Transition to prominent immunotherapy player

Medigene 3 August 2017 Update
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Medigene

Transition to prominent immunotherapy player

H1 results

Pharma & biotech

3 August 2017

Price

€10.69

Market cap

€236m

Net cash (€m) at 30 June 2017

59.9

Shares in issue

22.1m

Free float

70.7%

Code

MDG1

Primary exchange

XETRA

Secondary exchange

Frankfurt

Share price performance

%

1m

3m

12m

Abs

(5.6)

(4.6)

57.2

Rel (local)

(3.3)

(2.0)

30.9

52-week high/low

€14.8

€6.7

Business description

Medigene is a German biotech company with complementary technology platforms in cancer immunotherapy. Dendritic cell vaccines are in Phase I/II clinical studies, while a T-cell receptor candidate should enter the clinic in 2017.

Next events

TCR (IIT) clinical trial initiation

H217

First TCR (CIT) clinical trial initiation

H217

Q3 results

9 November 2017

Analyst

Dr Linda Pomeroy

+44 (0)20 3077 5738

Medigene is a research client of Edison Investment Research Limited

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
end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

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

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 2017 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 2017 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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