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Equity flash – Target price raised
Biotechnology | France
Genfit
Buy  | Target 53.00 EUR vs 34.80 EUR 
Est.chg
2014e
2015e
0.0%
43.9%
$T ypCap$ 1586 17 1 1 x 4580 2
Price : 41.46 EUR| Upside : 28 %
EPS
G
e
nf
it
#
A strong position for a future partnership
A unique opportunity in the NASH market
Friday 12 September 2014
45
Genfit currently benefits from particularly favourable stock market momentum driven by road
shows with management. We think that the group has a unique opportunity on the emerging
NASH (non-alcoholic steato-hepatitis) market, a metabolic illness more common than
diabetes and for which the international community is only now taking notice. For the time
being there is no treatment for this condition and Genfit appears to be just behind the leader,
the US group intercept, in the race.
40
35
30
25
20
15
10
5
Genfit
Genfit Relative to Next Biotech (Rebased)
Capital
GNFT FP | GNFT.PA
1 080
Market Cap (EURm)
898
Enterprise value (EURm)
5.20
Extrema 12 months
Free Float(%)
41.67
79.2
1m
3m
12m
Performance absolue
48.1
57.9
697.3
Perf. rel. "sector"
41.7
59.5
620.0
Perf. rel. Next Biotech
31.2
66.2
487.1
12/14e
12/15e
12/16e
0.0
60.0
0.0
EBITDA (MEUR)
-12.7
40.4
-20.4
EBIT (MEUR)
-12.7
39.9
-21.1
-12
34.5
-20
-0.53
1.32
-0.78
0.00
0.00
0.00
P/E (x)
ns
31.3
ns
P/B (x)
18.9
5.8
6.5
Net Yield (%)
0.0
0.0
0.0
FCF yield (%)
ns
2.9
ns
EV/Sales (x)
ns
14.97
ns
EV/EBITDA (x)
ns
22.2
ns
EV/Current EBIT (x)
ns
22.5
ns
Gearing (%)
-98
-98
-97
Net Debt/EBITDA(x)
4.0
ns
7.8
Performance (%)
P&L
Sales (MEUR)
Attr. net profit (MEUR)
Restated EPS (EUR)
Dividend (EUR)
Next Events
12/03/2015 FY Results
Clinical results for GFT-505 expected in Q2 2015
From recent contact with management we note that Genfit's next major catalyst, data from
its phase II study, is due at the beginning of Q2 2015. The group has learnt the lesson from
Intercept, which released data from the phase II trial on OCA in several stages. As a result,
Genfit is to wait until all of the data is fully available for phase II before publishing. The
message could therefore be particularly successful and convincing.
New target price: € 53
We have adopted a more aggressive stance on Genfit. With no change to our forecast for
GFT-505, still € 2bn (estimated launch in 2018), under our new scenario the company would
retain more value when a new partnership agreement is signed. This vision better reflects
the stronger position in which the group currently finds itself, in our view: support from US
investors and enhanced appeal of the NASH market following the publication of data by rival
Intercept. In concrete terms, we think that following the publication of phase II results on
GFT-505, the group will seek to raise funds on the NASDAQ (€ 100m in 2015 in our model)
in order to invest financially alongside an industrial partner. This means that the group would
no longer cede 80% of GFT-505's to this partner, as we had previously thought, but would
now retain at least 30%. In our model, this is reflected in the joint-financing for phase III from
2015-2017 against an upfront payment of € 60m in 2015 (vs € 30m previously) milestone
payments of € 500m (vs € 250m previously) and royalties of 35% of net sales (vs 25%
previously). Lastly, we have advanced our NPV by one year (first year of flows 2016) to
better reflect that fact that our target extends beyond the success of phase II next year. We
now retain a 50% probability of success since we think that GFT-505 will enter in phase III
testing next year (standard probability for phase III).
Valuation: still a 1 to 5 ratio with Intercept
Despite the share's recent gains (40% since the beginning of the month), Genfit's market
capitalisation is still five times smaller than that of its rival Intercept (NASDAQ: ICPT).
Granted, NASH does not represent the entirety of Intercept's valuation (its OCA drug is also
developed in primary biliary cirrhosis) although it represents a substantial share. As such, we
think that the gap in the valuation is set to narrow. Whilst we think that our target price will be
achievable following phase II results, our blue-sky scenario two years out (see chart on the
following page) indicates a potential of € 123 per share.
Sebastien Malafosse
+33 (0)1 44 51 88 46
[email protected]
Mourad Ben Jaafar
+33 (0)1 44 94 56 21
[email protected]
Conflict of interests:
Oddo Securities, a division of Oddo et Cie, limited sharepartnership - Bank authorised by ACPR
Oddo & Cie and/or one of its subsidiaries could be in a conflict of interest situation with one or several of the groups mentioned in this publication. Please refer to the conflict of interests section at the end of this document.
This is a non-contractual document, it is strictly for the private use of the recipient, and the information it contains is based on sources we believe to be reliable, but whose accuracy and completeness cannot be guaranteed.
The opinions given in the document reflect our appraisal at the time of publication and may therefore be revised at a later date.
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