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goetzpartners securities Limited Free to access research and investor meetings in a post-MiFID2 world. This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.
KEY TAKEAWAY Marinomed reported slightly weaker Q1/2019 revenues than we had anticipated, due largely to temporarily weaker demand for the marketed Carragelose products (colds and flu infections) in two core markets, Germany and Poland. Nevertheless, we believe that our projections for FY2019E remain achievable, since: (1) most other markets delivered positive sales performance, (2) Q1 has traditionally been a weaker quarter due to seasonality, with demand for Marinomed's products usually much stronger in H2, and (3) additional launches are planned to take place in the coming months. Importantly, lead pipeline asset and key value driver Budesolv (dissolved budesonide), which recently met key endpoints in the registrational Phase III trial in allergic rhinitis ("AR", hay fever), remains on track for submission in 2020E, paving the way for launch in 2021E. We maintain and reiterate our OUTPERFORM recommendation and EUR103 target price ("TP"). Increase in operating loss reflects Budesolv Phase III trial costs Marinomed reported Q1/2019 revenues of EUR0.75m vs. EUR0.92m in Q1/2018. The operating loss more than doubled to EUR2.63m from EUR1.05m, due largely to an increase in R&D expenses to EUR1.39m from EUR0.78m, reflecting costs related to the Budesolv Phase III trial, and one-off costs related to the recent IPO. There was also an increase in net financial expenses to EUR0.61m from EUR0.18m, which included EUR0.47m in non-cash costs related to the convertible bond. For FY2019, we forecast revenues of EUR7.16m, which assumes that there will be a significant ramp-up in revenues as Marinomed's 14 partners continue to expand sales of its six products across 40 countries, including through new launches. Our forecasts for operating and net loss are EUR9.14m and EUR9.54m, respectively, and we expect Marinomed to end the year with a net cash balance of EUR9.6m. Key driver Budesolv on track following positive Phase III trial results Marinomed had already reported that key value driver Budesolv (based on the proprietary Marinosolv platform) had met the primary and a key secondary endpoint of the pivotal Phase III trial in AR. In addition to demonstrating non-inferiority to reference product Rhinocort Aqua (budesonide suspension, marketed by J&J) after one week of treatment, the nasal spray also showed a faster onset of action. In our view, this data positions Budesolv to become a large product within the c.$13bn AR market, of which intranasal corticosteroids account for c.$5bn. We forecast launch in 2021E and peak sales of c.EUR760m in 2036E, which assumes a market share of around 5%. Marinomed intends to sell Budesolv as an OTC product and is currently in discussions with potential commercialisation partners. Target price of EUR103 per share suggests nearly 30% upside Our TP for Marinomed is based on a sum-of-the-parts valuation that consists of risk-adjusted net present values for marketed products and developmental product candidates plus net cash. Budesolv in AR accounts for 45% of our fair value, the Carragelose products for 28%, Tacrosolv (dissolved tacrolimus) in allergic conjunctivitis and dry eye disease for 21%, and net cash at YE2019E for the remainder. Kind regards,
goetzpartners securities Limited The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK. T +44 (0) 203 859 7725 | /
Registered in England No. 04684144. Managing Directors: Dr. Stephan Goetz, Martin Brunninger and Ulrich Kinzel.
Co-Heads / Senior Management - Martin Brunninger and Ulrich Kinzel.
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