Epigenomics AG (ECX - XETRA - €3.95 ) Buy Target Price: €10.00 Approval Expected Soon, Pending Labeling Jason Kolbert (212) 895-3516 jkolbert@maximgrp.com Jason McCarthy, Ph.D. (212) 895-3556 jmccarthy@maximgrp.com
Summary:
Epigenomics announced that the U.S. FDA has informed the company that the already submitted data for Epigenomics’ blood-based colorectal cancer (CRC) screening test Epi proColon is sufficient to allow the agency to make a final determination for approval. The company is finalizing labeling now. We expect an approval "soon." Conclusion: Epi proColon will likely be the first and only approved blood-based CRC test product in the market, driving the company (with its U.S. commercial partner Polymedco) towards entry and commercialization in the U.S. and global marketplaces.
Details:
Operational Highlights. Epigenomics continues to make steady progress in advancing the development of Epi proColon, targeting both the Asian and U.S. markets, specifically:
In the U.S., the company addressed the FDA response letter (its PMA submission of the Epi proColon). The FDA requested additional data to support patient compliance to CRC screening in the target population — i.e. in those patients with a history of non-compliance — to recommended CRC screening programs. With the information now in hand and the FDA announcement that no new data is needed, we expect an approval soon. Blood-based (Septin 9) testing protocol has been included in the Chinese screening guidelines for CRC. As a result, 3Q sales saw an increase. Epigenomics continued to support its Chinese partner BioChain to secure pricing and reimbursement decisions for the multiple provincial governments in China. The company extended its marketing efforts in Asia through multiple presentations at conferences, including LabAsia, the Malaysia 5th International Scientific Instrument and Laboratory Equipment Exhibition and Conference in Kuala Lumpur in October. In Europe, there have been presentations around the company's proprietary DNA methylation biomarker technology at the "Circulating Nucleic Acids in Plasma and Serum IX Meeting." There was also an Epigenomics awareness day for CRC screening as part of Berlin's Health Week. Beyond the Epi proColon, Epigenomcis has leveraged its existing product Epi proLung to complete a first clinical evaluation of its performance in two independent case-control sets (the training set had 30 plasma samples, and the larger testing consisted of 151 samples) of lung cancer blood samples. The DNA methylation panel demonstrated 95% sensitivity and 64% of specificity in detecting lung cancer. Epigenomics reported 3Q15 with nominal revenues (€471k), which ultimately translated into a net loss of €2.4M or (€ 0.14). The company ended the quarter with €8.9M in cash. Based on our assumptions, the company is funded through 2H16.
Valuation: Our 12-month target price of 10 € is based on ECX trading at an EV/revenue multiple of 3.5x our 2018 revenue outlook and discounted back to 2015.
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