Free to access research and investor meetings in a post-MiFID2 world.

This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.

Published to the market and investors on 29^th May 2019 @ 12.19pm (BST).

Marinomed Biotech AG (MARI-AT): Q1 masks solid sales performance in most markets
Recommendation: OUTPERFORM
Target Price: EUR 103.00
Current Price: EUR 81.50 (CoB on 28^th May 2019)

KEY TAKEAWAY

Marinomed reported slightly weaker Q1/2019 revenues than we had anticipated, due largely to temporarily weaker demand for the marketed Carragelose products (colds and flu infections) in two core markets, Germany and Poland. Nevertheless, we believe that our projections for FY2019E remain achievable, since: (1) most other markets delivered positive sales performance, (2) Q1 has traditionally been a weaker quarter due to seasonality, with demand for Marinomed's products usually much stronger in H2, and (3) additional launches are planned to take place in the coming months. Importantly, lead pipeline asset and key value driver Budesolv (dissolved budesonide), which recently met key endpoints in the registrational Phase III trial in allergic rhinitis ("AR", hay fever), remains on track for submission in 2020E, paving the way for launch in 2021E. We maintain and reiterate our OUTPERFORM recommendation and EUR103 target price ("TP").

Increase in operating loss reflects Budesolv Phase III trial costs

Marinomed reported Q1/2019 revenues of EUR0.75m vs. EUR0.92m in Q1/2018. The operating loss more than doubled to EUR2.63m from EUR1.05m, due largely to an increase in R&D expenses to EUR1.39m from EUR0.78m, reflecting costs related to the Budesolv Phase III trial, and one-off costs related to the recent IPO. There was also an increase in net financial expenses to EUR0.61m from EUR0.18m, which included EUR0.47m in non-cash costs related to the convertible bond. For FY2019, we forecast revenues of EUR7.16m, which assumes that there will be a significant ramp-up in revenues as Marinomed's 14 partners continue to expand sales of its six products across 40 countries, including through new launches. Our forecasts for operating and net loss are EUR9.14m and EUR9.54m, respectively, and we expect Marinomed to end the year with a net cash balance of EUR9.6m.

Key driver Budesolv on track following positive Phase III trial results

Marinomed had already reported that key value driver Budesolv (based on the proprietary Marinosolv platform) had met the primary and a key secondary endpoint of the pivotal Phase III trial in AR. In addition to demonstrating non-inferiority to reference product Rhinocort Aqua (budesonide suspension, marketed by J&J) after one week of treatment, the nasal spray also showed a faster onset of action. In our view, this data positions Budesolv to become a large product within the c.$13bn AR market, of which intranasal corticosteroids account for c.$5bn. We forecast launch in 2021E and peak sales of c.EUR760m in 2036E, which assumes a market share of around 5%. Marinomed intends to sell Budesolv as an OTC product and is currently in discussions with potential commercialisation partners.

Target price of EUR103 per share suggests nearly 30% upside

Our TP for Marinomed is based on a sum-of-the-parts valuation that consists of risk-adjusted net present values for marketed products and developmental product candidates plus net cash. Budesolv in AR accounts for 45% of our fair value, the Carragelose products for 28%, Tacrosolv (dissolved tacrolimus) in allergic conjunctivitis and dry eye disease for 21%, and net cash at YE2019E for the remainder.

Kind regards,

Brigitte de Lima, PhD, CFA | Research 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 | brigitte.delima@goetzpartners.com / healthcareresearch@goetzpartners.com

www.goetzpartnerssecurities.com

goetzpartners securities LinkedIn page

Registered in England No. 04684144.

Managing Directors: Dr. Stephan Goetz, Martin Brunninger and Ulrich Kinzel.

goetzpartners securities Limited - Team Members

Co-Heads / Senior Management - Martin Brunninger and Ulrich Kinzel.

Equity Research Analysts - Brigitte de Lima, Chris Redhead, Martin Piehlmeier and Kieron Banerjee.

Sales - Danny de Jong.

Corporate Finance - Ulrich Kinzel, Wolf Dornbusch and Youchen Xin.

Corporate Access - Tanya Tracey

Compliance & Research Production - Paul W. Dunne.

Click here to see our privacy policy.

GPSL has a formal client relationship with Marinomed Biotech AG.

GPSL publishes and distributes "Corporate Issuer Sponsored" Research. Our Corporate Issuer Sponsored Research and investor meetings (e.g. NDRs, 1 to 1 meetings) are free to access and attend and is not classified as an inducement in a post-MiFID2 world, this is because the issuer is paying GPSL. GPSL does not offer any execution or market making services. This is a marketing communication as defined by the Financial Conduct Authority ("FCA"). The information herein is considered to be an acceptable minor non-monetary benefit as defined under FCA COBS 2.3A19(5).

If our contractual relationship with clients ceases, then please be advised that we will no longer publish equity research on the specific client and any recipients of our equity research publications should not rely on our forecasts / valuation that have previously been published in the last full company research publication. Please note that GPSL will not publish a cessation of coverage notice to the market. Also, in accordance with the provision of MiFID2 - if our clients are not contractually paying GPSL to write and publish equity research, then we will not publish any future equity research publications to the market on the issuer until all of our unpaid fees have been paid.

In accordance with the General Data Protection Regulation ("GDPR") - if you would like to be removed / unsubscribed from our CRM (also please note that you are free to contact GPSL at any time in the future to have your e-mail subscription amended), please e-mail:
researchproduction@goetzpartners.com

About GPSL: goetzpartners securities Limited is a member of the goetzpartners group, and a leading pan European investment bank and research company. We bring together a wide range of expertise, insights and innovations to advance the interests of our clients around the world. The fast-changing environment brings challenges for businesses and investors. Research innovation, digital transformation and disruptive business ideas reshuffle the corporate world at a relentless pace. Our sector knowledge and our global footprint bring together corporate intelligence and a deep understanding of the industry with a wide network of top decision makers. These collective insights help our clients to stay at the leading edge of change.

This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.

This communication (including any attachments) from goetzpartners securities Limited ("GPSL") is confidential and may contain information which is proprietary, privileged or otherwise legally protected against unauthorised use or disclosure. If you receive this communication in error or are not the intended recipient of this communication, please delete and destroy all copies in your possession, notify the sender that you have received this communication, and note that any review or dissemination of, or the taking of any action in reliance on this communication is expressly prohibited. GPSL shall not be liable for the improper or incomplete transmission of the information contained in this communication nor for any delay in its receipt or damage to your system. GPSL does not guarantee that the integrity of this communication has been maintained nor that this communication is free of viruses, interceptions or interference and makes no warranties in relation to these matters. This is not an offer or a solicitation to buy or sell securities or investment products, or an official confirmation. GPSL record electronic and phone communications in accordance with FCA and MiFID2 regulations, they will be monitored for regulatory and training purposes. GPSL is authorised and regulated by the Financial Conduct Authority of the United Kingdom (Firm Reference Number: 225563).

Click on the following link for the GPSL MiFID2 Investor Guidance Notice

GPSL Equity Research publications are available on the following aggregators and via news distribution circuits (For Institutional Use Only): AlphaMetry, AlphaSense, Bloomberg (GOET), Capital IQ, EQS, FACTSET, ResearchFN, Research Tree, RNS Reach, Sentieo and Thomson Reuters.

Please copy the below link and paste it into your browser for the full pdf version of the equity research report:

https://gp.bluematrix.com/sellside/EmailDocViewer?encrypt=0b2479f0-3944-45c3-938d-d4459d296b23&mime=pdf&co=gp&id=paul.dunne@goetzpartners.com&source=libraryView

Free to access research and investor meetings in a post-MiFID2 world.

This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.