Epigenomics (ECX-DE): Good entry point for the long term investor

Dow Jones received a payment from EQS/DGAP to publish this press release.

goetzpartners securities Limited 
Epigenomics (ECX-DE): Good entry point for the long term investor 
 
23-Nov-2017 / 11:39 GMT/BST 
 
*This equity research note was formally published on 16th November 2017 at 
2.21pm.* 
 
*Epigenomics (ECX-DE): Good entry point for the long term investor 
 
Recommendation: OUTPERFORM (from NEUTRAL) 
Target price: EUR6.82 
Current price (as at 16th Nov 2017): EUR4.13* 
 
Upgrade to OUTPERFORM from NEUTRAL. Our upgrade is driven by a significant 
share price decline, improvement in pricing and sufficient liquid assets to 
prepare for commercialisation in the US. While US reimbursement decision is a 
binary event and represents uncertainty for this region, the health economic 
value of this test is of significant value to healthcare systems world-wide. 
We see a potential takeover attempt from existing or new investors as a 
possible scenario. Thus, current trading levels represent an attractive value 
proposition over a two to three-year period. 
 
*Results and Guidance* - The company has improved profit guidance for the full 
year by EUR2.0m based on deferred investments in its commercialisation 
platform due to delayed product reimbursement set up in the US. Revenues are 
expected to come in between EUR1.0m to EUR1.5m for 2017. The company has 
issued a convertible bond of EUR7.1m and has liquid assets of EUR16.9m. The 
average monthly burn rate has come down to EUR0.77m in 2017 (from EUR0.98m in 
2016). We believe, the current cash reserves will take the company comfortably 
through 2018. 
 
*Pricing of the test* - Price increase in the US remains a positive - As a 
reminder, on 22nd September this year the US CMS published their decision on 
test code and reimbursement price for Epi proColon, which was cross walked to 
a different test code. The newly determined payments rates according to PAMA 
see the price increasing to $124 from $83, a 50% upside. This is an important 
milestone in the CMS reimbursement process. 
 
*Reimbursement and Guidelines* - The test still needs to progress through 
national coverage determination following inclusion into medical guidelines. 
Epi proColon is the first blood-based biomarker test approved by the US FDA 
for CRC screening. It improves on convenience, acceptance, is less 
embarrassing and avoids the need for multiple tests. Epi proColon is in the 
process of being incorporated into US medical guidelines and now the price for 
reimbursement is set. 
 
*Distribution Agreement* - ECX has a US distribution deal with lead player 
Polymedco. Leading US laboratory company LabCorp has also launched Epi 
proColon. In China, a strategic collaboration is in place with Biochain, a 
leading distributor of laboratory testing which commenced commercialisation in 
2015. 
 
*Valuation* - ECX share price became undemanding in our view. Profitability 
guidance was raised and we view the pricing as a step in the right direction. 
However, the variables of national coverage determination and medical 
guideline incorporation still need to be met. The commercial potential of Epi 
proColon is highly attractive. Despite the near-term revenue visibility is not 
clear over the next 12 months, we believe that the value of such a test for a 
third party is significantly above the current trading price. Although, shares 
will come under pressure in a negative reimbursement decision the potential 
takeout scenario provides a valuation floor and future upside to today's 
trading levels. Hence, we upgrade our recommendation to OUTPERFORM (from 
NEUTRAL), but maintain our DCF-derived target price of EUR6.82. 
 
Click here for full PDF version [1] 
 
goetzpartners Corporate Research 
goetzpartners securities Limited 
The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK. 
T [phone] | [e-mail] / 
[e-mail] 
 
www.goetzpartnerssecurities.com [2] / www.goetzpartners.com [3] 
 
Registered in England No. 04684144. 
Managing Directors: Dr Stephan Goetz, Martin Brunninger and Ulrich Kinzel. 
 
To change your subscriptions or be removed / unsubscribed entirely from our 
CRM, please e-mail: [e-mail] 
 
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. 
 
This communication (including any attachments) from goetzpartners securities 
Limited ("GPSL") is confidential and may contain information which is 
proprietary, privileged or otherwise legally protected against unauthorised 
use or disclosure. If you receive this communication in error or are not the 
intended recipient of this communication, please delete and destroy all copies 
in your possession, notify the sender that you have received this 
communication, and note that any review or dissemination of, or the taking of 
any action in reliance on this communication is expressly prohibited. GPSL 
shall not be liable for the improper or incomplete transmission of the 
information contained in this communication nor for any delay in its receipt 
or damage to your system. GPSL does not guarantee that the integrity of this 
communication has been maintained nor that this communication is free of 
viruses, interceptions or interference and makes no warranties in relation to 
these matters. This is not an offer or a solicitation to buy or sell 
securities or investment products, or an official confirmation. GPSL [4] is 
authorised and regulated by the Financial Conduct Authority of the United 
Kingdom (Firm Reference Number: 225563). 
 
GPSL publishes both non-independent (corporate sponsored) and investment 
research. 
 
Click on the following hyperlink for our Research Library: GPSL Equity 
Research Library [5] 
 
GPSL equity research publications are also available and accessible on the 
following aggregators (for Institutional Use Only): AlphaSense, Bloomberg 
(GOET), Capital IQ, EQS, FACTSET, RNS Reach and Thomson Reuters. 
 
Notes - for non-HTML5 websites - please click on the folloiwng link for the 
full pdf version. 
 
https://gp.bluematrix.com/sellside/EmailDocViewer?encrypt=02d9d5df-3b77-4ac4-9 
7d7-8858777b5eb0&mime=pdf&co=gp&id=[e-mail]&source=library 
View [6] 
 
Dissemination of a FINANCIAL NEWS, transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
End of Announcement - EQS News Service 
 
632113 23-Nov-2017 
 
 
1: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=59bf7139599fcd72de21984d50f8961d&application_id=632113&site_id=vwd&application_name=news 
2: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=750ca54579c5d5447638f7f35718f4d1&application_id=632113&site_id=vwd&application_name=news 
3: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=f8cefacf98ae99af351300c1a543fffb&application_id=632113&site_id=vwd&application_name=news 
4: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=ba4d174d6cc17a15461e9920a97cb6e6&application_id=632113&site_id=vwd&application_name=news 
5: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=a8a38ea79831272865b5aae2e3600818&application_id=632113&site_id=vwd&application_name=news 
6: http://public-cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=ea6dd6aa56b110bd337bd06a06b81c29&application_id=632113&site_id=vwd&application_name=news 
 

(END) Dow Jones Newswires

November 23, 2017 06:39 ET (11:39 GMT)