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Curetis (CURE-NL): FDA opens door to opportunity
Recommendation: OUTPERFORM
Target Price: EUR10.00
Current Price: EUR5.66 (cob on 5^th April 2018)

KEY TAKEAWAY

The much anticipated FDA approval of the Unyvero platform and first lower respiratory tract ("LRT") cartridge is clearly transformative, opening the door to substantial opportunities in the US and beyond. While growth in Europe has disappointed, we believe clear differences between the markets should see significantly faster growth in the US. We are optimistic that the first US launch and the prospect of a pipeline of additional US cartridge approvals should have a positive impact on both installed base, cartridge volumes and sales over the next 12-24 months. FDA approval should also facilitate entry into other global markets, particularly China. We maintain and reiterate both our OUTPERFORM recommendation and target price of EUR10.

Bright prospects in the US - Better funded and less fragmented, the US healthcare market is more receptive to innovation than Europe. With US hospitals increasingly penalised for poor infection control and subjected to antibiotic stewardship guidelines (20% - 50% of US patients receive antibiotics that they don't need) and the threat of litigation for misdiagnosis, commercial and regulatory incentives to adopt rapid infectious disease diagnostics in the US are very clear. This is reflected in the feedback to us from US physicians.

Clinical and cost benefits - Through faster identification of microbial infection and antibiotic resistance, use of the Unyvero platform as an adjunct to standard microbiological analysis can have tangible benefits. More rapid diagnosis can significantly reduce time in intensive care. This is clearly good for the patient, but also good for hospital economics; potentially saving $1000s on individual patient costs. Hospitals in the US are usually reimbursed for complex indications at a standard rate based on diagnosis. Cost savings on individual patients improve the bottom line.

Ramp up in installed base - With an experienced twenty-strong sales and marketing team already in place, the company is confident of an installed base of 60-80 in the first full year. With the second panel for LRT for bronchial lavage close to FDA submission and a full pipeline of additional cartridges already in use in Europe, Curetis should be well placed to create a full menu of infectious disease tests to populate this base.

Speed entry into China - FDA approval often provides a lead for other regulatory approvals, including China. China is a major opportunity for Curetis where it already has a partner taking the platform through the CFDA process and performing the relevant studies.

Strong news flow in prospect - The recent agreement with MGI in China has opened up the prospect of broader strategic collaboration and highlights the potential for deal flow through the Ares Genetics antibiotic resistance subsidiary in China and beyond. News flow should also come from new cartridge approvals and launches.

Well placed to refinance - With the FDA approval in place, the company should be well placed to raise necessary funding to finance its growth.

Positive on the upside - We are optimistic for significant upside during 2018. We maintain and reiterate both our OUTPERFORM recommendation and target price of EUR10.

Kind regards,

Dr. Chris Redhead | Analyst
goetzpartners Healthcare Research Team | Research Team

goetzpartners securities Limited

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

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