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Analiza spółki - East Value Research (27.12.2016)

Dear all,

 today, we published an update on the Polish provider of diagnostic genetics Inno-Gene S.A. Our new SOTP-based fair value for the company is PLN 9.60 per share.


(1) In 9M/16, Inno-Gene (IGN) generated sales of PLN 3.6m (+5.9% y-o-y). Due to a significantly higher share of personnel costs and D&A expenses EBIT (PLN -0.9m vs. PLN -0.2m) and net income (PLN -1.8m vs. PLN -0.1m) deteriorated y-o-y. However, despite a smaller-than-planned capital increase in Q4/15 (PLN 4m at PLN 8.10 per share vs. max. PLN 10.4m) and a negative operating cash flow in 9M/16 of PLN -3.4m, the company had estimated net cash of PLN 0.3m as of 30/09/2016.


(2) In 2016, IGN announced several positive news. In Jul, its 100% subsidiary Centrum Badan DNA Sp. z.o.o (CBDNA) signed a distribution agreement relating to its diagnostic tests with the listed medical chain POLMED S.A. (has 22 own centers Poland-wide plus >2k co-operation partners). In Aug and Nov, Central Europe Genomics Center Sp. z.o.o, which is a 26.5%-73.5% JV of IGN and International Technology Ventures LLC with rights to the use of worldwide leading HiSeq X Ten WGS technology in Poland, announced that it had signed two agreements relating to financing of the JV: First, with the Medical University in Bialystok (max. PLN 30.1m), and second with Rubicon Partners Corporate Finance (PLN 30m, thereof PLN 5m own funds). CEGC will be the first commercial Whole-Genome Sequencing (WGS) laboratory in the CEE region and IGN’s management expect it to generate sales from Q3/17E. One of its first orders will be sequencing of max. 10k genomes, for which CBDNA and its consortium partners secured approx. PLN 50m net of EU funding on 22 Dec. We believe that other significant contracts will be announced in Q1/17E.


(3) Our new FV for IGN of PLN 9.60 consists of a SOTP with its diagnostic genetics segment (equity value of PLN 29.3m) and subsidiary CEGC (value of IGN’s 26.5% stake: PLN 18.9m). Although the new conservative Polish government might limit financing of genetic tests (especially NIPT), IGN should be able to increase revenues and gross margins going forward due to a focus on high-margin NGS and WGS services as well as online distribution and export sales. Regarding CEGC, we believe the project is very interesting as it addresses the rapidly growing market of personalized medicine. However, (public) WGS labs e.g. in UK, Germany or Sweden already analyze genetic data of Europeans. Also, there is a risk that technological progress might lower the cost of sequencing one genome to <USD 1k soon, which would negatively affect CEGC’ margins.


In case of any further questions, do not hesitate to contact us.


Best regards,


Adrian Kowollik

Managing Partner


East Value Research GmbH | Mülhauser Str. 5 | D-10405 Berlin

Tel. (D): +49 30 20609082 | Tel. (PL): +48 889 058 270 | E-Mail: | Skype: a_kowollik


Registration court: Amtsgericht Berlin-Charlottenburg | HRB 164473 B


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