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Edison Investment Research Limited
London, UK, 26 January 2021 Ergomed (ERGO): PrimeVigilance excels; CRO strengthened in US Ergomed's H220 trading update highlights a successful end to 2020 despite the COVID-19 pandemic causing restrictions for much of the year. Total revenues were £86.4m (up 26.5%). Like-for-like revenues in the PrimeVigilance segment grew 30% (or 56% including the acquisition in January 2020). Unsurprisingly, the CRO segment was flat. However, in H220 revenues were up 11.2% over H120 and up 15.2% y-o-y. Ergomed's key markets are the US and Europe, where vaccine deployment should be relatively efficient, so we expect the CRO segment to rebound throughout 2021. The recent MedSource acquisition will also significantly add to the 2021 top line. Because of the well-balanced pharma services offering (pharmacovigilance and CRO), Ergomed has proved to be a resilient business with further growth prospects intact, in our view. Net positive revisions to our estimates and an expansion of peer multiples have led to an upgrade of our valuation to £501m or 1,113p/share (from 845p/share previously).
We value Ergomed at £501m or 1,113p/share, compared to £409m or 845p/share previously, prior to the MedSource acquisition. This is a result of net positive revisions to our estimates, as well as substantial peer multiple expansion (see Exhibit 2 vs last published in our September 2020 report). FY20 results will be released in March 2021, when we will revise our estimates in detail.
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