Medigene — Update 21 December 2016

Medigene — Update 21 December 2016

Medigene

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Medigene

Continuing to take steps to focus on core

Out-licensing agreement

Pharma & biotech

21 December 2016

Price

€10.40

Market cap

€209m

Net cash (€m) at 30 September 2016

43.6

Shares in issue

20.1m

Free float

62.6%

Code

MDG1

Primary exchange

XETRA

Secondary exchange

Frankfurt

Share price performance

%

1m

3m

12m

Abs

6.4

53.0

47.9

Rel (local)

(1.1)

38.7

36.9

52-week high/low

€10.99

€6.25

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

FY16 results

March 2017

TCR (IIT) clinical trial initiation

2017

First TCR (CIT) clinical trial initiation

2017

Analysts

Dr Linda Pomeroy

+44 (0)20 3077 5738

Lala Gregorek

+44 (0)20 3681 2527

Medigene is a research client of Edison Investment Research Limited

Medigene has announced that it has granted an exclusive worldwide licence for the development and commercialisation of its preclinical-stage adeno-associated virus-like particles (AAVLP) technology to 2A Pharma, a Swedish biotech company. The financial details of the agreement are not disclosed, although Medigene has indicated that it will receive clinical, regulatory and commercial milestone payments, as well as royalties on net sales based on the technology. This is another positive development, with Medigene continuing to streamline its focus on its immunotherapy programmes, while retaining potential value from its non-core assets. We maintain our valuation at €233m.

Year end

Revenue (€m)

PBT* (€m)

EPS* (€)

DPS (€)

P/E (x)

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.

Non-core AAVLP technology out-licensed

Medigene’s AAVLP technology has undergone initial preclinical tests, conducted by academic partners. According to the company, it offers the potential to develop vaccines against various indications, including cancer and infectious diseases. Out-licensing the technology while retaining the potential to benefit from any future success is a positive step for Medigene as it continues to concentrate on its core business: the development of T-cell receptor (TCR) modified T-cells and next-generation dendritic cell (DC) vaccines.

Recent progress: TCR technology platform

Medigene has recently made significant progress, announcing its first commercial partnering agreement based on its proprietary TCR technology platform with bluebird bio. The collaboration will seek to identify four TCR therapeutic candidates against four targets. This was a positive development as it validates Medigene’s core 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.

Valuation: Maintained at €233m

Our rNPV-based valuation remains at €233m or €11.8 per share. We have updated the model to include Q3 reported cash of €43.6m plus the upfront payment from the bluebird bio deal received in early Q4 (€14.4m). We do not include any financial metrics from the AAVLP deal, but note that there is potential for upside if it develops successfully. The rest of our valuation assumptions are unchanged. Medigene is well funded and focused on executing its clinical development strategy over the next few years.

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

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: Medigene and 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 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.
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US

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Level 25, Aurora Place

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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

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 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 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

Acarix — Update 21 December 2016

Acarix

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