Event in Progress:
View the latest research on other companies in the sector.
Following Consort’s recent (11th September) announcement on the incident at Aesica’s Cramlington API facility we update our forecasts. Consort has estimated a total hit to operating profit of £7-9m, which we view as reasonable. We downgrade our FY 2020F operating profit by £9m and take a more cautious view on the ramp up of Aesica’s operating margin (now 10-11% one year later, by FY 2022F). Consort currently trades at a c.40% discount to its peers on a FY 2020F consensus PER, which we view as too aggressive with our fair value of 930p implying a discount of c.20%. Despite retaining concerns over the top line at Aesica and near-term catalysts, we believe the market is factoring in too negative an outlook over the medium-term. Upgrade to Buy (from Hold).
Consort Medical
Today’s AGM statement suggests underlying trading to be in-line with expectation. Management highlight the Bespak business as performing well, supported by the core MDI valve operation and the recent contract wins (as announced during FY19A results). However, management also flag their expectation that the 1H20 Aesica financial result will reflect the significant operational disruption caused by the Cramlington manufacturing facility incident (as reported in July), combined with a slower start to the year. Cramlington more difficult to remedy. The Cramlington plant decontamination has clearly taken materially longer than first thought (we understand due to the corrosive nature the materials involved). Although the specific Cramlington process at issue has yet to be restarted, we understand other activities within the facility are anticipated to start operating normally. Management is progressing an investigation into the root cause of the incident, with the specific process only restarted when that is complete and the appropriate actions have been taken. Incremental financial impact in FY20E. The financial impact of the Cramlington facility issue was initially estimated as a potential £3-5m hit to 1H20 Aesica operating profit. With management now guiding to a potential £7-9m impact, we reflect a further £4m decline on our FY20E operating profit forecast, in turn reducing our FY20E group EPS forecast by 11%. Thereafter, we leave estimates unchanged.
API manufacturing issue. According to management, the rapid thermal degradation of a chemical (used in an API manufacturing process) resulted in the expulsion of material and contamination of the facility. Management’s focus on safety means that all similar manufacturing processes have been suspended whilst the cause is determined. Consort is now being supported by a specialist decontamination company and process safety experts, who will investigate the problem and compile an independent report. Consort is working closely with local regulatory authorities. Financial impact difficult to quantify – we model cautiously (i.e. -£5m on FY20E adj PBT). The financial impact of the issue will depend on a number of factors including the timing and results of the ongoing investigation, the completion of remediation work and future production activities. However, management’s initial expectation is that group FY20 profit is likely to be negatively impacted by £3m-£5m (based on its current estimate of the anticipated disruption). Given the uncertainty, we choose to model cautiously, lowering FY20E revenue by £7m and PBT by £5m. Our FY20E EPS decreases by 12.7%. Subsequent year forecasts remain unchanged. Valuation: Although we deem this news as a negative and expect the stock to be weak as a consequence, we flag that the impact on our valuation is modest (-2%).
Consort reported FY 2019A results (13th June) that were just behind consensus (c1.5%) on revenues impacted by well flagged issues (Wixela launch delays). We were encouraged by the announcement of new contract wins, particularly for Syrina®/VapourSoft®, and evidence of momentum in Aesica’s pipeline, which we think could ultimately boost top line growth. However, the shares have recovered +18% since we upgraded to Buy (Jan19). With new development agreements c2-3 years away from meaningfully contributing to the top line, our continued conservatism around the Wixela (generic Advair) opportunity and few predictable catalysts to drive a re-rating over the next 6-12 months, we see the upside opportunity as constrained. Hence, we downgrade to HOLD with an updated 960p fair value (FV) (from 900p). Consort currently trades at a 30% discount to peers on a FY 2020F PER basis.
Consort Medical : Improving growth and margins for Aesica; Bespak steady (05-Dec-2017)
Interims are in line. Revenues +6.1% reported, PBT+7.7% but adj EPS was only up 3.2% and Net Debt is still high at £97.1m. There is no new news on Mylan contract for generic Advair and we do not expect to hear anything until mid-2018. A couple of small contracts have drifted away. We make only minor changes to our estimates and don’t see any catalysts in the short term. The shares now trading on 17.7x P/E to Apr-18, 12.4x EV/EBITDA - not obviously cheap without growth picking up but maybe there is enough promise on the Mylan contract to keep people interested for now. We move to Hold from Buy.
A strong set of results illustrates the consistency of Consort’s underlying business even as it’s two potentially largest contracts were delayed and discontinued in the final quarter of the year. Despite this, changes to estimates are limited and, though we anticipate a more muted 2018, we still consider Consort a core healthcare holding. The long term stability is supported by the potential for significant upside from the Vapoursoft autoinjector technology in the mid-term. We retain our BUY recommendation and increase our price target to 1194p (previously 1145p).
Today’s FY results are in line with our expectations, highlighting an improving operating performance at Aesica. The core Bespak delivered an in-line performance, impacted as expected by the termination of the supply agreement with Nicovations. We reiterate our Buy recommendation (upgraded from Hold in December 2016) and 1,125p target price.
FY results to 30th April were slightly ahead of both our and consensus expectations, demonstrating the consistency of the business even as new product lines are delayed. We continue to believe Consort is a stock to own for the long term, with solid performance in the short term underpinning the business which has the potential to demonstrate accelerated growth from substantial new products with the upside from the Vapoursoft portfolio likely to generate significant future value. We retain our BUY recommendation and 1145p price target.
FY results to 30th April are expected to be announced on 15th June. We expect the prelims to show consistency of performance despite the delays to the DEV200 and DEV610 launches. We expect the underlying business to have demonstrated continuing growth (PG est revenue +4.8%) with improving profitability (PG est EBITDA +6%). We do not expect Consort to be able to comment specifically on the delays to DEV200 and DEV610, but given the depth of the pipeline, expect historic growth rates to be maintained into FY 2018 without contribution from these products. We expect results commentary to focus on both the trajectory of margin improvement in Aesica, and autoinjectors within Bespak. We maintain our BUY recommendation and 1145p price target ahead of the results.
Edison Investment Research is terminating coverage on Consort Medical (CSRT). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
Consort Medical has announced that all supply agreements for Voke, an MHRA approved nicotine inhaler, have been terminated with immediate effect by Bespak’s partner, Nicovations. Termination was a contractual right in the event that Voke was not commercially launched before end-2016. Nevertheless, ‘constructive’ talks about Voke’s future continue between Nicovations (holder of distribution rights), Kind Consumer (developer of the product and underlying technology) and Bespak (formerly responsible for build, manufacturing and supply of filled devices and valve technology). Given cessation of the supply contract and uncertainty over Voke’s path to market, we remove it from our pipeline rNPV; this lowers our valuation range for Consort to 1,238-1,300p/share.
Consort has announced this morning that Nicovations, a subsidiary of BAT, has terminated its supply agreements for Voke (DEV200) effective immediately. We make no changes to estimates as the product had previously been removed from forecasts. We do not expect the company to lose financially from the termination of the contract. Although the loss of the DEV200 contract is disappointing, Consort has a substantial pipeline in addition to solid growth from its existing product lines, and over the next 12 months there are a number of product launches expected which could accelerate growth above our expectations. We expect the shares to be weak on today’s news, however, would see this as a buying opportunity as the underlying business remains strong.
Consort Medical’s H117 interims evidenced underlying earnings growth, ongoing margin expansion and increased diversity in the business and customer base. At Bespak significant contract wins and recent and potential near-term launches support longer-term growth. Increased capacity utilisation and the serialisation opportunity could drive Aesica operating margin towards the double-digit target. M&A could supplement Consort’s existing product, competency or geographic capabilities. Nevertheless, organic growth is supported by a growing pipeline, with 16 disclosed Bespak projects and an ‘Innovation funnel’ of 11 early-stage development/feasibility projects.
We make minor changes to our estimates following interim results last week and reiterate our BUY recommendation. The pull back in the shares offers a buying opportunity for a stock we see as a core holding in the UK healthcare sector. The long term contracts with global pharma underpin performance and new product launches are expected to accelerate growth. Longer term we expect both the VapourSoft technology and combined device/drug contracts to result in upside. We retain our 1145p price target.
Interim results are in line with expectations. Consort has demonstrated strong performance from both its Bespak and Aesica divisions. New product launches and increasing service revenues continue to keep performance at the high end of expectations, and the diversity of the portfolio balances. The near term product portfolio remains on track, margin improvement in Aesica continues and we expect both the VapourSoft technology and combined device/development contracts to result in outperformance over the long term. We continue to see Consort as a core holding in the UK healthcare sector and view the recent pull back in the shares as a good buying opportunity. We retain our BUY recommendation and 1145p price target.
Bespak’s first deal for its proprietary Syrina autoinjector platform is with an undisclosed major global biopharma. Syrina is based on proprietary VapourSoft technology that uses a liquid gas propellant (rather than a conventional spring) to provide the force for drug delivery. Bespak’s ability to customise its devices to the specifications of its biopharma customers provides a significant competitive edge, enabling delivery of higher volumes and a broader range of formulations (including viscous biologics) while reducing the risk of safety hazards for users. This first deal provides technology validation and may catalyse further injectables deals. Bespak has the potential to become the partner of choice in an environment where rising numbers of biologic drugs in development and increased pressure on healthcare costs make self-administration a more attractive option.
Consort Medical has announced that its Bespak division has entered into a master development agreement with an undisclosed global biopharmaceutical company, focused on Bespak's novel VapourSoft™ (gas propellant) driven autoinjector technology, Syrina™. Our assumption at this point is that the agreement is with a top-tier pharma and has the potential to be broad ranging in nature, representing very good validation of the VapourSoft platform. We make no change to forecasts at this point but consider both this and further potential deals represent excellent upside potential. Repeat Buy.
UCB has received approval for the CIMZIA AutoClicks Prefilled Pen which uses Bespak autoinjector technology. This is the first biologic to be approved using the Bespak technology and we believe this experience will translate to increased interest in the remainder of the autoinjector portfolio; in our view a substantially undervalued part of Consort. In the interim, the consistent performance of the company due to long term contracts, in addition to the potential for growth from multiple new product launches over the next 6 months, makes Consort an attractive stock in uncertain markets. We retain our BUY recommendation and 1145p price target.
Consort Medical and Astra Zeneca’s ‘significant’ new respiratory device supply agreement highlights the ongoing strength of Bespak’s metered dose inhaler (MDI) franchise. MDIs accounted for c 51% of the Bespak division’s total product revenues of £117.2m in FY16. This new multi-year agreement includes scale-up and supply of proprietary pMDI valves and actuators, which are critical components of AstraZeneca’s approved COPD (chronic obstructive pulmonary disease) therapy, Bevespi Aerosphere.
An in line trading update and new contract with Astra Zeneca should move the shares positively today. Although we make no changes to our forecasts as yet, we believe there is greater potential for upside both from underlying contracts and currency later in the period. The consistent performance due to a strong portfolio of long term contracts make Consort an attractive stock in uncertain markets. We retain our BUY recommendation and 1145p price target.
Consort Medical’s FY16 results reflected the first full year of consolidation of Aesica. Revenues of £277m evidenced the scalability of its full-service contract development and manufacturing operations, as well as the impact of ongoing operational efficiencies, with improved operating margins at both Bespak (+170bp) and Aesica (+210bp). Consort is making good progress with building scale and is well placed to capitalise on the strong growth in outsourcing development and manufacturing in the sector.
Consort’s pipeline of new products is building and confirmation that DEV610 is Mylan’s generic Advair has added to the sense that a major growth inflection point is approaching. Set against this is an almost perennial feeling of being underwhelmed at the pace of progress and the delays of launches (viz DEV200). We also continue to have some lingering reservations over the Aesica deal. We nudge our EPS forecasts up by 4% and await further details on the shape and pace of the DEV610 roll out.
FY16 prelims look in line/slightly ahead with a PBT / EPS beat down to lower Depreciation and lower tax than guided. Net Debt was £97.0m. The outlook positive with a number of potentially significant product launches slated for this year, including DEV610, which will likely require significant stock built ahead of launch. No material changes to forecasts expected at this stage, but momentum is building and there is the potential for "material outperformance" later in the year dependent on successful product launches. FX will also be helping.
Consort FY 2016 results to April are ahead of both our estimates and consensus. Bespak has performed particularly strongly with accelerating growth and higher margins than historically. Margin improvement has also been seen at Aesica and this is expected to continue. Slightly later launch dates for both DEV200 (launch now expected in next 12 months) and DEV610, revealed today as Mylan’s generic Advair, with full launch likely calendar Q2 2017, take the shine off the strong performance. However, our FY 2017 estimates for each are cautious and consequently we do not expect to make any changes to our forecasts on the back of the changes in timelines and the results. We continue to view Consort as a core holding in UK healthcare and we reiterate our BUY recommendation and 1145p price target.
Full results for Consort Medical are expected on 16th June. We expect a strong set of results, helped by currency, for which we adjust our estimates today. However, investor focus will be on the pipeline, in particular the expected launches of DEV200 (Voke) and DEV610 both due this year. Commentary from BAT gives a positive view on size of the Voke launch, but little on timing. We continue to believe that the steady growth multiple contracts with multiple pharmaceutical companies with significant new technology upside make Consort one of the most attractive holdings in the healthcare sector. We reiterate our BUY recommendation and 1145p price target ahead of the results.
Following the integration of Aesica, Consort Medical has expanded from its leadership position in drug delivery technology in Bespak to become a full-service contract development and manufacturing operation. With strong margin expansion already underway, we raise our EPS CAGR FY16-20e from 9.5% to 10.6%. Our DCF-based and peer group valuation is 1,292-1,399p.
The new contract is more important optically than commercially in the initial stages. It is the first to use expertise in development from both Bespak and Aesica, and should provide a good case study for the potential to combine Consort's device and drug manufacturing expertise in larger contracts. Initial revenues will be limited (service revenues) and we make no changes to our estimates. We maintain our Buy recommendation and 1145p price target.
Long term contracts with global pharma companies provide a solid and low risk revenue stream, growing circa 5% annually. We expect multiple new product launches to result in an acceleration of top line growth from 2016. Margin improvement from the new products and Aesica should result in a 3 year EPS CAGR of 9.4% even on our conservative estimates. We believe VapourSoft, where we expect the first contracts this year, will provide significant upside to this solid investment case.
Interim results look as expected, with no surprises in either the results or the outlook other than a hint that further acquisitions are being considered. The pipeline continues to progress steadily with one project added. We make no change to our forecasts and stay at Hold on valuation grounds. An acceleration in organic revenue growth is required for the shares to kick on from here, in our opinion.
We have reviewed our forecasts for the year ending 30 April 2016 and release those for the subsequent year. Concurrently, we have revisited our peer group valuation. We make some minor changes to our FY 2016 estimates and raise our target price to 987p, which is now based on multiples of our FY 2017 forecasts. As a result, we upgrade our recommendation from Sell to Hold
Aureus Mining: Official opening of New Liberty mine (BUY) | Consort Medical: 2017 estimates – valuation revisited (HOLD)
Consort Medical is a full-service contract development and manufacturing operation (CDMO) that operates across most areas of the pharmaceutical supply chain. Bespak’s strength in drug delivery devices is complemented by Aesica’s span of services from drug manufacture to finished product packaging. The FY15 results demonstrate that strategic progress is being maintained and the target of sustainable double-digit profit growth over the medium term remains on track. Our valuation is 1,001p to 1,061p.
Prelims are in line/slightly ahead of our forecasts, with the EPS beat due mainly to a one off tax benefit. This year, as flagged, FX will have a negative impact of c.6% at the PBT level, offset by a slightly better tax rate, so we expect to put through a c.4% EPS downgrade. Overall though, excluding this short tem headwind, the underlying business is performing largely as expected. We expect this two-way pull to continue ahead of clarity on the launch of the nicotine product with BAT, now expected later this year, so CSRT stays a Hold for now.
Trifast^: Full-year results exceed expectations (BUY) | Servoca*: Strong H1, upgrade to forecast (CORP) | Consort Medical: Prelims (SELL) | Trakm8*: Trakm8 adds video to telematics offering (CORP) | Europa Oil & Gas*: Ireland FEL 3/13 valuation (CORP) | Aukett Swanke*: Heads held high (CORP)
CSRT TRAK EOG AUK TRI SVCA
Consort Medical (CSRT LN) Prelims in line, FX a drag | Trifast (TRI LN) FY15 results c.5% ahead of forecasts and strong outlook
Consort Medical Trifast plc
Concerns over the Aesica acquisition, combined with market weakness, have seen the share price down over 20% since the announcement. Although we share the view that Aesica may initially dilute Consort’s quality of earnings, it is expected to be materially earnings enhancing and the combined capabilities should be attractive to pharma customers, improving the longer-term growth prospects. Overall, therefore, we don’t think the rating for the combined group should be significantly lower than Consort enjoyed before and so the recent share price weakness provides an attractive buying opportunity.
Share: