Quantum Genomics — An accelerated pace of partnership agreements

Quantum Genomics (PAR: ALQGC)

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Research: Healthcare

Quantum Genomics — An accelerated pace of partnership agreements

Quantum Genomics continues to sign partnership deals for firibastat in difficult-to-treat/treatment-resistant hypertension, including two in the month of October. One of the agreements is with Qilu Pharmaceutical for the Greater China region, Hong Kong and Macau while the other is with Xediton Pharmaceuticals for Canada. Quantum Genomics announced its first partnership, with Biolab Sanus covering Latin America, in December 2019 and one covering South East Asia, Australia and New Zealand with Orient Europharma (OEP) in September. We expect additional agreements to be announced in the coming months, potentially covering the US and EU markets.

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Healthcare

Quantum Genomics

An accelerated pace of partnership agreements

Development update

Pharma & biotech

16 November 2020

Price

€4.99

Market cap

€111m

Net cash (€m) at 30 June 2020 + financing

15.1

Shares in issue

22.2m

Free float

80%

Code

ALQGC

Primary exchange

Euronext Paris

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

61.3

85.0

57.8

Rel (local)

48.9

73.5

72.2

52-week high/low

€4.99

€1.88

Business description

Quantum Genomics is a biopharmaceutical company developing firibastat, a brain aminopeptidase A inhibitor for treating hypertension and heart failure. Its mechanism is implicated in the 25% of patients resistant to treatment. The Phase IIb study in hypertension was very positive and a Phase III was initiated recently. A Phase IIb study in heart failure is currently enrolling patients.

Next events

Additional partnerships

2020/21

QUORUM heart failure enrolment completion

YE20

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Quantum Genomics is a research client of Edison Investment Research Limited

Quantum Genomics continues to sign partnership deals for firibastat in difficult-to-treat/treatment-resistant hypertension, including two in the month of October. One of the agreements is with Qilu Pharmaceutical for the Greater China region, Hong Kong and Macau while the other is with Xediton Pharmaceuticals for Canada. Quantum Genomics announced its first partnership, with Biolab Sanus covering Latin America, in December 2019 and one covering South East Asia, Australia and New Zealand with Orient Europharma (OEP) in September. We expect additional agreements to be announced in the coming months, potentially covering the US and EU markets.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

0.0

(13.6)

(0.94)

0.0

N/A

N/A

12/19

0.0

(10.8)

(0.53)

0.0

N/A

N/A

12/20e

0.0

(15.6)

(0.64)

0.0

N/A

N/A

12/21e

0.0

(21.6)

(0.84)

0.0

N/A

N/A

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

Qilu agreement for Greater China

Quantum Genomics has signed a licensing and collaboration agreement with Qilu Pharmaceutical covering Greater China, Hong Kong and Macau. As part of the agreement, Quantum Genomics will receive upfront and milestone payments of up to US$50m and double-digit royalties. Importantly, Qilu plans to join the Phase III programme in hypertension, which will enable recruitment in the region.

A Canadian deal with Xediton

Xediton Pharmaceuticals signed an agreement to develop and commercialise firibastat in Canada. As part of the agreement, Quantum Genomics will receive up to US$11.35m in upfront and milestone payments as well as double-digit royalties.

Additional agreements likely to be announced soon

There are now four regional agreements in place covering firibastat for difficult-to-treat/treatment-resistant hypertension. However, the company has yet to license the candidate for either the major EU or US regions for hypertension, nor any region for heart failure. Based on recent management comments, we would expect additional licensing announcements in the near term.

Valuation: €1,030m or €46.34 per share

We have slightly adjusted our valuation to €1,030m or €46.34 per share from €1,028m or €47.63 per share. The higher total valuation is due to increased net cash as the short-term debt owed to Negma Group has been repaid in warrants, which were exercised. The lower per share value is due to an increased share count. We have not adjusted the valuation for the licensing deals as the specific upfront payments have not been disclosed. We may increase our probability of success in the future depending on the size and scope of future agreements.

Two additional partnerships and more to come

Quantum Genomics continues to sign licensing agreements for firibastat in difficult-to-treat/treatment-resistant hypertension. One of the recently announced partnerships is with Qilu Pharmaceutical for the Greater China region, Hong Kong and Macau. As part of the agreement, Quantum Genomics will receive upfront and milestone payments of up to US$50m and double-digit royalties. Importantly, Qilu plans to join the Phase III programme in difficult-to-treat/treatment-resistant hypertension, which will enable recruitment in the region. Qilu is an established vertically integrated company that develops, manufactures and commercialises novel pharmaceuticals and biologics along with generics and biosimilars. Qilu has 23,000 employees worldwide spread across 12 subsidiaries and 10 manufacturing sites. The company has launched over 200 products and had revenue of over US$3.3bn in 2019.

Additionally, Xediton Pharmaceuticals has signed an agreement with Quantum Genomics to develop and commercialise firibastat in Canada. As part of the agreement, Quantum Genomics will receive up to US$11.35m in upfront and milestone payments as well as double-digit royalties.

In September Quantum Genomics announced it had signed a licensing and collaboration agreement with OEP to develop and commercialise firibastat for difficult-to-treat/treatment-resistant hypertension in South East Asia (specifically, Taiwan, Malaysia, the Philippines, Singapore, Vietnam, Indonesia, Myanmar and Cambodia), Australia and New Zealand. As part of the agreement, Quantum Genomics will receive US$19m in upfront and milestone payments as well as double-digit royalties. Additionally, OEP will fund part of the Phase III programme in difficult-to-treat/treatment-resistant hypertension patients in Taiwan. OEP has over 1,000 employees worldwide (40% of which are outside of Taiwan) and had revenues of NT$6.1bn (over US$200m) in 2019.

Previously, in December 2019, Quantum Genomics had announced it has licensed firibastat for the treatment of hypertension to Biolab Sanus covering the Latin American region. Biolab Sanus is one of the largest pharmaceutical companies in Brazil, with over 140 products and 3,200 employees. In 2019 it had revenues of around US$600m. As part of the agreement, Biolab Sanus is obligated to pay US$21.2m in upfront and milestone payments as well as royalties. Additionally, Biolab Sanus will be responsible for clinical trial costs in Latin America, which are expected to account for around 20% of the patients enrolled in the Phase III FRESH trial.

There are now four regional agreements in place covering firibastat for difficult-to-treat/treatment-resistant hypertension. However, the company has yet to license the candidate in either the major EU or US regions for hypertension, nor any region for heart failure. Based on management comments on our Edison Talks podcast, we would expect additional licensing announcements in the near term.

Valuation

We have slightly adjusted our valuation to €1,030m or €46.34 per share from €1,028m or €47.63 per share due. The higher total valuation is due to higher net cash as the short-term debt owed to Negma Group (around €1.7m was owed as of the end of September) has been repaid in shares. The lower per share value is due to an increased share count. We have not adjusted the valuation for the licensing deals as the specific upfront payments have not been disclosed. We may increase our probability of success in the future depending on the size and scope of future agreements.

Exhibit 1: Quantum Genomics valuation table

Product

Main Indication

Local

Status

Prob. of success

Launch
year

Peak sales (US$m)

Patent protection

rNPV
(€m)

Firibastat (QGC001)

Hypertension

US

Phase III

50%

2023

1,110

2031

526.69

Firibastat (QGC001)

Hypertension

Europe

Phase III

50%

2023

959

2031

446.86

Firibastat (QGC001)

Development costs

 

 

 

 

(164.06)

Firibastat (QGC001)

Heart failure

US

Phase IIb

20%

2023

574

2031

134.49

Firibastat (QGC001)

Heart failure

Europe

Phase IIb

20%

2023

687

2031

159.57

Firibastat (QGC001)

Development costs

(88.61)

Total

 

 

 

 

 

 

 

1,014.94

Pro forma net cash (30 June 2020 + financing) (€m)

15.13

Total firm value (€m)

1,030

Total shares (31 October 2020) (m)

22.23

Value per basic share (€)

46.34

Source: Edison Investment Research

Financials

Quantum had €13.2m in cash and investments and €2.4m in debt at the end of H120. The company raised €1.7m through an equity line of credit with Kepler Cheuvreux in March and €6m through its Negma Group financing arrangement in the first half. It raised an additional €2m from Negma after the end of H120, bringing the total raised from that financial group to €8m, all of which has now been repaid. The Negma financings were loans that were repaid with warrants that were then exercised by Negma.

The company has stated it has cash to Q321. We forecast €28m in additional financing to the end of 2021, which we model as illustrative debt. The need for additional funding past this point will depend on the FRESH data and the company’s ability to sign additional licensing agreements.

Exhibit 2: Financial summary

€000s

2018

2019

2020e

2021e

Year end 31 December

PCG

PCG

PCG

PCG

PROFIT & LOSS

Revenue

 

 

0

0

0

0

Cost of Sales

0

0

0

0

Gross Profit

0

0

0

0

EBITDA

 

 

(13,598)

(10,760)

(15,617)

(21,572)

Operating Profit (before amort. and except.)

 

 

(13,598)

(10,760)

(15,617)

(21,572)

Intangible Amortisation

0

0

0

0

Other

0

(0)

15

0

Exceptionals

0

0

0

0

Operating Profit

(13,598)

(10,760)

(15,617)

(21,572)

Net Interest

0

0

0

0

Other

150

134

17

0

Profit Before Tax (norm)

 

 

(13,598)

(10,760)

(15,617)

(21,572)

Profit Before Tax (FRS 3)

 

 

(13,448)

(10,626)

(15,601)

(21,572)

Tax

1,458

1,547

2,028

2,804

Deferred tax

0

0

0

0

Profit After Tax (norm)

(12,140)

(9,213)

(13,589)

(18,768)

Profit After Tax (FRS 3)

(11,990)

(9,078)

(13,572)

(18,768)

Average Number of Shares Outstanding (m)

12.8

17.5

21.2

22.4

EPS - normalised (c)

 

 

(93.94)

(52.69)

(64.07)

(83.78)

EPS - FRS 3 (€)

 

 

(0.94)

(0.52)

(0.64)

(0.84)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

626

884

968

960

Intangible Assets

0

360

360

360

Tangible Assets

24

27

107

99

Other

602

497

501

501

Current Assets

 

 

17,855

14,222

18,922

20,162

Stocks

422

333

1,070

1,070

Debtors

2,636

2,486

3,163

3,163

Cash

14,797

11,164

14,456

15,696

Other

0

239

232

232

Current Liabilities

 

 

(5,764)

(4,061)

(5,057)

(5,057)

Creditors

(5,762)

(4,060)

(5,057)

(5,057)

Short term borrowings

(2)

(1)

0

0

Long Term Liabilities

 

 

(849)

(874)

(8,755)

(28,755)

Long term borrowings

(12)

(6)

(8,061)

(28,061)

Other long term liabilities

(837)

(869)

(695)

(695)

Net Assets

 

 

11,868

10,171

6,078

(12,690)

CASH FLOW

Operating Cash Flow

 

 

(10,901)

(10,665)

(14,324)

(18,742)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(16)

(118)

(18)

(18)

Acquisitions/disposals

0

0

0

0

Financing

15,071

7,382

5,293

0

Dividends

0

0

0

0

Other

(446)

(232)

(9)

0

Net Cash Flow

3,708

(3,633)

(9,058)

(18,760)

Opening net debt/(cash)

 

 

(11,069)

(14,783)

(11,157)

(6,396)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

6

7

4296

0

Closing net debt/(cash)

 

 

(14,783)

(11,157)

(6,396)

12,364

Source: company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Quantum Genomics and prepared and issued by Edison, in consideration of a fee payable by Quantum Genomics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

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New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Quantum Genomics and prepared and issued by Edison, in consideration of a fee payable by Quantum Genomics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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