Neovacs S.A.

31.10.2016 - Equity Research Einzelstudie // kaufen

Research Note - Neovacs S.A. - english

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Unternehmen: Neovacs S.A.
ISIN: FR0004032746
Branche: Biotechnologie-Pharma
Rating: kaufen
Kurs bei Erstellung in €: 0,71
Kursziel in €: 2,90
Mögl. Interessenskonflikt gem. §34b Abs.1 WpHG und FinAnv: 5a;11

Neovacs is a biotechnology company, which specialises in a technology platform called "Kinoid" for active immunotherapy in the area of autoimmune and inflammatory diseases. On the basis of the company’s own technology for the introduction of a polyclonal immune response (protected by six patent families until at least 2032). Neovacs focuses its development activities on active immunotherapy with IFNα kinoid, which is being developed for the medical indications SLE (systemic lupus erythematosus) and DM (dermatomyositis).

In the first half of 2016, the focus was on the further development in particular of the clinical trial phase IIb (IFN-K-002) for the indication SLE. This trial is currently being conducted with a total of 178 patients in 19 countries in Europe, Asia, Latin America and the USA. It is worth mentioning that in the last reporting period, Neovacs was able to extend approval of the phase IIb trial to the USA and South Korea. While the USA has the highest number of SLE cases, SLE may be classified as a rare illness (orphan disease) in South Korea which should facilitate a much quicker market approval.

The clinical development of IFNα should also be extended in the current financial year of 2016 to the indication dermatomyositis. In this respect, the preparatory measures have been taken for the start of a clinical trial phase IIa in Europe. In this trial, 30 DM patients in France, Italy, Germany, the UK and Switzerland are to be treated with the Neovacs product.

For our sales forecasts, we have used the marketing schedule and made estimates concerning the relevant regional case numbers, the potential Neovacs market share as well as treatment costs. Along the same lines of the expected progress in clinical approval we do not expect the initial sales until the 2018 financial year (SLE in South Korea). However, substantial proceeds are not expected to come until the 2020 financial year onwards when the marketing of IFN-K is expected to start for the treatment of DM in Europe, the USA and Asia. Approval for the treatment of SLE should bring about a substantial increase in sales.

On 12/10/2016, Neovacs S.A. announced it would be collaborating with the research laboratory for diabetes immunology of the renowned Cochin Hospital in Paris. Under the management of Dr. Fgnès Lehuen and Professor Christian Boitard, the proof of concepts is to be produced with the use of IFN-K for the treatment of type 1 diabetes.

Even though we have not included this new potential trial route in our forecasts, a positive result of this research collaboration could be an important milestone for Neovacs S.A. Unlike SLE and DM, type 1 diabetes is an illness with massive case numbers and therefore immense market potential. According to estimates by the IDF (International Diabetes Federation), there are currently around 415 million people suffering from diabetes, which equates to approximately every 11th adult worldwide. Type 1 diabetes accounts for approximately 10% of all diabetes cases.

We have not initially taken into account the additional potential from expansion of the indication. At present, only the indications systemic lupus erythematosus and dermatomyositis therefore serve as the basis for our valuation model. Our target price calculated within the framework of the DCF model, taking into account an unchanged marketing probability with phase II products amounting to 22.8% (source: Journal of Health Economics; The price of innovation: new estimates of drug development costs), remains unchanged at €2.90 per share. We can therefore confirm our current target price and continue to issue the BUY rating.


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