MagForce AG

07.11.2018 - Equity Research Report (english) // buy

Research Note – MagForce AG - english

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Unternehmen: MagForce AG
Branche: Biotechnologie-Pharma
Rating: buy
Kurs bei Erstellung in €: 6,09
Kursziel in €: 15,30
Mögl. Interessenskonflikt gem. §34b Abs.1 WpHG und FinAnv: 5a;6a;11

After the publication of the half-year figures, the forecasts for the coming financial years remain valid thanks to the continued positive outlook and the confirmed approval schedule. The basis for this remains the planned roll-out of NanoTherm technology in Europe, more specifically in Poland, Italy, Spain and Germany. The mobile solution, which eliminates the need for permanent and relatively costly installation in the treatment centres, has now been developed and the technical requirements have been met. The readiness of the treatment centres to cooperate on the deployment of MagForce technology should increase significantly, particularly because of the associated reduction in risk for the user.

Another important aspect of the European roll-outs is the planned reimbursement of costs by the insurance companies, as the treatment is currently still financed privately or by individual request to the health insurance provider. Reimbursement studies are to be carried out in this regard in the countries targeted, with low costs expected in each case.

The approval process for prostate treatment, which is still expected to be completed in the second half of 2019, is also proceeding as planned. Once the pivotal studies at the two treatment centres in Seattle and San Antonio have begun, the first results could even be published as early as in the first quarter of 2019. After an evaluation phase, we expect the start of the commercial treatment towards the end of the coming financial year 2019. In parallel to this, MagForce AG is expected to include further hospitals in addition to the two treatment centres that are currently part of the project, making timely, comprehensive treatment possible. In this regard, both the production of NanoTherm and the significantly smaller NanoActivator devices required for prostate treatment are to be promoted.

The conclusion of further cooperation agreements in Europe and the expected market approval for the treatment of prostate cancer in the USA should lead to the generation of the first significant revenues in the coming financial year. The Company should be able to show a rapid increase in the sales volume in the 2020 financial year. This is based on the inclusion of revenues in the US over the entire year and an expected rise in patient requests in Europe.

According to our expectations, break-even on EBITDA level will only be achieved in financial year 2021. In principle, we expect a relatively high level of profitability (EBITDA margin: approx. 45%), as high economies of scale are likely to be achieved given stable conditions. This forms the basis for our DCF valuation model.

Under the DCF valuation model, we have established a target price of €15.30 (previously: €15.80). The drop in the target price reflects the reduction in the participating interest in the US subsidiary MagForce USA to 67.9% (previously: 76.9%). This dilutive effect was caused by the capital increase of the subsidiary carried out in August 2018. Based on the current share price of EUR 6.09, we are maintaining our BUY rating.


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