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Alexza Pharmaceuticals
Initiation of coverage
All eyes on Adasuve
Pharma & biotech
Alexza's investment case rests on the commercial prospects for Adasuve,
27 August 2013
a potentially disruptive new product for acute agitation in adult
schizophrenia or bipolar disorder patients. Adasuve (Staccato loxapine)
was launched in Germany by Ferrer, and its US launch by Teva is expected
Price
US$4.35
Market cap
US$75m
in Q114. Adasuve offers speed and dosing reliability advantages in treating
acute agitation, and we estimate global sales of over $200m by 2018,
assuming a 20% peak market share. Its potential underpins our valuation
of $6.77/share, with upside from successful development of further
products using the Staccato inhaled delivery device.
Net cash ($m) Q213
32
Shares in issue
17.2m
Free float
96%
Code
ALXA
Primary exchange
Year end
12/11
12/12
12/13e
12/14e
Revenue ($m)
5.7
4.1
46.5
8.5
PBT* ($m)
(36.5)
(34.9)
(3.7)
(22.8)
EPS* ($)
(5.38)
(2.80)
(0.22)
(1.29)
DPS ($)
0.0
0.0
0.0
0.0
P/E (x)
N/A
N/A
N/A
N/A
Yield (%)
N/A
N/A
N/A
N/A
NASDAQ
Share price performance
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items.
Adasuve’s rapid time to effect a key advantage
Adasuve’s rapid time to therapeutic effect (10 minutes) vs intramuscular drugs (3090 minutes) or oral forms (>60 minutes) commonly used for acute agitation is a
substantial advantage given the risk of physical injury or property damage with
agitated patients in whom agitation is escalating. Current treatment options are
either slow to act or invasive, and are often dosed in combination. While Adasuve
will have a premium price of $75-100/dose (vs <$10 for most oral drugs, which are
1m
3m
12m
Abs
(2.9)
(5.2)
3.8
often dosed in combination and re-dosed during an agitation episode), we believe
that the advantages of quick effect and ease of administration will position Adasuve
as a key agent for initial treatment of agitation in medical emergency settings.
Rel (local)
(0.9)
(5.6)
(11.6)
Pulmonary concerns not a significant deterrent
Alexza Pharmaceuticals is a US-based company
developing products for acute CNS disorders using
its proprietary Staccato aerosol rapid drug delivery
system. Lead product Adasuve is approved in the
US and EU for acute treatment of agitation in
patients with schizophrenia or bipolar disorder.
As patients with active airway disease had higher respiratory events vs placebo in
safety studies, the FDA required a REMS protocol with Adasuve’s approval.
However, as few respiratory events occurred in the pivotal studies, we believe that
the respiratory toxicity risk is minimal and should not significantly deter physicians
and facilities from using the drug; we estimate a 20% peak market share.
Alexza to advance AZ-002 and other Staccato drugs
Adasuve’s approval validates the underlying technology of the Staccato platform
and Alexza is advancing AZ-002 (Staccato alprazolam) as a treatment candidate for
acute repetitive seizures in epilepsy patients. A Phase II study is expected to start
in H213, while further development candidates may be announced in H114.
%
52-week high/low
US$6.2
Business description
Next events
Adasuve US launch by Teva
Q413
AZ-002 start Phase II trial
H213
Analysts
Pooya Hemami
Christian Glennie
+1 646 653 7026
+44 (0)20 3077 5727
[email protected]
Valuation: rNPV of $85m represents upside
US$3.9
Edison profile page
We calculate an rNPV for Adasuve and AZ-002 at $85m. Adding $32m in net cash
(Q213) gives a $6.77 per share valuation for the firm. This represents clear upside
to Alexza’s $4.32 share price. We do not specifically value the Staccato platform
technology, which we believe can be extended into other pharmaceutical
ingredients and presents additional value-creation opportunities.
Alexza Pharmaceuticals is a research client of Edison Investment Research Limited
Investment summary: Gearing up for Adasuve launch
Company description: Staccato inhalation delivery platform
Alexza Pharmaceuticals is a California-based pharmaceutical company developing products using
its proprietary Staccato inhalation platform, which provides rapid and efficient drug delivery. Its lead
product, Adasuve (Staccato loxapine), has been approved in the US and EU to treat agitation in
patients with schizophrenia or bipolar I disorder, and was launched in Germany by European
commercial partner Ferrer, and is expected to be launched by US partner Teva in Q114. We
estimate peak global Adasuve revenue of $230m in 2022 and sustained profitability from 2016. The
firm is also developing AZ-002 (Staccato alprazolam) for acute repetitive seizures (ARS), which will
enter a Phase II study in H213, and we anticipate Alexza will announce a new development
programme in H114.
Valuation: rNPV of $85m indicates upside potential
We calculate an rNPV for Adasuve and AZ-002 at $85m. Adding $32m in net cash (Q213) gives a
$6.77 per share valuation for the firm. This represents clear upside to Alexza’s $4.32 share price.
This includes peak Adasuve sales of $230m and a 25% probability of success for AZ-002. We apply
a 12.5% cost of capital. Our assessment does not specifically value the Staccato platform
technology, which we believe can be extended into other active pharmaceutical ingredients and
presents additional value-creation opportunities in acute treatment settings. As the firm extends its
Staccato development pipeline in the coming quarters, these opportunities may provide further
upside to our valuation.
Sensitivities: Regulatory, IP and commercial execution
Alexza’s valuation is principally tied to Adasuve’s prospects. Pulmonary concerns in patients with
active airway disease (specifically asthma and COPD) in early clinical studies prompted regulators
to require risk management programmes (REMS) and post-marketing studies. Unfavourable study
data could lead to restrictions that could impair the drug’s penetration rate. We model Adasuve
having market exclusivity until 2022 (expiry date of key composition patents), but a five-year patent
term extension could be granted to strengthen the commercial window of the product, and the
complexity of the Staccato device could add barriers to would-be generic competitors once patents
expire. Alexza is also dependent on partners for the components used in Adasuve manufacturing,
and unforeseen supply interruptions could affect product availability. While we believe that current
partners Teva and Ferrer are committed to ensuring a strong commercialisation effort, sub-optimal
marketing activities could affect product penetration.
Financials: Further financing likely prior to reaching profitability
Alexza finished Q213 (30 June 2013) with $32m in net cash (after having received $40m upfront in
May 2013 as part of Teva’s US licensing deal) and has guided that its current cash on hand (with
the exercise of a $25m five-year note from Teva) will fund its operations through to Q314. While
Teva is responsible for funding the required US post-marketing studies and commercialisationrelated obligations, we expect Alexza’s R&D costs to remain in the $20m/year range as it spends
on AZ-002 and other pipeline projects. In addition, Alexza must fund the post-marketing Adasuve
commitments in Europe (which we estimate will cost $5m between H213 and end 2015). In addition
to the Teva note (with 50% of any outstanding balance convertible at Teva’s option to Alexza equity
at $4.4833/share), we estimate that Alexza will need to raise c $10m in additional debt in 2015 to
sustain its operations until Adasuve revenues are sufficient to sustainably generate positive free
cash flows, which we expect will occur in FY16 (once worldwide sales exceed $110m).
Alexza Pharmaceuticals | 27 August 2013
2
Outlook: Adasuve launch underway
Alexza is focused on supporting the upcoming commercial efforts of its licensing partners, Teva and
Ferrer, as Adasuve is launched in the US and multiple EU markets over the coming months, and on
strategic pipeline investments. Adasuve offers speed and dosing reliability advantages in acute
agitation settings, which should drive product uptake. Alexza’s Staccato device platform is also
being assessed in AZ-002 for ARS, and future product candidates. Adasuve’s commercial
prospects in acute markets, and the potential for future products using the Staccato platform,
underscores the investment case for Alexza.
Will rapid effect and dosing convenience override respiratory concerns?
Alexza has received FDA and EU approval for Adasuve for the acute treatment of agitation in adults
with schizophrenia or bipolar I disorder (BPI), and has secured partnerships with established and
recognised pharma companies. The key question for Alexza and its partners is how Adasuve’s
potential benefits for the agitation markets, as a rapidly-acting, non-invasive treatment option,
compare with its potential drawbacks (risk management programme and expected premium price)
versus oral or intramuscular (IM) drugs.
Review of agitation and established treatment approaches
Agitation episodes occur in many people suffering from major psychiatric disorders, including
schizophrenia and bipolar disorder, and are frequently treated in emergency room settings,
psychiatry departments/wards of hospitals, or in psychiatric hospitals. The US National Institute of
Mental Health estimates that in the United States, c 2.4m adults (1.1% prevalence) have
schizophrenia and c 5.7m adults (2.6% prevalence) have bipolar disorder. Approximately 1.7-1.8m
1,2
medical emergency room visits in the US per year may involve agitated patients. Up to 8m adults
3
in the EU have schizophrenia or bipolar disorder.
The treatment paths for agitated patients vary from facility to facility, such as between emergency
psychiatry (EP) units and full hospitals with medical emergency rooms (MER); in some EP clinics, a
majority (c 75%) of outpatient agitated patients will be discharged within 24 hours, and in others
(more often MERs) a similar or higher proportion will be admitted (to the psychiatry wards) for
periods of several days or longer.
Agitated individuals generally exhibit restlessness, pacing and unpredictable behaviour, and are at
risk of becoming aggressive and violent. A survey of US psychiatric emergency services estimated
4
that agitation led to an average of eight patient-to-staff assaults per facility per year. If agitation is
not treated quickly and effectively, it can escalate unpredictably and introduce significant safety
risks to staff and the patients. When faced with an agitated patient, non-pharmacologic approaches
(such as verbal de-escalation and reducing environmental stimulation such as lighting and noise)
5
are first attempted, but often these are unsuccessful and medications are required. The current
standard of care involves antipsychotic medications, such as first-generation antipsychotics (FGAs)
like haloperidol or second-generation antipsychotics (also referred to as atypical antipsychotics, or
APs) such as olanzapine (Zyprexa), ziprasidone (Geodon) and aripiprazole (Abilify) – these drugs
are all available in intramuscular (IM) or various oral dosage forms, although only the IM forms are
6
approved for treating acute agitation. Haloperidol (a dopamine-2, or D2, receptor blocker) has a
long history of use in agitation, but it can lead to cardiac arrhythmias and may induce acute
1
Zeller SL, Rhoades RW. Clin Ther. 2010;32:403–425.
Sachs GS. J Clin Psychiatry. 2006;67 Suppl 10:5-12.
Wittchen HU et al. Eur. Neuropsychopharmacol. 2011:21, 655-679.
4
Allen MH, Currier GW, Hughes DH, Reyes-Harde M, Docherty JP. The Expert Consensus Guideline Series.
Treatment of behavioral emergencies. Postgrad Med.2001 May:1-88.
5
Wilson MP, Pepper D, Currier GW, et al. West J Emerg Med. 2012 Feb;13(1):26-34.
6
Marder SR. J Clin Psychiatry. 2006;67 Suppl 10:13-21.
2
3
Alexza Pharmaceuticals | 27 August 2013
3
extrapyramidal side effects (EPS) such as dystonia, movement disorders or neuroleptic malignant
syndrome. APs are also D2-receptor antagonists, but also block receptor subtypes, notably
serotonin-2A (5-HT2A), and have a lower risk of EPS than FGAs. Benzodiazepines (which act on
the GABA brain receptor), such as lorazepam, are also used for agitation as they have a sedating
effect, but unlike antipsychotics, they do not treat the underlying psychiatric disease responsible for
the agitation, and also may cause respiratory depression or hypotension.
Given the desire for rapid therapeutic effect to reduce the risk of symptom escalation or harm to the
patient or staff, IM formulations of antipsychotics can be used and offer a more rapid onset of effect
than oral formulations. However, patients can be resistant to IM injection, presenting added physical
injury risks to both patients and caregivers, as well as the potential for mental trauma to the patient
that can compromise patient-physician relationships and cause longer-term effects on treatment
compliance. Despite their slower therapeutic effect in potentially volatile and unpredictable patient
scenarios, oral drugs are often the first drug class employed in agitation scenarios (despite not
being approved for the condition); current guidelines from the American Association for Emergency
Psychiatry recommend that for agitation cases involving psychoses, oral antipsychotics should be
employed before IM formulations. However, as oral drugs take 30 to 60 minutes to start exerting
effects, agitated patients still pose a risk of injury or property damage until a therapeutic effect is
attained. All in, the bulk of cases are treated with oral drugs, and IM drugs are employed in up to
10-30% of agitation cases (ie practitioners have to use IM drugs if the patient is uncooperative).
Staccato delivery provides rapid, non-invasive treatment
Alexza’s lead product Adasuve (Staccato loxapine) aims to address the discrepancy between the
need for rapid onset of anti-agitation effects and the slow onset of the most frequently utilised
treatments for agitation, while also offering a reliable and more patient-friendly mode of drug
administration. Loxapine is an FGA marketed since 1975 for use in schizophrenia. Its mechanism of
action involves D2 and 5-HT2A receptor antagonism. At the core of Alexza’s technology platform
and the Adasuve product is the firm’s proprietary Staccato technology, which provides rapid drug
delivery through inhalation. While other inhalation platforms exist, obtaining appropriate drug
particle sizes or consistent emitted doses may be challenging for many drug molecules; to our
knowledge, no other inhalation platform has been shown to efficiently deliver an antipsychotic
medication quickly enough to be competitive with IM drugs’ time to effect.
The Staccato system vaporises an excipient-free drug to form a condensation aerosol that enables
rapid drug delivery in a user-friendly manner. It consists of three components: a heat source (inert
metal heat plate), a thin film of active pharmaceutical ingredient (API), and an airway. Upon
activation, the heat plate rapidly heats and vaporises the drug film, and the drug vapour
subsequently cools and condenses into right-sized aerosol particles drawn into the patient’s lungs;
the entire system actuation occurs in under one second (Exhibit 1).
Exhibit 1: Staccato device system
Source: Alexza presentation, June 2013
Alexza Pharmaceuticals | 27 August 2013
4
The Staccato system is activated by the user’s breath – the patient simply inhales to receive the
drug dose, and does not require caregiver assistance or need to modify the breathing pattern. The
produced aerosol is relatively insensitive to patient inhalation rates. Oral inhalation through the
device initiates the immediate and controlled rapid heating of a thin film of drug (in Adasuve’s case,
excipient-free loxapine) to form a highly pure drug vapour, which condenses into aerosol particles
with a particle size distribution that enables rapid and efficient delivery to the deep lung. Peak
plasma levels in the systemic circulation is achieved within two minutes after administration; hence
the Staccato device provides speed of therapeutic onset that is comparable to intravenous (IV)
administration (and thus quicker than IM administration), but with greater ease, patient comfort and
convenience. Further, due to the rapid delivery/presentation of drug upon detection of inspiration,
over ~90% of the drug is inspired/inhaled within seconds, providing a high degree of drug delivery
reliability and better ensuring compliance vs oral drugs where ‘cheeking’ can occur (where patients
only pretend to swallow the medications and secretly insert the pill in their cheek, which may not
always be detected by the healthcare practitioner).
Rapidity of Adasuve response – a needed attribute in emergency settings
In our discussions with practising US psychiatrists treating agitation, we learnt that the duration (3060 minutes) before oral drugs start to reduce escalation of agitation symptoms is very often a
pressing concern, as many patients can injure staff or themselves or damage property during this
interval. There is also a general apprehension towards using IM drugs in the first line. The
physicians we consulted with suggested that they see Adasuve as a potential breakthrough given
its rapid response in a non-invasive formulation, offering a treatment option that does not require
physicians to trade-off either speed of effect or non-coercive dosing. In Exhibit 2 we summarise key
differences in Tmax between other commonly used drugs for agitation and Adasuve.
Exhibit 2: Common pharmacological treatments used in treatment of agitation
Route of administration
Oral
Oral
Oral
Oral
Intramuscular
Intramuscular
Intramuscular
Intramuscular
Intramuscular
Inhalation
Generic name
Risperidone
Olanzapine
Haloperidol
Lorazepam
Ziprasidone
Olanzapine
Aripiprazole
Haloperidol
Lorazepam
Loxapine (Adasuve) 10mg
Drug class
Atypical antipsychotic
Atypical antipsychotic
First-generation antipsychotic
Benzodiazepine
Atypical antipsychotic
Atypical antipsychotic
Atypical antipsychotic
First-generation antipsychotic
Benzodiazepine
First-generation antipsychotic
Tmax*
1h
6h
30-60min
20-30min
15min
15-45min
1h
30-60min
20-30min
<2min
Sources: Wilson MP, Pepper D, Currier GW, et al. West J Emerg Med. 2012 Feb;13 (1): 26-34; Draft document
from Alexza to PDAC Committee (December 2011); Edison Investment Research. Note: *Tmax refers to time
after drug administration where maximal plasma concentration is reached.
As shown above, the Tmax for Adasuve, at under two minutes (as determined through Alexza’s
pooled analysis of 115 subjects in Adasuve Phase I studies 004-103, 004-106, 004-107) is
significantly faster than any other IM or oral drug used for agitation. For treatment efficacy, the
Positive and Negative Symptom Scale, Excited Component (PEC) scale is often used, with lower
scores from baseline reflecting decreased states of agitation. Each of Alexza’s Phase III pivotal
studies (004-301 for agitated schizophrenia patients; 004-302 for agitated bipolar I disorder
patients) showed statistically significant (p<0.0001) improvements in PEC scores vs baseline
compared to placebo at two hours (the primary endpoint). The magnitude of PEC score
improvements were at the high end (8.6 to 9.2 points) compared to marketed IM drugs, suggesting
that Adasuve’s efficacy at two hours is broadly competitive with marketed IM drugs, although headto-head studies were not conducted.
In time to statistically significant treatment effect vs placebo, Adasuve appears to outperform other
products (Exhibit 3). Both pivotal studies showed statistically significant differences vs placebo
starting at 10 minutes (the first period where PEC measures were taken in these trials; measures
Alexza Pharmaceuticals | 27 August 2013
5
were taken at 10, 20, 30, 45, 60, 90 and 120 minutes post-dosing). IM olanzapine only started to
show differences at 30 minutes and IM aripiprazole did at between 45 and 120 minutes (depending
on the study and trial).
Exhibit 3: Comparisons of pivotal trial data between Adasuve, IM Aripiprazole and IM Olanzapine
Drug and dosage
Agitation
indication
Adasuve (inhaled
loxapine), 10mg
Schizophrenia
Bipolar I disorder
IM Olanzapine, 10mg Schizophrenia
Schizophrenia
Bipolar I disorder
IM Aripiprazole,
Schizophrenia
9.75mg
Schizophrenia
Bipolar I disorder
Comparator data
IM Haloperidol
Schizophrenia
Schizophrenia
Schizophrenia
Schizophrenia
IM Lorazepam
Bipolar I disorder
Bipolar I disorder
Treatment arm/ Mean reduction in
placebo arm PEC at 120min vs
sizes
baseline
Time to first significant
Time to significant Study identifier
reduction in PEC score difference in responders
vs placebo (>40% PEC response) vs
placebo*
10min
10min
004-301
113 / 115
8.6
105 / 105
131 / 54
46 / 45
98 / 50
57 / 62
9.2
7.74
8.95
8.98
7.82
10min
15min
30min
30min
45min
10min
120min
120min
120min
60min
004-302
F1D-MC-HGHB
F1D-MC-HGHV
F1D-MC-HGHW
CN 138050
175 / 88
75 / 73
7.99
8.74
120min
90min
120min
90min
CN 138012
CN 138013
126 / 0
40 / 0
60 / 0
185 / 0
51 / 0
68 / 0
7.63
7.29
7.32
8.25
9.57
6.08
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
F1D-MC-HGHB
F1D-MC-HGHV
CN 138050
CN 138012
F1D-MC-HGHW
CN 138013
Sources: Draft document from Alexza to PDAC Committee (December 2011); Edison Investment Research. Note: *In the IM
Aripiprazole responder analysis in patients with schizophrenia, the only assessment times reported in available data were at 60 and
120 minutes. In patients with bipolar disorder, the IM Aripiprazole/placebo comparison failed to achieve statistical significance at 30,
45, or 60 minutes, but was significant at 90 minutes. In the IM Olanzapine responder analysis in patients with schizophrenia, the only
reported assessment vs placebo in available data was at 120 minutes. In patients with bipolar disorder, the only pairwise comparison
reported in available data was at 120 minutes.
Both Adasuve studies also showed significant improvements in treatment response (defined as a
40% decrease from baseline in the PEC score) starting at 10 minutes, again a more quick response
than the measured paired differences in IM aripiprazole and olanzapine.
Despite this timely treatment effect, in terms of marketing against competing products, given that
Adasuve was not tested head to head, the company cannot in its promotional materials explicitly
indicate that it acts more quickly than the others; however, US and European regulators allowed the
company’s formal drug label (prescribing information) to indicate that the drug effect of Adasuve
was apparent at 10 minutes following dosing – a criterion that none of the competitors are allowed
to indicate, and would imply that Adasuve offers a faster treatment effect. In addition, the PEC
score reduction vs time post-dosing curves (which we expect that physicians will pay attention to)
clearly show a more rapid effect in PEC score for Adasuve vs IM olanzapine, aripiprazole and
haloperidol. As shown in exhibits 4 to 7 below, Adasuve causes a circa eight point reduction in the
PEC score within 30 minutes of dosing across both pivotal trials, whereas olanzapine, aripiprazole,
haloperidol and lorazepam all have shown slower rates of PEC reduction.
Alexza Pharmaceuticals | 27 August 2013
6
Exhibit 4: Mean change from baseline in PEC score
through two hours after a single dose in agitated
patients with schizophrenia (Study 004-301)
Exhibit 5: Mean change from baseline in PEC score
through two hours after a single dose in agitated
patients with bipolar disorder (Study 004-302)
Source: FDA Adasuve drug label, citing Study 004-301
Source: FDA Adasuve drug label, citing Study 004-302
Exhibit 6: Scores of inpatients with schizophrenia
spectrum disorders on the PEC scale from baseline to
two hours after the first IM injection of olanzapine,
haloperidol or placebo
Exhibit 7: Time course of mean change in PEC score
from baseline at 0 hours to two hours post initial dose
Source: Wright P, et al. Am J Psychiatry. 2001;158(7):1149-1151.
Source: Tran-Johnson TK, et al. J Clin Psychiatry 2007;68:111-119
In addition to a faster treatment effect vs both orals and IM drugs, we believe another advantage of
Adasuve vs oral drugs is the greater certainty of dosing administration due to the product’s delivery
mechanism; the device only releases drug once inhalation is detected (and is displayed through an
indicator) and normally the drug dose would be >90% absorbed within seconds upon normal
inhalation; the health care practitioner (HCP) can monitor the patient at this time to ensure
inspiration was completed with the device in-mouth; however, with oral drugs, due to ‘cheeking’
potential, there may be less reliability in ensuring that the drug was properly administered.
Pulmonary concerns the primary drawback
Adasuve’s potential Achilles heel is stakeholder concerns about possible pulmonary effects (none
of the other adverse events experienced in the clinical programme were attributed as possibly due
to treatment). In fact, the FDA issued a Complete Response Letter (CRL) in 2010 to Adasuve’s
initial 2009 US New Drug Application (NDA) citing such concerns and Alexza responded in its 2011
resubmission with a new safety data analysis from the three pulmonary safety studies and a
Alexza Pharmaceuticals | 27 August 2013
7
7
proposed risk mitigation strategy. A Phase I spirometry safety study (004-104) in healthy patients
(n=30) showed no difference in the proportions of patients obtaining a >10% decrease in FEV1
(forced expiratory volume, or the volume of air exhaled in the first second of a forced exhalation
starting from a position of full inspiration) vs placebo upon Staccato device deployment. However, in
similar studies in patients with asthma or chronic obstructive pulmonary disease (COPD), the drug
was associated with a reduction in FEV1. In a study of asthma patients (004-105), airway-related
adverse events (eg bronchospasm, wheezing, etc) occurred in 53.8% of Adasuve-treated patients
vs 11.5% of those on placebo. In a similar study of COPD patients (004-108), 19.2% of Adasuve
patients had such AEs vs 11.1% in placebo. The proportion of Adasuve-treated patients in the
asthma study (n=26) with reductions of FEV1 post-dosing of ≥10%, ≥15% and ≥20% were 84.6%,
61.5% and 42.3%, respectively, vs 11.5%, 3.8% and 3.8% for the placebo arm (n=26), respectively.
The proportion of Adasuve-treated patients in the COPD study (n=25) with reductions of FEV1 postdosing of ≥10%, ≥15% and ≥20% were 80%, 56% and 38.5%, respectively, vs 66.7%, 33.3% and
11.1%, respectively, for placebo (n=27).
All respiratory AEs in the Adasuve arms in both studies were either self-limiting or readily managed
with an inhalable bronchodilator. It should be noted that patients with significant pulmonary disease
were excluded from the Phase III pivotal studies. Adasuve was very well tolerated in patients
without active airway disease; among the 1,095 such study subjects dosed with Adasuve across the
clinical programme, only one (0.09%) required treatment (usual dose of inhaled albuterol) for postAdasuve airway related symptoms (bronchospasm). There was also no evidence for additional risk
of an airway AE following a second or third dose of Adasuve. In addition, 86.7% of participating
patients in the Phase II/III Adasuve programme were current or former smokers (thus a percentage
of these likely had some pulmonary impairment at baseline); hence smoking did not increase
airway-related AE risk. Further, none of the patients with a prior history of asthma or COPD (~7% of
enrolled) who received Adasuve in the Phase II or Phase III trials had an airway AE or required
bronchodilator therapy.
REMS protocol requirements may restrain drug usage
While clinical data suggests to us that the risk of pulmonary AE or bronchospasm in agitated
patients (even with a majority being smokers) without significant active airway disease would be
very low (and likely manageable with inhalable bronchodilator drugs), the FDA’s approval carried a
black box warning that Adasuve can cause bronchospasm that can potentially lead to respiratory
distress or arrest, and that the drug can raise mortality risk in elderly patients with dementia-related
psychosis (this latter warning is also found in all other approved antipsychotic drugs for agitation
and is not a concern). The FDA also required a Risk Evaluation and Mitigation Strategies (REMS)
programme as part of Adasuve’s approval to mitigate the potential for negative outcomes in the
event of Adasuve-induced bronchospasm. Core components of the US REMS programme include:

Facility certification. Adasuve can only be dispensed in healthcare settings that are certified to
dispense Adasuve and enrol in the Adasuve REMS programme. Facilities must be equipped to
provide immediate onsite access to an inhaled and nebulised short-acting beta-agonist
bronchodilator (such as albuterol).

Each certified facility must have immediate access onsite to equipment and staff trained to
provide advanced airway management (AAM), including intubation and mechanical ventilation.

Prior to treatment, patients must be screened for a history of asthma, COPD, other lung
diseases and must be examined for respiratory abnormalities.

Adasuve can only be administered once within a 24-hour period, and cannot be dispensed for
outpatient use.
7
A second CRL was issued in May 2012 citing minor manufacturing concerns, which were addressed in a June
2012 NDA resubmission by Alexza; Adasuve received FDA approval in December 2012.
Alexza Pharmaceuticals | 27 August 2013
8

Following Adasuve administration, patients must be monitored at least once every 15 minutes
for signs of bronchospasm for at least one hour.
Based on our discussion with physicians, while the REMS programme limits Adasuve usage into an
acute medical setting, most of its components will not be significant deterrents for physicians
prescribing Adasuve; the requirement for detailed history-taking (including of prior lung diseases) is
already standard procedure. The once-daily dosing is also not a barrier, given the therapeutic intent
would often be to calm the patient with a rapid-acting drug and then transition them to oral drugs
over time. The need to monitor patients for an hour post-dosing should have little effect on patient
flow, as the standard-of-care for acute agitation already requires frequent patient monitoring.
Of the REMS criteria, we view the requirement for AAM capabilities as being the most likely to
affect physician willingness to use Adasuve. While the need for AAM will be a non-issue in an MER
department (as equipment and trained staff are already present), some EP facilities will require
adding AAM capabilities if they are not in very close proximity to a hospital/MER setting. For such
EP facilities, there may be some reluctance among HCPs to learn intubation procedures. Partly
mitigating this risk in the US market is that while EP facilities will likely individually encounter more
acute agitation cases than an MER in a hospital, there are many more MER units than EP facilities
in the US (~4,500 vs ~200), where the need for AAM will not be a concern.
The risk of pulmonary effects from existing clinical data appears low and our discussions with
physicians suggest that most will not be overly concerned with this risk given the safety data from
the Phase III studies (as no patient required AAM). As post-marketing safety data is accumulated, it
remains feasible that some aspects of the REMS could be lessened within two to three years.
Premium pricing vs established agitation drugs a potential disincentive
Adasuve will be priced at a premium level vs existing acute agitation products (Exhibit 8 shows that
most currently used drugs cost under $10/dose while Adasuve will be priced at US$75-100/dose). A
per-individual drug dose comparison may not capture total treatment cost differences, given that
agitation episodes are currently often treated with multiple dose combinations of antipsychotic and
benzodiazepine drugs (whereas the majority of treated patients in the Phase III trials only needed a
single Adasuve dose to control their agitation), and benzodiazepines often cause over-sedation,
prolonging patient stays and increasing indirect costs. Nonetheless, the per-dose cost differential vs
Adasuve may pose an initial barrier towards the drug’s penetration, but we believe that hospital
pharmacists and administrators will recognise the drug’s indirect cost savings (notably lower
likelihood for property damage or patient/staff injury) versus slower-onset or IM drugs as a
meaningful treatment advantage. Hence, the high price may curb initial penetration but, as
recognition of the speed of onset and ease of administration advantages spread throughout the
medical community, we expect the penetration rate to rise.
Exhibit 8: US pricing examples of selected drugs used for acute agitation
Product
Adasuve (inhaled loxapine)
Olanzapine (oral)
Olanzapine (IM)
Aripiprazole (IM)
Aripiprazole (oral)
Haloperidol (oral)
Haloperidol (IM)
Ziprasidone (IM)
Ziprasidone (oral)
Risperidone (oral)
Lorazepam (oral)
Lorazepam (IM)
Approximate price ($) per dose
80.00*
5.80/8.80
20.40
8.50
8.95
0.10
1.60
7.75
3.80
0.15
0.04
5.40 to 6.30
Dose quantity
10mg
5mg/10mg
5-10mg
9.75mg
10mg
5mg
5mg
20mg
20mg
2mg
2mg
2mg
Source: Edison Investment Research, ZenRx, various sources. Note: *Pricing has not been formally specified,
but Alexza has guided for a $75-100 price range.
Alexza Pharmaceuticals | 27 August 2013
9
Capable marketing partners for Adasuve in Teva and Ferrer
In October 2011, Ferrer entered a commercialisation arrangement with Alexza to commercialise
Adasuve in Europe, Latin America, Russia and CIS, and in May 2013, Teva Pharmaceuticals
entered a partnership agreement with Alexza to commercialise the drug in the US market. Teva
paid $40m upfront, which in our view adds validation to the commercial opportunity and signals its
confidence in Adasuve’s prospects. Teva appears to be a suitable fit for Adasuve given its familiarity
and experience in the psychiatry and hospital markets, as Teva is the leading supplier of generic
clozapine, an AP indicated for treatment-resistant schizophrenia. Teva also provided up to $25m to
Alexza as a five-year note bearing 4% pa (with 50% of any outstanding balance convertible at
Teva’s option into Alexza shares at $4.4833/share). The exhibit below shows the key characteristics
of both licensing deals.
Exhibit 9: Summary of licensing terms of Adasuve partnerships with Teva and Ferrer
Partner
Teva
Pharmaceuticals
Grupo Ferrer
Territories
covered
US
Up-front Revenue
payment terms
$40m
Tiered royalties,
in addition to
manufacturing
revenues (at
least equal to
Alexza's COGS)
Europe, Latin
$10m
America,
Russia, and
Commonwealth
of Independent
States countries
Per-unit transfer
price
Potential milestones
Up to $195m based on net
sales targets and results of
post-approval studies
Up to $51m based upon
commercial launch in nine
pre-specified countries
(already received $3m for
MAA approval, and $1.25m
for July 2013 Germany
launch) and cumulative
sales milestones
Post-marketing
commitments
Teva responsible for all regulatory
commitments (including a 10,000
patient observational safety study,
and a clinical programme
assessing drug's safety and
efficacy in agitated adolescents)
Launch strategy
FDA approval Dec 2012
and launch expected Q413.
Teva committed to at least
a 40 sales rep-equivalent
sales team targeting
~1,000 hospitals (where
majority of emergency
agitation cases occur)
Alexza responsible for specific EU EU approval Feb 2013 and
post-approval commitments
launched in Germany in
(including benzodiazepine
July 2013; Expected to
interaction study, cardiac rhythm launch in Austria in H213
or QTc study, observational study, and in other large EU
and drug utilisation study). Ferrer markets (eg UK, France,
Spain) in 2014
is responsible for all other
regulatory and commercial
requirements
Source: Alexza SEC filings
Adasuve financial model
Our revenue projections are as follows: we assume 2m cases of agitation present to hospital or
psychiatric ER departments per year in the US, and that 75% of these cases would represent the
potential treatment market for Adasuve as we forecast 10% of presenting patients are too severely
agitated and/or not sufficiently cooperative to use Adasuve, and that 15% of patients will have a
pulmonary disease that would contraindicate them from taking Adasuve.
We estimate that on average, a presenting patient would receive four doses of an anti-agitation
treatment during their stay at a facility (some patients can be discharged in under 24 hours and only
receive one or two doses, while others may be admitted for a week or longer); this brings the target
US market at c 6m doses per year. We believe Adasuve’s rapid speed to effect will make it a lead
drug of choice for initial presentations of agitation (in BPI and schizophrenia), but we assume that
the majority of subsequent doses that may be required in inpatient settings (ie after admission to a
psychiatric ward) will more often be adequately managed by lower-costing oral drugs (although on
occasion, admitted patients who are poorly managed or who experience unpredictable
exacerbations will require fast-acting therapy and Adasuve may be used in such cases). Hence we
assume peak market US share of 20% for Adasuve starting in 2018 (see Exhibit 10).
Alexza Pharmaceuticals | 27 August 2013
10
Exhibit 10: Financial forecasts for Adasuve sales in agitation associated with schizophrenia or
bipolar disorder
US market
Total emergency visits involving patients with agitation (000)
Addressable treatment population
Treatable events per patient
Addressable target market in doses per year (000)
Adasuve market share
Adasuve unit sales (000)
Adasuve net price/unit (US$)
Net Adasuve sales (US$’000)
Net royalties to Alexza
Royalty rate from Teva (%)
EU market
Total emergency visits involving patients with agitation (000)
Addressable treatment population
Treatable events per patient
Addressable target market in doses per year (000)
Adasuve market share
Adasuve unit sales (000)
Adasuve net price/unit (US$)
Net Adasuve sales (US$’000)
Transfer revenues to Alexza (US$’000) from Ferrer
Transfer revenues net of supply costs (US$’000)
Net revenue transfer payment rate from Ferrer (%)
2013
2014
2015
2016
2017
2018
2019
2020
2,000
75%
4
6,000
0.0%
N/A
0
N/A
2,019
75%
4
6,057
2.7%
165
80.00
13,175
1,660
13%
2,038
75%
4
6,115
7.8%
479
84.00
40,199
5,789
14%
2,058
75%
4
6,173
13.0%
803
88.20
70,824
10,836
15%
2,077
75%
4
6,232
18.1%
1,130
92.61
104,691
17,464
17%
2,097
75%
4
6,292
19.9%
1,254
97.24
121,924
21,946
18%
2,117
75%
4
6,352
19.9%
1,266
102.10
129,241
23,263
18%
2,137
75%
4
6,412
19.9%
1,278
107.21
136,997
24,659
18%
3,185
75%
4
9,554
0.4%
36
88.45
3,169
634
490
15%
3,197
75%
4
9,592
1.7%
166
66.46
11,036
2,207
1,543
14%
3,210
75%
4
9,631
4.7%
453
58.80
26,614
5,323
3,422
13%
3,223
75%
4
9,669
7.8%
755
61.74
46,641
9,328
6,240
13%
3,236
75%
4
9,708
10.9%
1,058
64.83
68,573
13,715
9,411
14%
3,249
75%
4
9,747
12.0%
1,167
68.07
79,437
15,887
11,121
14%
3,262
75%
4
9,786
12.0%
1,172
71.47
83,743
16,749
11,963
14%
3,275
75%
4
9,825
12.0%
1,176
75.05
88,282
17,656
12,864
15%
Source: Edison Investment Research
We assume an initial US price for Adasuve of $80/dose. The tiered royalty terms of the Teva
arrangement have not been made public, but we model royalties starting at 13% and peaking at
18% at higher sales levels. The deal also calls for potential milestones of up to $195m, and we
assume that up to $50m will be triggered before 2022. We model that Alexza’s transfer price from
Ferrer will be c 20% of Ferrer’s net selling price (NSP) but netting out manufacturing costs, we
assume the effective gross profit for Alexza will approximate c 12-14% of Ferrer’s NSP (modelled
8
over the long term at 70% of the US price ). While a patent term extension may extend the key
Adasuve patents for an additional five years beyond 2022, and while its technology will be more
complicated to reproduce (vs pill dosage forms), we model that generic erosion will start in 2023.
Beyond Adasuve – Staccato targeting additional markets
Adasuve approvals in the US/EU markets and the securing of capable licensing partners enables
Alexza to develop the Staccato delivery technology for other therapeutic areas requiring rapid and
consistent drug delivery and ease of administration. The Staccato system appears to be broadly
applicable as Alexza has already screened >400 drugs, and ~200 have exhibited initial vaporisation
feasibility using its Staccato system, which can deliver both water-soluble and water-insoluble drugs
without the need for added excipients and additives (avoiding the potential for associated side
effects). Alexza has already completed clinical studies showing effective rapid pharmacokinetics
(PK) for AZ-002 (Staccato alprazolam), AZ-007 (Staccato zaleplon) and AZ-003 (Staccato fentanyl).
AZ-002 under development for ARS
While the AZ-007 and AZ-003 programmes are not presently active (due to a prioritisation of firm
resources), Alexza is actively developing AZ-002 for acute repetitive seizures (ARS), or clusters of
seizures occurring over a short time period. Epilepsy affects 2.3m patients in the US (US Centers for
Disease Control and Prevention), and up to 180,000 can suffer from unpredictable breakthrough
seizures despite taking anti-seizure medications (and may have between two and 12 ARS ‘cluster
8
While the initial price in Germany is €70, we expect the average selling price to decrease as Adasuve is
introduced in other EU territories.
Alexza Pharmaceuticals | 27 August 2013
11
attacks’ per year). Alprazolam is a generic benzodiazepine available in oral formulations approved for
anxiety and panic disorders. While a Phase II proof-of-concept (POC) study for AZ-002 in panic
9
disorder did not meet its primary end points, it did demonstrate a solid safety profile, and earlier
studies showed that the device provides rapid and effective drug PK with Tmax of two minutes.
Benzodiazepines are currently the standard of care for ARS, although only IV and rectal gel
formulations (such as Valeant’s Diastat, or diazepam rectal gel [DRG]) are approved for the
condition. DRG and generic equivalents are the only ARS approved products that can be used
outside healthcare settings.
Despite its inconvenient mode of delivery, DRG has a quick time to therapeutic onset of about 15
minutes, although its Tmax of 1.5 hours suggests that a benzodiazepine product with more rapid
PK could be more effective in preventing further seizures (the therapeutic rationale is that
prolonged or recurring seizures persisting for >30 minutes can lead to injury). The proposed role for
AZ-002 would be through its application (in or outside of healthcare settings) between seizure
episodes shortly upon the onset an ARS attack (as patients are usually coherent and able to follow
instructions between episodes) to prevent further seizure recurrences during the cluster attack.
Alexza is planning a double-blinded Phase II POC study for AZ-002 in ARS to start in H213; we
estimate the study will recruit 60-70 patients and the primary efficacy endpoint will be the number of
seizures occurring over a 12-hour period vs placebo. Alexza is also seeking orphan drug status.
A crowded ARS market
Other firms are also developing more convenient rapid delivery (RD) dosage forms of
benzodiazepines for ARS. Acorda Therapeutics is developing a 20mg diazepam nasal spray (DNS),
which completed three PK studies, including a 24-patient ‘pivotal’ study reported in March 2013
showing that its 20mg DNS had comparable plasma bioavailability to 20mg DRG. Acorda plans to
submit a 505(b)(2)-type New Drug Application (NDA) in H213, with potential FDA approval and
commercial launch in 2014. A 505(b)(2) application is a fast-track development/approval process as
existing efficacy and safety data from a listed product (in this case, DRG) can be referenced in the
filing for approval. Upsher-Smith Laboratories is developing an intranasal midazolam for ARS,
USL261, being studied in a 155-patient double-blind Phase III study, with results expected in H114
and potential product launch in H215 or 2016; USL261 has shown a Tmax of 10-15 minutes in PK
10
studies. Research has showed that intranasal midazolam compares favourably with DRG and IV
11
diazepam. Neurelis is developing NRL-1, an intranasal diazepam formulation, to start ‘pivotal’ PK
studies in H214 and will take two years to complete before filing a 505(b)(2) NDA submission. Jazz
Pharmaceuticals had studied an intranasal clonazepam spray (JZP-8) and even obtained orphan
drug eligibility for it, but announced in mid-2011 that it was re-evaluating its programme. Buccal
formulations of midazolam have also been used off-label for ARS (eg Buccolam, ViroPharma).
AZ-002 market opportunity
Prior to the introduction of generics in 2010, Diastat had US sales of ~$100m in 2010 (which fell to
under $40m in 2012). Diastat sells for ~$300 per administration vs ~$160 for generic DRG and
hence we estimate that pricing for the initial inhalable benzodiazepine will lie somewhere in
between. Given the inconvenience associated with DRG’s mode of administration, more convenient
benzodiazepine dosage forms could increase the size of the market, as there should be less
reluctance for product use among adult and adolescent patients. We assume that if the AZ-002
POC study is successful, Alexza could start a Phase III study in H214 (expected cost of $10-15m),
potentially leading to a 2017 launch. As the market may become more crowded with other RD forms
9
To our knowledge, no benzodiazepines have ever met the doxapram-induced panic attack endpoints used in
the AZ-002 panic attack study; AZ-002 may remain viable for established benzodiazepine treatment areas.
10
Holsti M, et al. Arch Pediatr Adolesc Med. 2010 Aug; 164 (8): 747-53.
11
Lahat E, et al. BMJ 2000;321:83.
Alexza Pharmaceuticals | 27 August 2013
12
of benzodiazepines, we assume that AZ-002’s market share will not exceed 20% (we define the US
market as 150,000 ARS susceptible patients experiencing an average of five cluster seizures per
year), although AZ-002 may differentiate itself by potentially providing a more rapid therapeutic
response (ie as its Tmax is believed to be shorter than USL261 and Acorda’s candidate).
Additional candidate expected to be announced in H114
Alexza plans to initiate active development of another Staccato candidate in H114 following an
internal review of pipeline opportunities, which may include AZ-003 (eg for acute pain) or AZ-007
(eg for insomnia) or another candidate for a yet unspecified indication. Alexza has also developed a
Staccato device permitting multiple drug dosing administrations. Alexza had also out-licensed
preclinical-stage Staccato nicotine in 2010 to Royalty Pharma (previously Cypress Bioscience) and
in January 2013 the parties amended the terms of their agreement such that if Royalty did not sell
or license Staccato nicotine by end-2013, all rights would transfer back to Alexza.
Valuation
We value Alexza using a risk-adjusted net present value (rNPV) model, using a 12.5% cost of
capital. Our valuation includes our revenue expectations for Adasuve across the US and Europe;
launches in other territories would provide modest upside. We also include a consideration for
AZ-002, but it only accounts for a minor proportion given that the compound has not shown POC
efficacy in ARS yet and hence we only assign a 25% probability of success.
Exhibit 11: Alexza Pharmaceuticals rNPV assumptions
Product
rNPV ($m)
Status
80.5
4.5
85.0
Approved
Phase II
Adasuve (Agitation)
AZ-002 (Acute repetitive seizures)
Total product rNPV
Probability
of success
100%
25%
Estimated Est peak US Global market Est max US Est peak WW
launch year market share
value ($m) royalty rate
sales ($m)
2013
20%
1,100
18% $240m in 2022
2017
20%
470
25% $86m in 2023
Source: Edison Investment Research
Our $85m rNPV calculation represents upside to Alexza’s EV of $43.2m, and equates to $6.77 per
share including $32m net cash (Q213). Our assessment does not specifically value the Staccato
platform technology, which we believe can be extended into other API and present additional valuecreation opportunities in acute treatment settings. As the firm extends its Staccato development
pipeline in the coming quarters, these opportunities may provide further upside to our valuation.
Sensitivities
Alexza’s valuation is principally tied to the revenue prospects of Adasuve. Early signs of US drug
adoption trends will be tracked via the pace of facilities registering for Adasuve REMS certification.
Factors affecting Adasuve sales and Alexza’s operating performance and returns are shown below.
Regulatory risk. If data from the post-marketing studies required as part of Adasuve’s US and EU
approvals reveal further pulmonary safety concerns, restrictions on its commercialisation could
arise through changes to its approved label, or a more burdensome REMS, or may even halt the
approval of the product. Conversely, if favourable safety trends emerge, the REMS could be
lessened, potentially furthering the reach of the product and expanding sales.
Intellectual property. Alexza has an extensive intellectual property (IP) position, with over 185 US
and international patents. The Staccato delivery technology is protected by composition patents valid
through 2022 covering processes for the delivery of drug aerosols (with the potential for an additional
patent term extension of up to five years). The FDA Orange Book references 12 patents for Adasuve,
including a patent (expiring in 2022) covering compositions for delivery of a condensation aerosol
Alexza Pharmaceuticals | 27 August 2013
13
comprising loxapine and the process for producing such an aerosol using the Staccato technology;
compositions patents for AZ-002 expire in 2022. The terms cited above do not include the provisions
for five years of additional patent term extension, which could also be granted by the FDA. Alexza
also strives to retain internal control over the final manufacture and assembly of its Staccato-based
product candidates, potentially enabling further IP protection by maintaining certain know-how and
trade secrets in house, making replication of Staccato devices by third parties more challenging.
Manufacturing and supplier risk. While Alexza completes Adasuve manufacturing at its Mountain
View, California, facility, it relies on single source suppliers for the product’s components, including
the printed circuit boards, the molded plastic airways and the heat packages (used to generate the
rapid heating necessary for vaporizing drug compounds without degradation, and supplied via an
exclusive supply relationship with Autoliv ASP). Any supply interruption from these parties would
limit the firm’s ability to manufacture Adasuve and impede its commercial or regulatory activities.
Reliance on commercial partners. Adasuve’s commercial success will hinge on the efforts and
capabilities of Alexza’s marketing partners, Teva and Ferrer, in ensuring an optimal and effective
commercialisation effort. Teva’s high upfront payment ($40m) signals a strong level of confidence in
the drug and is an indirect acknowledgement of a commitment to sufficiently market the product (as
would be necessary for it to re-coup its investment). However, Alexza has limited control over
Teva’s timing for a US Adasuve launch, and delays to the current Q114 guidance are possible.
Financing risk. We forecast Alexza to continue to run operating losses through 2015 as its R&D
and operating expenses exceed the royalties and revenues generated from Adasuve commercial
sales until the product’s penetration reaches a level (of c $100m in annual sales) to offset these
costs. Alexza may require additional financing to support its operations until Adasuve sales reach a
sufficient level to sustain its operations without external funding; we expect the firm to raise $10m in
capital in 2015. However, if sales ramp up more slowly than expected or if R&D spending or postmarketing commitments exceed current expectations, the firm may need to raise further capital.
Off-label usage or label extension to other indications. Our Adasuve forecasts only consider its
usage in schizophrenia or BPI-associated agitation. However, antipsychotic drugs are frequently
used in conditions for which they are not approved (eg benzodiazepines and oral drugs are not
approved for agitation but are frequently used; ziprasidone is not approved but is also used for
bipolar disorder agitation); hence, Adasuve could potentially eventually also be used off-label (eg in
addiction, dementia or intoxication-related agitation). Longer term, Adasuve’s label could potentially
be extended to allow the drug to reach the much broader outpatient market (eg ambulances or
even patient-initiated agitation therapy), which would require a relaxing of the current REMS and
likely additional clinical trials. This scenario could present significant upside to our financial
forecasts but cannot be assumed at present.
Financials
Alexza finished Q213 (30 June 2013) with $32m in net cash has guided that its current cash on
hand (and the exercise of the $25m Teva note) will fund its operations through Q314. While Teva is
now responsible for funding the required US post-marketing studies and commercialisation-related
obligations, we expect Alexza’s R&D costs to remain in the $20m/year range as it spends on AZ002 and other pipeline projects; Alexza must also fund the post-marketing Adasuve commitments
for the EU (which we assume will cost $5m between H213 and end-2015). We assume that Alexza
will reach profitability in FY16 and will need to raise c $10m in additional debt in 2015 sustain its
operations until Adasuve revenues are sufficient to sustainably generate positive free cash flows.
Following its purchase of Symphony Allegro in 2009, Alexza is obligated to make contingent cash
payments to the former Allegro shareholders relating to the licensing or royalty commercial revenue
derived from Adasuve and AZ-002; Allegro is entitled to 25% of the initial $100m of covered
Alexza Pharmaceuticals | 27 August 2013
14
revenues received by Alexza (c 10% remains outstanding as of Q213), and to 10% of all amounts
thereafter. Our normalised EPS estimates include the payments of these obligations to Allegro.
Exhibit 12: Financial summary
2011
US GAAP
2012
US GAAP
2013e
US GAAP
2014e
US GAAP
2015e
US GAAP
5,660
0
5,660
(10,580)
(28,262)
(33,182)
(34,368)
0
(4,000)
0
(38,368)
(2,163)
(36,531)
(40,531)
0
(36,531)
(40,531)
4,070
0
4,070
(6,757)
(21,849)
(24,536)
(28,872)
0
6,900
(5,000)
(26,972)
(1,006)
(29,878)
(27,978)
0
(34,878)
(27,978)
46,456
(3,104)
43,351
(11,572)
(21,818)
9,961
6,774
0
(32,400)
(10,127)
(35,752)
(315)
6,459
(36,068)
0
(3,668)
(36,068)
8,452
(1,323)
7,129
(7,772)
(18,400)
(19,043)
(21,744)
0
0
(1,106)
(22,850)
99
(21,645)
(22,752)
0
(22,752)
(22,752)
21,877
(3,911)
17,966
(7,315)
(16,482)
(5,831)
(8,108)
0
0
(2,691)
(10,798)
(293)
(8,401)
(11,092)
0
(11,092)
(11,092)
6.8
(5.38)
(5.38)
(5.97)
0.0
12.5
(2.80)
(2.80)
(2.24)
0.0
16.7
(0.22)
(0.22)
(2.16)
0.0
17.6
(1.29)
(1.29)
(1.29)
0.0
18.0
(0.62)
(0.62)
(0.62)
0.0
BALANCE SHEET
Fixed Assets
Intangible Assets
Tangible Assets
Investments (new ABCP Notes)
Current Assets
Short-term investments
Debtors
Cash
Other
Current Liabilities
Creditors
Short term borrowings
Long Term Liabilities
Long term borrowings
Other long term liabilities
Net Assets
21,053
0
21,053
0
27,552
2,001
0
14,902
10,649
(34,948)
(22,668)
(12,280)
(23,349)
0
(23,349)
(9,692)
16,933
0
16,933
0
23,618
5,051
0
17,715
852
(18,718)
(12,257)
(6,461)
(19,260)
0
(19,260)
2,573
17,386
0
17,386
0
20,647
9,148
0
8,269
3,231
(13,993)
(10,765)
(3,228)
(49,198)
0
(49,198)
(25,158)
15,085
0
15,085
0
24,704
9,148
0
11,159
4,398
(14,002)
(10,774)
(3,228)
(72,013)
(25,000)
(47,013)
(46,225)
13,248
0
13,248
0
25,209
9,148
0
8,050
8,011
(12,043)
(8,815)
(3,228)
(82,013)
(35,000)
(47,013)
(55,599)
CASH FLOW
Operating Cash Flow
Net Interest
Tax
Capex
Acquisitions/disposals
Financing
Dividends
Other
Net Cash Flow
Opening net debt/(cash)
HP finance leases initiated
Other
Closing net debt/(cash)
(32,263)
(2,163)
0
(496)
0
16,145
0
0
(18,777)
(23,252)
0
148
(4,623)
(22,235)
(1,006)
0
(27)
0
35,242
0
0
11,974
(4,623)
0
(292)
(16,305)
(7,055)
(315)
0
(1,090)
0
6,414
0
0
(2,046)
(16,305)
0
(70)
(14,189)
(21,809)
99
0
(400)
0
0
0
0
(22,110)
(14,189)
0
0
7,921
(12,376)
(293)
0
(440)
0
0
0
0
(13,109)
7,921
0
0
21,030
31-December
PROFIT & LOSS
Revenue
Cost of Sales
Gross Profit
General & Administrative
Research & Development
EBITDA
Operating Profit (before except.and Allegro payouts)
Intangible Amortisation
Exceptionals
Other including payouts to Symphony Allegro
Operating Profit
Net Interest
Profit Before Tax (norm)
Profit Before Tax (FRS 3)
Tax
Profit After Tax (norm)
Profit After Tax (FRS 3)
Average Number of Shares Outstanding (m)
EPS - normalised (US$)
EPS - normalised and fully diluted (US$)
EPS - (IFRS) (US$)
Dividend per share (p)
US$000
Source: Edison Investment Research, company accounts. Notes: Contingent payments to Symphony Allegro Holdings are in operating
cash flows. Our 2013 revenue forecasts include the exceptional one-time $40m up-front payment received from Teva. The exceptional
$32.4m expense in 2013 refers to Alexza’s revaluation of the present value of its future potential liabilities to Symphony Allegro
following the signing of the Teva deal. Our debt forecasts assume that Alexza will exercise the $25m debt facility provided by Teva in
2014, and that Alexza will raise an additional $10m in debt in 2015.
Alexza Pharmaceuticals | 27 August 2013
15
Contact details
Revenue by geography
2091 Stierlin Court
Mountain View, CA 94043
US
+1- 650-944-7000
www.alexza.com
N/A
CAGR metrics
Profitability metrics
Balance sheet metrics
Sensitivities evaluation
EPS 2011-15e
N/A ROCE 14e
N/A Gearing YY
N/A Litigation/regulatory

EPS 2013-15e
N/A Avg ROCE 2011-15e
N/A Interest cover YY
N/A Pensions

EBITDA 2011-15e
N/A ROE 14e
N/A CA/CL YY
N/A Currency

EBITDA 2013-15e
N/A Gross margin 14e
N/A Stock overhang

N/A Debtor days YY
N/A Interest rates

N/A Creditor days YY
N/A Oil/commodity prices

Sales 2011-15e
40.2% Operating margin 14e
Sales 2013-15e
N/A Gr mgn / Op mgn 14e
84.3% Stock days YY
Management team
Chief Executive Officer: Thomas King
Chief Financial Officer: Mark Oki
Thomas King has been chief executive officer since June 2003. From September
2002 to April 2003, Mr King served as chief executive officer of Cognetix, a
biopharmaceutical development company. From January 1994 to February 2001,
Mr King held various senior executive positions, at Anesta, a publicly traded
pharmaceutical company, including chief executive officer from January 1997 to
October 2000, and was a member of the board of directors until it was acquired
by Cephalon.
Mark Oki has been chief financial officer since July 2012, principal accounting
officer since May 2010 and principal financial officer since December 2011. Mr
Oki was VP, finance and controller from February 2010 to July 2012, and
controller from April 2006 to February 2010. From June 2001 to April 2006, Mr
Oki was controller of Pharmacyclics. From 1998 to 2001, Mr Oki held several
positions, including assistant controller at Incyte. From 1992 to 1997, Mr Oki held
several positions at Deloitte & Touche.
Chief Scientific Officer: James Cassella, PhD
SVP, Operations and Manufacturing: Michael Simms
James Cassella has been chief scientific officer and EVP of R&D since July
2012, having previously been SVP, R&D from June 2004 to July 2012. From April
1989 to April 2004, Dr Cassella held various management positions at Neurogen,
a publicly traded biotechnology company, including SVP, clinical research and
development from January 2003 to June 2004. Prior to Neurogen, Dr Cassella
was assistant professor of Neuroscience at Oberlin College.
Michael Simms has been SVP, operations and manufacturing since December
2011, and previously SVP, operations and quality from December 2009 to
December 2011, and SVP, operations and manufacturing from February 2008 to
December 2009. From May 2007 to February 2008, Mr Simms was SVP,
manufacturing operations and from June 2004 to May 2007 VP, manufacturing,
at Nektar Therapeutics.
Principal shareholders
%
Lansdowne Partners (Austria)
7.68
Federated Investors
5.55
Credit Suisse
4.82
Carnegie Asset Management
4.46
VHCP Management
3.17
Kennedy Capital Management
2.54
Prudential Financial
2.00
Companies named in this report
Teva (TEVA), Grupo Ferrer
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