Expansion of platform technology

Medigene 26 July 2016 Update

Medigene

Expansion of platform technology

US patent grant

Pharma & biotech

26 July 2016

Price

€7.22

Market cap

€142m

Net cash (£m) at 31 March 2016

46.3

Shares in issue

19.7m

Free float

62.6%

Code

MDG1

Primary exchange

XETRA

Secondary exchange

Frankfurt

Share price performance

%

1m

3m

12m

Abs

15.5

(14.5)

(32.7)

Rel (local)

8.3

(13.7)

(25.1)

52-week high/low

€10.3

€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 2017.

Next events

Interim results (six-month report)

5 August 2016

TCR (IIT) clinical trial initiation

H117

First TCR (CIT) clinical trial initiation

H217

Analysts

Dr Linda Pomeroy

+44 (0)20 3077 5738

Lala Gregorek

+44 (0)20 3681 2527

Medigene is a research client of Edison Investment Research Limited

Medigene has announced that it has expanded its TCR platform technology with the grant of a US patent focused on a method for identifying T-cell antigens. This demonstrates Medigene’s continued advancement of its TCR technology, including providing a new source for potential TCR candidates and establishing a more efficient method for identifying tumour-specific antigens. We maintain our rNPV-based valuation at €214m, or €10.8 per share, with upside expected as it executes its clinical strategy.

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.

Expansion of TCR platform technology – US patent

Medigene has expanded its TCR platform technology with the grant of a US patent, which claims a method for the identification of antigens recognised by CD4+ T-cells, including tumour-infiltrating CD4+ T-cells. The patent has a significant period of time to expiry (2030) and is important to Medigene as it offers an effective additional source for potential TCR candidates. It also enables the identification of patient-specific neoantigens seen by CD4+ cells. Neoantigens are potentially good targets for cancer immunotherapy as they are specifically expressed in the tumour, which potentially enables therapies to be specifically targeted.

Building on a broad patent base

Medigene has four patent families relating to its TCR platform, which comprise 47 granted patents and 14 pending applications. These patents are granted in a number of jurisdictions including Europe, the US, Australia and Canada.

Advancing immunotherapies

Medigene is making solid progress with the development of its immunotherapy franchise. Its DC vaccine programmes include a company-initiated trial (a Phase I/II study in 20 AML patients) and investigator-initiated trials (IIT) in AML and prostate cancer. In its TCR division, we expect the start of a planned IIT by mid-2017 following the announcement of a co-operation agreement, with grant funding, to conduct a Phase I. Two company-initiated trials are due to start in 2017 and 2018.

Valuation: Maintained at €214m, or €10.8/share

We maintain our rNPV-based valuation at €214m, or €10.8/share. Medigene’s announcement continues to build on recent positive developments such as the co-operation agreement, with grant funding to conduct an IIT Phase I trial. We expect upside to our valuation as Medigene executes 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, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Medigene and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

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

Share this with friends and colleagues