Pixium Vision : L’analyse d’Edison sur le rapprochement entre Pixium Vision et Second Sight

Pixium Vision

Pixium Vision to combine with Second Sight

On 6 January Pixium Vision announced it and Second Sight (EYES, Nasdaq) had entered a memorandum of understanding (MoU) to combine their businesses. Second Sight is developing the Orion Visual Cortical

Prosthesis System, which is in a US feasibility study and is designed to

provide useful artificial vision by sending electric impulses directly to the visual cortex. The stock-based transaction, which will also comprise a

c $25m capital raise, will enable both companies to pool their resources in

complementary sight-restoration neuromodulation technologies and build a one-company solution for many causes of blindness. The combined company's Nasdaq listing may also provide broader access to future financing sources. The transaction is subject to shareholder and French

regulatory approval, the attainment of a $25m capital raise (not yet

committed) and is guided to close by early Q221. We are maintaining our valuation and financial forecasts for Pixium Vision (standalone and excluding any contribution from Second Sight) at this time but will revise them on transaction completion.

		Revenue	PBT*	EPS*	DPS	P/E	Yield
	Year end	(€m)	(€m)	(€)	(€)	(x)	(%)
	12/18	1.6	(7.7)	(0.42)	0.0	N/A	N/A
	12/19	1.8	(9.8)	(0.44)	0.0	N/A	N/A
	12/20e	1.7	(8.6)	(0.28)	0.0	N/A	N/A
	12/21e	1.6	(11.0)	(0.25)	0.0	N/A	N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Mechanics of the MoU

Pixium Vision will become a holding company that owns 60% of the combined company's assets (which includes Pixium's retinal neuromodulation assets and 40% of a subsidiary containing the Orion-related assets), before the consideration of $25m financing that will be carried out at the level of the newly combined company. Second Sight shareholders will receive 60% of the Orion-related subsidiary before the combination with Pixium and will own 40% of the combined company on a pre-financing basis. Importantly, the combined company will have an exclusive right of first refusal to commercialise the Orion system.

Prima remains lead asset

In late 2020 Pixium started the PRIMAvera European pivotal study of the Prima Bionic Vision System in patients with dry age-related macular degeneration with geographic atrophy, a largely unmet market indication. Management expects implantations to be completed by YE21, with potential top-line12-month data in H222, supporting our estimate of potential CE mark and European launch in H223.

Valuation: Awaiting transaction close

We maintain our pipeline rNPV (enterprise value excluding net cash) for Pixium Vision (standalone) of €134.0m but will revisit our assumptions once the necessary steps for the proposed MoU are finished and/or the transaction reaches completion.

Business combination

Healthcare equipment & services

11 January 2021

Price		€1.07
Market cap		€47m
		$1.23/€
Net debt (€m) at 30 June 2020 (excluding	0.9
lease liabilities)
Shares in issue		44.0m
Free float		60%
Code		ALPIX
Primary exchange	Euronext Growth Paris
Secondary exchange		N/A

Share price performance

%	1m	3m	12m
Abs	30.2	87	45.2
Rel (local)	26.8	61.7	52.4
52-week high/low		€1.25	€0.50

Business description

Pixium Vision develops bionic vision systems for patients with severe vision loss. Its lead product, Prima, is a wireless sub-retinal implant system designed for dry-AMD. The company recently started a European pivotal study.

Next events

36-month data from EU feasibility study	Q121
Closing of transaction with Second Sight	H121

Analysts

Pooya Hemami, CFA	[phone]
Maxim Jacobs, CFA	[phone]

[e-mail]

Edison profile page

Pixium Vision is a research client of Edison Investment Research Limited

Combining two different sight-restoration technologies

The proposed transaction between Pixium Vision and Second Sight provides an opportunity to pool the complementary sight-restoration technology assets of both firms, strengthen Pixium's access to networks of US ophthalmologists and reference centres and its market access expertise and, more importantly, provide a platform via Second Sight's current US market listing for gaining access to US-based investors for future fundraising needs. Operationally, there will be effectively no change in Prima's advancement as the core Prima-related operations will remain at their current location in France and no major changes in R&D and operations headcount are anticipated.

Exhibit 1: Business combination rationales presented by both companies

Source: Pixium Vision and Second Sight presentation

Pixium Vision | 11 January 2021

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Exhibit 1: Additional business combination rationales presented by both companies

Source: : Pixium Vision and Second Sight presentation

Second Sight's earlier efforts focused on the development of Argus II, the world's first FDA- and CE Mark-approved retinal implant device, intended for patients with late-stage retinitis pigmentosa. The Argus II is an epiretinal implant and, as mentioned in our prior reports, Pixium's Prima subretinal implant has several advantages over it, such as a higher resolution on the implant chip and a less invasive surgical insertion procedure. Second Sight launched the Argus II system in Europe in 2011 and in the US in 2014 but, due to a relatively limited market size for Argus II (in 2019 there were 28 units implanted versus 69 in 2018), it decided in 2019 to suspend production of Argus and direct its development focus to the Orion Visual Cortical Prosthesis System (Orion).

Overview of the Orion system

Orion is an implanted cortical stimulation (prosthetic cortical neuromodulation) device intended to provide useful artificial vision to individuals who are blind due to a wide range of causes. Orion is designed to convert images captured by a miniature video camera mounted on glasses into a series of small electrical pulses that bypass the diseased or injured eye anatomy. The pulses are communicated wirelessly to an array of electrodes implanted on the surface of the brain's visual cortex (where it is intended to provide the perception of patterns of light).

The Orion system's focus is different than Prima, in that it stimulates an area downstream on the retino-cortical axis than Prima, and is more suited towards addressing different causes of vision loss. Prima is designed to provide electrical signals at the retinal level to compensate for retinal injury (say, due to atrophic dry age-related macular degeneration) but it relies on a functioning optic nerve to relay that information to the visual cortex (so Prima cannot provide a benefit in patients with end-stage glaucoma, for instance). We expect Prima to provide a higher level of visual resolution and functionality than Orion given among other factors, the more precise level of resolution afforded by its 378-electrode chip (implanted in the retina), compared to the 60-electrode array that comprises the Orion system. That said, Orion is still designed to allow otherwise blind

Pixium Vision | 11 January 2021

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subjects to potentially identify and differentiate light from dark objects and improve mobility and independence. In practice, we view Orion as best suited for instances where there is an optic nerve or optic tract disease or injury and the preferred approach for providing prosthetic vision would be to bypass the nerve/tract pathway and directly stimulate the visual cortex. Hence, end-stage glaucoma, optic nerve disease, neuropathies or related tumours could be potential indications for Orion. From a corporate strategy point of view, combining both the Second Sight and Prima businesses provides the opportunity for the pooling of resources for separate and complementary neuromodulation approaches (Prima based on stimulating the retina and Orion based on the visual cortex) for sight restoration. We expect the two products to continue to exist separately (especially the core implantation components of the systems) and target different sight-restoration markets (Prima for Dry-AMD, Orion largely for conditions affecting the optic nerve or tract) although it is possible that there may be some eventual synergies for the non-implanted external hardware or augmented reality analytics or components of either system (ie there could be future revisions to the augmented reality glasses or pocket computer/image processing analytics), but this would not affect the time-to-market for Prima BVS.

A six-subject Early Feasibility Study of the Orion device is underway at the Ronald Reagan UCLA Medical Center in Los Angeles and Baylor College of Medicine in Houston. Regularly scheduled visits at both sites were placed on hold in mid-March due to COVID-19; however, visits at UCLA resumed in Q320. Second Sight reports that 12-month results for the six subjects indicate a good safety profile with encouraging efficacy data and benefits in helping subjects perform their daily living tasks. The data have not yet been peer reviewed but Second Sight indicated previously in prior comments it may support advancement of Orion into a larger pivotal clinical trial. At this point we believe it is premature to predict when Orion could be commercialised because it is also possible that further revisions or trials will be undertaken before a pivotal trial is started.

Exhibit 3: Orion interim results of early feasibility study

Source: Pixium Vision and Second Sight presentation

Pixium Vision | 11 January 2021

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