CO.DON — Building roll-out momentum in Europe

CO.DON — Building roll-out momentum in Europe

CO.DON is a manufacturer of autologous cell therapies for the treatment of cartilage defects. The main product, Spherox, is based on the core
spheroid technology and can repair cartilage defects of the knee via a minimally invasive procedure. After accumulating supportive data from the Phase III (ongoing) and the Phase II ‘co.dis’ (successfully completed this year) trials, CO.DON obtained marketing authorisation from the EMA in July 2017 and is now rolling out Spherox in several European markets. This has been slower than initially expected due to the transition period from the older product and reimbursement issues, but the company expects progress by the end of Q318 and guides break-even by 2021.

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Written by

CO.DON

Pharma & biotech

Price

€4.21

Market cap

€83m

Share price graph

Share details

Code

CNWK

Shares in issue

19.7m

Net cash (€m) at end-H118

5.3

Business description

CO.DON is a biopharmaceutical company focused on commercialising regenerative treatments for cartilage repair. Its main product, Spherox, is based on the core spheroid technology and can repair cartilage defects of the knee using patients’ own cells via a minimally invasive procedure. Spherox has received EMA marketing authorisation for knee cartilage repair and is being launched in multiple European countries.

Bull

Established market base and distribution in Germany.

Substantial expansion possible after the EU-wide marketing authorisation.

Positive findings from clinical trials support efficacy and safety.

Bear

Visibility increased after EMA authorisation, which could invite competition (although product development can be lengthy).

Although well financed now, any unexpected operational setbacks could lead to the need for additional capital.

Dependent on positive reimbursement decisions in EU countries.

Analysts

Jonas Peciulis

+44 (0) 20 3077 5728

Building roll-out momentum in Europe

CO.DON is a manufacturer of autologous cell therapies for the treatment of cartilage defects. The main product, Spherox, is based on the core spheroid technology and can repair cartilage defects of the knee via a minimally invasive procedure. After accumulating supportive data from the Phase III (ongoing) and the Phase II ‘co.dis’ (successfully completed this year) trials, CO.DON obtained marketing authorisation from the EMA in July 2017 and is now rolling out Spherox in several European markets. This has been slower than initially expected due to the transition period from the older product and reimbursement issues, but the company expects progress by the end of Q318 and guides break-even by 2021.

EMA’s approval opens multiple European markets

CO.DON specialises in the regenerative treatment of articular cartilage defects. During a biopsy procedure, healthy cartilage cells are taken from the patient’s own cartilage as well as a blood sample. This is cultivated in a laboratory outside the body using CO.DON’s innovative biological techniques to create cartilage, which is then transplanted back into the defect area. Although CO.DON’s products have been sold in Germany since 1997 and some 14,000 patients have already been treated, the EMA authorisation was required for EU-wide distribution and was received in July 2017 based on accumulated data from the clinical trials.

Expansion beyond Germany home market is ongoing

Another milestone for Spherox was the Final Appraisal Determination published by the UK’s NICE in January 2018, which recommended the use of autologous chondrocyte implantation for adult patients with knee cartilage defects larger than 2cm², as a cost-effective therapy. The first UK-based patient was treated in May 2018 and CO.DON is working to roll out Spherox in other European markets, at the same time investing in capacity expansion with planned capex of €10m to build a state-of-the-art human cell therapy production site in Leipzig. Leveraging its experience in cell therapies, CO.DON plans to establish a JV with Xintela, a listed Swedish biotech, to co-develop a stem cell product for osteoarthritis, which was supported by CO.DON’s largest investor, which acquired a 26% stake in Xintela.

Break-even guided in 2021; EV of €80m

H118 revenue of €3.0m was flat y-o-y, while operating loss was €3.8m vs -€2.4m, due to product roll-out and associated costs. Lack of sales growth was explained by CO.DON as a transition phase from its older product (co.don chondrosphere) to Spherox after the EMA approval, and reimbursement issues. This should be resolved by end-Q318. The company guides break-even in 2021. CO.DON reported H118 cash of €20.3m (net cash: €5.3m), resulting in an EV of €80m.

Consensus estimates

Year end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/16

5.6

(3.7)

(0.23)

0.0

N/A

N/A

12/17

6.0

(7.1)

(0.36)

0.0

N/A

N/A

12/18e

6.7

(7.6)

(0.33)

0.0

N/A

N/A

12/19e

8.4

(5.3)

(0.27)

0.0

N/A

N/A

Source: CO.DON data, Thomson Reuters

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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Auris Medical Holding — Q318 results and business updates

Auris Medical recently reported its Q318 results and provided a brief business update on its active programs. R&D expenditure for the period was down roughly 60% over Q317, which reflects management’s swift pivot to focus on Phase I development. Auris plans to initiate two intranasal betahistine trials in Q119: the AM-125 Phase II trial in acute vertigo and AM-201 Phase I trial for olanzapine-induced weight gain.

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