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Published to the market and investors on 3^rd October 2018 @ 6.57am (London time).

 

Curetis (CURE-NL): Convertible secures room to manoeuvre
Recommendation: OUTPERFORM
Target Price: EUR10.00
Current Price: EUR3.59 (COB on 2^nd October 2018)

KEY TAKEAWAY

While convertible instruments of this type can be expensive, the EUR20m financing facility secured with Yorkville Advisors provides necessary room to manoeuvre. Immediate access to EUR3.5m (net EUR3.22m) and a further EUR1.5m (net EUR1.38m) fulfils the company's short-term cash needs. This should allow the company to pursue alternative financing in the capital markets or by securing strategic and / or non-dilutive financing from larger corporates, as it delivers on its strategy. A further EUR17.5m in convertibles and warrants may be accessed by Curetis over 3 years as needed. Unyvero US roll-out is going well with significant upside from both China and corporate deal flow. We maintain and reiterate both our OUTPERFORM recommendation and EUR10 target price as detailed in our fuller analysis published in May 2018.

Convertible provides platform - A combination of fees, discounts and warrants make financing through convertible instruments of this type expensive. However, with the first net EUR4.6m warrant-free and with the rest in reserve, Curetis now has the resources to push forward the US Unyvero roll-out, as well as secure further value creating deals on both the diagnostic and antibiotic resistance platforms. This should provide a platform to secure further less dilutive finance.

US launch on track - While still early days, with 10 accounts close to agreeing terms and up to 50 firmly in the sights, at the H1/2018 results management were confident in securing a US installed base of 40 - 60 by YE2018E and 60 - 80 within 12 months of launch. The first 10 accounts are indicating a need 700 - 800 lower respiratory cartridges p.a. and perhaps double that for other accounts targeted. This would significantly exceed the 400 - 500 in our model. The US promises to be a significant value driver; particularly as Curetis rolls out the extended lower respiratory tract and joint infection Unyvero panels in the US over the next 12 - 24 months.

Upside from China and deal flow - The company is aggressively driving opportunities in China and RoW. The regulatory strategy is on-track with the Chinese partner looking to leverage data from the US FDA and Europe to streamline the process. Already approved in the key Singapore Asian reference market, distributors in North Africa and Latin America have also made substantial commitments. Direct sales in Europe also continue to grow. Deal flow from Unyvero and Ares Genetics antibiotic resistance platforms promise to provide both long term value as well as non-dilutive cash-flow.

Finance provides opportunity - Curetis now has the necessary finance to push forward its 12 - 18 month objectives. We see this as an attractive opportunity for investors at current levels given the increasingly positive outlook. We maintain and reiterate both our OUTPERFORM recommendation and EUR10 target price.

Kind regards,

Chris Redhead | Analyst

goetzpartners Healthcare Research Team | Research Team

goetzpartners securities Limited

The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.

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

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