Medigene
Written by
Medigene |
Strategic alliance validates TCR technology |
Strategic alliance |
Pharma & biotech |
5 October 2016 |
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Medigene is a research client of Edison Investment Research Limited |
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Medigene has announced an alliance with bluebird bio, a prominent T-cell immunology company. It is Medigene’s first commercial partnering agreement based on its proprietary T-cell receptor (TCR) technology platform. The collaboration will seek to identify four TCR therapeutic candidates against four targets. This is a positive development as it validates Medigene’s TCR technology and makes use of technological synergies to develop new immuno-oncology products, which could prove beneficial. Importantly, it does this while retaining all rights for its proprietary TCR development programme and TCR library. We have increased our valuation to €233m (vs €219m), as we have rolled the model forward to an estimated Q3 position and included the upfront payment.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
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 |
10.7 |
(10.2) |
(0.50) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
T-cell immunotherapy alliance with bluebird bio
Medigene has announced its first commercial partnering agreement based on its proprietary TCR technology platform with bluebird bio. The deal is to produce TCR therapeutic candidates against four targets using Medigene’s TCR technology platform and bluebird bio’s lentiviral vector, gene editing, synthetic biology and manufacturing capabilities. The partnership will be executed with Medigene having responsibility for generating and delivering the relevant TCRs to bluebird bio, as well as joint development of preclinical product candidates, and bluebird bio taking responsibility for clinical development and any resulting commercialisation.
Validation of technology and attractive deal metrics
Medigene will receive an upfront payment of $15m R&D funding (specific to the collaboration) and potential milestones resulting from preclinical and clinical development, along with any resulting commercialisation (company guidance indicates royalty payments could range from single to double digits). The deal offers validation of its TCR technology and also has wide-ranging potential as the four targets could be utilised across a number of indications.
Valuation: Increased to €233m with upside potential
We increase our rNPV-based valuation to €233m or €11.8 per share from €219m (€11.08), as we have rolled the model forward to an estimated Q3 position and included the upfront payment of €13.4m (expected early Q4). We have also increased deferred revenue in FY16 and included the recognition of the revenue over four years, starting in FY17 (we will review this treatment following Q3 results). This is positive progress and we expect upside as the programme of four targets and potential subsequent move into the clinic progresses. It is well funded to execute its clinical development strategy.
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 |
10,667 |
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 |
||
Bluebird bio partnership |
3,338 |
|||||
Cost of sales |
(2,086) |
(1,103) |
(1,305) |
(1,415) |
||
Gross profit |
11,698 |
5,705 |
5,751 |
9,253 |
||
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 |
0 |
||
Operating profit |
(2,881) |
(10,439) |
(11,890) |
(9,593) |
||
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) |
(8,794) |
Operating profit (before GW and except.) |
|
|
(2,288) |
(9,802) |
(11,315) |
(9,019) |
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) |
(10,177) |
Profit before tax (FRS 3) |
|
|
(5,912) |
(13,399) |
(13,701) |
(10,751) |
Tax |
155 |
400 |
0 |
0 |
||
Profit/(loss) from discontinued operations |
0 |
0 |
0 |
0 |
||
Profit after tax (norm) |
(5,164) |
(12,362) |
(13,126) |
(10,177) |
||
Profit after tax (FRS 3) |
(5,757) |
(12,999) |
(13,701) |
(10,751) |
||
Average number of shares outstanding (m) |
12.2 |
16.8 |
19.9 |
20.2 |
||
EPS - normalised (€) |
|
|
(0.42) |
(0.74) |
(0.66) |
(0.50) |
EPS - FRS 3 (€) |
|
|
(0.47) |
(0.77) |
(0.69) |
(0.53) |
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 |
67,714 |
54,524 |
Stocks |
4,406 |
6,654 |
6,654 |
6,654 |
||
Debtors |
1,733 |
763 |
763 |
763 |
||
Cash |
14,976 |
46,759 |
59,029 |
45,839 |
||
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) |
(27,229) |
(23,892) |
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 & bluebird bio) |
(10,823) |
(10,605) |
(23,955) |
(20,618) |
||
Net assets |
|
|
49,071 |
89,988 |
77,839 |
68,565 |
CASH FLOW |
||||||
Operating cash flow |
|
|
(8,765) |
(10,585) |
3,855 |
(11,002) |
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 |
12,270 |
(13,191) |
||
Opening net debt/(cash) |
|
|
(10,166) |
(14,976) |
(46,759) |
(59,029) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other (foreign exchanges differences) |
(1) |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(14,976) |
(46,759) |
(59,029) |
(45,839) |
Source: Company accounts, Edison Investment Research
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