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Ergomed Plc: THE INVESTMENT CASE

Ergomed's hybrid strategy gives it plenty of ammo

The hybrid pharma services and drug development group has hit some key milestones over this year as trial results are eyed.
Drugs
INVESTMENT OVERVIEW: ERGO The Big Picture
Ergomed is gaining traction and has five partnership deals in the portfolio

It’s tough for small pharma companies to carry out pioneering drug research.

Ergomed Plc’s finance director Stephen Stamp believes its model is the only way it can be done realistically.

The company (LON:ERGO) is a pharmaceutical hybrid, a pharma services firm that also takes a stake in drugs during the development process.

That means as well as a profitable services business, it also has exposure to a number of new treatments making their way through clinical trials.

Ergomed has five partnership deals in the portfolio - with  Asarina, Aeterna Zentaris, CEL-SCI, Ferrer and Modus Therapeutics but wants to increase its co-development portfolio to 10 agreements in the medium term.

Haemostatix one of its own

In addition it has bought Haemostatix for US$28mln.

Its two lead products are PeproStat, a liquid haemostat that is applied to wounds to control bleeding during surgery.

And ReadyFlow, a blood-free transparent haemostatic gel that can be applied to irregular bleeds at the late pre-clinical stage, This will compete with existing dry products that are slower to act and require preparation.

Peprostat is expected to start a phase II trial next year and ReadyFlow to move into phase I in 2018.

Trials in focus

Haemostatix is a big step for Ergomed and the risks of going it alone were highlighted in May as one of the co-development pipeline, Aeterna Zentaris’s Zoptrex - a drug for women with advanced endometrial cancer - failed its phase III trial.

As co-development partner Ergomed contributed to the costs of the trial in return for a share in any revenues generated from commercialisation.

It had already received a portion of upfront payments from several license agreements entered into by Aeterna Zentaris. Its clinical services arm carried out the trial, which took place in more than 100 centres globally.

Zoptrex disappointing but not material

Numis, a buyer with a target price of 275p, said while the Zoptrex failure was a disappointment the co-development pipeline should be viewed as an optionality and the core services businesses continues to perform very strongly.

Other co-development deals are with Asarina Pharma AB is for Sepranolone. Ergomed will conduct the phase IIb clinical study of this treatment designed for women suffering from premenstrual dysphoric disorder (PMDD).

Another of its partners – Modus - is developing Sevuparin, a potential treatment for sickle cell disease, which is in a phase 2 clinical trial.

Big twelve months ahead 

Numis left its forecasts unchanged on the Zoptrex news as any success was not assumed in its model. The broker added highlights going forward over the twelve months are:

  • Asarina’s Phase II start in PMDD by end of year,
  • Modus’ Ph II completion in SCD Q1 18
  • Ph II results expected on wholly-owned PeproStat Q1 18
  • Opportunistic acquisitions which build upon the core CRO and PV businesses – ERGO has £4.4m cash and no debt

Services growing ...

2016 was strong for Ergomed’s services division. Revenues were £38mln, up 26%, with an order backlog at the end of the year of £70mln.

Last year also saw the acquisition of PharmInvent Services for an initial £4.8mln, with 80% of the sum paid in cash and the remainder in equity.

The acquisition bulked up the company’s very successful PrimeVigilance unit, which specialises in monitoring drugs once they have been licensed for use.

...by acquisition

In May 2015 Ergomed acquired Sound Opinion, one of the UK's leading medical information service providers. That was then merged with PrimeVigilance to become a “go-to” for that service across the continent.

Two German service groups, O+P and GASD were added in the summer of 2016 to providean in-house Electronic Data Capture system and biostatistics and data management capabilities respectively.

More deals and partnerships ahead

Going forward, expect more of the same said Andrew Mackie, Group Business Officer.

Ergomed looks at 100 compounds a year for its shared development programmes, he says, while it is looking for more bolt-ons in the style of O+P and GASD.

Some of these opportunities are in due diligence, some have term sheets submitted and some have barely got off the drawing board.

 

 

 

 

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Ergomed Plc Timeline

Newswire
April 13 2017

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