MagForce AG

06.03.2018 - Equity Research Einzelstudie // buy

Research Note – MagForce AG - english

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Unternehmen: MagForce AG
Branche: Biotechnologie-Pharma
Rating: buy
Kurs bei Erstellung in €: 6,75
Kursziel in €: 15,80
Mögl. Interessenskonflikt gem. §34b Abs.1 WpHG und FinAnv: 5a;6a;11

On 10 February 2018, MagForce AG made public the FDA’s approval for a clinical study (Investigational Device Exemption, IDE) on focal tumour ablation for the treatment of intermediate risk prostate cancer. This is a major milestone for the development of the company, especially due to the fact that the American approval authorities now define MagForce technology as a medical device. Compared to the approval of medication, the approval for medical devices can be achieved at significantly lower cost over a shorter period of time.

120 male patients are to be included in the registration study. Due to the relatively high number of cases in this indication area (230,000 new prostate cancer cases in the United States every year), MagForce AG expects it will be able to recruit the required number of patients very quickly. We expect the treatment phase to be completed by the fourth quarter of the current financial year. After the subsequent evaluation period, the FDA should grant approval during the fourth quarter of 2019, approximately one year later than we had anticipated.

At the same time, the company is continuing the rollout stage for the treatment of brain tumours (glioblastoma) in Europe. The MagForce technology has already been approved in Europe and the opening of further treatment centres will bring it closer to patients, particularly in Poland, Italy and Spain. With the means from the financing measures taken in 2017, the company has sufficient financial power to open new treatment centres in Europe and to install the required NanoActivator® devices. Another important aspect of the future development of the company is its obtaining of cost reimbursement by insurance companies, as this relatively costly treatment is currently still being financed privately. For this purpose, MagForce AG was able to bring in an experienced manager from the medical technology sector in Dr. Lutz Helmke. In his role as Executive Vice President and Managing Director Europe, he will further develop cost reimbursement in Europe in particular. He gained his expertise in this area in long-term management positions, in which he was responsible for the implementation of accounting systems and cost reimbursements.

For the coming financial years, MagForce AG will continue to report low levels of revenue. We expect approval in the United States to be granted in late 2019, pushing the first noteworthy proceeds from the treatment of prostate patients into 2020. The glioblastoma treatment in Europe will continue to be dominated by the planned rollout in Poland, Spain and Italy. Besides the installation of NanoActivator® devices in these countries, the company will carry out reimbursement studies with up to 20 patients. In addition, marketing activities will be ramped up in order to raise the profile of MagForce technology and thereby create a foundation for increased demand.

We previously reported a forecast reduction for the next three financial years but consider the approval risk in the United States to be significantly lower due to the FDA approval of the clinical study. To account for this situation, we reduced the beta to 1.77 (previously: 2.04) and thereby the discounting rate to 9.76% (previously: 11.01%). This had over-compensated our forecast reduction until the year 2020. The resulting fair value per share at the end of the 2018 financial year corresponds to the stock price target of €15.80 (previously: € 15.00) and we maintain the Rating BUY.


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