First Berlin – PAION AG Research Update (12/07/2021)

First Berlin Equity Research has published a research update on PAION AG (ISIN: DE000A0B65S3). Analyst Simon Scholes reiterated his BUY rating and decreased the price target from EUR 4.90 to EUR 4.10.

Abstract
So far this year PAION's partners have launched its ultra-short-acting sedative/anesthetic, remimazolam, in the US for procedural sedation and in South Korea for the indication general anaesthesia. These launches follow market introductions by partners last year in Japan for general anaesthesia and in China for procedural sedation. Furthermore in early 2021, PAION announced the acquisition of exclusive European commercialisation rights for the vasoconstrictor, giapreza, and the tetracycline-class antibiotic, xerava, from the US company, LaJolla Pharmaceutical. Both drugs are approved in the US and Europe. Giapreza is promising because it raises blood pressure in patients with septic or other distributive shock who remain hypotensive despite adequate volume restitution and application of catecholamines and other available vasopressor therapies. Xerava, which is indicated for complex intrabdominal infections, has a broader spectrum of action than recently approved cephalosporin- and carbapenem- beta- lactamase inhibitor antibiotic combinations. This acquisition is also important because with remimazolam it gives PAION the critical mass to justify setting up its own marketing apparatus in Europe. The EU and UK authorities have recently approved remimazolam for procedural sedation and approval for general anaesthesia is likely in 2022. PAION plans to launch giapreza, remimazolam and xerava in Germany, the UK, Netherlands and Denmark during H2 2021 and in further European markets in 2022. In our view PAION's 2026 target for revenue and EBITDA of €200m and €100m, respectively is realistic, especially given the wholesale pricing of remimazolam in the US for procedural sedation, which at USD39 per dose is over 60% above our previous expectation of USD24. Procedural sedation in the US is the single biggest market for remimazolam. We maintain our Buy recommendation but have lowered the price target to €4.10 (previously €4.90). The reduction in our price target mainly reflects a larger dilutive effect from future share issues than we had previously modelled. The additional capital is required to finance the build-up of the European marketing network ahead of projected cashflow breakeven in 2024.