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goetzpartners securities Limited
Epigenomics (ECX-DE): Strong tailwinds expected from Epi proLiver
10-Oct-2018 / 11:11 GMT/BST
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*Published to the market and investors on 10th October 2018 @ 10.19am (London
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*Epigenomics (ECX-DE): Strong tailwinds expected from Epi proLiver*
*Recommendation: OUTPERFORM*
*Target Price: EUR4.01 (reduced from EUR6.82) *
*Current Price: EUR2.24 (COB on 9th October 2018) *
*KEY TAKEAWAY*
Epigenomic's growing portfolio of liquid biopsy tests represents strong
commercial potential. The company recently announced plans for a new test in
their portfolio, to CE mark its mSEPT9 blood test for liver cancer. We expect
this to happen by year-end 2018E, allowing for commercialisation in Europe. We
are convinced about the positive commercial outlook of Epigenomic's liquid
biopsy tests due to a differentiated profile, fast readouts, a large target
markets and significant health-economic impact. We have built a proprietary
costing and economic analysis to illustrate direct diagnostic cost savings
with Epi proLiver and a health economic benefit of catching liver cancer
patients earlier than with standard of care. We reiterate our OUTPERFORM
recommendation and adjust our DCF-derived target price to EUR4.01 (from
EUR6.82).
Liver cancer - a large commercial opportunity
A c.EUR3bn global market together with the growing trend towards minimally
invasive liquid biomarkers, makes liver cirrhosis surveillance for HCC a
promising market for Epigenomics. The company intends to initiate a
prospective clinical trial in the U.S. for submission to the FDA, and
potentially CFDA for approval in China. We forecast strong growth in the
liquid biopsy market and see strong strategic and commercial potential for
Epigenomics by capitalising on this opportunity.
Proprietary cost analysis indicates strong health-economic savings potential
We conducted a cost-analysis in order to estimate the direct and indirect
savings associated with implementation of an effective blood-based screen such
as Epi proLiver. Our analysis shows a significant reduction in the frequency
of false positives due to inaccurate ultrasound testing, thus decreasing the
number of redundant MRI/CT scans, the costs associated with avoidable
complications, as well as premature mortality and morbidity.
U.S. Congress supports coverage of blood-based colorectal cancer screening
tests
In early October, Epigenomics announced that the U.S. Congress urges the
Centers of Medicare & Medicaid Services ("CMS") to provide coverage for
blood-based screening tests for colorectal cancer. This positive step towards
legislative approval generates a strong tailwind for Epi proColon, paving the
way for widespread adoption and utilisation across the U.S., increasing
screening participation rates and decreasing the frequency of late-stage colon
cancer diagnoses.
Valuation suggests ample upside
In our view, the key uncertainty remains reimbursement and inclusion into
medical guidelines for Epi proColon, and CE mark for Epi proLiver, but with
the new product candidate de-risking the commercial outlook, Epigenomics
offers a highly attractive investment opportunity. We reiterate our OUTPERFORM
recommendation and adjust our target price to EUR4.01 (from EUR6.82) to
reflect delays in the development of Epi proLung.
Kind regards,
Martin Brunninger | 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 | martin.brunninger@goetzpartners.com /
healthcareresearch@goetzpartners.com
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(END) Dow Jones Newswires
October 10, 2018 06:11 ET (10:11 GMT)
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