Special Feature
Getting Phase III ready - make or break results Feb 2013 Cogane has the potential to become the first small-molecule, disease-modifying therapy for Parkinson’s and therefore could attract a lucrative licensing deal. However, this depends on the outcome of the Confident-PD study in 408 patients with newly diagnosed, treatment-naive Parkinson’s disease which should render top-line results in February 2013. The concurrent development of a solid dose capsule formulation of Cogane is also important as positive results in both studies would present potential partners with a Phase III-ready asset and help Phytopharm extract best value from partnership discussions.
ALS option Cogane has also demonstrated potential as a treatment for amyotrophic lateral sclerosis (ALS), with positive data from four different models of ALS. Depending on the outcome of Confident-PD, ALS could offer an additional valuation parameter in any licensing discussions or may provide a fall-back avenue of development for Cogane if the drug fails in the Parkinson’s trial. son’s trial.
Ahead of data from the Confident-PD trial, we assign a 25% probability of success — positive results and securing a partner would raise that probability to 50% and therefore our rNPV to £83m. Importantly, Phytopharm has reiterated prior guidance that existing cash reserves are sufficient to fund operations to the end of 2013.
SBM Take It is a very binary potential result in early 2013 for Phytopharm — success in the Phase 2 trials and a multi-fold return on your investment; failure, and a likely 80-90% drop in the stock price. That being said, the stock market is based on leaks and speculation and it is likely to be very difficult to contain results as we near the end of the trial — patients will invariably talk. As with oil exploration stocks that approach well drill results, animal instincts coupled with speculative tendencies typically take hold, and so we wouldn’t discount a run in the stock price towards the end of the year. At the current level, for those readers who are prepared to not margin this position and only place a small amount of their portfolio in the stock, the risk:reward is attractive at this price, in our opinion.
Valuation: rNPV of £48m with significant uplift potential We maintain our risk-adjusted NPV of £48m which compares favourably with Phytopharm’s £10.4m enterprise value, based on net cash of £13.3m as of 31st March 2012. Over 50% of the valuation is assigned to Cogane’s potential in Parkinson’s.
Disclaimer - The basis of this research has been supplied by Edison Investment Research (EIR). EIR do not advocate buy or sell recommendations and the opinion expressed within this piece is solely that of Spreadbet Magazine.
56 | www.financial-spread-betting.com | September 2012