Endonovo Therapeutics Inc (ENDV)

[Joecanada13]

***FUTURE OUTLOOK***

Endonovo is an emerging US-based biotechnology company developing therapeutics from a proprietary technology platform designed to treat disease targeting inflammation. The company’s technology utilizes time varying electromagnetic field technology (TVEMF), which induces an electrical field to reduce inflammation and promote cell regeneration. Endonovo hopes this will be a disruptive alternative to pharmaceutical treatment for a number of indications, promising efficacy, lower costs and a strong safety profile. Endonovo’s approach is differentiated from other electric pulse technologies by the slew rate and wave formations, which management stated has been optimized for effective cellular response and to promote tissue regeneration. Initially Endonovo will target acute liver failure, an indication in which the current standard of care is inadequate. This rare disease affects only 2,000 people per year in the US, but if Endonovo is successful in demonstrating the effectiveness of its approach, it could open up larger market opportunities in organ failure and broader liver disease indications, such as chronic liver disease, which affects 8mn+ people per year in the United States. Indeed, Endonovo management has estimated the market opportunity in liver-related indications alone at approximately $4Bn per year, considering Alcohol- induced liver deterioration, Fulminant liver failure, and surgery-induced liver failure. Here the company would face a number of emerging and established competitors in the biotechnology industry, and would seek to compete based on bringing to market an effective and cost-disruptive new treatment.

In terms of its Cytotronics platform, the company uses TVEMF to work with cells and biologics, with an aim to enhance and expand cells. Initially the company is targeting graft versus host disease (GVHD), a rare disease with limited competition but one which could be used to generate data that could expand Endonovo’s platform for other indications. The company is exploring other solutions in biologics, such as creating a human leukocyte antigen (HLA) neutral product that could be used as an off the shelf allogeneic therapy. The market for biologics is large, growing and competitive; it is expected to reach $30 billion by 2024E, according to research from Visiongain.
In the following graphic we examined key size and profitability metrics for a group of competitors and peer companies of Endonovo. While there is no perfect publicly traded comparable group, we felt it was appropriate to examine the size and profitability from a range of companies developing therapies for similar diseases, such as Intercept Pharma, which is seeking to develop treatments for NASH, a market we expect Endonovo to target as well. We did not include Endonovo given that its early stage and low asset base skewed the percentage returns.

ROA vs. ROA– Endonovo Peers



Product development / Revenue forecast

Endonovo is a pre-clinical biotechnology company, which does not yet generate revenues or cash flows from therapeutic products. The company is developing two platforms, ImmunotronicsTM and CytotronicsTM, both of which management sees as having large market potential in a number of therapeutic indications if they can achieve regulatory clearance and successfully be brought to market. Given that Endonovo is in the early stage of development for each platform, there is considerable uncertainty as to its ability to obtain regulatory clearance and successfully commercialize its products.

If the results of the preclinical studies are encouraging. Our model assumes the company is successful in these endeavors, and raises sufficient capital to fund growth and operations on terms that our palatable to common shareholders.
With its Immunotronics platform, Endonovo is initially targeting acute liver failure with the development of a non-implantable device targeting inflammation. The company expects to begin a pre-clinical study in rat livers during 2H16. Following this study, management plans to file for an Investigational Device Exemption (IDE) in early 2017, and aspires to commence a human study in 2017E. Our forecast assumes the company is successful in these efforts, with FDA clearance achieved by the end 2019E and eventual commercialization beginning in 2020E.

We also believe the company will be able to leverage information gained as it pursues this indication towards developing Immunotronics therapies for chronic liver disease, such as non-alcoholic fatty liver disease (NAFLD) and the treatment of other organ failures. Likely future indications for which the company may seek to explore therapeutic treatments for organ failure include the heart, single lung, kidney, pancreas and intestine, among others. Our model assumes the company pursues strategic licensing partnerships to develop a therapeutic solution using its technology for other organ failure besides liver following early trial results. We have modeled a cumulative total of $12.5mn in license / partnership monies received during the 2018E-2020E period from these activities. For NAFLD, we have assumed a commercial product reaches market in the back half our forecast, which ends in 2027E.
For the Cytotronics platform, Endonovo management plans to initially target GVHD (Graft versus Host disease). The company will seek to obtain an orphan drug designation in early 2017E, with plans to file an Investigational New Drug Exemption (IND) application by the end of 2016E. We have assumed that the company obtains FDA clearance by the end of 2020E/ early 2021E, with commercialization beginning in 2021E.

Key Performance Indicators of ENDV, FY15E-FY19E