As said, worth the gamble...
Ladenburg Thalmann
Jeffrey Cohen
Creation of a Critical Care Focused Company with a U.S. Phase III Levosimendan (SIMDAX) Trial. Initiating Coverage with Buy Rating and Price Target of $10.50.
We are initiating coverage of Oxygen Biotherapeutics (OXBT) with a Buy rating and price target of $10.50.
On October 21, 2013 Oxygen Biotherapeutics, Inc. announced that they had signed a definitive agreement to acquire certain assets of privatelyheld Phyxius Pharma which is focused on the North American development and near-term commercialization of levosimendan (trade name Simdax) to prevent and treat cardiac surgery patients at risk for developing low cardiac output syndrome (LCOS). We believe this drug represents an estimated $600 million U.S. market.
Levosimendan is a calcium sensitizer which was developed for intravenous use (24 hour) in hospitalized patients with Acutely Decompensated Heart Failure (ADHF). The compound was first approved in Sweden during 2000 and is currently manufactured and marketed in 53 countries by Orion Pharmaceuticals (€20.63-ORNBV, NR) of Espoo, Finland and has produced revenues of €44 million Euros ($60
million USD) during CY-2012. The drug is also marketed within certain Latin American countries by Abbott Laboratories ($39.57-ABT, NR) who also had owned rights to certain other territories which were sold back to Orion in 2009.
The drug has a plethora of published clinical studies, clinical trials, health economic data and meta-analysis and has been administered to more than 600,000 patients to date. The drug’s administration regimen and more specific use (indications) has evolved significantly through clinical experience and includes the decrease (or virtual elimination) of loading (bolus) doses and dramatically increased use specific for cardiac surgeries (mitral valve replacement and Coronary Artery Bypass Grafting (CABG)).
We believe that the Company has taken into account the drug’s vast experience in designing what we believe to be a well thought out Phase III protocol which utilizes all of the European experience throughout the past decade, coupled with a focus on cardiac surgery patients classified with Low Cardiac Output Syndrome (LCOS).
Oxygen Biotherapeutics, Inc. is based in Morrisville, North Carolina. The Company has approximately 14 employees as of Q2-2014 (October, 2013) and is also conducting a Phase II trial in Europe studying perfluorocarbon (PFC) therapeutic oxygen carrier (Oxycyte) for Traumatic Brain Injury (TBI).
We anticipate that Levosimendan could become commercially available in the U.S. during CY-2017 (and in Canada during CY-2018) and we have modelled in peak revenues of $244.4 million during FY-2023 prior to anticipated generic competition. Our price target of $10.50 is based upon the net present value (NPV) of discounted cash flows (DCF) to the Company through FY-2027 with peak free cash flow of $42.3 million during FY-2023. We are using a 15% annual discount rate and 20 million outstanding shares for our calculation.
