Main menu
Edison Group
  • Home
  • Sparks
  • Equities

    Equities

    View All Equities

    Equities by Sector

    YXT.com

    MCap

    USD127m

    Last close

    USD23.43

    ▲ 20.23 (632.19%)

    Northern Data Group

    MCap

    EUR486m

    Last close

    EUR6.28

    ▲ −1.28 (−16.88%)

    Bodycote

    MCap

    GBP1,572m

    Last close

    GBP9.14

    ▲ −9.00 (−0.98%)

  • Sectors

    Sectors

  • Megatrends

    Megatrends

  • Thematics

    Thematics

    View All Thematics

    Latest

  • Audiovisual

    Audiovisual

    View All Audiovisual

    Latest

Mologen — Update 13 April 2016

Mologen — Update 13 April 2016

Mologen

Analyst avatar placeholder

Written by

Mologen

Lefitolimod trials on track

FY15 update

Pharma & biotech

13 April 2016

Price

€3.73

Market cap

€84m

Net cash (€m) at 31 December 2015

24.6

Shares in issue

22.6m

Free float

52%

Code

MGN

Primary exchange

Frankfurt Prime
Standard

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.7)

(24.7)

(29.4)

Rel (local)

(9.1)

(23.0)

(10.5)

52-week high/low

€5.6

€3.4

Business description

Mologen is a German biotech company developing novel immunotherapies. The lead products are lefitolimod (TLR9 agonist) for metastatic colorectal cancer maintenance, SCLC and HIV; and MGN1601, an allogeneic renal cell vaccine.

Next events

First patient-in-combination trial

H116

Strategic review

H116

IMPALA recruitment completed

H216

IMPULSE: start analysis

Q416

Analysts

Dr Susie Jana

+44 (0) 20 3077 5700

Daniel Wilkinson

+44 (0)20 3077 5734

Mologen is a research client of Edison Investment Research Limited

Mologen’s pipeline is focused around lead candidate lefitolimod (MGN1703). Patient enrolment for IMPALA, the pivotal Phase III study in metastatic colorectal cancer (mCRC), continues on track and we expect full enrolment by end 2016. Data due in H117 from the IMPULSE Phase II trial in lung cancer could trigger a licensing deal. FY15 net cash of €24.6m should ensure IMPALA patient recruitment by year-end 2016. We have lowered our valuation of Mologen to €337m, or €14.89 per share, on a more protracted market launch timeline across the product portfolio.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/14

0.0

(17.0)

(1.01)

0.0

N/A

N/A

12/15

0.0

(20.5)

(0.98)

0.0

N/A

N/A

12/16e

0.0

(24.9)

(1.20)

0.0

N/A

N/A

12/17e

0.0

(25.8)

(1.24)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

IMPALA and IMPULSE: Major inflection points near

Lefitolimod (MGN1703), an innovative DNA-based TLR9 agonist, is currently in four clinical trials. In January Mologen announced preliminary demographic data for the first 200 patients in its most advanced study, the 540-patient Phase III IMPALA trial in mCRC; full patient enrolment is expected by end 2016. Results from lefitolimod’s Phase II IMPULSE trial in small cell lung cancer (SCLC), which completed patient enrolment in 2015, are expected in H117. This could potentially trigger a licensing deal and consequently additional funding options for lefitolimod.

TEACH study extension

Initial data for the use of lefitolimod to treat HIV patients (TEACH study) have demonstrated that it increases activation of key immune markers. Encouraged by this response, investigators have extended the patient dosing regimen. Dosing has been extended from one to six months; final results are now expected H117.

Combination therapy: Increasing the appeal

A combination study of Mologen’s lead candidate lefitolimod with Yervoy (Bristol-Myers Squibb), an immune checkpoint inhibitor, has been announced. The combination of two immunotherapies has potential synergistic effects on survival. While Yervoy’s safety record is a concern, lefitolimod has previously demonstrated a good safety profile; if this is maintained while increasing efficacy over the monotherapy, lefitolimod’s licensing appeal increases.

Valuation: €337m (€14.89/share)

We have reduced our valuation of Mologen to €337m (vs €387m) or €14.89/share (vs €17). Our lower valuation is attributed to a change in market launch times across the product portfolio. Our model suggests a cash runway into 2017; we forecast additional illustrative financing of €30m in FY16.

Valuation

We have reduced our valuation of Mologen to €337m (€14.89/share); 60% of the reduction is due to the adjustment in market launch times relating to lefitolimod in its lead indication metastatic colorectal cancer (CRC). We now expect lefitolimod for CRC to launch in 2019 (vs 2018 previously) in the EU and 2020 (vs 2018) in the US. Timelines have also been extended across the portfolio to more realistically reflect launch expectations. We await the new management’s strategy review in H116 for further insight into the launch timetables. Our other assumptions remain unchanged and our sum-of-the-parts DCF model remains at a standard 12.5% discount rate. We do not currently ascribe any value to the HIV indication or combination trial as we await further clarity on the deployment of cash resources from the expected portfolio review in H116. Our key assumptions and valuation metrics are summarised in Exhibit 1 below.

Exhibit 1: Mologen valuation metrics and assumptions

Product

Status

Market
launch

NPV
(€m)

Peak sales ($m)

Probability
of success

Royalty
estimate

rNPV
(€m)

rNPV share (€)

Key assumptions

MGN1703: CRC - US

Phase III-ready

2020

103

301

65%

25%

65

2.86

~135,000 CRC cases/yr; 25% metastatic + 5% regional; 60% chemo response; 25% peak share (2023); $50,000 treatment price; 2025 patent expiry

MGN1703: CRC - EU

Phase III

2019

211

613

65%

25%

135

5.97

~345,000 CRC cases/yr; 25% metastatic + 5% regional; 60% chemo response; 25% peak share (2023); $30,000 treatment price; 2025 patent expiry

MGN1703: CRC – Japan

Phase III-ready

2021

13

81

50%

15%

7

0.29

~40,000 CRC cases/yr; 25% metastatic + 5% regional; 60% chemo response; 25% peak share (2025); $40,000 treatment price; 8 yrs exclusivity

MGN1703: SCLC - US

Phase II-ready

2022

32

153

30%

15%

9

0.42

~225,000 lung cancer cases/yr; 15% SCLC; 75% advanced SCLC; 70% chemo response; 20% peak share (2023); $50,000 price; 2023 patent expiry

MGN1703: SCLC - EU

Phase II

2022

22

162

30%

15%

3

0.12

~310,000 lung cancer cases/yr; 15% SCLC; 75% advanced SCLC; 70% chemo response; 25% peak share (2025); $30,000 price; 2025 patent expiry

MGN1703: SCLC – Japan

Phase II-ready

2023

3

19

25%

15%

1

0.03

~38,000 lung cancer cases/yr; 15% SCLC; 75% advanced SCLC; 70% chemo response; 25% peak share (2025); $40,000 price;

MGN1601: RCC - US

Phase II-ready

2023

248

344

25%

70% operating margin

57

2.54

~63,000 RCC cases/yr; 35% advanced RCC; 15% peak penetration (2024); $75,000 treatment price; 12 yrs BLA exclusivity (2032)

MGN1601: RCC - EU

Phase II-ready

2023

158

229

25%

70% operating margin

35

1.54

~75,000 RCC cases/yr; 35% advanced RCC; 15% peak penetration (2024); $50,000 treatment price; 10 yrs BLA exclusivity (2030)

MGN1601: RCC - Japan

Phase II-ready

2023

3

22

25%

15%

1

0.03

~6,000 RCC cases/yr; 35% advanced RCC; 15% peak penetration (2025); $60,000 treatment price; BLA exclusivity (2030)

Portfolio value

793

312

13.80

Cash

25

1.09

Net cash at 31 December 2015

Total

337

14.89

22.6m shares out

Source: Edison Investment Research. Note: Cancer incidence rates from SEER/American Cancer Society/Globocan.

Lefitolimod (MGN1703) across CRC and SCLC accounts for 65% of our total €337m valuation. The outcome of the IMPULSE Phase II study in SCLC and ultimately the IMPALA Phase III trial in mCRC are the key near-term drivers. Positive results would prompt higher probabilities of success, leading to potentially significant valuation increases (see unadjusted NPV).

Lefitolimod is an immunomodulating drug (TLR9 agonist) that broadly activates the immune system, enabling it to increase the recognition and combat of cancer cells. It is being developed as a maintenance treatment for use after effective induction chemotherapy to reduce tumour burden by building a specific response based on free circulating tumour-associated antigens.

To date, Mologen has reported encouraging preliminary overall survival (OS) data from a Phase II (IMPACT) study with MGN1703 in mCRC, particularly in certain subgroups of patients. These results have shaped the design of the IMPALA trial now underway. For example, only patients who have responded to induction chemotherapy are eligible for the IMPALA trial, following the findings of a pronounced OS benefit (24.5 months) vs placebo (15.1 months) in these patients (albeit in relatively small patient numbers).

Our valuation assumes that a licensing partner will be secured on successful completion of the IMPALA study, with a 25% royalty rate in mCRC. Since the SCLC programme will have completed Phase II, we assume a more modest 15% royalty. In reality, the royalty rate may fall somewhere between the two levels. However, we have not included any upfront fees and/or milestones that would be expected on securing a partner and successful commercialisation of the product, which offers further potential upside to our valuation. While we assume a deal on completion of IMPALA, we note that a partnership could be secured ahead of IMPALA study data in 2017/18 (for example, on the back of positive IMPULSE data in 2017).

For MGN1601, we assume Mologen will commercialise the product itself in the US and Europe, with a 15% COGS and 15% marketing costs, giving a 70% operating margin. A partner would be required in Japan/RoW and therefore royalties would be receivable (estimated at 15%).

Sensitivities: Clinical execution risk

The key sensitivities relate to the clinical performance of MGN1703 and the company’s ability to secure the additional financing, and/or a partner, to complete the full clinical programme. Results from the IMPULSE and IMPALA studies will have a major bearing on MGN1703’s chance of regulatory approvals and commercial success. We have made assumptions about the potential market opportunity available to MGN1703, which do not currently include significant stratification of patient populations. MGN1703 may be most active in certain subgroups, which could reduce the target patient pool. However, confirmed activity in a patient subset may result in a higher treatment price, greater reimbursement rates and more favourable economic terms from any partnership.

Future development of MGN1601 is dependent on funding and/or partnerships. At present MGN1703 is the priority, although we currently assume that with new management in place active development of MGN1601 may resume in 2016.

Financials

Cash at 31 December 2015 was €24.6m, which includes the capital raise in April 2015 when €28.3m gross (€26.2m net) was raised from the rights issue (one-for-three) of c 5.7m new shares at €5.00 per share. Our model suggests that current cash is sufficient to fund operations to early 2017, depending on the progress of the IMPULSE and IMPALA studies for MGN1703. Importantly, this provides a cash runway that accommodates some important milestones in 2016, particularly the primary analysis of the IMPULSE study data in SCLC and completion of patient recruitment into the IMPALA trial. However, a funding gap remains in respect of the IMPALA study (primary endpoint estimated by end-2017). We estimate this to be in the €25-35m range and include an illustrative €30m financing, nominally attributed to debt, in our FY16 forecasts, to allow completion of the study. The size and timing of the financing may vary significantly and could be influenced by the outcome of the IMPULSE study (H216) and potential licensing deals.

A net loss of €20.5m as reported (vs €17.1m in 2014) primarily reflects increased R&D expenditure in FY15 of €16.8m (vs €13.3m in FY14). R&D expense, as classified by Mologen, is mainly derived from “cost of materials” of €11m (€8.7.m in FY14) and “personnel expenses” of €5.1m (€5.1.m in FY14), as reported in the income statement. Mologen continues to expect R&D increases in FY16, mainly in support of the IMPALA and IMPULSE trials, with this expected to drive a higher net loss than in 2015. We forecast FY16 R&D (cost of materials) costs of €15.4m and SG&A (personnel expenses) of €5.2m. Our forecast net loss for FY16 is €24.9m.

Exhibit 2: Financial summary

€'000s

2013

2014

2015

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

227

12

39

40

50

Cost of Sales

0

0

0

0

0

Gross Profit

227

12

39

40

50

Research and development (cost of materials)

(2,904)

(8,687)

(11,011)

(15,415)

(16,186)

Selling, general & administrative (personnel expenses)

(4,364)

(5,113)

(5,074)

(5,175)

(5,227)

Other operating income / expense

(2,803)

(3,199)

(4,372)

(4,368)

(4,368)

EBITDA

 

 

(9,844)

(16,987)

(20,418)

(24,919)

(25,731)

Operating Profit (before GW and except.)

 

(9,923)

(17,059)

(20,499)

(24,943)

(25,762)

Intangible Amortisation

(935)

(38)

(40)

(88)

(53)

Exceptionals/Other

0

0

0

0

0

Operating Profit

(10,858)

(17,097)

(20,539)

(25,030)

(25,815)

Net Interest

30

19

3

25

8

Other

0

0

0

0

0

Profit Before Tax (norm)

 

 

(9,893)

(17,040)

(20,496)

(24,918)

(25,755)

Profit Before Tax (FRS 3)

 

 

(10,828)

(17,078)

(20,536)

(25,006)

(25,807)

Tax

0

0

0

0

0

Deferred tax

0

0

0

0

0

Profit After Tax (norm)

(9,893)

(17,040)

(20,496)

(24,918)

(25,755)

Profit After Tax (FRS 3)

(10,828)

(17,078)

(20,536)

(25,006)

(25,807)

Average Number of Shares Outstanding (m)

15.4

16.8

20.8

20.8

20.8

EPS - normalised (c)

 

 

(0.64)

(1.01)

(0.98)

(1.20)

(1.24)

EPS - FRS 3 (c)

 

 

(0.70)

(1.02)

(0.99)

(1.20)

(1.24)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

457

440

414

411

435

Intangible Assets

237

206

175

105

63

Tangible Assets

220

234

239

306

372

Other

0

0

0

0

0

Current Assets

 

 

15,480

14,613

25,981

31,523

6,248

Stocks

33

30

28

28

27

Debtors

0

0

0

0

0

Cash

14,765

13,563

24,592

30,134

4,860

Other

682

1,020

1,361

1,361

1,361

Current Liabilities

 

 

(943)

(1,747)

(6,886)

(6,886)

(6,886)

Creditors

(943)

(1,747)

(6,886)

(6,886)

(6,886)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(10)

(8)

(6)

(30,006)

(30,006)

Long term borrowings

0

0

0

(30,000)

(30,000)

Other long term liabilities

(10)

(8)

(6)

(6)

(6)

Net Assets

 

 

14,984

13,298

19,503

(4,958)

(30,209)

CASH FLOW

Operating Cash Flow

 

 

(8,869)

(15,602)

(15,095)

(24,349)

(25,168)

Net Interest

0

3

0

0

0

Tax

0

(6)

12

0

0

Capex

(146)

(93)

(95)

(109)

(106)

Acquisitions/disposals

1

0

0

0

0

Financing

8

14,495

26,207

0

0

Dividends

0

0

0

0

0

Other

0

0

0

0

0

Net Cash Flow

(9,006)

(1,203)

11,029

(24,458)

(25,274)

Opening net debt/(cash)

 

 

(23,777)

(14,765)

(13,563)

(24,592)

(134)

HP finance leases initiated

0

0

0

0

0

Exchange rate movements

(6)

1

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(14,765)

(13,563)

(24,592)

(134)

25,140

Source: Mologen accounts; Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Mologen 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 2016. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Research: Healthcare

Transgene — Update 13 April 2016

Transgene

Continue Reading
Cookie Policy Overview
Edison Group

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping us understand which section of the website you find more interesting and useful. See our Cookie Policy for more information.

Strictly necessary and functional

These cookies are used to deliver our website and content. Strictly necessary cookies relate to our hosting environment, and functional cookies are used to facilitate social logins, social sharing and rich-media content embeds.

Advertising

Advertising Cookies collect information about your browsing habits such as the pages you visit and links you follow. These audience insights are used to make our website more relevant.

Performance

Performance Cookies collect anonymous information designed to help us improve the site and respond to the needs of our audiences. We use this information to make our site faster, more relevant and improve the navigation for all users.