DJ Curetis (CURE-NL): Partnering drives turn-round
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goetzpartners securities Limited
Curetis (CURE-NL): Partnering drives turn-round
06-May-2019 / 08:13 GMT/BST
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*Curetis (CURE-NL): Partnering drives turn-round*
*Recommendation: OUTPERFORM*
*Target Price: EUR3.50 (reduced from EUR10) *
*Current Price: EUR1.14 (CoB on 3rd May 2019) *
*KEY TAKEAWAY*
Insufficiently financed to implement its integrated model, Curetis has opted
to market its infection diagnostic Unyvero platform through established
players. In Europe, Curetis will now leverage the extensive sales and
marketing infrastructure of Menarini. While maintaining a direct sales
capability for now, we anticipate that Curetis will also move towards a
co-distribution model to exploit the substantial US opportunity. Prospects in
China remain bright with partner Beijing Clear Biotech ("BCB") boosting
minimum purchase guarantees in advance of Unyvero approval and launch in
2020E. Curetis believes that this less capital intensive strategy can be
funded from the out-licensing of the new 'load and walk' Unyvero A30 RQ; a
variety of partners may be interested in this flexible, convenient and
cost-effective MDx solution. Expected to be self-financing in the near term,
there may be additional upside from a possible spin-out of its unique AMR
(anti-microbial resistance) subsidiary Ares Genetics. Now at historic lows, we
reiterate our OUTPERFORM recommendation, and reduce our target price to
EUR3.50 (from EUR10).
*Strong European partner* - Where Curetis has struggled on-its-own, with 1000
employees, pan-European infrastructure and ten thousand instrument installed
base, Menarini Diagnostics is well equipped to drive adoption of the Unyvero
A50 platform.
*US remains major opportunity* - Increasing regulatory and commercial
incentives for rapid accurate infection diagnosis are expected to drive demand
for Unyvero A50 in the innovative and less fragmented US market. Currently
focussed on direct sales, we anticipate movement to a more partnered model
will accelerate A50 adoption.
*China opportunity expanded* - With approval by the National Medical Products
Administration and launch expected in 2020E, BCB has already increased minimum
purchase guarantees to 360 systems and 1.5 million test cartridges over eight
years.
*Largely self-financing* - Suitable for application in infectious disease,
oncology and beyond, Curetis indicates significant interest to license the
cost-effective, rapid load and walk Unyvero A30 RQ platform. Resulting upfront
payments expected to be sufficient to support new less capital-intensive
strategy.
*Upside from Ares Genetics AMR spin-out* - Ares subsidiary equipped to meet
growing demand for detection and monitoring of AMR. Initial opportunity will
be in testing service for public health and more complex infection; long term
upside from development of IVD kits supported by same-day cloud-based AMR
analysis. Most likely venture funded; with first financing round possible by
YE2019E.
*Value upside and triggers* - Unable to finance an integrated model, the stock
has seen a dramatic decline. We see significant upside from the new less
capital-intensive co-distribution strategy. First cash upfronts from A30 RQ
out-licensing and a possible VC funding of Ares Genetics promise potential
triggers in H2/2019E, H1/2020E.
Kind regards,
Chris Redhead | 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 | chris.redhead@goetzpartners.com /
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