2018 - creating further value
Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies.The new co-development deal with Allergy Therapeutics adds 9p to the calculation of the top end of our valuation range. Furthermore, the announcement that Stephen Stamp is taking over as CEO is good news for the business - Stephen understands the company well and should help drive it forward.
Allergy Therapeutics is a long-established UK-based allergy specialist with expertise in short-course allergy therapies. The deal with Ergomed is a multi-product, multi-study co-development partnership to support the commercialisation of Allergy Therapeutics’ OralVac platform.
Ergomed benefits from an almost unique model for listed UK Life Sciences business: long-term revenue generating contracts can be foreseen over a year ahead. In effect c.60% of forecast revenues are already contracted for on the first day of the new financial year. That makes profits easier to predict.
Over the last 18 months, Ergomed secured higher growth revenue for the Services business through the acquisition of PSR with its Orphan Drug specialism, and the acquisition of PharmInvent. It also saw new development deals with Asarina and Allergy Therapeutics, a positive phase II clinical trial for its proprietary programme, Haemostatix’ PeproStat, and completion of a number of trials for its co-development programmes, along with a modest fundraising, new licensing deals and a new CEO. Quite a period!
Good visibility means that Ergomed can better manage its cash flows, and can invest in its higher-value programmes, such as its new co-development deal with Allergy, with confidence in the performance of its underlying business. Ergomed has the potential for further licensing deals for its Development programmes, upside to the valuation range and more M&A.
Our revised valuation range now stands at 270p-394p per share, compared to the current price of 183p.
Ergomed is engaged in the provision of specialized services to the pharmaceutical industry and the development of new drugs. Co. focuses on oncology, neurology and immunology and the development of orphan drugs. Co. is building a portfolio of co-development partnerships with pharmaceutical and biotech companies. Co. has two business segments: clinical research services, which provides clinical development services to clients ranging from pharmaceutical companies to small and mid-sized drug development companies; and drug safety and medical information services, which includes Co.'s subsidiary, PrimeVigilance Limited, a pharmacovigilance and medical information services company.
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