GBC Research initiates coverage of Ergomed plc with a "buy" recommendation and target price of GBP 2.73 per share
OREANDA-NEWS. GBC Research, a German research house focusing on small- and mid-cap companies, has initiated coverage of Ergomed plc (AIM: ERGO LN, Xetra: 2EM GR) with a "buy" recommendation and target price of GBP 2.73 (EUR 3.22). Ergomed is a profitable UK-based group dedicated to the provision of specialised services to the pharmaceutical industry and the development of new drugs.
GBC valued Ergomed plc at GBP 111.43 million or GPB 2.73 per share, 128% higher than the closing price of GBP 1.20 on the London AIM market on the day prior to the publication of the GBC report. The valuation was based on a sum-of-parts analysis, involving separate valuations of the services and products businesses. The overall valuation consisted of a discounted cash flow model to value the services business and a risk-adjusted discounted valuation of the product portfolio.
GBC noted that the services business serves as a stable foundation for the business model, providing a high level of sustainable profitability as well as increasing cash flows, with synergies between the two business segments - clinical research services (CRO) and pharmacovigilance (PV). In its products business, Ergomed leverages its significant drug development expertise and enters into co-development agreements with partners, sharing the development costs of particularly promising product candidates in exchange for a percentage of future profits. There are currently five products in the co-development pipeline at different stages of development. Ergomed also has two proprietary internal drug development programs from the acquisition of Haemostatix which are expected to be particularly promising.
In its report, GBC indicated it foresees a continuation of the dynamic growth experienced in previous years, with average growth rates of more than 25% between 2011 and 2015, and predicts an increase in sales of 15.8% relative to 2015. The predicted increase stems from Ergomed's solid positioning in the market, the company's innovative clinical trials approach and its international positioning in the development services sector, coupled with the order backlog of GBP 59.0 million at the start of the year, which already covered 85% of the projected services business sales for 2016. In addition, the product portfolio is expected to reach important milestones over the course of 2016 and early 2017. GBC also expects high growth rates to continue in the following years.
Ergomed plc is a profitable UK-based business providing drug development services to the pharmaceutical industry and has a growing portfolio of co-development partnerships. It operates in over 50 countries.
Ergomed provides clinical development, trial management and pharmacovigilance services to over 100 clients ranging from top 10 pharmaceutical companies to small and mid-sized drug development companies. Ergomed successfully manages clinical development from Phase I through to late phase programmes.
Ergomed has a wide therapeutic focus, with a particular expertise in oncology, neurology and immunology and the development of orphan drugs. Ergomed believes its approach to clinical trials is differentiated from that of other providers by its innovative Study Site Management model and the use of Study Physician Teams, resulting in a close relationship between Ergomed and the physicians involved in clinical trials.