Epigenomics: Priority FDA Review Puts Approval On Target For Q4

Acceptance of its PMA application and notification of priority review status puts Epigenomics’ (ECX) bood-based Epi proColon on track for approval in Q413. Meanwhile, rival Exact Sciences has just filed a PMA application for its stool-based Cologuard test. The disparity in the market’s enterprise valuations of the two companies ($27m vs $750m) suggests that investors believe Exact’s test will dominate the market. However, Edison contends that Epi proColon still has a place in this market, and in this scenario, Epigenomics’ low valuation offers investors a geared upside.


Priority FDA review puts approval on target for Q4
The filing of the PMA and award of priority review status makes US approval of Epi proColon possible by Q413. The PMA was based on two large studies that showed sensitivity (across all CRC stages) of 68-72% at a specificity of 80-81%. However, the overall performance data may not be the key determinant of success in the market. The ability to identify early-stage CRC and the presumed patient preference for blood- vs stool-based tests may prove to be as important.
Not so exacting a rival?

Results from Exact Sciences’ DeeP-C trial showed an impressive 92% sensitivity at 87% specificity, but a mildly disappointing 42% sensitivity (given >50% had been targeted) for pre-cancerous polyps (albeit 66% for polyps ≥2cm). Exact recently submitted this final PMA module to the FDA, six months later than Epi proColon’s PMA application filing.

Funded to Q413
A rights issue and subsequent private placement in January raised €5m (gross), giving Epigenomics a cash runway until Q413; cash at the end of Q1 was €5.5m. However, investors should expect the company to seek to raise further equity finance in 2013.

Valuation: Risk-adjusted NPV of €84m
Our risk-adjusted NPV for Epigenomics remains unchanged at €84m. Our gross valuation model is based on prudent assumptions of Epi proColon’s probability of success, launch date, pricing and market penetration.

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