£193.9m market cap

402.5p last close

Ergomed is a global full-service CRO business with a core focus on the US and EU. It provides Phase I–III clinical services in addition to post-marketing pharmacovigilance (Phase IV) services through its PrimeVigilance division. Ergomed is predominantly focused on oncology, orphan drugs or rare diseases and pharmacovigilance.

Investment summary

We are initiating coverage on specialist pharmaceutical services provider Ergomed. We believe it should prove relatively resilient during the COVID-19 crisis and has the fundamentals in place to execute its growth strategy. Ergomed announced impressive audited numbers for FY19, with revenue up 26% to £68.3m and EBITDA up 5.5x to £12.5m. The FY19 announcement is effectively Ergomed’s fourth profit upgrade for FY19 and a small beat on recently reset FY19 expectations. Ergomed trades at a discounted EV/EBITDA of 10.1x vs the contract research outsourcing (CRO) sector average of 11.5x (FY20). We value Ergomed at £186m or 399p/share. Ergomed’s strong organic growth is benefiting from a clear strategic focus on high growth pharma sectors, margin control and order book growth (up 15% to £125m in FY19, giving 90% visibility to 2020).

Y/E Dec
Revenue (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 54.1 2.3 1.0 1.9 211.8 200.4
2019A 68.3 12.5 8.6 19.8 20.3 16.1
2020E 84.8 14.9 13.7 24.9 16.2 14.3
2021E 100.3 17.6 16.5 28.9 13.9 11.9
Share price graph
Balance sheet
Forecast net cash (£m) 16.5
Forecast gearing ratio (%) N/A
Price performance
Actual 7.1 2.4 141.0
Relative* 32.7 43.7 222.3
52-week high/low 464.0p/167.5p
*% relative to local index
Key management
Miroslav Reijanovic CEO
Richard Barfield FD