| goetzpartners securities Limited Epigenomics (ECX-DE): Key catalysts to fuel growth throughout 2019 16-May-2019 / 14:16 GMT/BST 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 16th May 2019 @ 7.02am (BST). Epigenomics (ECX-DE): Key catalysts to fuel growth throughout 2019 Recommendation: OUTPERFORM Target Price: EUR4.01 Current Price: EUR1.90 (CoB on 15th May 2019) KEY TAKEAWAY Epigenomics reported Q1/2019 sales of EUR331k (7% YoY), driven largely by a 198% YoY increase in product revenue, which was in part offset by lower licensing revenue due to the recently announced termination of the collaboration with Chinese licensing partner BioChain. We expect solid underlying growth momentum to continue throughout 2019, with back-end loaded revenue generation in Q3 and Q4 fuelled by a number of commercial as well as regulatory catalysts that can unlock significant sales potential for Epi proColon as well as support the commercialisation of HCCBloodTest, the latest addition to Epigenomic's growing portfolio of liquid biopsy tests, which allows for blood-based detection of liver cancer. 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"). Q1/2019 financial results Epigenomics reported total Q1/2019 revenue of EUR331k, an increase of 7% compared to Q1/2018. Total revenue was primarily driven by strong product sales growth (198% YoY), which was in part offset by a decrease in licensing revenue due to termination of the distribution agreement with Chinese partner BioChain. Other income attributable to exchange rate gains amounted to EUR499k (vs. EUR10k in Q1/2018). R&D expenses of EUR1.6m were broadly in line with last year (2% YoY), while SG&A expenses increased significantly to EUR2.4m from EUR1.8m (32% YoY) as a result of higher marketing expenses to fuel commercial development. Epigenomics closed Q1 with an improved net loss position of EUR-3.0m (-6% YoY) and as of March 31, 2019, cash stood at EUR12.9m, which should allow the company to fund operations well into 2020E. Continued progress on CMR coverage for Epi proColon Epigenomics recently announced that the Centers for Medicare & Medicaid Services ("CMS") has accepted the company's application for a National Coverage Determination ("NCD") review of Epi proColon, which constitutes one of two pathways to obtaining CMS coverage. While CMS have not yet initiated the review process due to a lack of resources available at present, CMS will issue a proposed decision within six months of starting the process, which management expect to begin in due course. A positive decision would represent a major breakthrough for Epigenomics, and we anticipate on-going updates on timelines and assume share price momentum along with positive news flow. Rich news flow expected to catalyse growth throughout 2019 Having reached a number of critical milestones in 2018, we expect the positive momentum to continue throughout 2019 and anticipate rich news flow driven by (1) publication of the results from the microsimulation study in Q2/2018, paving the way for inclusion into the colorectal cancer screening guidelines, (2) a potential green light from the CMS for Epi proColon, which would translate into immediate coverage in the US, (3) progress on the prospective clinical study for liver cancer detection, and (4) an update on a new distribution agreement in China. As such, 2019 represents a decisive year for Epigenomics that, in our view, could lay a solid foundation for sustainable long-term growth. 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, Martin Piehlmeier and Kieron Banerjee. Sales / Marketing - Erland Sternby and Danny de Jong. Corporate Finance - Ulrich Kinzel, Wolf Dornbusch and Youchen Xin. Corporate Access and IR - Tanya Tracey and Bettina Ellinghorst. Compliance / Research Production - Paul W. Dunne. Click here to see our privacy policy. GPSL has a formal client relationship with Epigenomics AG. GPSL publishes and distributes "Corporate Issuer Sponsored" Research. Our Corporate Issuer 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: 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. |
812491 16-May-2019
