Medigene
Written by
Medigene |
Recent deals enable greater focus on the core |
Deal updates |
Pharma & biotech |
8 February 2016 |
Share price performance
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Medigene is a research client of Edison Investment Research Limited |
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Recent non-core, business-related newsflow has proved highly beneficial to Medigene. The full and final transference of EndoTAG-1 rights to SynCore and the sale of its Catherex subsidiary to Amgen for $10.5m (40% to Medigene) tidies up its legacy pipeline and IP assets, while providing a decent revenue stream. Medigene’s core focus remains on its immune-oncology franchise, and we look forward to significant progress in 2016. Our rNPV-based valuation increases to €216m or €10.98 per share.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
7.6 |
(9.7) |
(1.01) |
0.0 |
N/A |
N/A |
12/14 |
13.8 |
(5.3) |
(0.42) |
0.0 |
N/A |
N/A |
12/15e |
7.4 |
(12.2) |
(0.72) |
0.0 |
N/A |
N/A |
12/16e |
8.1 |
(12.8) |
(0.64) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Non-core business benefits realised
A spin-out of Medigene, Catherex has now been fully acquired by Amgen. Catherex held IP related to Amgen’s recently approved and launched Imlygic, an oncolytic viral therapy for melanoma. The deal included a $10.5m upfront payment, of which Medigene will receive 40%. There is also the potential of future milestones and royalties from sales of Imlygic. Medigene also recently completed the full transference of EndoTAG-1 rights to SynCore for €5m (to be paid in five annual instalments), while retaining potential upside from future milestones and royalties.
Promising early data with dendritic cell vaccines
Promising early data from its two independent clinical programmes in patient groups with acute myeloid leukaemia (AML) were presented at the American Society of Hematology (ASH) meeting in December 2015. The data indicate an excellent safety profile and the capacity to induce T-cell responses in elderly patients unable to undergo stem cell transplantation.
Core focus underpinned by CEO appointment
We also note the recent appointment of Professor Dolores Schendel as CEO. As CSO and co-founder of Trianta Immunotherapy, acquired by Medigene in 2014 and now the core technology, this is a logical appointment.
Valuation: Raised to €216m from €208m
Our rNPV-based valuation increases to €216m (from €208m), or €10.98 per share (vs €10.60/share), primarily as a result of the Catherex-Amgen deal. Medigene is entitled to 40% of the upfront payment (estimated at €3.85m), milestones and royalties from sales of Imlygic, recently approved and launched in Europe and the US for the treatment of advanced, metastatic melanoma. Using consensus (Bloomberg) forecasts for Imlygic, which indicate peak sales of $455m by 2022, and applying an estimated 1% royalty on sales, we value the Imlygic royalties (including the upfront payment of €3.85m) at €20m.
Valuation
We have increased our rNPV of Medigene’s product portfolio to €171m (vs €154m), due to the addition of the potential Imlygic royalty stream following Amgen’s acquisition of Catherex. We include the upfront fee estimate of €3.85m and a 1% royalty on consensus (Bloomberg) forecasts for Imlygic, which indicate peak sales of $455m by 2022.
Offsetting this is a reduction in Veregen peak sales estimate (to $48m vs $55m) based on the lower than expected Q315 run rate. With estimated FY15 cash of €44.2m, our overall valuation for Medigene is now €216m (vs €208m previously), or €10.98 per share (vs €10.60/share). We previously removed EndoTAG-1 from our valuation model, so the SynCore deal has no impact on our valuation, although we acknowledge the potential upside from royalties on sales of the drug if it reaches the market (SynCore is currently planning a Phase III study). Our other key assumptions remain unchanged, although we have rebased the model to 2016, which results in a modest increase in the rNPV of each programme (Exhibit 1).
Exhibit 1: NPV sum-of-the-parts
Product |
Status |
Launch |
NPV (€m) |
Peak sales |
Probability of success |
Royalty rate |
rNPV |
rNPV/share |
Veregen |
Marketed |
2009 |
20 |
48 |
100% |
20% |
20 |
1.02 |
Imlygic |
Marketed* |
2015 |
20 |
455 |
100% |
1% |
20 |
1.01 |
DC vaccine - AML |
Phase I/II |
2022 |
58 |
333 |
25% |
15% |
11 |
0.57 |
DC vaccine - prostate cancer |
Phase II |
2024 |
143 |
1,002 |
25% |
15% |
36 |
1.82 |
TCR |
Pre-clinical |
2024 |
743 |
4,214 |
5% |
20% |
30 |
1.55 |
DC vaccine deal metrics |
200 |
25% |
34 |
1.71 |
||||
TCR deal metrics |
500 |
5% |
21 |
1.04 |
||||
Portfolio total |
984 |
171 |
8.73 |
|||||
Net cash (FY15e) |
44.2 |
2.25 |
||||||
Overall valuation |
216 |
10.98 |
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Source: Edison Investment Research, *Marketed by Amgen
Financials
Medigene’s last reported financials at Q315 were revenue of €5.3m (vs €8.4m in Q314) and cash of €50.8m. The lower revenues were partly due to lower supply chain orders than anticipated for Veregen in Q315, while Q314 included significant one-off revenues. As a result, company guidance for FY15 Veregen revenues has been reduced (see Exhibit 2). We have lowered our FY15 total revenues from €8.4m to €7.4m and FY16 from €9.7m to €8.1m. The company has also altered EBITDA (loss) guidance due to lower R&D costs than planned for its immunotherapies programme. These are a result of lower third-party charges and personnel costs. We have adjusted for this and reduced our EBITDA (loss) to €9.2m (vs €11.9m). FY16 balance sheet adjustments for the Amgen acquisition of Catherex (Medigene’s subsidiary) include cash of €3.85m (upfront fee) and a reduction in intangible assets to €34m (vs €37.4m) and current liabilities to €6.5m (vs €7.8m).
Exhibit 2: Medigene guidance and Edison forecasts for FY15
€m |
FY14 |
FY15 previous |
FY15 revised |
Edison FY15e |
Edison FY15e |
Edison FY15e |
Veregen royalties |
2.4 |
Double-digit percentage |
High single-digit percentage |
2.9 |
2.5 |
5.7 |
Veregen total revenue |
5.2 |
Stable |
3-4 |
4.4 |
3.5 |
(32.7) |
EBITDA loss |
2.0 |
11-13 |
9-10 |
11.9 |
9.2 |
N/A |
Source: Medigene Q315 presentation, Edison Investment Research
Exhibit 3: Financial summary
€'000s |
2013 |
2014 |
2015e |
2016e |
2017e |
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Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
7,592 |
13,784 |
7,405 |
8,102 |
8,957 |
of which: Veregen revenues (royalties/milestones/supply) |
4,209 |
5,195 |
3,497 |
3,940 |
4,311 |
||
Imlygic revenues (royalties) |
0 |
0 |
0 |
569 |
1,053 |
||
R&D partnering (SynCore/Falk Pharma/grants) |
890 |
6,096 |
1,414 |
1,100 |
1,100 |
||
Non-cash income (Eligard) |
2,493 |
2,493 |
2,493 |
2,493 |
2,493 |
||
Cost of sales |
(1,735) |
(2,086) |
(1,299) |
(1,496) |
(1,644) |
||
Gross profit |
5,857 |
11,698 |
6,106 |
6,606 |
7,313 |
||
Selling, general & administrative spending |
(8,273) |
(7,081) |
(7,616) |
(7,834) |
(8,058) |
||
R&D expenditure |
(6,605) |
(7,498) |
(8,500) |
(9,775) |
(10,753) |
||
Other operating spending |
0 |
0 |
. |
0 |
0 |
||
Operating profit |
(9,021) |
(2,881) |
(10,674) |
(11,003) |
(11,498) |
||
Goodwill & intangible amortisation |
(485) |
(527) |
(500) |
(475) |
(474) |
||
Exceptionals |
0 |
0 |
(664) |
0 |
0 |
||
Share-based payment |
(60) |
(66) |
(50) |
(50) |
(50) |
||
EBITDA |
|
|
(8,210) |
(2,005) |
(9,210) |
(10,253) |
(10,749) |
Operating profit (before GW and except.) |
|
|
(8,476) |
(2,288) |
(9,460) |
(10,478) |
(10,974) |
Net interest |
(1,553) |
(1,774) |
(2,870) |
(2,485) |
(2,317) |
||
Other (forex gains/losses; associate profit/loss) |
310 |
(1,257) |
150 |
150 |
151 |
||
Profit before tax (norm) |
|
|
(9,719) |
(5,319) |
(12,180) |
(12,813) |
(13,140) |
Profit before tax (FRS 3) |
|
|
(10,264) |
(5,912) |
(13,394) |
(13,338) |
(13,664) |
Tax |
(18) |
155 |
0 |
0 |
0 |
||
Profit/(loss) from discontinued operations |
0 |
0 |
0 |
0 |
0 |
||
Profit after tax (norm) |
(9,737) |
(5,164) |
(12,180) |
(12,813) |
(13,140) |
||
Profit after tax (FRS 3) |
(10,282) |
(5,757) |
(13,394) |
(13,338) |
(13,664) |
||
Average number of shares outstanding (m) |
9.6 |
12.2 |
16.8 |
19.9 |
20.2 |
||
EPS - normalised (€) |
|
|
(1.01) |
(0.42) |
(0.72) |
(0.64) |
(0.65) |
EPS - FRS 3 (€) |
|
|
(1.07) |
(0.47) |
(0.80) |
(0.67) |
(0.68) |
Dividend per share (€) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
BALANCE SHEET |
|||||||
Fixed assets |
|
|
36,392 |
46,617 |
55,329 |
51,849 |
51,650 |
Intangible assets & goodwill |
29,170 |
38,377 |
37,877 |
34,122 |
33,648 |
||
Tangible assets |
405 |
951 |
1,201 |
1,476 |
1,751 |
||
Other non-current assets |
6,817 |
7,289 |
16,251 |
16,251 |
16,251 |
||
Current assets |
|
|
16,263 |
24,666 |
52,722 |
42,270 |
26,988 |
Stocks |
3,046 |
4,406 |
6,500 |
6,500 |
6,500 |
||
Debtors |
1,363 |
1,733 |
1,200 |
1,200 |
1,200 |
||
Cash |
10,166 |
14,976 |
44,219 |
33,767 |
18,485 |
||
Other |
1,688 |
3,551 |
803 |
803 |
803 |
||
Current liabilities |
|
|
(5,092) |
(7,755) |
(9,356) |
(8,068) |
(8,068) |
Trade accounts payable |
(1,419) |
(1,785) |
(1,500) |
(1,500) |
(1,500) |
||
Short-term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Deferred income |
(22) |
(57) |
(56) |
(56) |
(56) |
||
Other |
(3,651) |
(5,913) |
(7,800) |
(6,512) |
(6,512) |
||
Long-term liabilities |
|
|
(11,287) |
(14,457) |
(14,449) |
(14,449) |
(14,449) |
Pension provisions |
(304) |
(413) |
(405) |
(405) |
(405) |
||
Long-term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other liabilities (Deferred taxes; Trianta milestones) |
(291) |
(3,221) |
(3,221) |
(3,221) |
(3,221) |
||
Deferred revenues (Eligard non-cash income) |
(10,692) |
(10,823) |
(10,823) |
(10,823) |
(10,823) |
||
Net assets |
|
|
36,276 |
49,071 |
84,246 |
71,602 |
56,121 |
CASH FLOW |
|||||||
Operating cash flow |
|
|
(11,597) |
(8,765) |
(12,742) |
(13,638) |
(13,965) |
Net interest |
12 |
9 |
(1,370) |
(985) |
(817) |
||
Tax |
(661) |
0 |
0 |
0 |
0 |
||
Capex |
(142) |
(873) |
(500) |
(500) |
(500) |
||
Expenditure on intangibles |
0 |
0 |
0 |
0 |
0 |
||
Acquisitions/disposals |
0 |
0 |
0 |
3,853 |
0 |
||
Equity financing |
2,378 |
14,502 |
43,855 |
819 |
0 |
||
Other |
0 |
(62) |
0 |
0 |
0 |
||
Net cash flow |
(10,010) |
4,811 |
29,243 |
(10,451) |
(15,282) |
||
Opening net debt/(cash) |
|
|
(20,113) |
(10,166) |
(14,976) |
(44,219) |
(33,767) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other (foreign exchanges differences) |
63 |
(1) |
(0) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(10,166) |
(14,976) |
(44,219) |
(33,767) |
(18,485) |
Source: Company accounts, Edison Investment Research
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