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 38.00 to EUR 11.00.

PAION’s lead product remimazolam was first approved in January 2020 in Japan in the indication general anesthesia (GA). It has since been approved in the US for procedural sedation (PS), in the EU for both PS and GA and in most Asian markets in either one or both indications. However, sales development has so far been disappointing. Lack of marketing muscle, difficulty in accessing physicians during the pandemic and a product recall in Japan meant that sales excluding one-off payments from licensees were not as expected in 2022. The good news is that towards the end of last year PAION concluded a marketing deal for southern Europe with a strong partner (US company, Viatris, market cap: USD12bn) and that remimazolam has been approved for GA in the EU and UK in April and August respectively. Procedures involving GA typically last 2-3 hours compared with under 30 minutes for PS. We expect PAION and its partners to generate up to €100 per patient with remimazolam in GA – up to 5x more than in PS. 10 million procedures using GA are carried out every year in the EU on the high risk patients targeted by the company. Brightening prospects are reflected in 2023 revenue guidance of €13m-€19m, which was confirmed in the Q1/23 report. The lower end of this guidance entails a trebling of product revenue relative to 2022. Based on strong preliminary Q2/23 numbers, we expect the new CEO, Tilmann Bur, who joined PAION on 1 September, to adopt identical or similar numbers in the final Q2/23 report due at the end of this month. PAION have indicated that €30m is needed to build up a sales force large enough to push the company to break-even. Financing possibilities include further licensing deals, new debt, equity, and the sale of royalties on remimazolam in one or more of Japan, South America, South Korea, Taiwan or the US. We retain our Buy recommendation but have lowered our price target from €38.0 to €11.0 to reflect lower revenue and profit forecasts compared with our last study of January 2022.