In H118, Medigene announced several key developments including the start of its MDG1011 Phase I/II TCR clinical trial, a gross capital raise of €32.3m (which expands cash reach past 2019) and the expansion of its bluebird partnership to cover a total of six targets (worth potentially US$1.5bn in milestones plus royalties). The MDG1011 Phase I/II clinical trial is enrolling patients and we forecast that the Phase I part of the TCR trial and the now fully enrolled Phase I/II DC vaccine trial will read out in 2019. We have updated our forecasts and now value Medigene at €453m (€18.47/share).
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Medigene |
Financial strength through trial readouts |
Trading update |
Pharma & biotech |
7 August 2018 |
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Medigene is a research client of Edison Investment Research Limited |
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In H118, Medigene announced several key developments including the start of its MDG1011 Phase I/II TCR clinical trial, a gross capital raise of €32.3m (which expands cash reach past 2019) and the expansion of its bluebird partnership to cover a total of six targets (worth potentially US$1.5bn in milestones plus royalties). The MDG1011 Phase I/II clinical trial is enrolling patients and we forecast that the Phase I part of the TCR trial and the now fully enrolled Phase I/II DC vaccine trial will read out in 2019. We have updated our forecasts and now value Medigene at €453m (€18.47/share).
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
9.7 |
(13.4) |
(0.66) |
0.0 |
N/A |
N/A |
12/17 |
11.4 |
(12.4) |
(0.60) |
0.0 |
N/A |
N/A |
12/18e |
10.4 |
(17.8) |
(0.76) |
0.0 |
N/A |
N/A |
12/19e |
11.0 |
(17.2) |
(0.70) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
TCR trial: Aiming to increase enrolment speed
Medigene has begun enrolment for its first clinical trial (Phase I/II) with its T-cell receptor (TCR) modified T-cell (MDG1011) product candidate in patients with r/r multiple myeloma (MM), acute myeloid leukaemia (AML) or myelodysplastic syndrome (MDS). Medigene has noted that it is in discussion with the German regulatory authority with the aim of speeding up enrolment by changing the inclusion criteria from one patient per disease in each dose cohort to require at least one MM patient and at least one patient of either AML or MDS.
bluebird expansion aids immunotherapy growth
Medigene’s expansion of the bluebird’s partnership (see our update note, bluebird bio back for more) to include an additional two TCRs takes the total to six ongoing programmes. The expansion includes a one-off payment of €8m to Medigene and up to €250m in potential milestone payments per candidate, which resulted in core immunotherapy revenues growing to €3.4m from €2.3m in H117.
H118 financials: €32.3m gross raise boosts capital
To reflect new guidance, we have adjusted our revenue forecasts to account correctly for the deferred revenue from the recent expansion of the bluebird collaboration. We have reduced our FY18 R&D forecasts (€21.6m vs €25.3 previously), as H118 clinical trial costs were lower than previously forecast due to slower patient enrolment, and forecast an FY18 EBITDA loss of €18.2m vs a loss of €21.2m previously. The net €30.1m capital raise has strengthened Medigene’s cash to €80.8m at end June 2018 (including time deposits).
Valuation: €453m (€18.47/share)
We value Medigene at €453m (€18.47/share) vs €416m (€18.65/share) previously. This is based on an rNPV of its TCR, DC and legacy assets in addition to deal metrics for the bluebird bio partnership and legacy asset, Veregen. We have rolled forward our model and include the recent €30.1m net capital raise.
Exhibit 1: Financial summary
€'000s |
2016 |
2017 |
2018e |
2019e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
9,749 |
11,375 |
10,409 |
11,018 |
of which: Veregen revenues (royalties/milestones/supply) |
3,048 |
2,790 |
1,433 |
1,582 |
||
R&D partnering (SynCore/Falk Pharma/grants) |
3,155 |
0 |
0 |
0 |
||
Non-cash income (Eligard) |
2,493 |
3,699 |
3,699 |
3,699 |
||
Bluebird bio partnership |
1,053 |
4,886 |
5,278 |
5,738 |
||
Cost of sales |
(1,402) |
(1,621) |
(553) |
(613) |
||
Gross profit |
8,347 |
9,754 |
9,856 |
10,405 |
||
Selling, general & administrative spending |
(10,025) |
(8,266) |
(7,186) |
(7,395) |
||
R&D expenditure |
(11,538) |
(14,877) |
(21,572) |
(21,787) |
||
Other operating spending |
0 |
0 |
0 |
0 |
||
Operating profit |
(8,974) |
(13,389) |
(18,901) |
(18,777) |
||
Goodwill & intangible amortisation |
(525) |
(524) |
(523) |
(522) |
||
Exceptionals |
4,242 |
0 |
0 |
0 |
||
Share-based payment |
0 |
0 |
0 |
0 |
||
EBITDA |
|
|
(12,371) |
(12,122) |
(18,153) |
(18,030) |
Operating Profit (before amort. and except.) |
|
|
(12,691) |
(12,865) |
(18,378) |
(18,255) |
Net interest |
(1,009) |
(1,434) |
(691) |
(478) |
||
Other (forex gains/losses; associate profit/loss) |
263 |
1,884 |
1,278 |
1,546 |
||
Profit Before Tax (norm) |
|
|
(13,437) |
(12,415) |
(17,792) |
(17,187) |
Profit before tax (reported) |
|
|
(9,720) |
(12,939) |
(18,315) |
(17,709) |
Tax |
228 |
(634) |
(101) |
(101) |
||
Profit/(loss) from discontinued operations |
0 |
0 |
0 |
0 |
||
Profit after tax (norm) |
(13,209) |
(13,049) |
(17,893) |
(17,288) |
||
Profit after tax (reported) |
(9,492) |
(13,573) |
(18,416) |
(17,810) |
||
Average number of shares outstanding (m) |
20.0 |
21.6 |
23.4 |
24.6 |
||
EPS - normalised (c) |
|
|
(66.20) |
(60.42) |
(76.38) |
(70.41) |
EPS - Reported (€) |
|
|
(0.48) |
(0.63) |
(0.79) |
(0.73) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
||||||
Fixed assets |
|
|
47,742 |
48,595 |
47,460 |
47,357 |
Intangible assets & goodwill |
35,767 |
36,292 |
35,769 |
35,247 |
||
Tangible assets |
3,323 |
4,329 |
4,717 |
5,136 |
||
Other non-current assets |
8,652 |
7,974 |
6,974 |
6,974 |
||
Current assets |
|
|
63,973 |
63,342 |
77,229 |
57,245 |
Stocks |
7,866 |
7,724 |
7,724 |
7,724 |
||
Debtors |
1,175 |
1,699 |
680 |
680 |
||
Cash |
52,630 |
51,724* |
66,631* |
46,646* |
||
Other |
2,302 |
2,195 |
2,195 |
2,195 |
||
Current liabilities |
|
|
(11,966) |
(9,808) |
(8,699) |
(8,699) |
Trade accounts payable |
(973) |
(725) |
(798) |
(798) |
||
Short-term borrowings |
0 |
0 |
0 |
0 |
||
Deferred income |
(3,575) |
(3,575) |
(3,495) |
(3,495) |
||
Other |
(7,418) |
(5,508) |
(4,406) |
(4,406) |
||
Long-term liabilities |
|
|
(21,157) |
(15,962) |
(20,379) |
(17,042) |
Pension provisions |
(408) |
(405) |
(405) |
(405) |
||
Long-term borrowings |
0 |
0 |
0 |
0 |
||
Other liabilities (Deferred taxes; Trianta milestones) |
(2,395) |
(3,672) |
(3,672) |
(3,672) |
||
Deferred revenues (Eligard non-cash income & bluebird bio) |
(18,354) |
(11,885) |
(16,302) |
(12,965) |
||
Net assets |
|
|
78,592 |
86,167 |
95,612 |
78,861 |
CASH FLOW |
||||||
Operating cash flow |
|
|
(3,611) |
(20,729) |
(17,475) |
(19,562) |
Net interest |
(45) |
(45) |
109 |
322 |
||
Tax |
(102) |
(75) |
(101) |
(101) |
||
Capex |
(1,677) |
(1,533) |
(613) |
(644) |
||
Expenditure on intangibles |
0 |
0 |
0 |
0 |
||
Acquisitions/disposals |
10,537 |
480 |
1,242 |
0 |
||
Equity financing |
(77) |
19,329 |
30,078 |
0 |
||
Other |
846 |
1,667 |
1,667 |
0 |
||
Net cash flow |
5,871 |
(906) |
14,907 |
(19,985) |
||
Opening net debt/(cash) |
|
|
(46,759) |
(52,630) |
(51,724) |
(66,631) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other (foreign exchanges differences) |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(52,630) |
(51,724) |
(66,631) |
(46,646) |
Source: Company accounts, Edison Investment Research. Note: *Cash consists of cash in addition to both long- and short-term time deposits.
|
|
Research: TMT
IQE’s post-H118 close trading update notes the group continues to trade in line with current market expectations. Importantly, it comments on a significant increase in photonics revenues from product qualifications, underpinning management’s expectation of a photonics ramp-up in H218 and FY19. We raise our revenue estimates slightly but otherwise leave our forecasts unchanged.