DJ Evotec AG (EVT-DE): Evotec and Centogene join forces in rare diseases
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goetzpartners securities Limited
Evotec AG (EVT-DE): Evotec and Centogene join forces in rare diseases
02-Sep-2018 / 12:24 GMT/BST
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*Published to the market and investors on 31st August 2018 @ 8.42am (London
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*Evotec AG (EVT-DE): Evotec and Centogene join forces in rare diseases*
*Recommendation: OUTPERFORM*
*Target Price: EUR25.00 (increased from EUR19.40 / UR) *
*Current Price: EUR22.09 (COB on 30th August 2018)*
*KEY TAKEAWAY*
Evotec has signed a global strategic partnership with Centogene AG focused on
small molecule drug discovery for rare genetic diseases. This is an exciting
opportunity for Evotec with large future upside potential, since (1) rare
diseases are one of the fastest growing pharmaceutical markets, (2) the cost
of genetic testing has come down rapidly over the last decade, allowing for
extensive genetic analyses at low cost, and (3) Centogene, a global leader in
genetic testing and big data solutions focused on rare genetic diseases, owns
a proprietary mutation database that allows for unique medical and genetic
insights both for target and biomarker identification. We increase our target
price to EUR25 per share (from EUR19.40 which was under review) and reiterate
our OUTPERFORM recommendation. Evotec is uniquely positioned to continue
benefiting from the strong pharma outsourcing trend, in our view, based on its
highly innovative technology platforms.
Rare / orphan diseases have become a highly sought therapy area
Approximately 7,000 rare diseases have been identified to date, and 2% - 3% of
the human population suffers from a rare disease. According to Evaluate
Pharma, orphan drug sales are expected to grow to a staggering $290bn by
2022E, representing an 11% 2017-2022E CAGR and accounting for over one-fifth
of total prescription drug sales.
Key challenges include small patient numbers, limited data and inadequate
models
Although collectively rare diseases are a large therapy area, each disease in
itself is represented by very small patient numbers. Hence, the underlying
genotype is not well understood for most disease phenotypes. In addition,
there is a lack of adequate cellular and experimental models - all of which
render drug development a challenging endeavour.
The cost of genetic testing has been falling exponentially
The first full sequence of a human genome, announced in 2001, took about 15
years and cost an estimated $2.7bn. Since then, multiple technological
advances including the introduction of next-generation sequencing ("NGS") have
led to a rapid decline in sequencing costs. It is now possible to sequence a
whole human genome for just over $1,000 in a matter of 2-4 weeks. This has
paved the way for an explosion in human genomic information, thus boosting the
understanding of rare genetic diseases.
Centogene is a leader in genetic testing and big data analysis
Since being founded in 2005, Centogene AG, a privately held German company,
has rapidly established itself as a leading, fully integrated leader in
genetic testing for rare diseases. One of its unique selling points is
CentoMD, a genotype / phenotype mutation database, which is based on c.180k
analysed human cases, has over 3,400 associated phenotypes, and includes over
6.7 million variants. CentoMD represents a powerful tool for the
identification of novel drug targets and biomarkers, as well as suitable
patients in the context of clinical trials.
Combining Evotec's drug discovery tools with Centogene's rare disease insights
The collaboration will focus on the development of a strategic high-throughput
platform to test small molecules for rare metabolic diseases, combining
Evotec's drug discovery capabilities - particularly its induced pluripotent
stem cell ("iPSC") platform - with Centogene's leading mutation database. To
our knowledge, this is the first partnership of its kind, once again
demonstrating Evotec's position at the forefront of biopharma innovation,
including embracing the increasing role of digitalisation and big data to
optimise the utility of technology and resources with the aim of improving R&D
efficiency by reducing time and cost of drug discovery whilst increasing the
chance of success.
Kind regards,
Brigitte deLima | Analyst
goetzpartners Healthcare Research Team | Research Team
goetzpartners securities Limited
The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.
T +44 (0) 203 859 7725 | brigitte.delima@goetzpartners.com /
healthcareresearch@goetzpartners.com
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