Epigenomics — Update 12 January 2016

Epigenomics — Update 12 January 2016

Epigenomics

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Epigenomics

Epi proColon gets FDA fillip

Pharma & biotech

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13 January 2016

Price

€4.8

Market cap

€87m

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Share details

Code

ECX

Listing

Frankfurt

Shares in issue

18.1m

Business description

Epigenomics is a German molecular diagnostics company focused on the detection of cancer. Its main product is Epi proColon, a blood-based DNA test for colorectal cancer, which uses a sophisticated PCR assay to detect methylated copies of the Septin9 gene. It has 38 employees (30 June 2015).

Bull

US guidelines target CRC screening compliance of 80% from current 63%.

A blood-based test could prove an alternative for the non-compliant population.

Epi proColon PMA submission study met its key endpoint, non-inferiority of total sensitivity across all CRC clinical stages of 72% vs 68% for standard FIT (faecal immunochemical test).

Bear

Considerable resources required for the launch of Epi proColon.

Remaining uncertainty of the FDA decision.

Higher overall efficacy of some blood-based cancer tests in development.

Analysts

Hans Bostrom

+44 (0)20 3681 2522

Christian Glennie

+44 (0)20 3077 5727

Epigenomics is a research client of Edison Investment Research Limited

In a surprise move, the FDA has reversed its request for a new behavioural study of Epigenomics’ blood-based colorectal cancer (CRC) diagnostic test, Epi proColon. US marketing clearance and launch now look likely over the coming few months. With a current cash reach to H216, a cash call may now be deferred until after a possible US approval, and the consequent increased certainty may prove beneficial to current shareholders.

FDA drops demand on another Epi proColon study

In its November 2015 response to the ADMIT study concluded in May 2015, the FDA requested yet more data to show that Epi proColon raises willingness among the 37% of US citizens failing to take part in CRC screening programmes, a major public health policy concern. ADMIT showed 99.5% compliance to Epi proColon but, owing to the study design, the 88% compliance to standard faecal-based FIT was several times higher than normal, thus compromising statistical significance. Epigenomics subsequently appealed the FDA’s decision and demanded a supervisory review. Now, the FDA has announced that available data will suffice to reach a final determination on Epi proColon’s safety and effectiveness in the coming months.

Labelling and post-marketing study still to finalise

FDA clearance is still subject to the resolution of technical topics such as appropriate language in the product labelling (Epi proColon is likely to be recommended for CRC screening in patients resisting a faecal test or colonoscopy) and the design of post-approval studies. We believe an approval of Epi proColon should prove helpful in advancing CRC screening from the current 63% of eligible patients towards the American Cancer Society’s goal of 80% by 2018. The test will be made available in the US in co-operation with Polymedco, the largest distributor of CRC tests. On approval, it would be the first and only FDA-approved blood-based CRC test.

Cash call likely needed to support US launch

Based on its quarterly cash burn of €2.5m in the past year, we expect Epigenomics’ €9.0m liquid resources (Q315) to be sufficient until H216. A further €5.2m may be raised from the exercise of convertible notes (2m new shares). With FDA approval now looking possible in Q216 (previously expected in H216), any cash call may take place with more certainty and therefore potentially at a higher share price.

Valuation: At a discount to cancer-diagnostic peers

Following the recent revaluation, Epigenomics’ EV of €84m compares with its cancer diagnostic peers Exact Sciences’ €412m (€/$1.09) and VolitionRx at €66m.

Consensus estimates

Year
end

Revenue
(€m)

PBT
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/13

1.6

(7.3)

(0.62)

0.0

N/A

N/A

12/14

1.5

(8.4)

(0.74)

0.0

N/A

N/A

12/15e

2.5

(12.0)

(0.69)

0.0

N/A

N/A

12/16e

8.9

(9.4)

(0.49)

0.0

N/A

N/A

Source: Bloomberg consensus, company data

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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

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

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