Adding earnings. Adding future upside.
​Ergomed offers clinical trial and pharmacovigilance services to pharmaceutical companies, while also co-developing a product portfolio of therapies. It has unusually high revenue visibility, indeed the order backlog stood at c £60m at the end of July. The security of revenues is due to two factors: long-term clinical trial contracts in the Clinical Research Organisation (CRO) business and the high client retention rates seen in the Primevigilance business.
The recent acquisition of PharmInvent Services adds further high growth revenue stream to Ergomed's portfolio. At the interim results, management highlighted the strength of the contract visibility in Ergomed’s Services business. The security of revenues is due to two factors: long-term clinical trial contracts in the Clinical Research Organisation (CRO) business and the high client retention rates seen in the Ergomed’s Primevigilance business. The newly acquired PharmInvent has excellent client retention rates too, and is growing as strongly as PrimeVigilance.
The new co-development deal with Asarina adds a further attractive co-development partner. This time, Ergomed has taken a share of the business which should give it upside from and access to follow-on therapies for premenstrual dysphoric disorder. The main value is likely to be in the oral follow-on, and if it gets to the clinic, investors could expect to see further valuation upside.
Our sum of parts calculation rises on the back of these developments by 34p, giving a range of 163p - 301p per share.
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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