Biotech Values

[SF Wolf]

Neurotrope:

AEGIS Capital: Buy Rating of $31 share

 
 
NTRP: Has Neurotrope Pulled An Alzheimer's Sword From The Stone?
Summary We are initiating coverage of Neurotrope with a Buy rating and a price target of $31 per share. The company is developing Bryostatin-1 as a stimulator of PKCε, an early regulator of brain cell growth and repair. A Phase IIb trial has completed enrollment in Alzheimer’s disease, with data expected in late April 2017.

Bryotstatin-1 stimulates PKCε, a protein involved in the formation of new memories. Data shows that it acts as an early "regulatory control" that stimulate synaptic growth and other neuronal pathways involved in the brain. We believe its mechanism of action can affect several important pathologies of the disease.

Phase IIb Trial Results Expected In Late April to May The primary endpoint in trial is the change in Severe Impairment Battery (SIB), a clinical tool evaluating several cognitive functions. Safety and efficacy are also endpoints. Each of the secondary endpoints evaluates specific effects of Bryostatin-1.

Bryostatin Clinical Trials Have Both High Risk and High Reward The only treatments for Alzheimer’s disease (AD) are drugs that lessen symptoms with little to no effect on disease progression. The mechanism of disease is unclear and subject to widely varied opinions in the medical community. Dozens of clinical trials in AD have failed, making it a high risk indication for development. If the Bryostatin-1 Phase IIb trial is successful, it could be the first disease-modifying therapy that prevents AD progression and restores lost memory. If the Phase IIb trial is partially successful (meets some but not all of its endpoints) we believe it could still have therapeutic value in AD and other neurological diseases where cognitive function or development is affected.

Valuation We expect NTRP to be driven by the results of its Phase IIb clinical trial, currently scheduled to be reported in late April 2017. Marketed drugs that provide a modest reduction in symptoms have had annual sales in the $2 billion to $5 billion ranges. Products for AD intended only to slow the progression of disease or reduce symptoms have achieved market valuations in the $1 billion range after positive Phase II data, which we believe reflects the high unmet need and sales potential for effective AD drugs. Neurotrope's market valuation is currently about $145 million, which we believe discounts the current uncertainties and high risk before the data announcement.
To value NTRP, we began by estimated earnings for the first year of profitability. We assume first revenues in 2020, and base our estimates on a cost of $1,500 per month. We use a probability adjustment of 75% of revenues to allow for the high risk of failure in clinical trials for Alzheimer’s disease. We further discount FY2021 EPS of $5.96 by 30% per year, with a multiple of 15X for a price target of $31 per share.

Alternatively, we considered the valuations for comparable companies in clinical development for Alzheimer’s disease. Based on expected sales of drugs that are intended to slow the decline in cognitive function or reduce symptoms, we believe our estimates for Bryostatin-1 are conservative. Our price target correlates with a market capitalization of about $330 million compared with about $145 million today. See Risk Factors and Valuation Methodology on page 17.

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