Free to access research and investor meetings in a post-MiFID2 world.
This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.
Published to the market and investors on 28th March 2019 @ 12.03pm (GMT).
Epigenomics (ECX-DE): 2018 results highlight strong underlying growth momentum
Recommendation: OUTPERFORM
Target Price: EUR4.01
Current Price: EUR1.76 (CoB on 27th March 2019)
KEY TAKEAWAY
Having reached a number of critical milestones throughout 2018, Epigenomics reported FY2018 product sales of 0.8m (47% YoY), highlighting the company’s strong underlying growth momentum. While total sales of EUR1.5m (-18% YoY) were slightly below our revenue expectations, largely due to a reduction in licensing revenue associated with a one-off patent sale in Q4/2017, product sales in Q4/2018 increased by 7% YoY. We are revising our sales forecasts for FY2019E and out-years as a result of the recently announced termination of the collaboration with Chinese licensing partner BioChain and to account for the recently published 2019E revenue guidance in the range of EUR3.0m to EUR6.0m. We continue to see the positive commercial outlook of Epigenomic’s liquid biopsy tests due to a differentiated profile, fast readouts, large target markets and a significant health-economic impact. We maintain and reiterate both our OUTPERFORM recommendation and EUR4.01 target price („TP“).
Strong underlying growth momentum expected to carry forward into 2019E
Epigenomics has reached a number of significant milestones throughout 2018, including a final reimbursement rate for Epi proColon of $192.00, CE marking of HCCBloodTest for liver cancer as well as a successful capital increase. Reimbursement coverage remains a primary focus for the company going forward, with FDA submission for HCCBloodTest also expected later this year. Success on both fronts would represent a turning point for the company and lay a strong foundation for sustainable long-term growth.
FY2018 financial review
Epigenomics reported total revenue for FY2018 of EUR1.5m and an operating loss of EUR12.9m. The EUR2.1m increase in R&D expenditure (48% YoY) is mainly attributable to the post approval study, we therefore anticipate lower R&D expenses for 2019E. Strengthened by a recent capital increase with gross proceeds of EUR22.3m, YE2018 cash stood at EUR17.1m, which should allow the company to fund operations into 2020E.
Adjusting 2019E sales and beyond
We have updated our 2019E and out-year forecasts to reflect the recent termination of the license agreement with BioChain and to account for 2019E revenue guidance of EUR3.0m to 6.0m. We expect Epigenomics to enter a phase of rapid growth, fuelled by a positive coverage decision for Epi proColon, and believe the results of the microsimulation study will facilitate much-anticipated inclusion into the American Cancer Society („ACS“) updated colorectal screening guidelines.
Valuation suggests ample upside
With the recent CE marking for HCCBloodTest, in our view, the key uncertainty remains medicare coverage and inclusion into medical guidelines for Epi proColon. With the new liver product de-risking the commercial outlook, Epigenomics offers a highly attractive investment opportunity with significant potential for growth. We maintain and reiterate both our OUTPERFORM recommendation and TP of EUR4.01.
Kind regards,
Martin Piehlmeier | Analyst
goetzpartners Healthcare Research Team | Research Team
goetzpartners securities Limited
The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.
T +44 (0) 203 859 7725 | martin.piehlmeier@goetzpartners.com / healthcareresearch@goetzpartners.com
www.goetzpartnerssecurities.com
goetzpartners securities LinkedIn page
Registered in England No. 04684144.
Managing Directors: Dr Stephan Goetz, Martin Brunninger and Ulrich Kinzel.
goetzpartners securities Limited – Team Members
Equity Research Analysts – Martin Brunninger, Brigitte de Lima, Chris Redhead and Martin Piehlmeier.
Sales / Marketing – Erland Sternby.
Corporate Finance – Ulrich Kinzel, Wolf Dornbusch, Youchen Xin and Kieron Banerjee.
Corporate Access and IR – Tanya Tracey and Bettina Ellinghorst.
Compliance – Paul W. Dunne.
Click here to see our privacy policy.
GPSL has a formal client relationship with Epigenomics AG.
GPSL publishes and distributes „Investment“ Research and „Corporate Sponsored“ Research. Our Corporate Sponsored Research and investor meetings (e.g. NDRs, 1 to 1 meetings) are free to access and attend and is not classified as an inducement in a post-MiFID2 world, this is because the issuer is paying GPSL. GPSL does not offer any execution or market making services. This is a marketing communication as defined by the Financial Conduct Authority („FCA“). The information herein is considered to be an acceptable minor non-monetary benefit as defined under FCA COBS 2.3A19(5).
In accordance with the General Data Protection Regulation („GDPR„) – if you would like to be removed / unsubscribed from our CRM (also please note that you are free to contact GPSL at any time in the future to have your e-mail subscription amended), please e-mail:
researchproduction@goetzpartners.com
About GPSL: goetzpartners securities Limited is a member of the goetzpartners group, and a leading pan European investment bank and research company. We bring together a wide range of expertise, insights and innovations to advance the interests of our clients around the world. The fast-changing environment brings challenges for businesses and investors. Research innovation, digital transformation and disruptive business ideas reshuffle the corporate world at a relentless pace. Our sector knowledge and our global footprint bring together corporate intelligence and a deep understanding of the industry with a wide network of top decision makers. These collective insights help our clients to stay at the leading edge of change.
This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.
This communication (including any attachments) from goetzpartners securities Limited („GPSL“) is confidential and may contain information which is proprietary, privileged or otherwise legally protected against unauthorised use or disclosure. If you receive this communication in error or are not the intended recipient of this communication, please delete and destroy all copies in your possession, notify the sender that you have received this communication, and note that any review or dissemination of, or the taking of any action in reliance on this communication is expressly prohibited. GPSL shall not be liable for the improper or incomplete transmission of the information contained in this communication nor for any delay in its receipt or damage to your system. GPSL does not guarantee that the integrity of this communication has been maintained nor that this communication is free of viruses, interceptions or interference and makes no warranties in relation to these matters. This is not an offer or a solicitation to buy or sell securities or investment products, or an official confirmation. GPSL record electronic and phone communications in accordance with FCA and MiFID2 regulations, they will be monitored for regulatory and training purposes. GPSL is authorised and regulated by the Financial Conduct Authority of the United Kingdom (Firm Reference Number: 225563).
Click on the following link for the GPSL MiFID2 Investor Guidance Notice
GPSL Equity Research publications are available on the following aggregators and via news distribution circuits (For Institutional Use Only): AlphaMetry, AlphaSense, Bloomberg (GOET), Capital IQ, EQS, FACTSET, ResearchFN, Research Tree, RNS Reach, Sentieo and Thomson Reuters.
Please copy the below link and paste it into your browser for the full pdf version of the equity research report:
https://gp.bluematrix.com/sellside/EmailDocViewer?encrypt=811c876a-dcc3-4a88-afcd-30ae5a845a2a&mime=pdf&co=gp&id=paul.dunne@goetzpartners.com&source=libraryView
Free to access research and investor meetings in a post-MiFID2 world.
This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.
Dissemination of a CORPORATE NEWS, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
