Medigene A Fresh Start In PBC

Medigene has a solid base to embark on a new phase of development, focused on progressing RhuDex to proof-of-concept data in primary biliary cirrhosis (PBC), a potentially lucrative orphan drug market. A robust Phase II trial design and regulatory approvals in 2013 should help to support the partnering and/or fresh financing required to complete the study. Veregen (genital warts) sales, which could increase significantly over the next few years, and new development/partnering progress for EndoTAG-1 (breast cancer) in 2013, are also important valuation drivers.

RhuDex An Attractive Proposition For PBC
Medigene’s decision to switch development plans for RhuDex (CD80 inhibitor) for PBC, an autoimmune disorder of the liver, from prior progress in rheumatoid arthritis (RA), was a shrewd move to fast track development in an attractive orphan drug market. A Phase II study is scheduled to start in H114 and complete by end-2015, with a robust trial design that could ultimately make RhuDex a valuable and attractive asset to support partnering and/or fresh financing.

Veregen Poised For Growth
Veregen (topical ointment for genital warts) is licensed globally to 16 partners and Medigene receives supply chain revenues, royalties and milestones (€3.4m Veregen revenues received in FY12 based on €12m in-market sales). Already marketed in the US, Germany, Austria, Spain, Switzerland and Serbia, multiple new country launches (particularly in Europe) are planned for 2013, providing a platform for potentially significant sales growth in 2014 and beyond (peak sales est $100m).

EndoTAG-1 Still In Play
Medigene made overdue partnering progress on EndoTAG-1 in 2012 by securing SynCore Bio as a partner to help conduct a pivotal Phase III study in triple negative breast cancer (TNBC). SynCore will cover 50% of the cost and patient recruitment (mostly in Asia, Australia and New Zealand) into the study, with Medigene still seeking a partner(s) for EU/US development and commercialisation rights.

Valuation: €75m Represents Clear Upside
We value Medigene at €75m, or €2.03 per share, based on a total rNPV of its products (Veregen, EndoTAG-1 and RhuDex) at €55m and €20m in net cash as of end-2012. This represents clear upside to Medigene’s €31m market capitalisation and €0.84 share price. With cash reserves estimated at c €9.5m by the end of 2013, Medigene is funded through to the end of 2014, but in reality is likely to require fresh funds in H214. A financing initiative ahead of the start of the Phase II RhuDex study cannot be ruled out.

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