First Berlin – Formycon AG Research Update (14/09/2018)

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

Q2/18 revenue of €10.9m (Q2/17: €4.6m) and EBIT of €1.6m (Q2/17: €-2.2m) were well above our forecasts of €6.0m and €-0.7m respectively because development on FYB202 carried out in Q1/18 was not invoiced until Q2/18. Reported Q1/18 revenue of €13.7m and EBIT of €6.7m were boosted by an €8.5m credit relating to past investment in FYB202. Stripping out this credit Q1/18 revenue and EBIT would have been €5.2m and €-1.8m respectively. We had expected figures close to this level in Q2/18. But the fact that the service contract with FYB202 partner Aristo Pharma was not signed until Q2/18 meant that Q2/18 revenue and profit benefited from development work done by Formycon on FYB202 in Q1/18. H1/18 revenue was €24.6m (H1/17: €8.0m). Management has raised full year revenue guidance from €35m to €36-40m implying average quarterly revenues during H2/18 of €5.7m to €7.7m. Full year profit guidance is now for "a clearly positive result" (previously: "a significantly positive result"). We have revised up our 2018 revenue forecast to €36.0m (previously: €35.0m) but have not altered our net profit forecast of €4.2m. Our projections for subsequent years are unchanged as is our price target at €53.0. We maintain our Buy recommendation.