Medigene |
Transition to prominent immunotherapy player |
H1 results |
Pharma & biotech |
3 August 2017 |
Share price performance
Business description
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Analyst
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Medigene’s H1 results are in line with our expectations and represent the completion of its transformation into a prominent T-cell immunotherapy player. Highlights from H1 include submission of a clinical trial authorisation (CTA) to begin its first clinical T-cell trial and a fund-raising of €20.7m (gross). We maintain our valuation at €315m, but expect upside as it executes on its strategy over the next 12-18 months.
Year |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
6.8 |
(12.8) |
(0.74) |
0.0 |
N/A |
N/A |
12/16 |
9.7 |
(11.3) |
(0.56) |
0.0 |
N/A |
N/A |
12/17e |
9.0 |
(18.6) |
(0.89) |
0.0 |
N/A |
N/A |
12/18e |
9.3 |
(20.2) |
(0.91) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Strong progress in H117
H117 denotes the completion of Medigene’s transition into a T-cell immunotherapy-focused company. It submitted a CTA application in July to begin the first clinical trial with its proprietary T-cell receptor (TCR) modified T-cells. If approved, the company intends to start a combined Phase I/II safety and feasibility clinical trial at the end of 2017. This submission completes the transformative Trianta Immunotherapies acquisition, triggering the final milestone payment of €2m to be made within the next five months. Medigene also achieved a fund-raising of €20.7m (gross), which leaves the company well-funded to develop its clinical programmes. For an overview of the company-initiated trial (CIT) design and Medigene’s TCR technology, please see our recent outlook note.
Significant steps expected in H217 and beyond
In H217 we expect Medigene to initiate its own TCR clinical study as well as an investigator-initiated TCR study. Alongside progression of its TCR programme into the clinic, we also expect the company to generate further TCR leads, particularly through its TCR development deal with bluebird bio, a prominent T-cell immunology company. We believe it is worth noting that Medigene operates in an area of significant interest, particularly around CAR-T candidates and technologies and, importantly, its TCRs could offer efficacy/safety advantages.
Valuation: Maintained at €315m with upside potential
We maintain our rNPV-based valuation at €315m or €14.23/share. Medigene has now completed its transformation into an immunotherapy company, demonstrated by the final milestone being triggered by the CTA submission. Medigene is well funded (H117 net cash, equivalents and time deposits of €60m) and we expect a number of important milestones in 2017 and 2018, which could offer upside to the stock. Specifically, we expect completed enrolment in Phase I/II studies for its DC vaccines in AML, the start of its first company-initiated TCR clinical study and potential newsflow relating to the progression of TCR leads resulting from its bluebird bio deal.
Exhibit 1: Financial summary
€'000s |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
13,784 |
6,808 |
9,749 |
8,959 |
9,263 |
of which: Veregen revenues (royalties/milestones/supply) |
5,195 |
3,101 |
3,048 |
3,128 |
3,433 |
||
R&D partnering (SynCore/Falk Pharma/grants) |
6,096 |
1,214 |
3,155 |
0 |
0 |
||
Non-cash income (Eligard) |
2,493 |
2,493 |
2,493 |
2,493 |
2,493 |
||
Bluebird bio partnership |
1,053 |
3,338 |
3,338 |
||||
Cost of sales |
(2,086) |
(1,103) |
(1,402) |
(1,231) |
(1,353) |
||
Gross profit |
11,698 |
5,705 |
8,347 |
7,728 |
7,910 |
||
Selling, general & administrative spending |
(7,081) |
(7,615) |
(7,942) |
(8,286) |
(8,524) |
||
R&D expenditure |
(7,498) |
(8,529) |
(11,538) |
(17,884) |
(19,672) |
||
Other operating spending |
0 |
. |
0 |
0 |
0 |
||
Operating profit |
(2,881) |
(10,439) |
(6,891) |
(18,443) |
(20,286) |
||
Goodwill & intangible amortisation |
(527) |
(526) |
(525) |
(524) |
(523) |
||
Exceptionals |
0 |
0 |
4,242 |
0 |
0 |
||
Share-based payment |
(66) |
(111) |
(50) |
(50) |
(50) |
||
EBITDA |
|
|
(2,005) |
(9,384) |
(10,238) |
(17,644) |
(19,488) |
Operating profit (before GW and except.) |
|
|
(2,288) |
(9,802) |
(10,558) |
(17,869) |
(19,713) |
Net interest |
(1,774) |
(2,914) |
(1,009) |
(1,495) |
(1,928) |
||
Other (forex gains/losses; associate profit/loss) |
(1,257) |
(46) |
263 |
720 |
1,489 |
||
Profit before tax (norm) |
|
|
(5,319) |
(12,762) |
(11,304) |
(18,644) |
(20,152) |
Profit before tax (FRS 3) |
|
|
(5,912) |
(13,399) |
(7,637) |
(19,218) |
(20,725) |
Tax |
155 |
400 |
228 |
0 |
0 |
||
Profit/(loss) from discontinued operations |
0 |
0 |
0 |
0 |
0 |
||
Profit after tax (norm) |
(5,164) |
(12,362) |
(11,076) |
(18,644) |
(20,152) |
||
Profit after tax (FRS 3) |
(5,757) |
(12,999) |
(7,409) |
(19,218) |
(20,725) |
||
Average number of shares outstanding (m) |
12.2 |
16.8 |
20.0 |
21.0 |
22.1 |
||
EPS - normalised (€) |
|
|
(0.42) |
(0.74) |
(0.56) |
(0.89) |
(0.91) |
EPS - FRS 3 (€) |
|
|
(0.47) |
(0.77) |
(0.37) |
(0.91) |
(0.94) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed assets |
|
|
46,617 |
51,552 |
47,742 |
50,012 |
52,282 |
Intangible assets & goodwill |
38,377 |
35,713 |
35,767 |
35,243 |
34,720 |
||
Tangible assets |
951 |
2,502 |
3,323 |
6,117 |
8,910 |
||
Other non-current assets |
7,289 |
13,337 |
8,652 |
8,652 |
8,652 |
||
Current assets |
|
|
24,666 |
59,900 |
63,973 |
61,190 |
36,767 |
Stocks |
4,406 |
6,654 |
7,866 |
7,866 |
7,866 |
||
Debtors |
1,733 |
763 |
1,175 |
1,175 |
1,175 |
||
Cash |
14,976 |
46,759 |
52,630 |
49,847 |
25,424 |
||
Other |
3,551 |
5,724 |
2,302 |
2,302 |
2,302 |
||
Current liabilities |
|
|
(7,755) |
(9,664) |
(11,966) |
(11,966) |
(11,966) |
Trade accounts payable |
(1,785) |
(1,354) |
(973) |
(973) |
(973) |
||
Short-term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Deferred income |
(57) |
(226) |
(3,575) |
(3,575) |
(3,575) |
||
Other |
(5,913) |
(8,084) |
(7,418) |
(7,418) |
(7,418) |
||
Long-term liabilities |
|
|
(14,457) |
(13,879) |
(21,157) |
(17,820) |
(14,482) |
Pension provisions |
(413) |
(359) |
(408) |
(408) |
(408) |
||
Long-term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other liabilities (Deferred taxes; Trianta milestones) |
(3,221) |
(2,915) |
(2,395) |
(2,395) |
(2,395) |
||
Deferred revenues (Eligard non-cash income & bluebird bio) |
(10,823) |
(10,605) |
(18,354) |
(15,017) |
(11,679) |
||
Net assets |
|
|
49,071 |
87,909 |
78,592 |
81,416 |
62,601 |
CASH FLOW |
|||||||
Operating cash flow |
|
|
(8,765) |
(10,585) |
(3,611) |
(19,469) |
(20,977) |
Net interest |
9 |
(20) |
(45) |
5 |
(428) |
||
Tax |
0 |
0 |
(102) |
0 |
0 |
||
Capex |
(873) |
(1,328) |
(1,677) |
(3,019) |
(3,019) |
||
Expenditure on intangibles |
0 |
0 |
0 |
0 |
0 |
||
Acquisitions/disposals |
0 |
0 |
10,537 |
0 |
0 |
||
Equity financing |
14,502 |
43,695 |
(77) |
19,700 |
0 |
||
Other |
(62) |
21 |
846 |
0 |
0 |
||
Net cash flow |
4,811 |
31,783 |
5,871 |
(2,783) |
(24,424) |
||
Opening net debt/(cash) |
|
|
(10,166) |
(14,976) |
(46,759) |
(52,630) |
(49,847) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other (foreign exchanges differences) |
(1) |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(14,976) |
(46,759) |
(52,630) |
(49,847) |
(25,424) |
Source: Medigene accounts, Edison Investment Research
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