This equity research note was formally published on 17th November 2017 at 5.00am.

Curetis (CURE-NL): Focus on US launch

Recommendation: OUTPERFORM
Target price: EUR10.00
Current price (as at 17th Nov 2017): EUR3.75

Sluggish EU sales growth and slippage in the installed base target into Q1/2018 were sure to disappoint. While exact timing can never be assured, we remain confident that FDA approval will take place within the next month or two. While it is always possible that approval may drop into next year, the 2018 US launch of the Unyvero platform remains the major Curetis driver. We believe clear differences between the markets should see significantly faster growth in the US compared with Europe. We remain optimistic that the first US launch and the prospect of a pipeline of additional US cartridge approvals should have a positive impact on both installed base, cartridge volumes and sales during 2018. China remains a substantial opportunity for Unyvero, as well as strategic deal flow through the Ares Genetics subsidiary. Given the anticipated upside, we remain positive despite European delays. The current stock weakness looks substantially over done and is a good entry point for investors. We maintain and reiterate our OUTPERFORM recommendation and EUR10 target price.

Europe disappoints - Installations and sales continue to lag expectations in Europe. While the company is hopeful that the appointment of Riwat Lim from QIAGEN will invigorate progress, the company will need to show it can speed and expand the conversion of current demonstration and evaluation sites into real sales.

Brighter prospects in the US - We remain as confident as we can be that FDA approval will take place shortly. Better funded and less fragmented, the US healthcare market is generally more receptive to innovation than Europe. With US hospitals increasingly penalised for poor infection control and subjected to antibiotic stewardship guidelines (20% - 50% of US patients receive antibiotics that they don't need) and the threat of litigation for misdiagnosis, commercial and regulatory incentives to adopt rapid infectious disease diagnostics in the US are building. This is reflected in the feedback from US physicians we have spoken to. This together with a pipeline of new panels, should drive adoption of the Curetis Unyero platform during 2018 following FDA approval.

Further upside from China and other deal flow - Unyvero continues to progress towards regulatory submission in China. The recent agreement with MGI in China has opened up the prospect of broader strategic collaboration and highlights the potential for deal flow through the Ares Genetics antibiotic resistance subsidiary in China and beyond.

Funded to inflection - Although given the European delays, Curetis may struggle to achieve our current EUR2.5m top-line estimate for 2017, YE cash should be in-line with our expectations (see FDA approval major catalyst in H2) and, with a further EUR15m to draw down from the EIB, sufficient to take the company through the anticipated inflection points and well-placed to raise additional capital thereafter.

Positive on the upside - Retaining our estimates beyond 2017 (see FDA approval major catalyst in H2), we are optimistic for significant upside during 2018. We maintain and reiterate our OUTPERFORM recommendation and EUR10 target price.

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goetzpartners Corporate Research | Research Team
Dr. Chris Redhead | Analyst

goetzpartners Corporate Research
goetzpartners securities Limited
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T +44 (0) 203 859 7725 | healthcareresearch@goetzpartners.com / chris.redhead@goetzpartners.com

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