An advancing immunotherapies programme

Medigene 6 April 2016 Update

Medigene

An advancing immunotherapies programme

FY15 results

Pharma & biotech

6 April 2016

Price

€7.16

Market cap

€141m

Net cash (€m) at 31 December 2015

46.8

Shares in issue

19.7m

Free float

55.6%

Code

MDG1

Primary exchange

XETRA

Secondary exchange

Frankfurt

Share price performance

%

1m

3m

12m

Abs

(9.1)

(19.4)

(40.9)

Rel (local)

(6.6)

(13.1)

(26.1)

52-week high/low

€14.4

€5.2

Business description

Medigene is a German biotech company with a core technology platform in cancer immunotherapy. Dendritic cell (DC) vaccines are in Phase I/II clinical studies, while a T-cell receptor (TCR) candidate should enter the clinic in 2016.

Next events

Data from IIT DC vaccine Phase I/II – prostate cancer

April 2016

Q116 results

12 May 2016

Analysts

Dr Linda Pomeroy

+44 (0)20 3077 5738

Christian Glennie

+44 (0)20 3077 5727

Medigene is a research client of Edison Investment Research Limited

Medigene is well funded, with a net cash position of €46.8m (FY15). There is a clear strategy in place to advance both its DC vaccine programmes and TCR programme with the funds. We expect newsflow in the near term from its most advanced technology (DC vaccines) in Phase I/II studies for AML and prostate cancer, and the start of the first clinical study with its promising TCR technology. Our rNPV-based valuation remains at €216m.

Year end

Revenue (€m)

PBT* (€m)

EPS* (€)

DPS (€)

P/E (x)

Yield (%)

12/14

13.8

(5.3)

(0.42)

0.0

N/A

N/A

12/15

6.8

(12.8)

(0.74)

0.0

N/A

N/A

12/16e

7.1

(13.1)

(0.66)

0.0

N/A

N/A

12/17e

7.3

(13.5)

(0.67)

0.0

N/A

N/A

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

Advancing DC vaccine programmes

Medigene’s DC vaccine programmes include investigator-initiated trials (IITs) and a company-initiated trial (CIT), both of which are making progress. The CIT is a Phase I/II study in 20 AML patients, started in March 2015. The first six patients have been treated and, following review by the Data and Safety Monitoring Board, Medigene has commenced Phase II with the recent announcement that the first Phase II patient has started treatment. Once patient recruitment is complete, the Phase II trial will take about two years to complete (one year of treatment and one year of follow-up), with expected completion in 2019 and data readout in 2020. The start of Phase II has triggered a €3.2m milestone payment to former Trianta Immunotherapies shareholders. This will be settled by the issue of new shares, already forecast in our model. We also expect data from an IIT in Phase II for use of its DC vaccine in prostate cancer in H116. As outlined previously, the DC vaccine has technical advantages and holds promise as both a mono and combination therapy.

Potential TCR technology newsflow

Also due to start (at end 2016) is the IIT of TCR therapy in cancer, currently being prepared for its clinical trial application and pending grant funding to move forward. Two CITs in TCR therapy are being prepared, due to start in 2017 and 2018.

Valuation: Maintained at €216m

Our rNPV-based valuation remains at €216m or €10.96 per share (vs €10.98 per share due to an increase in the number of shares). We have rolled the model forward by three months and now use an estimated Q116 cash of €48.2m, based on a projected cash burn of €1m per month, offset by receipt of €4.5m from the Catherex sale. We have also revised our DC vaccine assumptions and adjusted the timeframe of a potential deal to 2018 (vs 2017) and launch to 2023 (vs 2022) now that we have more clarity on study timing with commencement of the Phase II part of the trial. We expect Veregen revenues to remain stable following the one-off stocking problem identified in Q315. The rest of our valuation assumptions are unchanged. Medigene is well funded and focused on executing its clinical development strategy over the next few years.

Exhibit 1: Financial summary

€000s

2014

2015

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

13,784

6,808

7,056

7,330

of which: Veregen revenues (royalties/milestones/supply)

5,195

3,101

3,462

3,737

R&D partnering (SynCore/Falk Pharma/grants)

6,096

1,214

1,100

1,100

Non-cash income (Eligard)

2,493

2,493

2,493

2,493

Cost of sales

(2,086)

(1,103)

(1,305)

(1,415)

Gross profit

11,698

5,705

5,751

5,915

Selling, general & administrative spending

(7,081)

(7,615)

(7,833)

(8,057)

R&D expenditure

(7,498)

(8,529)

(9,808)

(10,789)

Other operating spending

0

.

0

0

Operating profit

(2,881)

(10,439)

(11,890)

(12,931)

Goodwill & intangible amortisation

(527)

(526)

(525)

(524)

Exceptionals

0

0

0

0

Share-based payment

(66)

(111)

(50)

(50)

EBITDA

 

 

(2,005)

(9,384)

(11,090)

(12,132)

Operating profit (before GW and except.)

 

 

(2,288)

(9,802)

(11,315)

(12,357)

Net interest

(1,774)

(2,914)

(2,529)

(2,361)

Other (forex gains/losses; associate profit/loss)

(1,257)

(46)

719*

1,204*

Profit before tax (norm)

 

 

(5,319)

(12,762)

(13,126)

(13,514)

Profit before tax (FRS 3)

 

 

(5,912)

(13,399)

(13,701)

(14,088)

Tax

155

400

0

0

Profit/(loss) from discontinued operations

0

0

0

0

Profit after tax (norm)

(5,164)

(12,362)

(13,126)

(13,514)

Profit after tax (FRS 3)

(5,757)

(12,999)

(13,701)

(14,088)

Average number of shares outstanding (m)

12.2

16.8

19.9

20.2

EPS - normalised (€)

 

 

(0.42)

(0.74)

(0.66)

(0.67)

EPS - FRS 3 (€)

 

 

(0.47)

(0.77)

(0.69)

(0.70)

Dividend per share (€)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed assets

 

 

46,617

53,631

45,730

46,309

Intangible assets & goodwill

38,377

37,792

35,188

34,664

Tangible assets

951

2,502

3,605

4,708

Other non-current assets

7,289

13,337

6,937

6,937

Current assets

 

 

24,666

59,900

54,364

37,836

Stocks

4,406

6,654

6,654

6,654

Debtors

1,733

763

763

763

Cash

14,976

46,759

45,679

29,151

Other

3,551

5,724

1,268

1,268

Current liabilities

 

 

(7,755)

(9,664)

(8,376)

(8,376)

Trade accounts payable

(1,785)

(1,354)

(1,354)

(1,354)

Short-term borrowings

0

0

0

0

Deferred income

(57)

(226)

(226)

(226)

Other

(5,913)

(8,084)

(6,796)

(6,796)

Long-term liabilities

 

 

(14,457)

(13,879)

(13,879)

(13,879)

Pension provisions

(413)

(359)

(359)

(359)

Long-term borrowings

0

0

0

0

Other liabilities (Deferred taxes; Trianta milestones)

(3,221)

(2,915)

(2,915)

(2,915)

Deferred revenues (Eligard non-cash income)

(10,823)

(10,605)

(10,605)

(10,605)

Net assets

 

 

49,071

89,988

77,839

61,890

CASH FLOW

Operating cash flow

 

 

(8,765)

(10,585)

(9,495)

(14,339)

Net interest

9

(20)

(1,029)

(861)

Tax

0

0

0

0

Capex

(873)

(1,328)

(1,328)

(1,328)

Expenditure on intangibles

0

0

0

0

Acquisitions/disposals

0

0

9,953

0

Equity financing

14,502

43,695

819

0

Other

(62)

21

0

0

Net cash flow

4,811

31,783

(1,080)

(16,528)

Opening net debt/(cash)

 

 

(10,166)

(14,976)

(46,759)

(45,679)

HP finance leases initiated

0

0

0

0

Other (foreign exchanges differences)

(1)

0

(0)

0

Closing net debt/(cash)

 

 

(14,976)

(46,759)

(45,679)

(29,151)

Source: Company accounts and Edison Investment Research. Note: *To be consistent with company reporting, we have included the Imlygic royalties in the share of profit or loss from associates, whereas we included such payments in revenues previously.

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Germany

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United Kingdom

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US

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New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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