Admedus Ltd (ASX:AHZ) has received a buy recommendation from the New York based Maxim Group, which has initiated coverage on the company.
Maxim has allocated a $2.00 price target. Shares in Admedus last traded at around $0.50.
The following is an extract from the report.
An Alternative to Bio-Prosthetic Heart Valves; Initiating Coverage with a Buy Rating and a $2.00 Price Target
Admedus is currently selling CardioCel®, a bio-engineered tissue scaffold to repair congenital heart defects, and expanding into the heart valve market.
It is made of biocompatible bovine tissue; is off-the-shelf available, stentless, durable, and flexible; and shows resistance to calcification.
The major failure mode of implanted tissue is calcification. CardioCel's phase II (follow-up) data showed no signs of calcification at seven years postimplantation, and, as such, it reduces the need for follow-on surgeries.
CardioCel is becoming a surgeon-preferred biomaterial for heart valve repair surgeries.
We believe that it represents a disruptive technology in the $2.5B heart valve repair and replacement market, which is dominated by products commercialized by large medical device companies, such as the Hancock II tissue valve from Medtronic (MDT-$76.27-NR) and SAPIEN 3 from Edwards Scientific (EW-$86.49-NR).
The product has yet to build traction, as the company has been capital constrained. CardioCel launched in the EU in 2013 and in the US in 2014.
It is now being sold in Canada, Australia, Asia, the Middle East, and North Africa, covering 135 medical centers. However, last year's revenues were only $2.64M.
Management is now hoping to build traction as KOL awareness builds.
Beyond CardioCel, Admedus is developing a DNA-based therapeutic vaccine for HSV-2 and HPV. Final data from the ongoing phase II HSV-2 study are expected to be released in 2Q17.
Conclusion. We believe Admedus is an "undiscovered" Australian company with a portfolio of regenerative products in a big market. As revenue builds, we believe valuation will follow.
CardioCel is a bio-implant sourced from bovine pericardium that is engineered via Admedus' ADAPT® platform, resulting in a durable, collagen-based scaffold with strong mechanical properties and resistance to calcification, while supporting native cell infiltration, growth, and differentiation for repairing cardiac and vascular defects.
It is processed by a proper decellularization regime, optimized crosslinking, and adequate detoxification to avoid any immunological response that could potentially trigger a calcification cascade, thus rendering calcific degeneration postimplantation.
In July 2015, Admedus announced positive long-term data from the CardioCel phase II study, which showed no follow-on heart procedures related to CardioCel, nor were there any signs of calcification seen.
HSV-2 immunotherapy. Admedus’ HSV-2 glycoprotein D (gD2)-based DNA vaccine uses codon optimization DNA technology, which enhances protein expression in the cell or tissue targeted, and results in an improved immune response.
Another component of the technology is to use a combination of DNA encoding ubiquitin and non-ubiquitin proteins to enhance the degradation of the protein and optimize Tcell responses, while preserving structural epitopes necessary for B-cell responses, achieving both prophylactic and therapeutic results from the vaccine.
An HSV-2 phase II study (n=44), which is evaluating the safety of the vaccine, impact on viral load and shedding, and viral flare frequency, is ongoing.
Interim data showed a favorable safety profile, with a reduction in viral lesions. Final data are expected in 2Q17.
Valuation. Our model only includes CardioCel in CHD and heart valve repair for conservatism.
We use free-cash-flow-to-the-firm (FCFF), discounted-EPS, and sum-of-the-parts models, with a risk rate of 30%, equally weighted and averaged, to derive our $2.00 price target.
Proactive Investors is a global leader reporting financial news, media, research and hosts events for listed emerging growth companies and investors across four continents.