ZACK'S VALUATION/FINANCIAL STATUS:
Brief Synopsis of the AACR event:
We Raise Our Price Target to $30
We maintain our Outperform rating for ADXS and raise our 12-month price target to $30.00 per share from previous $18.00 per share based on the recent clinical achievements.
We are optimistic about Advaxis’ live, attenuated Listeria technology, which is a unique immunotherapeutic platform that can target various cancer indications and infectious diseases. This technology has advantages over other immunotherapies and has generated positive clinical data. Combination of its technology with checkpoint inhibitors has the potential to become new standard of care for cancer treatment.
The recent deals are especially encouraging in our view. The deal with Aratana could get ADXS-cHER2 the first approved immunotherapy for animals in 2015. The deals with Biocon and GBP expand the usage of ADXS-HPV therapy for cervical cancer in the world two largest markets of cervical cancer in terms of patient population. The favorable terms in the deals not only strengthen Advaxis’ balance sheet in a non-dilutive way, but also validate the Company’s technology and clinical programs.
The collaborations with Merck and MedImmune may lead to license deals.
We look forward to the announcement of initiation of the pivotal Phase III trials of ADXS-HPV for recurring cervical cancer in 2015.
Advaxis has developed a robust pipeline based on its proprietary platform technology. In addition to cervical cancer, ADXS-HPV has potential to target other HPV-mediated cancers, such as head & neck cancer as well as anal cancer. The Company plans to initiate two clinical programs of ADXS-cHER2 targeting breast cancer and pediatric osteosarcoma respectively. A Phase I/II trial of ADXS-PSA is also planned for the treatment of prostate cancer.
ADXS-HPV has a huge market potential. Cervical cancer is a worldwide problem and ranks as the 2nd leading cause of cancer death of women in the world. According to WHO, about 630 million people are infected with one of the over 100 strains of HPV. Global prevalence of clinically pre-malignant HPV infections is between 28 to 40 million women. Approximately 500,000 women are diagnosed of cervical cancer each year and about 11.4% of women in the general population are estimated to harbor cervical HPV infection. In the US, about 12000 new cases of cervical cancer are diagnosed each year. Prevalence of cervical cancer is higher in developing countries and India, China and South America are the three regions with highest cervical cancer prevalence (50% of cervical cancer burden).
The Company’s balance sheet is relatively strong. In Feb, 2015, Advaxis closed an equity financing with several institutional investors for gross proceeds of approximately $23.0 million in a registered direct offering of approximately 3.1 million shares at a price of $7.50 per share.
As of Jan 31, 2015, Advaxis held $30.6 million in cash. With the new financing, we estimate the company currently holds cash of approximately $50 million, which could last into the end of 2016 according to our financial model.
In terms of valuation, we think Advaxis is still undervalued at current market price. Currently, the Company shares are trading at about $22 per share which values the Company at about $600 million in market cap based on 27 million outstanding shares. This is still a discount compared to its peers.
We predict ADXS-HPV for cervical cancer to be approved in the US in late 2017 or early 2018 with 75% probability. Sales will reach $100 million in 2020 with earnings per share of $1.36. Using a relative valuation model, we come up with the value for HPV cervical cancer of $19.00 per share by using 45 x P/E multiple and discounted at 20% for 5 years. Adding the value of $11 for other indications of HPV and other clinical programs, we reach our price target of $30 per share for the company.
Our price target of $30.00 per share values the Company at $810 million in market cap, which is still conservative in our view. Apparently, risk is still high for Advaxis at this stage. We will keep a close eye on cash balance and clinical program advances.
ACCORDING TO THEIR RESEARCH, ADXS IS IN VERY GOOD FINANCIAL SHAPE AND GROSSLY UNDERVALUED.
