Ergomed PLC
www.ergomedplc.com TICKER: ERGO EXCHANGE: AIMErgomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies.
LATEST REPORTS
Services businesses showing promise
Published: Oct 31 2018
Ergomed’s strategy is to become a global leader by 2020 in Pharmacovigilance and Services for orphan drug development. The reliance on the risk/reward profile of development deals is being dissipated by improvements seen in the Services businesses and better cost controls.
Following this period of transition, a better, more forecastable, cash-generating story will support the valuation expectations for the company. Our valuation is upgraded to 242p / share for the Services businesses, with a further 120p for the Development portion of Ergomed.
Building for growth
Published: Aug 16 2018
Ergomed’s strategy is to become a global leader in pharmacovigilance and orphan drug development services by 2020. This refocusing of the business, communicated earlier in the year, moves Ergomed away from its reliance on the risk/reward profile of development deals and will ultimately result in a much better, more visible, and cash-generating story.
At the Full Year results, the new CEO Stephen Stamp outlined a value-enhancing vision for the business: a move away from co-development projects towards its existing Clinical Research Services (CRS) and its drug safety and medical information (DS&MI) businesses. Both the CRS and DS&MI businesses have been providing clear, repeatable project revenues and these markets are growing substantially.
However, a number of issues have impacted business performance in the first six months of the year including the delay in the timing of a few key contracts and the lag effect of training up new staff to cope with the influx of expected work over the next few years. The former impacted revenues, the latter weighed on costs.
Stephen Stamp took over as CEO while the business was in a period of rapid growth and change. For some months, the role of CFO was unfilled, making Stamp’s job tougher still. The recent appointment of the new CFO Stuart Jackson should help improve information flow to the investment community. Stuart has 20 years' experience at CFO level, having managed companies on the London, NASDAQ and Oslo Stock Exchanges.
Our FY2018 and FY2019 estimates have been trimmed to reflect the revised projections. Updating our valuation using peer-based metrics of c1.8x EV/Sales and c18x PE gives a fair value for the Services businesses (CRS and DS&MI) of 215p / share. The Development and Haemostatix businesses add a further 120p to that, based on an NPV (Net Present Value) analysis.
2018 - creating further value
Published: May 15 2018
Ergomed’s new strategy is to become a global leader in pharmacovigilance and orphan drug development services by 2020. This refocusing of the business moves Ergomed away from its reliance on the risk/reward profile of development deals, towards repeatable and sticky contracts across various geographies and therapy areas. This offers a much better, more visible, cash-generating story.
FY2017 saw Net Services revenue up 36% to £39.6m, Gross profits rose 22% to £14.6m and pre-R&D EBITDA were up to £5.5m from £4.1m in the previous year. Ergomed ended the period with cash of £3.2m, and has been generating further cash since then. By end of December 2017 Ergomed had won £54m in new contracts, up 29% yoy.
The forward order book grew to £88m by the end of December 2017, up from £70m at the same time the previous year and from £59m in 2016. All these contracts are in the refocused Services businesses. Of this, we estimate around 50% falling in FY2018, with most of the rest coming through over FY2019 and FY2020.
The Pharmacovigilance (PV) business, which operates on yearly contracts is relatively sticky – many of these contracts repeat year-on-year, and it is difficult for the client to change PV consultants. For the first time, in 2017, the PV business generated more revenues than the Contract Research Organisation (CRO) business at 56% or £22.2m. The PV business grew 68% last year with recent acquisitions in this area adding further expertise and geographies.
FY2018 and FY2019 estimates have been revised to reflect the changing business model and the move away from a reliance on co-development deals. While revenues are modestly lower, margins have increased, and so EBITDA is broadly unchanged. Organic growth of the Services businesses should continue to be ahead of the market growth of 18% YoY for PV, and 9.5% yoy for the CRO business. Both the PV and CRO businesses will benefit from Ergomed’s new focus and margins should continue to improve.
Our headline valuation has been revised to centre on the Services businesses only, giving a fair value of 266-292p. The Development and Haemostatix businesses add a further 120p to that range.
NB you can see the CEO and COO discussing Ergomed’s results and outlook here: https://www.equitydevelopment.co.uk/webinars/?d=%3D%3DAOwQjM<kn=7578a3acdfe5242d3860b309e7d57cfeIyYubFeL
An interview with management
Published: Apr 13 2018
Stephen Stamp, CEO, and Dr Jan Petracek, COO and CEO of PrimeVigilance Ltd. discuss the Group's recent results announcement and explain their strategy to capture sizable growth opportunities.
2018 - creating further value
Published: Jan 08 2018
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies.
The new co-development deal with Allergy Therapeutics adds 9p to the calculation of the top end of our valuation range. Furthermore, the announcement that Stephen Stamp is taking over as CEO is good news for the business - Stephen understands the company well and should help drive it forward.
Allergy Therapeutics is a long-established UK-based allergy specialist with expertise in short-course allergy therapies. The deal with Ergomed is a multi-product, multi-study co-development partnership to support the commercialisation of Allergy Therapeutics’ OralVac platform.
Ergomed benefits from an almost unique model for listed UK Life Sciences business: long-term revenue generating contracts can be foreseen over a year ahead. In effect c.60% of forecast revenues are already contracted for on the first day of the new financial year. That makes profits easier to predict.
Over the last 18 months, Ergomed secured higher growth revenue for the Services business through the acquisition of PSR with its Orphan Drug specialism, and the acquisition of PharmInvent. It also saw new development deals with Asarina and Allergy Therapeutics, a positive phase II clinical trial for its proprietary programme, Haemostatix’ PeproStat, and completion of a number of trials for its co-development programmes, along with a modest fundraising, new licensing deals and a new CEO. Quite a period!
Good visibility means that Ergomed can better manage its cash flows, and can invest in its higher-value programmes, such as its new co-development deal with Allergy, with confidence in the performance of its underlying business. Ergomed has the potential for further licensing deals for its Development programmes, upside to the valuation range and more M&A.
Our revised valuation range now stands at 270p-394p per share, compared to the current price of 183p.
Positive PeproStat Data
Published: Nov 01 2017
Recently announced results from the phase II clinical trial of PeproStat were positive. As a result, the probability of PeproStat reaching the market increased from around a third to around two-thirds. This adds £12.7m to the valuation of this programme. As expected the shares saw strong performance on the back of the positive data. There remains significant upside to the bottom end of our 276p-401p valuation.
Ergomed acquired Haemostatix in May 2016 for £28m (an initial £8.0m upfront, with the remainder in success-based milestone payments). Haemostatix had developed a new approach to controlling bleeding using a peptide that binds to fibrinogen, targeting a surgical market valued at c. US$2.5bn, growing at c. 6.2% pa.
The phase II trial consisted of 169 patients treated (162 evaluable) at 16 sites in five European countries. PeproStat was shown to be clinically and significantly superior to standard of care across three surgery types.
The mean time to Haemostasis was reduced by 1.55 minutes for PeproStat vs. standard of care, and favourable by investigator opinion (80.9% surgeons rated PeproStat (blinded) as good to excellent in controlling bleeding vs 59.6% for standard of care).
The first commercial deal for a Haemsotatix product was signed late September with a South Korean company, Boryung Pharmaceutical Co. Ergomed will receive an upfront payment and a series of milestone payments as well as a double-digit share of all future product sales in this territory.
Further PeproStat deals, along with the start of the next trial in H2 2018 and initial ReadyFlow data, should feature in the news flow over the next 12-18 months, along with further acquisitions to boost the profitability of the Services business.
The bottom of the 276p - 401p per share valuation is based on the more conservative “Services-only” sales forecast, discounting completely the potential upside from Development projects. The top of the range adds in these projects with the Haeomstatix programme now making up 60% of the Development valuation.
Well-positioned ahead of PeproStat data
Published: Oct 20 2017
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies.
Ahead of the PeproStat data expected toward the end of this month, Ergomed recently improved its competitive position for its Services businesses with its acquisition of PSR in the Orphan Drug/Rare Disease. At the same time, it signed its first deal for PeproStat (and ReadyFlow), suggesting attractive commercialisation opportunities awaiting the data at the end of the month.
Excitingly, the first commercial deal for a Haemsotatix product, PeproStat for the treatment of surgical bleeding was signed late September, having completed the recruitment of its 169 patient Phase IIb trial in July, six months ahead of schedule. A positive result from this clinical trial could increase the probability of success from 36% to 63% (as estimated by BIO for this therapeutic area) in the valuation analysis, nearly doubling the valuation for this programme.
The expected news flow for the rest of 2017 and into 2018 is focused on the outcome of the PeproStat Haemostatix trial data, further acquisitions to boost the profitability of the Clinical Research Services businesses may occur and more contract wins are likely.
The bottom of the range of our increased 281p-397p per share valuation is based on the more conservative “Services-only” sales forecast, discounting completely the potential upside from the attractive Products and Co-Development projects. The top of the range adds in these Product and Co-development projects. With significant upside to the bottom end of our valuation, the shares could see strong performance on the back of positive clinical data.
ARCHIVE
2017
Ergomed interim results webinar September 2017
Published: Sep 19 2017
Dr Dan Weng, CEO, Stephen Stamp, CFO and Andrew Mackie, CBO run through the firm's interim results.
Outlook focused on PeproStat data soon
Published: Sep 18 2017
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies.
Performance in H1 was in line with expectations as total revenues were up a healthy 31% to £22.9m. While net revenues (excluding reimbursed costs) were up 53% to £19.5m,; good performance was seen across the group. As expected following a £1m increase in R&D spend this year on Haemostatix, EBITDA remained broadly flat year-on-year. Most importantly, the forward order book for the Services businesses remains attractive, standing at £70m at the end of July, up c. £10m year-on-year.
The new CEO, Dr. Dan Weng, is expected to continue to drive the business. At the same time, the company retains its visionary and hugely experienced founder, Dr. Miroslav Reljanovic as Executive Vice Chairman. He will be responsible for providing strategic support. This is an exciting combination of talent.
Ergomed’s proprietary compound, PeproStat for the treatment of surgical bleeding, completed the recruitment of its 169 patient Phase IIb trial in July, six months ahead of schedule. This means that the data readout is now expected around the end of October 2017, substantially earlier than expected.
The expected news flow for the rest of 2017 is focused on the outcome of the PeproStat Haemostatix trial, possible acquisitions to boost the profitability of the Clinical Research Services businesses and additional contract wins.
The bottom of the range of our unchanged 232p - 397p valuation per share is based on the more conservative “Services-only” sales forecast, discounting completely the potential upside from the attractive Products and Co-Development projects. The top of the range adds in these Product and Co-development projects.
NB to see a management webinar tomorrow register here: https://register.gotowebinar.com/register/794515183261947906
Ongoing strength in Ergomed's approach
Published: May 08 2017
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies.
Aeterna Zentaris, a co-development partner of Ergomed, announced that its Pivotal Phase III Clinical Trial of Zoptrex in women with endometrial cancer failed to meet its primary endpoint. As a result, there is no longer any potential upside from the relationship. We have reduced the top end of our valuation range/share which includes the co-development deals, by 39.7p.
While it is disappointing that the phase III trial of Zoptrex failed, it is not fatal to Ergomed’s business model. Indeed, in some ways the relationship with Aeterna illustrates the strength rather than the weakness of this model. It was a low-risk co-development deal as Ergomed has already received c US$20m from the service revenues and partnering deals that Aeterna struck on Zoptrex.
In the meantime, the underlying profit generating business remains very healthy. The forward order book for the CRO currently stands at c. £70m (up from £59m in 2016). Of this, we estimate just under 50% falling in FY2017, with the rest coming through over FY2018 and FY2019. In addition, the Pharmacovigilance (PV) business, which operates on yearly contracts, remains sticky – many of these contracts repeat year-on-year.
The expected news flow for 2017 and 2018 suggests significant valuation inflexion points: we shall be looking out, for example, for the Haemostatix trial and Sevuparin phase II results. The Services business could see additional contract wins and is likely to be the focus for M&A. Financial forecasts remain unchanged.
The bottom of the range of our 232p - 397p valuation per share is based on the more conservative “Services-only” sales forecast, discounting completely the potential upside from the attractive Products and Co-Development projects. The top of the range adds in these Product and Co-development projects. This top-end valuation is now 397p, after the removal of the Zoptrex deal.
£70m contracted revenues still to come
Published: Apr 11 2017
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies.
2016 perfectly highlighted the strengths of the Ergomed business: the visibility of its Contracted Revenues and the potential upside from co-development deals. Contracted revenues now stand at an impressive £70m, up from £42m, and the outlook remains auspicious. FY2016 came in ahead of revised forecasts and there are upgrades to FY2017 onwards.
Our FY2016 assumptions were upgraded following the period-end update to revenues of £38m, £2.1m of Profit before Tax and fully diluted EPS of 3.5p. The actual performance showed revenue growth of £39.2m offset by some increased costs. The growth in the Services business substantially outpaced industry average.
The forward order book for the CRO is very healthy. It currently stands at £70m (up from £59m in 2016). Of this, we estimate just under 50% falling in FY2017, with the rest coming through over FY2018 and FY2019. In addition, the Pharmacovigilance (PV) business, which operates on yearly contracts, remains sticky – many of these contracts repeat year-on-year. Considering this, we estimate PV revenues of c£17m for FY2017. At the same time, FY2019 forecasts have also been released and, with no Haeomstatix R&D included, profits grow substantially.
Expected newsflow for 2017 and 2018 indicates significant valuation inflexion points starting with the read-out in April of the Zoptrex phase III results, while in 2018 Haemostatix data and Sevuparin phase II results are of interest. Meanwhile, the Services business could see additional contract wins and is likely to be the focus for M&A.
Finally, our valuation range is increasing. With Haemostatix moving into phase II, good peer performance, earnings upgrades and an attractive order book, the analysis suggests a value range per share of 232p to 437p.
View the Results Webinar
Published: Apr 04 2017
You can now hear Dr. Miroslav Reljanovic, Founder and Chief Executive Officer, Stephen Stamp, Chief Finance Officer, and Andrew Mackie, Chief Business Officer, present the preliminary 2016 results on behalf of Ergomed.
To view simply click on the video below.
Ergomed plc - Equity Development Investor Forum, January 2017
Published: Jan 27 2017
Stephen Stamp, Chief Financial Officer, presents the exciting opportunities for Ergomed plc.
2016 revenues ahead of forecasts
Published: Jan 25 2017
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies.
The recent period end update for Ergomed confirmed the good performance for that was expected for FY2016, with revenues of £38m up 26% year on year, against £35.5m forecast. The company retains its momentum, and with an attractive forward order book currently worth £42m, this could be expected to continue.
Our FY2016 assumptions have been adjusted to reflect the better than expected performance: revenues have increased to £38m, adding just over £0.1m to EBITDA, and around £0.03m to PBT. This improved the fully diluted EPS by 0.1p.
A sum-of-the-parts valuation analysis suggests that the Services businesses are valued at c.202p / share. With the Products businesses added to this, the group valuation increases to 301p / share.
2016
Adding earnings. Adding future upside.
Published: Dec 13 2016
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies. It has unusually high revenue visibility, indeed the order backlog stood at c £60m at the end of July. The security of revenues is due to two factors: long-term clinical trial contracts in the Clinical Research Organisation (CRO) business and the high client retention rates seen in the Primevigilance business.
The recent acquisition of PharmInvent Services adds further high growth revenue stream to Ergomed's portfolio. At the interim results, management highlighted the strength of the contract visibility in Ergomed’s Services business. The security of revenues is due to two factors: long-term clinical trial contracts in the Clinical Research Organisation (CRO) business and the high client retention rates seen in the Ergomed’s Primevigilance business. The newly acquired PharmInvent has excellent client retention rates too, and is growing as strongly as PrimeVigilance.
The new co-development deal with Asarina adds a further attractive co-development partner. This time, Ergomed has taken a share of the business which should give it upside from and access to follow-on therapies for premenstrual dysphoric disorder. The main value is likely to be in the oral follow-on, and if it gets to the clinic, investors could expect to see further valuation upside.
Our sum of parts calculation rises on the back of these developments by 34p, giving a range of 163p - 301p per share.
Excellent H1 progress, confident for H2
Published: Oct 11 2016
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies. It has unusually high revenue visibility, indeed the order backlog stood at c £60m at the end of July. The security of revenues is due to two factors: long-term clinical trial contracts in the Clinical Research Organisation (CRO) business and the high client retention rates seen in the Primevigilance business.
In an area that is normally fraught with risk, Ergomed has pursued a low risk strategy to benefit from drug development. It provides its services on (on-average) a zero-margin basis to its partner for a percentage (between 5% and 15%) of the revenue the partner receives for the asset. The income encompasses both long-term royalties and nearer-term milestones.
The recent H1 results show that Ergomed has already contracted enough business to hit FY2016 expectations, and has good visibility into FY2017 too. We also see significant upside potential going forward from its co-development relationships and from its ownership of Haemostatix.
Our valuation of the shares looks separately at the Services and Products (including co-development and Haemostatix) businesses. The Services business alone is valued higher than the current share price (at between 159p – 211p), while the Products business adds a further 83p. Adding to Products' worth a value for Services of 184p, means we reach a fair value of 267p / share.
View the Results Webinar
Published: Sep 30 2016
You can now hear Dr. Miroslav Reljanovic, Founder and Chief Executive Officer, Steven Stamp, Chief Finance Officer, and Andrew Mackie, Chief Business Officer, present the interim results for Ergomed and answer investor questions.
To view simply click on the video below.