Following guidance from the US FDA, Acacia Pharma has now outlined the regulatory pathway for its lead asset, BARHEMSYS, and plans to resubmit the new drug application (NDA) in Q319. This could enable a launch in H120 if approved by the FDA. Ongoing deficiencies with Acacia’s chosen contract manufacturing organisation (CMO), which led to two complete response letters (CRL), have resulted in the appointment of a new CMO. With increased visibility on the strategy, we have reintroduced our previously withdrawn forecasts and adjusted our launch timelines for BARHEMSYS in the US. We now forecast a launch in H120 (previously H119). We have also reduced our cost expectations in 2019 as Acacia delays its marketing operations. We now value Acacia at €631m.
The receipt of two CRLs from the US FDA in the past nine months has weighed heavily on Acacia’s share price. However, both CRLs related to problems at Acacia’s CMO and not the clinical data package. The recent appointment of a new CMO for BARHEMSYS means the approval pathway is clearer. The new CMO has a track record in manufacturing amisulpride (the active pharmaceutical ingredient of BARHEMSYS) and has regularly undergone successful FDA inspections, most recently in September 2018 when its facility was rated ‘no action indicated’, the best possible outcome.
Following the delay to approval of BARHEMSYS, we have reduced our forecast 2019 SG&A to reflect delayed sales activities. While Acacia has halted the hiring of sales reps, key senior sales personnel are being retained and will continue to educate and prepare the market for the potential BARHEMSYS launch in 2020. We have also reduced our forecast 2019 R&D spend (on development of BARHEMYS in chemotherapy-induced nausea and vomiting) as cost controls take effect. We forecast c £40m will need to be raised in H120 (following potential approval) to fund operations, with additional future funding dependent on sales execution.
Our revised valuation of €631m or €11.8/share (vs €635m or €11.9/share previously) is based on a risk-adjusted NPV model. We have updated our model to reflect the delay in the US launch to H120 (from H119 previously). We have also rolled our model forward, updated for FX rates and adjusted for net cash of 31 May, which we calculate at £12.6m. We note FX rates have had a significant positive impact on our valuation.