First Berlin – Formycon AG Research Update (06/06/2018)

First Berlin Equity Research has published a research update on Formycon AG (ISIN: DE000A1EWVY8). Analyst Simon Scholes reiterated his BUY rating and increased the price target from EUR 52.00 to EUR 53.00.

Formycon's Q1/18 results were well above our expectations because the company booked an €8.5m credit in revenue and profits relating to past investment in FYB202. Sales came in at €13.7m (FBe: €5.0m; Q1/17: €3.4m) while EBIT was €6.7m (FBe: €0.0m; Q1/17: €-0.7m). Formycon and Aristo Pharma GmbH formed a joint venture to further develop FYB202 at the end of 2017. Formycon's share of the J.V. is 24.9%. The €8.5m credit reflects the development work carried out by Formycon during 2013-16 – i.e. prior to the J.V.'s foundation. Formycon will be able to deduct €8.5m from its 24.9% share of future development spending in FYB202, but will be entitled to a 24.9% share of licensing and marketing revenues generated by the J.V. We are raising our price target to €53.0 (previously: €52.0) to reflect the present value of the €8.5m reduction in Formycon's funding obligation to the J.V. We maintain our Buy recommendation.