
`Number of shares, diluted
`Data per Share (EUR)
`EPS
`Restated EPS
`% change
`BVPS
`Operating cash flows
`FCF
`Net dividend
`
`2014
`6.0
`1 273%
`4.4
`(25.2)
`(25.2)
`-129%
`(0.32)
`(21.9)
`3.6
`0.10
`(23.2)
`(23.2)
`-27.6%
`
`(21.7)
`11.2
`0.81
`(0.00)
`0.0
`NM
`(5.5)
`(33.7)
`
`30.5
`80.8
`22.6
`16.1
`0.0
`150
`17.2
`36.6
`96.3
`150
`141
`
`0.0
`(24.05)
`(16.47)
`(5.67)
`0.0
`99.48
`
`(0.23)
`(0.23)
`-15.1%
`0.97
`(0.22)
`(0.34)
`0.0
`
`2015
`10.0
`66.4%
`6.3
`(26.0)
`(26.0)
`-3.1%
`1.00
`(27.9)
`(2.9)
`0.03
`(27.9)
`(27.9)
`-20.7%
`
`(22.1)
`0.14
`0.56
`(0.01)
`0.0
`NM
`(8.3)
`(22.8)
`
`44.7
`80.8
`29.1
`8.8
`0.0
`163
`20.8
`41.2
`101
`163
`136
`
`0.0
`(27.57)
`(20.49)
`(8.19)
`0.0
`22.90
`
`(1.22)
`(1.22)
`-424%
`4.43
`(0.97)
`(1.00)
`0.0
`
`2016
`0.01
`-99.9%
`9.5
`(10.6)
`(10.6)
`-59.2%
`0.50
`(10.1)
`0.0
`0.0
`(22.1)
`(22.1)
`-20.9%
`
`(22.1)
`1.1
`0.80
`0.0
`0.0
`NM
`(0.29)
`(24.0)
`
`45.5
`80.8
`21.1
`(0.00)
`0.0
`147
`20.8
`31.4
`95.2
`147
`130
`
`0.0
`(23.22)
`(16.98)
`(0.31)
`0.0
`25.67
`
`(0.86)
`(0.86)
`-29.4%
`3.71
`(0.86)
`(0.94)
`0.0
`
`2018e
`2017e
`5.7
`0.03
`215% 19 909%
`11.9
`13.1
`(19.3)
`(17.3)
`(19.3)
`(17.3)
`-81.7%
`-10.3%
`0.0
`0.0
`(19.3)
`(17.3)
`0.0
`0.0
`0.0
`0.0
`(19.3)
`(17.3)
`(19.3)
`(17.3)
`-12.8%
`-10.3%
`
`2019e
`15.0
`165%
`15.7
`(6.0)
`(6.0)
`-65.4%
`0.0
`(6.0)
`0.0
`0.0
`(6.0)
`(6.0)
`-65.4%
`
`(19.3)
`0.00
`0.90
`0.0
`0.0
`NM
`(13.2)
`(20.2)
`
`46.4
`80.8
`33.9
`(0.00)
`0.0
`161
`20.8
`31.4
`109
`161
`144
`
`0.0
`(17.69)
`(13.39)
`(12.08)
`0.0
`25.67
`
`(0.75)
`(0.75)
`-12.8%
`4.25
`(0.75)
`(0.79)
`0.0
`
`(17.3)
`0.06
`1.0
`0.0
`0.0
`NM
`5.2
`(18.4)
`
`47.4
`80.8
`15.6
`(0.45)
`0.0
`143
`20.8
`30.9
`91.7
`143
`127
`
`0.0
`(18.87)
`(13.65)
`5.66
`0.0
`25.67
`
`(0.67)
`(0.67)
`-10.3%
`3.57
`(0.67)
`(0.72)
`0.0
`
`(6.0)
`0.09
`1.1
`0.0
`0.0
`NM
`12.4
`(7.2)
`
`48.5
`80.8
`8.4
`(1.2)
`0.0
`137
`20.8
`30.0
`85.7
`137
`121
`
`0.0
`(6.98)
`(4.95)
`14.43
`0.0
`25.67
`
`(0.23)
`(0.23)
`-65.4%
`3.34
`(0.23)
`(0.28)
`0.0
`
`2020e
`
`38.4
`156%
`17.3
`20.5
`20.5
`-%
`0.0
`20.5
`0.0
`5.1
`15.4
`15.4
`-%
`
`15.4
`0.23
`1.2
`0.0
`0.0
`NM
`(1.6)
`14.0
`
`49.7
`80.8
`22.4
`(3.1)
`1.0
`150
`20.8
`27.9
`101
`150
`136
`
`0.0
`15.22
`11.31
`(1.57)
`0.0
`25.67
`
`0.60
`0.60
`-%
`3.94
`0.60
`0.54
`0.0
`
`Source: Company Data; Bryan, Garnier & Co ests.
`
`Company description
`Nicox is a biopharmaceutical company
`specializing in ophtalmics.
`
`2
`
`000002
`
`

`

`Nicox
`
`1.
`
`Table of contents
`Vyzulta now on the market ................................................................................................ 4
`1.1. Nicox flagship product in IOP superior to the current best-sellers ............................................ 4
`1.1.1.
`Vyzulta is a differentiated prostaglandin analog… ............................................................... 4
`1.1.2.
`Demonstrated superiority to the best-sellers ......................................................................... 5
`1.2.
`Backed by B+L, approved in the US and set to exceed USD700m in sales at peak ................ 8
`1.2.1.
`US sales of USD400m for recently-launched Vyzulta .......................................................... 8
`1.2.2.
`Steps needed to unlock value in RoW ................................................................................... 11
`1.3.
`Steady innovation in glaucoma with fully-owned NCX-470 ...................................................... 11
`1.3.1.
`NCX-470: a next-generation IOP-lowering product .......................................................... 11
`1.3.2.
`Fully-owned NCX-470 could attract Valeant’s interest ..................................................... 12
`2. Recently-approved Zerviate should not be overlooked .................................................... 13
`2.1.
`First Nicox product to be approved by the FDA ........................................................................ 13
`2.2.
`Partnered with a US-based ophthalmic co. .................................................................................... 13
`3. NCX-4251 in Blepharitis ................................................................................................... 14
`3.1.
`The unmet medical need ................................................................................................................... 14
`3.2. NCX-4251 could be the first dedicated treatment ....................................................................... 14
`4. Buy rating, FV EUR17 ...................................................................................................... 15
`Price Chart and Rating History ................................................................................................ 16
`Bryan Garnier stock rating system ........................................................................................... 19
`
`3
`
`000003
`
`

`

`Nicox
`
`1. Vyzulta now on the market
`1.1. Nicox flagship product in IOP superior to the
`current best-sellers
`1.1.1. Vyzulta is a differentiated prostaglandin analog…
`Latanoprostene bunod ophthalmic solution 0.024% (LBN 0.024%, brand name Vyzulta) is a nitric
`oxide-donating (NO-donating) prostaglandin F2-alpha analog which reduces intraocular pressure (IOP)
`using two action mechanisms that set it apart from other assets in this therapeutic class:
`
`Vyzulta has a dual MoA
`vs. current monotherapies
`
`n By stimulating the excretion of aqueous humour via the uveoscleral path (~25% of total outflow),
`which is a secondary outflow path. More precisely, small quantities of this liquid can leak out as
`it crosses the iris and the sclera (this is notably how Xalatan, latanoprost, treats the disease).
`
`n By increasing the outflow speed via the trabeculum and the Schlemm's canal (conventional
`outflow, ~75% of total outflow) thanks to the generation of nitric oxide (differentiating factor
`stemming from Nicox's expertise). Furthermore, note that several studies suggest that patients
`suffering from glaucoma tend to have far-lower-than-normal levels of NO (Galassi et al, 2004).
`
`Fig. 1: Vyzulta dual mode of action (left) in the Glaucoma market dominated by
`prostaglandin analogs (% of total US prescriptions, right)
`
`Other
`1%
`
`Carbonic
`Anhydrase
`Inhibitor
`8%
`
`Alpha Agonists
`10%
`
`Bimatoprost
`9%
`
`Travoprost
`8%
`
`Fixed Combo
`16%
`
`Beta-Blocker
`13%
`
`Prostaglandin
`Analogue
`53%
`
`Latanoprost
`36%
`
`Latanoprost (Xalatan, Pfizer), bimatoprost (Lumigan, Allergan), travoprost (Travatan, Alcon)
`
`Source: Eyeworld.org (Constance Okeke, MD, Eastern Virginia Medical School, Norfolk, Virginia, IMS.
`
`At present, the treatment of glaucoma mainly involves prostaglandin analogs and beta-blockers:
`
`Glaucoma market
`dominated by
`Prostaglandin Analogs
`and Beta-Blockers
`
`n Beta-blockers are also used in various cardiac pathologies given their ability to fix onto receptors
`of certain stress hormones (adrenalin, noradrenalin), blocking their actions and favouring a
`reduction in cardiac frequency and arterial pressure. Under the framework of glaucoma treatment,
`beta-blockers are among the various first-line alternatives.
`
`n Prostaglandin analogs are clearly the option the most used from a first-line treatment perspective
`in view of their ability to drastically reduce IOP with a far more satisfactory safety profile than
`beta-blockers. Based on the latest figures from IMS, note also that these approaches represent
`over half of the prescriptions given out in the US (19 million prescriptions in 2016 out of a total
`of more than 36 million).
`
`4
`
`000004
`
`

`

`Vyzulta superior to
`Xalatan in phase II trial
`
`
`Nicox
`
`
`1.1.2. Demonstrated superiority to the best-sellers
`
`Vyzulta is Nicox’ flagship product, approved in the US on November 2, 2017 for patients suffering
`from lower intraocular pressure (IOP) with open-angle glaucoma (OAG accounts for approx 90% of
`all glaucoma cases) or ocular hypertension (OTH). The approval was primarily based on positive results
`from one phase II trial (VOYAGER) and a two phase III trials (APOLLO and LUNAR).
`
`n In the 28-day VOYAGER phase II trial which enrolled 413 patients, LBN 0.024% proved
`superior vs latanoprost 0.005%. LBN 0.024% demonstrated a significantly greater reduction in
`mean IOP compared with latanoprost at Day 7 (difference 0.98mmHg, p=0.033), Day 14
`(difference 1.14mmHg, p=0.015) and at primary endpoint on Day 28 (difference 1.23mmHg,
`p=0.005). The higher incidence of instillation site pain in the LBN 0.024% group vs latanoprost
`(12.0% vs 6.1%) drove the higher incidence of treatment-related AEs (19.3% vs. 12.2%), all
`manageable. However, we note the higher occurrence of conjunctival hyperaemia in the
`latanoprost group (4.8% vs 0% for LBN). This should be read in conjunction with a meta-analysis
`carried out in 2009 (Honrubia, 2009) showing that the use of latanoprost was associated with a
`lower incidence of conjunctival hyperaemia compared to bimatoprost 0.003% and travoprost
`0.004%, hence the better safety profile of LBN 0.024% with regard to this type of adverse event
`in our view.
`
`
`Fig. 2: VOYAGER phase II trial (primary endpoint, left; secondary endpoint, right)
`
`*
`
`*
`
`*
`
`*
`
`80%
`
`70%
`
`60%
`
`50%
`
`40%
`
`30%
`
`20%
`
`10%
`
`(% of IOP with IOP ≤ 18 mmHg)
`
`Responder rate
`
`0%
`
`Day 14
`Day 7
`Latanoprostene bunod 0.024%
`
`
`
`Day 29
`Day 28
`Latanoprost 0.005%
`
`
`
`8,86*
`
`7,72
`
`9,0*
`
`7,77
`
`8,27*
`
`7,29
`
`7,21
`
`6,25
`
`Day 7
`p=0.033
`
`Day 14
`p=0.015
`
`Latanoprostene bunod 0.024%
`
`Day 28
`Primary Endpoint
`p=0.005
`Latanoprost 0.005%
`
`Day 29
`p=0.051
`
`10
`
`56789
`
`Reduction in mean diurnal IOP
`
`
`
`Note that the last administration was at Day 27 evening and Day 29 a post-treatment assessment.
`
`Source: Weinreb, 2015; Bryan, Garnier & Co ests.
`
`
`Nicox’ partner B+L (see below) carried out two phase III trials (APOLLO and LUNAR) which
`confirmed the efficacy and safety profile of LBN 0.024%. Over a three month (12 weeks) treatment
`course, both studies met their primary endpoints by showing the non-inferiority of LBN 0.024% vs.
`Timolol 0.5% in the reduction of mean diurnal IOP.
`
`Efficacy confirmed in two
`phase III trials vs. timolol
`0.5%
`
`Note that the APOLLO and LUNAR trials in which 420 and 417 patients were randomized in each
`study on a 2:1 basis to either LBN 0.024% QD (evening) or Timolol Maleate 0.5% BID had similar
`designs apart from the open label safety extension phase which lasted nine months in the APOLLO
`trial, compared to three months in the LUNAR trial.
`
`5
`
`000005
`
`

`

`LUNAR phase III trial
`showed the non-
`inferiority of LBN 0.024%
`vs timolol 0.5%
`
`Nicox
`
`n In the LUNAR trial, mean IOP was significantly lower in the LBN 0.024% group vs. timolol over
`three months (p≤0.025) at all time points but week 2 measurement at 8AM (p=0.216). IOP ranged
`from 17.7 to 19.2 mmHg with LBN 0.024% compared to 18.8 to 19.6 mmHg with Timolol.
`Despite a positive trend, LBN 0.024% failed to show a statistically significant reduction in the
`percentage of patients with IOP lowering to a target of ≤18 mmHg (17.7% vs. 11.1% in the
`control group, p=0.084). Note that the measure of this secondary was statistically significant in
`the APOLLO trial (see below). However in LUNAR, the measure of reduction from baseline in
`IOP of ≥25% was statistically significant (31.0% vs 18.5% in the control group, p=0.007).
`
`Fig. 3: LUNAR phase III (primary endpoint, bottom left; secondary endpoints, top
`and bottom right)
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`8AM 12PM 4PM 8AM 12PM 4PM 8AM 12PM 4PM
`Week 2
`Week 6
`Week 12
`Timolol 0,5%
`
`LNB 0,024%
`
`20,0
`
`19,5
`
`19,0
`
`18,5
`
`18,0
`
`17,5
`
`17,0
`
`16,5
`
`Mean IOP (mmHg)
`
`31,0%
`
`18,5%
`
`17,1%
`
`11,1%
`
`Mean IOP ≤18 mmHg
`p=0.084
`
`LNB 0,024%
`
`Percent Change From
`Baseline in Mean IOP ≥25%
`p=0.007
`Timolol 0,5%
`
`35%
`
`30%
`
`25%
`
`20%
`
`15%
`
`10%
`
`5%
`
`0%
`
`PercentResponse
`
`**
`
`**
`
`**
`
`Week 12
`Week 6
`Week 2
`Average of IOP at 8AM, 12PM and 4PM
`LNB 0,024%
`Timolol 0,5%
`
`*p≤0.025; **p≤0.034
`
`Source: Medeiros, 2016; Bryan, Garnier & Co ests.
`
`10
`
`0123456789
`
`Mean Change(Decrease) in Diurnal
`
`IOP (mmHg) FromBaseline
`
`APOLLO phase III trial
`showed superiority of
`LBN 0.024% vs. timolol
`0.5%
`
`n In the APOLLO trial, not only did Vyzulta reached its primary endpoint of non-inferiority vs.
`Timolol 0.5% but it also demonstrated superiority from week 2 to 12. Indeed, IOP was
`significantly lower in the LBN 0.024% group (range 17.8-18.7 mmHg) than in the timolol 0.5%
`group (range 19.1-19.8 mmHg) at all nine time points (p≤0.002). Key secondary endpoints were
`all statistically significant. 1/ A higher proportion of subjects in the LBN 0.024% group had IOP
`measurement ≤18 mmHg at all time points than the timolol 0.5% group (22.9 vs. 11.3%; p=0.005)
`and 2/34.9% of patients in the LBN 0.024% group had a ≥25% decrease in IOP from baseline
`at all time points vs. 19.5% in the control group (p=0.001). Lastly, the measurements of IOP
`decrease from baseline were better in APOLLO vs. LUNAR with LBN 0.024% superior to
`timolol 0.5% at all nine time points (range 7.7-9.1 mmHg vs. 6.6-8.0 mmHg, p≤0.002).
`
`6
`
`000006
`
`​
`

`

`
`Nicox
`
`
`Fig. 4: APOLLO phase III
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`8AM 12PM 4PM 8AM 12PM 4PM 8AM 12PM 4PM
`Week 2
`Week 6
`Week 12
`LNB 0,024%
`Timolol 0,5%
`
`
`
`
`20,0
`
`19,5
`
`19,0
`
`18,5
`
`18,0
`
`17,5
`
`17,0
`
`16,5
`
`Mean IOP (mmHg)
`
`34,9%
`
`19,5%
`
`22,9%
`
`11,3%
`
`Mean IOP ≤18 mmHg
`p=0.005
`
`Percent Change From
`Baseline in Mean IOP ≥25%
`p=0.001
`
`LNB 0,024%
`
`Timolol 0,5%
`
`
`
`40%
`
`35%
`
`30%
`
`25%
`
`20%
`
`15%
`
`10%
`
`5%
`
`0%
`
`PercentResponse
`
`
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`*
`
`8AM 12PM 4PM 8AM 12PM 4PM 8AM 12PM 4PM
`Week 2
`Week 6
`Week 12
`LNB 0,024%
`Timolol 0,5%
`
`10
`
`0123456789
`
`Mean Change(Decrease) in IOP
`
`(mmHg) FromBaseline
`
`
`
`*p≤0.002
`
`Source: Weinreb, 2016; Bryan, Garnier & Co ests.
`
`
`Strong efficacy sustained
`at 12 months
`
`Good safety profile of
`LBN 0.024%
`
`n Sustained efficacy at 12 months. At 12 months post-randomization (end of follow-up) LBN
`0.024% demonstrated a sustained IOP lowering compared to baseline with mean diurnal IOP
`among all subjects ranging from 32% to 34% (p<0.001 at each 6, 9 and 12 months’ time points).
`More importantly, subjects crossed over to LBN from timolol in the follow-up phase experienced
`an additional 6.3% to 8.3% decrease in mean diurnal IOP (Garcia, 2016).
`
`Turning to safety, the phase III results confirmed the good safety profile of LBN 0.024%. The higher
`incidence of conjunctival hyperaemia associated with the use of LBN 0.024% (9.0% active vs. 0.7%
`control and 2.8% vs. 1.5% in the LUNAR and APOLLO trials respectively). However, the latter AEs
`were manageable (the majority was mild in severity). We note that one patient receiving LBN 0.024%
`in each of the two phase III trials left the study due to ocular side effects caused by the treatment
`(APOLLO: one patient with mild conjunctival oedema and mild conjunctival irritation, considered
`probably treatment related, in both eyes; LUNAR: one patients with ocular hyperaemia deemed
`definitely related to LBN 0.024%).
`
`In all, ocular the side effects were fairly similar to marginally increased with LBN 0.024% compared to
`timolol and latanoprost. However, their intensity (mostly mild) did not reduced patient adherence in
`clinical trials and, as such, should not affect patient compliance to LBN 0.024% as a first line therapy
`in our view.
`
`7
`
`000007
`
`

`

`
`Nicox
`
`
`1.2. Backed by B+L, approved in the US and set to
`exceed USD700m in sales at peak
`
`
`
`In 2010, Nicox licensed latanoprostene bunod 0.024% to Bausch & Lomb (B+L) for USD10m upfront
`alongside USD169.5m in development and sales milestones as well as tiered royalties on net sales
`ranging from 10% to 15% to be paid to Nicox (6% to 11% after payments to Pfizer). In 2013, Valeant
`acquired Bausch & Lomb in a USD8.7bn deal. After two Complete Response Letters (CRLs; July 2016
`and August 2017) pointing only to manufacturing concerns at Bausch & Lomb’s plant in Tampa
`(Florida) which did not call into question Latanoprostene bunod 0.024%’s strong clinical package, the
`FDA approved Vyzulta on November 2, 2017.
`
`Nov. 2017: FDA approval
`Dec. 2017: US launch
`
`
`Despite a checkered history, Valeant is committed to Vyzulta as the product has the potential to take a
`significant share in the glaucoma market (see below). We believe this should help the company to
`achieve its turnaround strategy initiated in 2016. Valeant’s turnaround strategy focuses on specialty
`markets which is the case for the Glaucoma market, which is set to deliver a 2.5%-3.5% growth rate
`through to 2023 to approximately USD4bn-USD5bn. Note also that, as part of the company’s strategy,
`the 2017 to 2019 period is focused on a massive launch phase with over 80% of Valeant R&D programs
`expected to be launched, including Vyzulta.
`
`
`
`Source: Valeant.
`
`
`Pricing in-line with other
`prostaglandin analogs
`
`
`
`1.2.1. US sales of USD400m for recently-launched Vyzulta
`Vyzulta was launched on December 18, 2017 and is priced in-line with other prostaglandin analogs i.e.
`at around USD1,200 after discount. Note that we have assumed a price at the high end of this range
`which is consistent with the profile of Vyzulta i.e. USD1200 per patient per year. This should enable
`Valeant to gain market share from 1/ prostaglandin analogs as well as 2/ β-Blockers which tend to be
`more expensive class on the market for the treatment of Glaucoma. As a reminder, Vyzulta showed
`superiority to timolol in phase III.
`
`
`
`Fig. 5: Wholesale Acquisition Price (WAC) of branded Glaucoma drugs (in USD)
`
`Active Ingredient
`
`Company
`
`Price to Wholesaler
`
`Allergan
`
`Alcon
`
`Pfizer
`
`Merck & Co
`
`Merck & Co
`
`Alcon
`
`Allergan
`
`Alcon
`Merck & Co
`
`Allergan
`Merck & Co
`
`1185
`
`1141
`
`1057
`
`946
`
`1311
`
`1318
`
`1548
`
`889
`658
`
`1564
`1205
`
`Class
`
`Prostaglandin
`
`Prostaglandin
`
`Prostaglandin
`
`β-Blockers
`
`β-Blockers
`
`β-Blockers
`
`Alpha Agonist
`
`Brand
`
`Lumigan
`
`Travatan Z
`
`Xalatan
`
`Timoptic-XE 0.25%
`
`Timoptic-XE 0.5%
`
`Betoptic S
`
`Alphagan P
`
`Carbonic Anhydrase Inhibitor
`Carbonic Anhydrase Inhibitor
`
`Azopt
`Trusopt
`
`bimatoprost
`
`travoprost
`
`latanoprost
`
`timolol
`
`timolol
`
`betaxolol
`
`brimondine
`
`brinzolamide
`dorzolamide
`
`Combination
`Combination
`
`Combigan
`Cosopt
`
`brimonidine/timolol
`dorzolamide/timolol
`
`
`
`
`
`8
`
`000008
`
`

`

`
`Nicox
`
`
`
`Combigan (brimonidine/timolol) - Combination
`Alphagan P (brimondine) - α2 Agonist
`Betoptic S (betaxolol) - β-Blockers
`Timoptic-XE 0.5% (timolol) - β-Blockers
`Cosopt (dorzolamide/timolol) - Combination
`Lumigan (bimatoprost) - Prostaglandin
`Travatan Z (travoprost) - Prostaglandin
`Xalatan (latanoprost) - Prostaglandin
`Timoptic-XE 0.25% (timolol) - β-Blockers
`Azopt (brinzolamide) - CAI
`Trusopt (dorzolamide) - CAI
`
`0
`
`200
`
`400
`
`600
`
`800
`
`1000
`
`1200
`
`1400
`
`1600
`
`
`
`Source: Schlenker, 2015, Article ID 547960; Bryan, Garnier & Co ests.
`
`Despite a gradual ramp-up
`reflecting the time needed
`to enter wholesaler and
`Medicare part D
`formulary lists, our
`estimates are above c.s.
`
`
`We expect a gradual ramp-up of US sales as Valeant will have to give higher discounts as well as do free
`sampling to get into wholesalers’ lists. Since most patients suffering from IOP are over 65 years old and
`potentially covered by Medicare (see chart below), in our view it is also likely to take Valeant a couple
`of months to get onto the Medicare part D formulary list. Another element to take into account is the
`couponing program running until May 31st, 2018. Our sales estimates, which reflect a cautious ramp-
`up in 2018 and 2019, are USD10m above consensus (c.s.).
`
`Fig. 6: Glaucoma patients ≥65 years old
`
`≥65 yo
`52%
`
`<65 yo
`48%
`
`
`Source: APPOLO and LUNAR phase III trial demographics (pooled); Bryan, Garnier & Co ests.
`
` n
`
` Rhopressa is not a threat
`
`The FDA recently approved Aerie Pharmaceutical’s Rhopressa (Dec. 18, 2017). While this approval
`came slightly ahead of the PDUFA goal date set for February 28, 2018 it had been much anticipated
`after a positive AdCom (9-1 vote in favour) in October 2017. In the light of Rhopressa’s phase III data
`package (Rocket 1, 2 and 4) alongside an anticipated smaller-scale launch (product not backed by a
`partner), we would not expect its commercial roll-out to be a threat to Vyzulta’s US launch.
`
`n Results from the Rocket 2 phase III trial (2015) showed that the product reduced mean IOP by
`hitting the non-inferiority primary endpoint. However, Rhopressa did not show any superiority
`to timolol. Note also that the results from the Rocket 2 trial countered the results from the Rocket
`1 trial which showed non-inferiority in post-hoc analysis only. Taking a closer look at inclusion
`criteria from the Rocket 2 trial and bearing in mind the fact that mean IOP in healthy patients is
`in the 12-22mmHG range, Rhopressa’s study looks less challenging than that of Vyzulta.
`
`9
`
`Aerie Pharmaceutical’s
`Rhopressa did not show
`superiority to timolol
`
`000009
`
`

`

`
`Nicox
`
`
`
`Baseline characteristics of
`Rocket 2 make it less
`challenging than Vyzulta’s
`phase III trials
`
`Rhopressa has lower
`efficacy at month 3 vs.
`week 2 and week 6
`
`
`
`
`
`Vyzulta should benefit
`from a wide-scale launch
`
`1/ Good safety profile
`2/ Strong efficacy
`4/ Well-known molecule
`
`Valeant
`
`BGe
`
`Rhopressa effectively 1/ demonstrated its non-inferiority to timolol only in patients with an IOP
`at baseline ≤25mmHG but 2/ failed to show non-inferiority to timolol for patients with an IOP
`at baseline of ≤27mmHG (secondary endpoint). Note that Vyzulta’s phase III trials included a
`population with higher IOP at baseline (24-36mmHG range) and that the product demonstrated
`superiority to timolol irrespective of the IOP level at baseline. Moreover, Rhopressa had a lower
`efficacy at month 3 vs. week 2 and 6, raising the issue of sustainable efficacy of the treatment
`while Vyzulta showed a reduction in mean IOP of 7.5 to 9.1 mmHg at between 2 and 12 weeks
`of treatment (p<0.05).
`
`n While the wide-scale commercial roll-out Nicox’s Vyzulta was initiated by Valeant (B+L), Aerie
`Pharmaceuticals plans to hire approximately 100 sales reps to address 80% of the IOP market (or
`12,000 physicians). They are expected to be trained by Q2 2018 for an effective launch towards
`mid-2018. However, we have doubts about Aerie Pharmaceutical’s ability to 1/ be competitive
`from a payers’ point of view in terms of the discounts to be granted, especially since Rhopressa’s
`anticipated positioning as an adjunctive therapy will significantly increase the cost of treatment,
`2/ convince prescribers considering that Vyzulta will have been on the market for approximately
`half a year, 3/ demonstrate a clinical benefit compared to Vyzulta which is positioned as a front-
`line therapy and has a better safety profile. Remember that Aerie had to launch an additional
`phase III study to support the US and European safety filing requirements (Rocket 4).
`
`Vyzulta’s 1/ good safety profile and 2/ strong efficacy (IOP lowered by up to 9 mmHg while most of
`the products lower IOP by a max. of 8 mmHg) should all enable Valeant to reach c.USD405m in sales
`at peak (EUR358m, BGe). It is also important to note that Vyzulta is a NO-donating latanoprost analog
`of the most widely-prescribed glaucoma treatment (latanoprost) which should drive adoption by
`physicians. Lastly, our estimates are below Valeant’s own USD1bn peak sales guidance for Vyzulta (incl.
`USD500m in the US), leaving room for upwards revision.
`
`Fig. 7: Vyzulta sales estimates (BGe, in EURm)
`
`
`
`2017e 2018e 2019e
`
`2020e
`
`2021e 2022e 2023e 2024e 2025e
`
`VYZULTA - Revenues (EURm)
`
`% growth y-o-y
` US
`
` % sales
` Europe7
`
`0,5
`
`n/s
`0,5
`
`36
`
`n/s
`36
`
`
`0
`
`100%
`0
`
`72
`
`102%
`72
`
`100%
`0
`
`161
`
`123%
`146
`
`91%
`15
`
`9%
`
`253
`
`58%
`197
`
`78%
`45
`
`18%
`
`375
`
`48%
`248
`
`66%
`91
`
`24%
`
`495
`
`32%
`301
`
`61%
`122
`
`25%
`
`606
`
`22%
`354
`
`58%
`154
`
`25%
`
`637
`
`5%
`358
`
`56%
`156
`
`24%
`
`
`
`BGe US peak sales of
`USD405m
`
`
`Sales
`(USD)
`WW
`US
`
`1.0bn
`0.5bn
`
`0.7bn
`0.4bn
`
` % sales
`
` Japan
`
` % sales
`
`VYZULTA - Royalties (EURm)
`
`
`
`0
`
`
`
`0
`
`0%
`
`0
`
`0%
`
`2
`
`0%
`
`0
`
`0%
`
`4
`
`0
`
`0%
`
`10
`
`12
`
`5%
`
`20
`
`36
`
`72
`
`97
`
`10%
`
`15%
`
`16%
`
`30
`
`40
`
`67
`
`123
`
`19%
`
`70
`
`in % of revenues
`
`6,0%
`
`6,0%
`
`6,0%
`
`6,0%
`
`8,0%
`
`8,0%
`
`8,0% 11,0% 11,0%
`
`Source: Bryan, Garnier & Co ests.
`
`
`Current share price only
`takes into account US
`peak sales of USD405m
`
`BGe c.EUR11/share
`
`Following the launch of the product in the US, we have changed our WACC to 8% for our US sales.
`This WACC is closer to that of Valeant and reflects the commercial risk now borne by Nicox’s partner
`which has critical mass in the Ophthalmic market. As detailed in Chapter 4, in our view the current
`share price is only pricing in Vyzulta US peak sales of USD405m. The latter represents c.EUR11/share
`or 60% of our Fair Value.
`
`10
`
`
`
`000010
`
`

`

`We don’t rule out Vyzulta
`being out-licensed to local
`partners in Europe and
`Japan
`
`
`Nicox
`
`
`1.2.2. Steps needed to unlock value in RoW
`In Europe, where Valeant has a smaller footprint, we believe the company is currently reviewing its
`strategic options and is likely to decide whether or not to file for approval over the course of 2018 with
`the first sales in 2020 (BGe). While the EMA does not require an additional phase III trial, we don’t
`rule out the possibility of country-by-country negotiations on reimbursement and the smaller revenue
`opportunity (BGe c.USD175m or EUR155m in sales at peak) potentially leading Valeant to out-license
`Vyzulta.
`
`In Japan, a phase III trial in Japanese patients will be necessary. Our understanding is that, like in
`Europe, Valeant might choose not to tackle this market on a standalone basis and bear the cost of a
`phase III trial alone. As such, an out-licensing of Vyzulta to a local player cannot be ruled out. We
`estimate the first sales in 2021 and peak sales of c.USD140m or EUR120m (BGe).
`
`60% PoS to our EU+JPN
`non-risk adjusted peak
`sales of USD315m
`
`BGe EUR2/share
`
`To reflect the above-mentioned strategic options, we have decided to apply a 60% probability of success
`to our sales outside the US vs. 80% previously. We also believe that being backed by a local partner
`rather than Valeant in these regions might affect the sales potential. This has led to a downwards
`revision in our peak sales from USD380m to USD315m (Europe and Japan). Vyzulta (excl. US)
`accounts for EUR2.5 or 14% of our Fair Value.
`
`
`
`1.3. Steady innovation in glaucoma with fully-owned
`NCX-470
`
`
`1.3.1. NCX-470: a next-generation IOP-lowering product
`NCX-470 is a fully-owned nitric oxide-donating (NO-donating) bimatoprost analog developed for IOP
`in patients with open-angle glaucoma and ocular hypertension. In short, NCX-470 has a dual mode of
`action, targeting both the conventional outflow via nitric oxide (NO; see Chapter 1.1.1.) and the non-
`conventional outflow via bimatoprost. While it is based on the same clinically validated NO-donating
`platform as Vyzulta, we believe that NCX-470 should benefit from bimatoprost’s higher efficacy
`compared to latanoprost. Several studies have reported that bimatoprost has a greater IOP-lowering
`effect than latanoprost of about c.0.5 mmHg (Advances in Therapy, July 2004, Volume 21, Issue 4, pp 247–
`262; Daka, 2014; Li, 2016).
`
`NCX-470 fully owned by
`Nicox
`
`Based on the clinically
`validated NO-donating
`platform
`
`We expect NCX-470 to
`show a higher efficacy
`than Vyzulta
`
`In three animal models with glaucoma, NCX-470 showed higher IOP-lowering than equimolar
`bimatoprost (see charts below). Given 1/ bimatoprost’s greater efficacy vs. latanoprost and 2/ a higher
`concentration of NO in NCX-470 than Vyzulta, we would expect NCX-470 to show an IOP-lowering
`of approx. ≥10 mmHg i.e. ≥1 mmHg compared to Vyzulta.
`
`Limited cannibalization
`with Vyzulta
`
`Upon the successful development and demonstrated efficacy of NCX-470 to lower IOP by approx ≥10
`mmHg i.e. ≥1 mmHg IOP-lowering improvement vs. Vyzulta, NCX-470 could become a preferred
`therapeutic alternative in the following settings, with a limited risk of cannibalization with Vyzulta. 1/
`as a front-line treatment for patients suffering from severe IOP. Indeed, it is important to bear in mind
`that bimatoprost is the preferred therapeutic option in a second line setting and that NCX-470 is a NO-
`donating bimatoprost analog. 2/ in a 2L setting for patients with progression of IOP while being treated
`with either latanoprost or Vyzulta.
`
`11
`
`000011
`
`

`

`
`Nicox
`
`
`Fig. 8: NCX-470 preclinical results
`Transient saline-induced ocular
`Ocular Normotensive dogs
`hypertensive rabbits
`
`
`Ocular hypertensive non-human
`primates
`
`bimatoprost 0.03% (n=6)
`NCX 470 0.042% (n=6)
`
`*
`
`12
`3
`
`*
`
`18
`4
`
`
`
`0
`1
`
`6
`2
`time (h)
`
`
`02
`
`-2
`
`-4
`
`-6
`
`-8
`
`IOP (mmHg)
`
`
`
`
`Source: Impagnatiello et al., IOVS. (2015) 56 (11):6558-64; Bryan, Garnier & Co ests.
`
`
`
`
`
` n
`
` Limited risk from upcoming Roclatan
`
`Aerie Pharmaceutical